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[2011] NSWSC 753
Supreme Court of NSW
2009-12-04
Brereton J
Original judgment source is linked above.
... The [purchaser]'s claims now appear in the Amended Summons of 25 October 2002. The principal claims are Claims 1 and 3 to establish that the [purchasers] have terminated the Contract of Sale and are contractually entitled to return of the deposit, and Claim 4 for an order that the deposit be repaid with interest under s.55(2A) of the Conveyancing Act 1919. There are also claims for damages for breach of contract, damages under the Fair Trading Act 1987 (Claims 5, 6 and 7) and ancillary claims. The principal matter debated at the hearing was the claim for the return of the deposit under s 55(2A). 101Although ultimately it failed, it was not unarguable, and might well have succeeded, but for the late emergence of the evidence of Mr Bonser about the inclined piling method. 102It is true that the Lucantonios also persisted at the hearing before Bryson J in an argument that they had validly terminated the contract (for breach by the vendor) and were contractually entitled to return of the deposit. However, as appears from the above extract from his Honour's judgment, it was far from the main issue in the case. Moreover, while Austin J had held the Lucantonios' case unarguable on the basis of Standard Condition 7, his Honour had accepted that there was an argument that special condition 40 did not preclude the Lucantonios' claim. As appears from the above discussion of the complaint about institution of the Equity proceedings, there was a basis for arguing that his Honour was incorrect - a view which Mr Warren expressed in his advice of 13 June 2002. Bryson J did not decide the contractual aspect of the case adversely to Mr Lucantonio on the basis of standard condition 7, but first on the factual basis that compliant construction in accordance with the development approval was not impossible, and secondly on the basis of special condition 40 - a basis in respect of which Austin J had found that Mr Lucantonio's case was not unarguable. 103Given that there remained, at least until Mr Bonser's critical evidence emerged, an arguable case for substantial damages under the Fair Trading Act , and an arguable case for return of the deposit under Conveyancing Act s 55(2A), I do not accept that any reasonably competent and prudent barrister would have advised discontinuance of the proceedings (with the concomitant costs consequences) after Austin J's judgment. In that context, such a barrister could well also have persisted in the contractual case, as it did not significantly expand the scope of the continuing proceedings beyond that which they would have had if confined to the Fair Trading Act and s 55(2A) claims, and there was some basis for doubting Austin J's conclusion on standard condition 7, while his observations about special condition 40 gave cause for some hope. 104I therefore do not accept that breach of duty has been established in this respect. 105Conclusion . It follows that I am not satisfied that Mr Warren departed in any material respect alleged from the standard expected of a barrister of reasonable competence and prudence. This conclusion relieves me of the need to resolve the issue of advocates' immunity. Had I found a breach of duty, it would have been necessary to consider the question of causation. For reasons to which I come below in respect of the case against the solicitor, Mr Lucantonio's case against Mr Warren would have failed on this ground also.
The claim against the solicitor 106I turn then to the claim in respect of the solicitor, Mr Stichter, against whom Mr Lucantonio claims damages for professional negligence and for breach of contract (being the client/solicitor retainer). Although originally there were allegations of "pre-contractual" negligence, these were not pressed in final submissions, and the case ultimately comprised allegations concerning advice in respect of the institution and continuation of the Equity proceedings, and in respect of the notice to complete. 107To a considerable extent, Mr Lucantonio's case did not sufficiently distinguish between the advice to commence the Equity proceedings on the one hand, and the advice about the notice to complete on the other. While in a sense they are related, there are important reasons for distinguishing them, partly because of questions of causation, and partly because those questions inform the degree of risk that attended alternative courses of action. It was not implicit in commencing the Equity proceedings that completion would not take place. Commencement of proceedings did not enliven any right of the vendor to terminate. Termination of the contract and forfeiture of the deposit was caused by the failure to complete, not by the institution of the Equity proceedings. Proceedings for damages under the Fair Trading Act could have been sustained whether or not the contract was completed, if Mr Kleinert's opinion proved to be correct; proceedings for return of the deposit under Conveyancing Act , s 55(2A), would have been inevitable when the contract was not completed. 108In respect of the Equity proceedings, the allegations of negligence are that Mr Stichter: (1) failed to advise the Lucantonios that they did not have the right to rescind the contract for sale on the basis that the development approval was ineffective; (2) advised the Lucantonios to commence proceedings against the vendor for specific performance and other remedies; and (3) advised the Lucantonios to continue those proceedings after Austin J's judgment holding that there was no serious question to be tried upon the contention that the contract was not validly terminated by the vendor and declining to extend the caveat. 109Failure to advise the Lucantonios that they were not entitled to rescind the contract for sale on the basis that the development approval was ineffective . For the reasons given above in respect of the equivalent allegation against Mr Warren - in short that the Lucantonios were not advised that they could rescind the contract, and did not purport to do so, except after Austin J's judgment when it was an appropriate positional response - this particular goes nowhere. 110Advice to commence proceedings against the vendor for specific performance and other remedies . In substance, this allegation is that it was negligent to advise the Lucantonios to commence the Equity proceedings to claim specific performance with compensation, and damages under the Fair Trading Act . 111Advice to the effect that it would be appropriate to institute the Equity proceedings was given in the telephone conference between Mr Lucantonio, Mr Stichter and Mr Warren on 3 December 2001. As appears from my discussion of the case against Mr Warren, I have the gravest doubts that the claim for specific performance with compensation was sustainable: special condition 40 was in my view fatal to it. However, in a professional negligence case, particularly one involving a solicitor not versed in conveyancing litigation, I must be careful not to impose my own views as a universal professional standard. Austin J did not think that special condition