Hawkins v Clayton [1988] HCA 15 | Case summary | Zoe

CTHHCA

Hawkins v Clayton

[1988] HCA 15

High Court of Australia|1988-04-08|Before: Gaudron JJ, Yeldham J, Wilson J, Deane J, Richmond P, Windeyer J, Oliver J, As Deane J

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At a glance

Source facts

Court

High Court of Australia

Decision date

1988-04-08

Before

Gaudron JJ, Yeldham J, Wilson J, Deane J, Richmond P

Source

Original judgment source is linked above.

Judgment (144 paragraphs)

[1]

This matter is fundamental to the resolution of the case. Deane J. concludes that, in failing to take any positive steps to locate the executor, Mr. Hawkins, during the period of more than six years after the death of the testatrix in circumstances where a few phone calls would have sufficed to locate him, the respondents failed to discharge the duty of care which they owed to him as the executor of her estate. His Honour finds the source of that duty of care to rest in the relationship of proximity existing between the respondents and the testatrix (and Mr. Hawkins, in his capacity as executor) combined with the foreseeability of a risk of damage arising from a failure to take reasonable care.

[2]

It is clear that any relationship of proximity that exists in this case would not have arisen but for the professional relationship between the respondents and the testatrix. In determining the precise nature of the relationship giving rise to the alleged duty of care, we find it helpful to start with the contract under which the will was drawn and retained in the custody of the respondents. It is that contract which "indicate[s] the nature of the relationship that gives rise to the common law duty of care": Central Trust Co. v. Rafuse [25] ; cf. per Richmond P. Bowen v. Paramount Builders [1] . It was said by Windeyer J. in Voli v. Inglewood Shire Council [2] , in the context of ascertaining the duty of care which an architect owes to one who is a stranger to the contract between the architect and the building owner, that the contract "is not an irrelevant circumstance. It determines what was the task upon which [the architect] entered". So it is here. In the case of solicitors, the remarks of Oliver J. in Midland Bank v. Hett, Stubbs and Kemp [3] are particularly pertinent:

[28]

Analogous duties are not numerous, for the occasions are few when a person with an interest in property needs to be told of it in order to be able to enjoy it. In Hawkesley v. May [20] , Havers J. held that the trustees under a deed of settlement had a duty to inform a beneficiary, on his attaining his majority, that he had an interest in the capital and income of the funds of the trust. His Lordship accepted that he was bound by the rule in In re Lewis; Lewis v. Lewis [21] that, in the absence of a direction in the will, an executor owes no duty to inform a legatee of the terms of a legacy even though the executor takes a beneficial interest in the legacy in the event of the legatee's failure to satisfy a condition attached to the legacy - a rule which Havers J. said had "no attraction for me on the merits" [22] . However, his Lordship was able to distinguish between an interest taken under a public document (a will in Somerset House) and a private document (a trust deed). The ground of distinction may seem tenuous; another ground of distinction may be that an executor's duty is to distribute to legatees who are entitled rather than to assist them to satisfy conditions of entitlement. However that may be, the duty imposed in Hawkesley v. May is analogous to the duty of disclosure which, in my opinion, arose in the circumstances of this case. It may be that there is a broad principle, founded on general standards of honesty and fair dealing, that some duty of disclosure is imposed on one who holds the property of another or an instrument of title to the property of another as a bare custodian or trustee when the other does not know of his entitlement to the property and the holder has reason to believe that the other does not know of his entitlement. In appropriate circumstances, such a broad principle would support a duty of disclosure owed by the custodian of a deceased testator's will to a beneficiary when the nominated executor is dead or cannot be found or renounces the office of executor. That duty does not need to be considered in this case; in this case, the nominated executor accepted the office. An executor's assumption of office is inconsistent with any further duty of disclosure. Thereafter the duty of making the will effectual is his to discharge.

[34]

I am conscious that it has been said in recent judgments of this Court that the existence of a duty of care depends on whether the requisite relationship of proximity exists between a person who is said to owe the duty and a person to whom the duty is said to be owed and that I have not adopted that approach in determining whether a duty of disclosure exists in this case. The notion of proximity as I understand it is simply Lord Atkin's neighbourhood principle which depends on the reasonable foreseeability of loss. Others have understood the notion to subsume foreseeability within a wider concept underlying the wide variety of cases which may be gathered under the heading of "negligence". In deference to majority judgments in this Court, I would be constrained to inquire whether "the requisite relationship of proximity" existed if that phrase defined a legal criterion of such precision that it answered the question whether, in the present circumstances, a duty of care exists. I do not understand the wider concept of proximity to furnish a test for determining whether the particular facts of a case give rise to a duty of care. In San Sebastian Pty. Ltd. v. The Minister [25] , I explained the difficulties I see in attempting to apply the wider concept of proximity to the facts of a particular case. Lacking the specificity of a precise proposition of law, the wider concept remains for me a Delphic criterion, claiming an infallible correspondence between the existence of the "relationship of proximity" and the existence of a duty of care, but not saying whether both exist in particular circumstances. When the existence of a duty in a new category of case is under consideration, the question for the court is whether there is some factor in addition to reasonable foreseeability of loss which is essential to the existence of the duty: see Jaensch v. Coffey [26] . In many of the new categories of case in which a duty has been held to exist, reasonable foreseeability of loss has not been sufficient in itself to give rise to a duty to act or to abstain from acting in order to avoid the loss. In a case where a novel category of duty is proposed and the factors which determine its existence must be identified, the court may have regard to a variety of considerations the nature of the activity which causes the loss, the nature of the loss, the relationship between the parties and contemporary community standards (especially where liability for breach of the proposed duty would be disproportionate to the risk which a person might reasonably be expected to bear as an incident of engaging in the particular activity if no limiting factor were identified). In Sutherland Shire Council v. Heyman [27] I suggested that it is preferable for the law to develop new categories of negligence incrementally and by analogy with established categories, for the established categories provide firm evidence of the kinds of factors which condition the existence of the various categories of duties. It is one thing to speak in general terms about the considerations which affect the development of the law; it is another to define the law as developed. In a novel category of case, when it appears that the proposed duty depends on some factor additional to reasonable foreseeability of loss, the additional factor must be identified. In my opinion, the identification must be sufficiently precise to permit the tribunal of fact (whether judge or jury) to ascertain the existence of the relevant factor or factors: see San Sebastian Pty. Ltd. v. The Minister [28] . Indeed, it is only by reference to factors so precisely identified that it is possible to define the nature and content of the proposed duty. And it is only by reference to the nature and content of a duty that it is possible to define the elements of the cause of action in tort for its breach. Having defined the duty of disclosure owed by the custodian of a deceased testator's will to the executor named in the will, it is necessary next to turn to the elements in the cause of action for its breach.

[36]

The elements which are essential to the existence of a cause of action for breach of a duty of disclosure owed to an executor include, of course, damage. The nature of the damage which a breach is apt to cause discloses other elements in the cause of action. The damage caused by breach of a duty of disclosure owed to an executor can flow only from his ignorance of the will or its contents or its custody. That ignorance prevents his assumption of the office of executor. It may be tautologous to say that the executor's ignorance of the will or its contents or its custody is an element in the cause of action founded on breach of the duty. After all, if the executor knows of the will, its contents and its custody, he cannot establish the necessary causal relationship linking a breach of the duty of disclosure and any loss occasioned by his failure to exercise or enjoy his rights in respect of the estate. Once the executor knows the material facts, no further failure to disclose on the part of the custodian can be productive of damage. The damage recoverable for breach of the duty of disclosure thus exhibits uniformly this feature: the damage caused by the breach of duty is generated by events occurring when the executor is ignorant of his title to the estate and before he has elected whether or not to renounce the office of executor. The damage recoverable for breach of the duty also exhibits uniformly a further feature: the damage is not caused by an infringement of the proprietary or possessory rights of the executor in respect of the assets in the estate. The executor's proprietary or possessory rights are unaffected, but they are not enjoyed or exercised. The cause of action arising from a breach of a duty of disclosure has a different origin from a cause of action arising from an infringement of the proprietary or possessory rights of the executor over the assets in the estate. It does not devolve on the executor as an asset in the estate of the testator. Nor does it arise out of the executor's administration of the estate. To the contrary, it arises out of his failure to enter upon the administration of the estate. Though the cause of action enures for the benefit of the estate, it is not complete when the estate suffers loss by reason of the nominated executor's failure to enter upon administration of the estate: he may renounce the office and never enter upon administration of the estate.

[43]

The solicitors in their defence pleaded that the action was statute-barred and in argument they rely on the Limitation Act as an ultimate defence if it should be found that they were otherwise liable for breach of duty. The submission made on their behalf is that the damage caused by any breach of duty on their part began in 1975 or, in any event, not later than six years before the action was commenced on 22 November 1982. By November 1976 at the latest, so the argument goes, the period of limitation had commenced to run so that the plaintiff's cause of action was extinguished by the time the solicitors told him of the will or within a relatively short time afterwards. Of course, the injustices occasioned by statutes of limitation have been seen in many cases (see, e.g., Cartledge v. E Jopling & Sons Ltd. [29] where time was held to run before the plaintiff discovered that he had contracted compensible pneumoconiosis) and have led to modification of the bar in personal injury cases: see Pt III, Div. 3 of the Limitation Act. Wilson J. in Kamloops v. Nielsen [30] observed that "perhaps the most serious concern is the injustice of a law which statute-bars a claim before the plaintiff is even aware of its existence". It would not be surprising if the application of s. 14(1)(b) of the Limitation Act to cases of economic loss sometimes worked an injustice. The Act may be pleaded by a defendant whether its operation will serve the ends of justice or not. This was not a case in which the plaintiff's claim depended on a contest between the contradictory recollections of opposing witnesses whose memories were likely to be dimmed by the passage of time; nor was it a case where a disputed claim had been allowed to lie dormant while the limitation period ran. It was a case in which the whole of the material evidence as to breach of duty came from the solicitors themselves and from their own documents. Yet, if the argument founded on the Limitation Act, is right, the solicitors' breach of duty, persisted in throughout all or most of the limitation period, has successfully produced an exemption from their liability to compensate an executor for loss which their breach of duty caused. It is not an attractive argument. If the argument be right, there is an incentive for a solicitor whose breach of a duty imposed by law causes damage to an executor to conceal it from the executor until six years have passed, even though further damage may accrue from day to day so long as the concealment continues. The argument does not sit easily with the public perception, sedulously cultivated by professional societies, that the professional standards of solicitors assure substantial protection in the administration of the estates of deceased clients. The argument is no more attractive if it is advanced at the insistence of professional insurers. The terms of a policy which is apt to qualify the protection expected by the public are a matter of private contract or perhaps of negotiation by professional societies.

[45]

Whether the raising of the Limitation Act in a case like the present is regarded as appropriate or not, the issue raises questions which depend on the answer to a technical question: when does a cause of action in tort for breach of a duty to disclose first accrue? The majority of the Court of Appeal held that such a cause of action first accrues when damage occurs irrespective of the claimant's knowledge (per Kirby P.) or as soon as the wrongful act has caused some damage beyond what can be regarded as negligible: per Glass J.A. There is no doubt that most causes of action for negligence first accrue when the plaintiff first suffers damage caused by the defendant's breach of duty. The ordinary rule is restated in Cartledge v. E. Jopling & Sons Ltd. in terms reproduced by Glass J.A. in the Court of Appeal. Difficulties in applying the rule have been encountered in England in cases where damage has occurred on land or defects have occurred in the construction of buildings, but there is no reason to doubt the applicability of the orthodox view: see the discussion in Sutherland Shire Council v. Heyman [31] . There are some observations in South Australia v. Johnson [32] which suggest that time runs from discovery of damage rather from the occurrence of damage, but those observations are to be accounted for by the conventional basis on which the parties chose to fight the case - a basis which precludes the judgment in that case from being treated as a rejection of established legal principle. This case, however, is not an ordinary case in which a plaintiff seeks damages for negligence. For reasons earlier stated damage is not temporally the last element of the cause of action to occur. Unlike the ordinary case, the last element to occur in a case of the present kind is the nominated executor's assumption of the office of executor. Until that occurs, the cause of action is not complete. For the purposes of s. 14(1)(b) of the Limitation Act, "time runs from the accruer of the cause of action, but a cause of action does not accrue unless there be some one who can institute the action": Meyappa Chetty v. Supramanian Chetty [33] ; and see Thomson v. Clanmorris (Lord) [34] . Until the nominated executor assumes the office of executor, the cause of action does not accrue and time does not begin to run. If a cause of action is itself an asset which devolves on the executor or arises from an infringement of the proprietary or possessory rights of an executor in respect of the estate, the executor's ignorance of his title would not prevent the time from running: cf. Knox v. Gye [35] . But where no action can be brought by the nominated executor until he assumes office, time runs only from that event. Time commenced to run in this case only from Mr. Hawkins' assumption of the office in March 1981. The action was commenced within six years thereafter. The defence based on the Limitation Act fails.

[57]

When, on 20 January 1975, the respondent solicitors were informed that the testatrix had died, they acted on the basis that they still held the testatrix's original will in their custody. After discussion with a nephew of the testatrix, they did a number of things in respect of which they were, more than six years later, to render a memorandum of professional costs on the basis that they had been acting for the estate. They obtained details of the testatrix's account with the Commonwealth Savings Bank of Australia and inspected the contents of a safe custody packet which the bank held. They authorized payment by the bank of the testatrix's funeral expenses. They communicated the contents of the will to the nephew. They inititated inquiries to ascertain whether the testatrix had made a subsequent will of which they were unaware. They wrote to another relative of the testatrix and to the solicitor acting for yet another advising that the particular relative, according to the will of the testatrix which "we hold", had no interest in her estate. They failed, however, to take any steps to locate Mr. Hawkins or to inform him that the testatrix had died and that, no doubt contrary to any reasonable expectation which he might have had, he remained her executor and was, apart from the legacy of $200 to the testatrix's adopted daughter, the sole beneficiary under what they believed to be her last will. It was not until March 1981, which was after Mr. Hardwick's retirement, that any positive attempt was made by the firm to impart that information to Mr. Hawkins. Then, when told for the first time of his interest under the testatrix's will, Mr. Hawkins immediately took steps to safeguard and administer her estate. In the meantime, the testatrix's house, which was the main asset in her estate, had been permitted to fall into a state of disrepair and, for a considerable period, to lie vacant. When a return was subsequently lodged with the Stamp Duties Office for death duty purposes, a substantial fine for late lodgment was imposed. As I followed the argument, it is not disputed that the estate sustained loss by reason of Mr. Hawkins' ignorance, in the period up until March 1981, of his appointment as the testatrix's executor and residuary beneficiary.

[59]

In the Supreme Court, the plaintiff's action was propounded as a claim both in contract and in tort. At first instance, little, if any, attention would appear to have been given in argument on behalf of the plaintiff to the distinction between a claim by Mr. Hawkins in his personal capacity and a claim by him as executor of the testatrix's estate. The claim in contract was apparently presented as a claim for damages for breach of a contract between the firm and Mr. Hawkins. The claim in tort was apparently presented as a claim for damages for breach of a common law duty of care which the firm had owed him personally as distinct from in his representative capacity as executor. The learned trial judge (Yeldham J.) dealt with the action on that basis. He dismissed it, holding that there had been no contract between the firm and Mr. Hawkins and that the firm had owed him no relevant duty of care. Accordingly, his Honour found it unnecessary to consider a defence, raised on behalf of the firm, that the action was not maintainable by reason of the Limitation Act 1969 NSW, s. 14(1). An appeal by the plaintiff from his Honour's decision was dismissed by the New South Wales Court of Appeal (Kirby P. and Glass J.A., McHugh J.A. dissenting). In the course of argument, we were informed by counsel that, before the Court of Appeal, "it was argued that the action was brought [by Mr. Hawkins] as executor also". This is confirmed by the judgment of Kirby P. which identifies as one of the questions "debated in the oral and written submissions of the parties" the question whether "there existed a duty of care, arising in contract or tort, owed by the respondents to [Mr. Hawkins] as executor of the estate of the testatrix". The majority of the Court of Appeal held that, even if the plaintiff would otherwise have had a good claim, it was statute-barred. Their Honours dealt with the appeal on that basis and accordingly found it unnecessary to determine whether, but for the Limitation Act point, the plaintiff would have been entitled to succeed. McHugh J.A., in dissent, was of the view that the firm had been in breach of a duty of care which it owed to Mr. Hawkins under the law of negligence and that s. 14(1) of the Limitation Act did not prevent the maintenance of the plaintiff's action for damages for breach of that duty.

[69]

Examination of the material in evidence fully confirms Yeldham J.'s conclusion that it is unclear whether the original will had remained in the custody of the firm. The affidavits of Mr. Hardwick and Mr. Sullivan, on the basis of which probate was granted, were, as has been said, to the effect that it did. Nowhere, however, is there any statement by anyone that he or she actually saw the will after the testatrix's death. The basis of Mr. Sullivan's belief that the will had remained in the custody of the firm appears to have been the statement in the letter to the testatrix that a photostat copy of the will, and not the original, was forwarded to her. Mr. Hardwick's oral evidence in chief was, as has been seen, to the effect that that statement was probably incorrect. In his affidavit, Mr. Sullivan indicated that, when he took over supervision of the matter in February 1981, the instruction cover contained xerox copies which he believed to have been "made by the firm after the [testatrix's] death". His belief in that regard would, however, seem to conflict with the statement in Mr. Hardwick's affidavit that, shortly after "the original instructions were received", he caused xerox copies of the will to be made and caused the will to be placed in a section of the strongroom reserved for documents relating to his matters. Regardless of whether one treats the reference to "original instructions" in that statement as a reference to the original instructions to act on the preparation of the testatrix's will or as a reference to the instructions to return it to the testatrix, the inference would seem to be that the xerox copies in the instruction cover, to which Mr. Sullivan referred, were prepared, at the latest, some four years before the testatrix died. On the other hand, the available evidence in relation to this aspect of the case lay exclusively within the knowledge and control of the respondent solicitors who include Mr. Hardwick and Mr. Sullivan among their number. The affidavits of both Mr. Hardwick and Mr. Sullivan, on the basis of which probate was granted, and which were made more than two years closer to the events than the hearing of the action, were plainly to the effect that the will had remained in the custody of the firm at the time of the testatrix's death. Under cross-examination, Mr. Hardwick said that he "would not know at this stage" whether his suggestion that he would have sent the original will to the testatrix was correct and that he "wouldn't know" whether the will had been retained and "lost in the [firm's] strongroom". Mr. Sullivan's affidavit, which was received as an exhibit, remained unqualified by any subsequent evidence from him since he was not called as a witness. In all the circumstances, it appears to me that the inferences which should properly be drawn, at least for the purposes of the present proceedings against the respondent solicitors, are that, notwithstanding the request for its return which the testatrix had made more than three years before her death, the will continued to be held by the firm pursuant to the arrangement for its safe custody and that it was misplaced among other documents in the firm's strongroom after the testatrix had died.

[72]

A number of the contractual terms relating to the custody of the will can be readily inferred as a matter of actual intention. One is that, as a matter of joint contractual intention, the testatrix and the firm could, during the life of the testatrix, each bring the bailment to an end by reasonable notice to the other party: the testatrix could require that her will be handed to her; the firm could require that she remove her will from its custody. It was obviously in the contemplation of both testatrix and the firm that the will might remain in the firm's custody at the time of the testatrix's death. That being so, another term which can be inferred, as a matter of actual intention of the parties, is that, in that event, the firm assumed continuing responsibility for the safe custody of the will until such time as it was handed over to some person, institution or authority to whom or to which the firm was entitled to entrust possession of it. Closer to the borderline between inference and imputation, a further term which can be inferred is that the firm was authorized, when the testatrix died, to communicate the contents of the will to any person with a legitimate interest in them, including any person named in the will as executor or a beneficiary. Once one passes beyond that stage to the question whether it was a term of the contract that the firm was, when the testatrix died, under an obligation to take any (and, if so, what) positive steps to locate some or all of the persons named in her will, one passes beyond the stage of inclusion of terms by reason of inferred actual intention. It simply cannot be inferred or assumed as a matter of actual fact that the testatrix ever directed her mind to that question or that, if she did, there was any actual joint intention of herself and Mr. Hardwick which can be expressed as a contractual term. The likelihood is that the testatrix was content to rely upon Mr. Hardwick as the custodian of her will without troubling herself about whether he was to be under a duty to take any, and if so what, positive steps to ensure that effect could be given to her testamentary intentions. If a term spelling out the obligations of the firm in that regard is to be included in the contract between the parties, it must be implied as a matter of presumed or imputed intention.

[73]

Care must be taken to avoid an automatic or rigid application of the ordinary cumulative criteria for determining whether a term should be implied in a written contract to a case where the contract is oral or partly oral or where it is apparent that the parties have never attempted to reduce their agreement to complete written form: cf. Hospital Products Ltd. v. United States Surgical Corporation [38] . The cases in which those criteria were laid down or accepted as the cumulative ingredients of an overall test were concerned with the question whether a term should be implied in a formal contract which was complete upon its face: see, in particular, B.P. Refinery (Westernport) Pty. Ltd. v. Hastings Shire Council [39] ; Secured Income Real Estate (Australia) Ltd. v. St. Martins Investments Pty. Ltd. [40] ; Codelfa Construction Pty. Ltd. v. State Rail Authority of N.S.W. [41] . In such cases, the insertion of an additional term effectively involves an alteration to what the parties have formally accepted as the complete written record of the compact between them. As the judgment of Mason J. in Codelfa [42] (Stephen and Wilson J. concurring with his Honour's comments on this aspect of the case) clearly indicates, the cumulative criteria formulated or accepted in such cases cannot be automatically applied to cases such as the present where the parties have not attempted to spell out all the terms of their contract but have left most or some of them to be inferred or implied. Where that is so, there is no question of effectively altering the terms in which the parties have seen fit to embody their agreement; the function of a court is, as Lord Wilberforce pointed out in Liverpool City Council v. Irwin [43] : "simply to establish what the contract is, the parties not having themselves fully stated the terms." In the performance of that function, considerations of what is "reasonable", "necessary to give business efficacy to the contract" and "so obvious that "it goes without saying" " (B.P. Refinery (Westernport) Pty. Ltd. [39] ; The Moorcock [44] ; Shirlaw v. Southern Foundries (1926) Ltd. [45] ) may be of assistance in ascertaining the terms which should properly be implied in the contract between the parties. There will not, however, be the need or the justification for the law to refuse to imply any imputed term which does not clearly satisfy all such requirements. This is particularly so where, as here, the contract has passed from the executory stage and has been executed by one or both parties.

[78]

In the present case, there was no finding in the courts below that there existed any settled professional practice defining what, if any, steps a solicitor in New South Wales is obliged to take to locate the executor or the beneficiaries under a will which is in his custody at the time of the testator's death. Nor is there any satisfactory evidence or other material before the Court upon which a finding of any such settled practice or of the effect of any relevant past dealing could properly be based. The only relevant evidence was that of a Sydney solicitor (Mr. Windeyer) who was, at the time he gave his evidence, the Chairman of the Insurance Claim Committee of the Law Society of New South Wales. Upon analysis, however, his evidence does no more than establish that he personally would, on learning of the death of a testator whose will he held, write to the executor and that, if he was unaware of the executor's address, he would look up the name in the telephone book. In a context where it is ordinarily in the interests of a solicitor's probate practice that the executor be located, that evidence is inadequate to base a finding of any general practice defining the professional obligations of a solicitor in the postulated circumstances. Indeed, I did not understand the contrary to have been argued by either side. That being so, the question whether there should be implied in the contract between the testatrix and the firm either a term imposing a specific obligation to locate the executor or beneficiaries under the testatrix's will or a term imposing some more general duty encompassing such an obligation falls to be answered by reference to whether it can be seen that the implication of such a term is necessary for the reasonable or effective operation of such a contract in the circumstances. The existence and content of any general duty of care under the law of negligence would seem, at least prima facie, to be relevant to any assessment of the need to imply such a contractual term. It is convenient to turn, at this stage, to consider whether the firm was under any such common law duty of care.

[79]

While assumpsit remained in its infancy, an action for breach of the duty of a solicitor to a client to be skilful and careful lay in case: see per Viscount Haldane L.C., Nocton v. Lord Ashburton [51] ; Poulton, Tort or Contract, Law Quarterly Review, vol. 82 (1966), 346, at pp. 360-361 and Dwyer, Solicitor's Negligence - Tort or Contract?, Australian Law Journal, vol. 56 (1982), 524, at p. 526ff. Subsequently, an action for breach of the duty of care and skill owed by a solicitor in the performance of professional work for a client came to be seen as lying also, and then exclusively, in assumpsit or contract: see, generally, the discussion of the authorities contained in the judgment of the Supreme Court of Canada (delivered by Le Dain J.) in Central Trust Co. v. Rafuse [52] and in the judgment of Oliver J. in Midland Bank v. Hett, Stubbs and Kemp [53] . Thus, in Groom v. Crocker [54] , Sir Wilfrid Greene M.R. commented that the "relationship of solicitor and client is a contractual one . It was by virtue of that relationship that the duty [of skill and care] arose, and it had no existence apart from that relationship". In the same case [55] , Scott L.J. said that "the mutual rights and duties" of a solicitor and his client "are regulated entirely by the contract of employment". The emergence and development of the modern law of negligence, particularly since the decision in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [56] , inevitably led to a reappraisal of the isolation of a solicitor from the reach of the ordinary law of negligence in relation to his professional dealings with a client. The clear trend of modern authority is to support the approach that the duty of care owed by a solicitor to a client in respect of professional work prima facie transcends that contained in the express or implied terms of the contract between them and includes the ordinary duty of care arising under the common law of negligence: see, in particular, Esso Petroleum v. Mardon [57] ; Midland Bank v. Hett, Stubbs and Kemp [58] ; Aluminium Products (Q.) Pty. Ltd. v. Hill [59] ; MacPherson and Kelley v. Kevin J. Prunty & Associates [60] ; Vulic v. Bilinsky [61] ; Sacca v. Adam [62] ; Brickhill v. Cooke [63] ; Central Trust Co. v. Rafuse [64] ; Finlay v. Murtagh [65] ; Day v. Mead [66] . That approach is also supported by principle in that, in the context of the general scope of the modern law of negligence to which members of this Court have long sought to give effect (see, e.g., the earlier cases in this Court referred to in Hackshaw v. Shaw [67] ), there are no acceptable grounds for refusing to recognise the liability of a solicitor in tort for negligence in the performance of professional work for a client. That liability prima facie corresponds with what Windeyer J. described in Voli v. Inglewood Shire Council [68] , a case concerning the liability of an architect for negligence in the performance of professional work, as "the ordinary liabilities of any man who follows a skilled calling". In the course of his judgment, which was concurred in by the other members of the Court (Dixon C.J. and Owen J.), Windeyer J. went on to examine the content of those "ordinary liabilities". It suffices, for present purposes, to quote two extracts from his Honour's judgment [69] :

[84]

The identity and relative importance of the factors which are determinative of the existence of a relevant relationship of proximity vary in different categories of case: see, e.g., Jaensch v. Coffey [1] ; Heyman [2] . It is so with respect to the factor of physical nearness, in the sense of space and time. In the case of an activity which involves a foreseeable risk of causing direct physical injury to those nearby, physical nearness will ordinarily suffice to create a relevant relationship of proximity: see per Lord Esher M.R., Le Lievre v. Gould [3] . On the other hand, it is not necessary for the existence of a relationship of proximity in some other categories of case for there to have been any physical proximity between the parties concerned. Indeed, a relationship of proximity can exist with, and a duty of care can be owed to, a class of persons which includes members who are not yet born or who are identified by some future characteristic or capacity which they do not yet have. Cases involving damage by reason of a latent defect in property demonstrate the point. Thus, a relationship of proximity ordinarily exists between the architect or builder of a residential building (e.g. a maternity hospital) and the members of the class of persons who will in future years be born or housed in it. That relationship of proximity is such as to give rise to a duty of care to avoid a real risk of injury by reason of faulty design of the building. The duty of care is owed to each member of the class. If, by reason of the negligence of architect or builder, the building subsequently collapsed and a particular baby was injured, that baby would have a cause of action for the damage sustained by reason of the breach of the duty of care which may have been owed to him, and broken, by a person who has died before he was born. Cases, such as the present, involving economic damage which is, and was likely to be, sustained by the estate of an immediate party to the relationship provide examples where a relationship of proximity can exist with a person (perhaps unborn) by reason of some future characteristic or capacity which he does not yet have. If, for example, a professional man is in a relationship of proximity with a client which gives rise to a present duty of care to avoid future economic loss of a kind which obviously might be sustained either by the client or by his estate after his death, the relationship of proximity will ordinarily exist with a class which includes both the client, in respect of loss sustained during his life, and his legal personal representative in respect of injury sustained after his death. In such a case, the resultant duty of care will be presently owed both to the client and to the future legal personal representative (in his capacity as such).

[86]

The critical factors of the relationship between the testatrix and the firm which gave it the character of a relationship of proximity with respect to economic loss of the kind sustained in the present case are those related elements which lie at the heart of the ordinary relationship between a solicitor and his client, namely, assumption of responsibility and reliance. The solicitor, as a specially qualified person possessing expert knowledge and skill, assumes responsibility for the performance of professional work requiring such knowledge or skill. The client relies upon the solicitor to apply his expert knowledge and skill in the performance of that work. In the ordinary case, the only kind of damage which is likely to result from the negligence of the solicitor in the performance of his professional work is pure economic loss. In that context, the elements of assumption of responsibility and of reliance combine with that of the foreseeability of a real risk of economic loss to give the ordinary relationship between a solicitor and his client the character of one of proximity with respect to foreseeable economic loss. The present case fell within that category. It was also a case in which economic loss caused by negligence on the part of the solicitor might clearly be sustained either by the client or by her estate after her death. If the will was lost by the firm during the testatrix's life, she would personally sustain the economic loss comprising legal costs or other expenses involved in the preparation and execution of a new will. On the other hand, an obvious object of the arrangement under which the testatrix's will was entrusted to the custody of the firm was to ensure that it would be available on her death to the named executor to inform him of his nomination by the testatrix as the person appointed to protect and duly administer the assets comprising her estate. The risk of economic loss being sustained by the estate if the named executor remained unware of his appointment was real and foreseeable. That risk would plainly be compounded if the person named as executor was also, for practical purposes, the sole beneficiary. In these circumstances, the relevant relationship of proximity which existed with respect to economic loss of the kind which was in fact sustained by the estate extended to include both the testatrix and her legal personal representative after her death.

[88]

In drawing and supervising the execution of the testatrix's will and undertaking responsibility for its custody in the present case, the firm was acting professionally as the testatrix's solicitors. In accepting responsibility for custody of the testatrix's will after her death, the firm effectively assumed the custodianship of the testatrix's testamentary intentions. If the firm simply retained custody of the will without disclosing its existence to anyone at all, those testamentary intentions would obviously be likely to be frustrated - by grant of probate of an earlier will, by grant of letters of administration on the basis that the testatrix had died intestate or by the estate remaining unadministered and the assets being neglected, misused or misappropriated. Those aspects of the relationship between the firm and the testatrix (and Mr. Hawkins, in his capacity as executor) combined with the foreseeability of a risk of damage of the kind sustained to bring the case within a category in which the relationship of proximity was such as to give rise to a duty of care which might, depending upon the circumstances, extend to require some positive action to avoid such damage. It is neither necessary nor desirable to attempt to define, in the abstract, the precise content of the firm's duty of care or the precise extent to which the firm was required to take positive action. The relevant question is whether the failure of the firm to take any positive steps at all to locate Mr. Hawkins during a period of more than six years after it became aware of the testatrix's death constituted, as a matter of fact, a breach of the duty of care which the firm, as a matter of law, owed Mr. Hawkins as the testatrix's legal personal representative. That question must be answered by reference to the standard or measure of care which was reasonable in the circumstances. In the present case, that standard or measure of care was that indicated by Windeyer J. in Voli [4] , namely, the care and skill to be expected of a qualified and ordinarily competent and careful solicitor in the exercise of his profession. In the courts below, only McHugh J.A. found it necessary to consider whether the conduct of the firm fell short of the standard of care which the firm was obliged to observe. In all the circumstances, it is appropriate for this Court to determine that question for itself.

[90]

As has been said, the plaintiff's action in negligence was propounded as brought by Mr. Hawkins personally as well as in his capacity as executor. There may well be circumstances in which a failure by a firm of solicitors to communicate the existence or contents of a will in its custody to a person named in it as executor and principal beneficiary would constitute an actionable breach of a duty of care owed under the common law of negligence to that person in his personal capacity as a beneficiary. Circumstances where a failure of a firm of solicitors to disclose the existence of the will caused the assets of the estate to be irretrievably distributed to the next-of-kin or to persons claiming under an earlier will might provide an example of such a case if, upon analysis, it appeared that the estate itself could not properly be said to have directly sustained the relevant damage. In such a case, the assumption of responsibility by the solicitor, the unavoidable dependence for information of the beneficiary and the foreseeability of economic loss to the beneficiary in his personal capacity, could well combine to give rise to a relevant duty of care owed directly to the beneficiary. The present is not, however, such a case. The damage which it is sought to recover in the present case (i.e., the economic loss sustained by reason of the deterioration of the house, lost rental and the incurring of the fine for late lodgment of the death duty return) was all directly sustained by the estate before administration had been completed. That being so, any loss or damage sustained by Mr. Hawkins in his personal capacity (i.e. as a beneficiary) was indirect and remote. It consisted of the possibility of a reduction in the ultimate value of his interest in the unadministered estate by reason of the damage which the estate had sustained. If the estate has a good cause of action against the firm and recovers the amount of such damage, Mr. Hawkins will have sustained no relevant loss or damage at all in his personal capacity. The point is perhaps made more clearly if it be assumed that some person other than Mr. Hawkins had been appointed executor. In that event, Mr. Hawkins as a beneficiary in the estate would have had no more right to obtain damages from the firm for the loss sustained by the estate by reason of the firm's negligence than he would, e.g., have had to obtain damages from the negligent driver of a motor vehicle for physical damage caused to another motor vehicle which constituted an asset of the testatrix's estate. The right and the obligation to preserve the assets of the estate pending completion of administration and to bring proceedings for loss or damage sustained by the estate belong to the executor, acting on behalf of the estate, and not to a beneficiary acting directly on his own behalf.

[92]

Regardless of whether the traditional implication of a contractual term requiring that the solicitor exercise due skill and care is treated as being based upon the imputed intention of the parties in the circumstances or upon some general rule of law that such a term is to be implied in contracts of that kind unless the parties have excluded it (cf., e.g., per Lord Cross of Chelsea, Liverpool City Council v. Irwin [5] ), recognition that the ordinary law of negligence prima facie applies in respect of work done by a solicitor for his client removes a large part of the basis and justification for the implication of such a general contractual duty of care. The content of the solicitor's duty of skill and care under the contractual term which has traditionally been implied corresponds with the content of the ordinary duty of skill and care under the common law of negligence: see, e.g., Central Trust Co. v. Rafuse [6] . It is, however, at least arguable that there are some important differences between the incidents of the contractual duty and those of the tortious or delictual duty at least in so far as the consequences of breach are concerned. Thus, an action for breach of the contractual duty lies when the breach occurs but an action for breach of the tortious duty lies only if and when damage has been sustained and the cause of action is complete: but cf., e.g., Schwebel v. Telekes [7] , per Laskin J.A. Again, and notwithstanding the liability of a solicitor in negligence for economic loss caused to a client, it is arguable that there are differences, which could conceivably be of practical significance, between the measure of damage for breach of the contractual duty and the measure of damage for breach of the tortious duty. Yet again, it is arguable that the amount recoverable for breach of the contractual duty may vary from that recoverable for breach of the tortious duty according to what (if any) further contractual term is to be implied dealing with the consequence of contributory negligence.

[95]

To the extent that the incidents of an independent general contractual duty of care would differ from those of an independent tortious duty, it is even more difficult to rationalize the implication of a contractual duty. Once one accepts that the ordinary law of negligence can apply to render a solicitor liable for economic loss caused to a client by professional negligence, the content and incidents of the solicitor's common law duty of care must be seen as representing the law's judgment of the extent to which it is reasonable and desirable to render a solicitor liable for loss or damage suffered by his client. Why, one is led to ask, should the same common law formulate a general rule, or impute to the solicitor and his client a joint intention, that the solicitor should be under some superimposed and different contractual liability for such loss or damage notwithstanding the absence of actual agreement between them that that should be so? A positive response to that question must be founded upon a flawed perception of a continuing dichotomy between a law of contract and a law of tort. The rationalization and principled development of the law cannot but be prejudiced and impeded for so long as the law of contract and the law of tort are, on the basis of past distinctions between different causes of action, seen as operating upon the same set of circumstances to impose, independently of actual intention, consequences which a legal theorist might describe as concurrent but which any ordinary person would describe as conflicting. The law of contract and the law of tort are, in a modern context, properly to be seen as but two of a number of imprecise divisions, for the purpose of classification, of a general body of rules constituting one coherent system of law. Where rules classified in different divisions would otherwise conflict or compete, an essential function of the whole system is to avoid, resolve or rationalize such conflict or competition, not to induce or preserve it.

[96]

The problems involved in the perception of co-extensive contractual and tortious duties of care have not gone unnoticed in judgments in other courts or in learned writings. Indeed, appreciation of them has played no small part in the thinking of those who have vainly sought to keep the solicitor completely removed from the reach of the common law of negligence at least in so far as the performance of professional work pursuant to a contract with his client is concerned. I have already indicated my inability to accept that solution consistently with what I see as the proper and reasoned development of the common law. If one accepts the concurrent existence in the ordinary case of imputed general contractual term and tortious duty, one possible solution of the resulting tension might be to seek to identify the nature of the plaintiff's substantial claim so that the plaintiff 's claim could then be limited to that "to which he is in law entitled, according to the true facts of the case and the real nature of the transaction": Chinery v. Viall [8] ; Winfield, Province of the Law of Tort (1931), 80-81. Upon analysis however, that solution would create more problems than it would solve unless the need to identify the nature of the substantial claim was seen as the occasion for a new and unacceptable submission to the out-moded barriers of the old forms of action. A more acceptable solution was recently mentioned by Cooke P. in his penetrating judgment in Day v. Mead [9] , namely, "to recognize that, subject to special contractual terms, the same duty of care arises in both tort and contract and has the same incidents. On this view, the duty is not to cause damage by failing to take reasonable care; and a cause of action for negligence does not arise in either tort or contract unless and until damage accrues". Plainly, there is much to be said for that approach. On balance, however, it seems to me to be preferable to accept that there is neither justification nor need for the implication of a contractual term which, in the absence of actual intention of the parties, imposes upon a solicitor a contractual duty (with consequential liability in damages for its breach) which is co-extensive in content and concurrent in operation with a duty (with consequential liability in damages for its breach) which already exists under the common law of negligence. Put differently, the imputation of a relevant contractual term should be confined to what is justified by ordinary principles governing the implication of a term on the basis of the imputed intention of the parties, which, in a case such as the present where the parties have not sought to express all of the terms of the contract between them, is what can be seen to be necessary for the effective or reasonable operation of that contract. Plainly, it is not necessary for either the effective or reasonable operation of the contract between the firm and the testatrix that there should be superimposed upon the duty of care which the firm owed the testatrix under the common law of negligence a concurrent contractual duty of care of co-extensive content.

[103]

Kamloops, like the decision of the English Court of Appeal in Sparham-Souter v. Town & Country Developments (Essex) Ltd. [14] which the Supreme Court of Canada preferred to the subsequent decision of the House of Lords in Pirelli General Cable Works Ltd. v. Oscar Faber & Partners [15] , was a case where economic loss had been sustained as a consequence of the development of a latent defect in a building. Commonly in such cases, the building never existed and was never owned without the defect and (in the absence of consequential collapse or physical damage or injury) the only loss which could have been sustained by the owner was the economic loss which would be involved if and when the defect was actually discovered or became manifest, in the sense of being discoverable by reasonable diligence, with the consequence that the damage was then sustained by the then owner: cf. Sutherland Shire Council v. Heyman [16] . The position is different in cases where all or some of the damage, be it in the form of physical injury to person or property or present economic loss, is directly sustained in the sense that it does not merely reflect diminution in value or other consequential damage which occurs or is sustained only when a latent defect which has existed at all relevant times becomes manifest. In those cases, damage is sustained when it is inflicted or first suffered and the cause of action accrues at that time. I do not read the passage in the judgment of the Court in South Australia v. Johnson upon which the plaintiff relied as intended to effect any considered qualification of that general rule. In so far as Rafuse establishes a different general rule for Canada in relation to the operation of Statutes of Limitation, I am not persuaded that it should be followed in this country. That is not, of course, to say that the general rule may not be subject to qualification in some special circumstances or that its application may not involve unresolved difficulties in special categories of case (e.g., cases where all that is involved at the time of a tortious act is a risk of future economic loss): cf. Schlosser, Some Recent Developments in the Law of Limitation of Actions, Concurrent Liability and Pure Economic Loss, Alberta Law Review, vol. 25 (1987), 388, at pp. 393-394 .

[105]

It can be assumed for the purposes of the present case that economic loss caused by the negligent failure to inform Mr. Hawkins of the existence and contents of the testatrix's will was first sustained, in the sense that rent was not earned, within twelve months of her death. In the light of the subsequent grant of probate which retrospectively vested all of the testatrix's real and personal estate in Mr. Hawkins as from her death, the damage which was then sustained by the estate can now be seen to have been sustained by Mr. Hawkins as the testatrix's executor. The question for the purposes of s. 14(1) of the Limitation Act is not, however, when damage was sustained. The relevant question is when the cause of action first accrued " to the plaintiff or to a person through whom he claims ". In the circumstances of the present case, that question gives rise to a miscellany of problems to which reference was made in argument or in judgments in the courts below. The cause of action obviously did not accrue to the testatrix for she was dead when the damage was sustained. It may be arguable that, viewed contemporaneously, the cause of action accrued to the Public Trustee at the time when damage was first sustained. The limited interest of the Public Trustee under s. 61 of the Wills, Probate and Administration Act assumed an ephemeral quality, however, after the grant of probate to Mr. Hawkins and it is difficult to see how it could realistically be said that the Public Trustee was, for the purposes of s. 14(1) of the Limitation Act, the person to whom the right of action had originally accrued (cf. the reference to the first of a class of owners in Pirelli [17] ) or a "person through whom" the plaintiff in the present case claims. Nor is it easy to see how, in the context of s. 61 and viewed objectively, it can realistically be said that the cause of action accrued to Mr. Hawkins as executor some six years before he decided to apply for, let alone obtained, a grant of probate of the testatrix's will. Finally, it is arguable that, in the circumstances of the present case, the duty of care owed by the firm was a continuing one, that the breach of that duty continued up until the firm finally took some positive steps to locate Mr. Hawkins and inform him of the existence and contents of the will and that damages (which would include the loss of a right of action by the operation of the Limitation Act) continued to accrue in varying forms right up until the time when the Stamp Duties Office imposed a fine for late lodgment of the death duty return and when Mr. Hawkins incurred any additional legal costs involved in seeking probate of a copy will as distinct from the original document. In these circumstances, there is something to be said for the view that a distinct cause of action accrued each time new damage was incurred by reason of the continuing breach of duty. It is, however, unnecessary to pursue these problems involved in the firm's defence based on the Limitation Act. There is a more general answer to that defence. Its basis is to be found in the circumstance that, in the present case, the negligent failure of the firm to inform Mr. Hawkins of the existence and contents of the testatrix's last will not only caused the damage which was sustained by him in the capacity of executor of the testatrix's estate but also effectively concealed from him, for so long as he remained unaware of the contents of the will, the existence of the cause of action in negligence against the firm.

[106]

It is inevitable that a Statute of Limitations will, on occasion, lead to injustice in the special circumstances of particular cases. Such injustice, when it occurs, is an unavoidable cost of the benefits involved in ensuring that plaintiffs act promptly and that defendants are not subjected to the litigation of stale claims. The present case falls, however, in an anomalous category where the applicability of a limitation provision such as s. 14(1) would invariably involve prima facie hardship and injustice and where any compensating public benefit, apart from protecting the courts from being required to determine issues of distant fact, is absent. If a wrongful action or breach of duty by one person not only causes unlawful injury to another but, while its effect remains, effectively precludes that other from bringing proceedings to recover the damage to which he is entitled, that other person is doubly injured. There can be no acceptable or even sensible justification of a law which provides that to sustain the second injury will preclude recovery of damages for the first. It would, e.g., be a travesty of justice and common sense if the law provided that a cause of action lay for damages for false imprisonment but then went on to provide that that cause of action would be lost if the false imprisonment continued for six years after the cause of action first accrued. Likewise, it would be a travesty of justice and common sense if the law imposed a duty upon a solicitor to take positive steps to inform a third person of the contents of a document of which the solicitor was alone aware and then provided that any cause of action against the solicitor for damage caused by a negligent failure to perform that duty would be lost if the negligence continued for six years. It is arguable that the notion of unconscionable reliance upon the provisions of a Statute of Limitations which provides the foundation of the long-established equitable jurisdiction to grant relief in a case of concealment of a cause of action until after the limitation period has expired (cf. s. 55(1) of the Limitation Act) should, by analogy, be extended to cover cases such as these where the wrongful act at the one time inflicts the injury and, while its effect remains, precludes the bringing of an action for damages. It seems to me, however, that the preferable approach is to recognize that it could not have been the legislative intent that the effect of provisions such as s. 14(1) of the Limitation Act should be that a cause of action for a wrongful act should be barred by lapse of time during a period in which the wrongful act itself effectively precluded the bringing of proceedings. On that approach, the reference in s. 14(1) of the Act to the cause of action first accruing should be construed as excluding any period during which the wrongful act itself effectively precluded the institution of proceedings.

[136]

The plaintiff's cause of action will not accrue until damage occurs, which will commonly consist of cracks coming into existence as a result of the defect even though the cracks or the defect may be undiscovered and undiscoverable. The passage makes it clear that the cause of action did not accrue merely by reason of the sustaining of economic loss, for in one sense that loss was sustained as soon as the defect came into existence: at that stage the owner had something inherently less valuable than he would have had but for the defect in the chimney. His Lordship did allow, however, that there might be cases "where the defect is so gross that the building is doomed from the start, and where the owner's cause of action will accrue as soon as it is built" [26] . In his Lordship's view, such cases would be exceptional. Save for the reference to a building "doomed from the start", Pirelli has nothing to say as to the time of accrual of a cause of action for economic loss which is sustained otherwise than in consequence of or in conjunction with physical damage to property. The brief reference to a building "doomed from the start" seems to have been intended to enable a plaintiff to bring action before physical damage actually occurred, as was allowed, e.g., in Junior Books Ltd. v. Veitchi Ltd. [27] . Perhaps what his Lordship had in mind was that a cause of action in negligence for economic loss sustained in consequence of or in conjunction with a defect to property accrues when the property sustains damage, unless actual financial loss is sustained at an earlier time. The subsequent decision of the House of Lords in Ketteman v. Hansel Properties Ltd. [28] , in which it was claimed unsuccessfully that the buildings there in issue were doomed from the start, throws no further light on the question of accrual of a cause of action for economic loss sustained otherwise than in consequence of or in conjunction with physical damage to property. 1. [1976] Q.B. 858. 2. [1976] Q.B. 858. 3. [1983] 2 A.C., at p. 16. 4. [1983] 2 A.C., at p. 16. 5. [1983] 1 A.C. 52. 6. [1987] 1 A.C. 189.

[140]

Considerations other than those enunciated in Pirelli and Kamloops are arguably relevant to the answer as to when a cause of action for negligence causing economic loss accrues. It may, for example, be relevant to consider the precise interest infringed by the negligent act or omission. In actions in negligence for economic loss it will almost always be necessary to identify the interest said to have been infringed to determine whether the risk of loss or injury to that interest was reasonably foreseeable and whether a sufficient relationship of proximity referable to that interest was present so as to establish a duty of care. If the interest infringed is the value of property, it may be appropriate to speak of a cause of action in negligence for economic loss sustained by reason of latent defect as accruing when the resultant physical damage is known or manifest, for as was explained by Deane J. in Heyman [31] it is only then the actual diminution in market value occurs. If, on the other hand, the interest infringed is the physical integrity of property then there is a certain logic in looking at the time when physical damage occurs, as was done in Pirelli. So too, if the interest infringed is an interest in recouping moneys advanced it may be appropriate to fix the time of accrual of the cause of action when recoupment becomes impossible rather than at the time when the antecedent right to recoup should have come into existence, for the actual loss is sustained only when recoupment becomes impossible. The discoverability test adopted in Central Trust Co. seems to have been premised on the assumption that the interest infringed was the possession of a right to recoupment rather than recoupment itself: se e Schlosser, Some Recent Developments in the Law of Limitation of Actions, Concurrent Liability and Pure Economic Loss, Alberta Law Review, vol. 25 (1987), 388, at p. 390 , where the point is made in relation to Central Trust Co. that as the "mortgagors" made repayments until 1977 (notwithstanding that the mortgage given in 1968 was void ab initio) no actual loss was sustained until 1977.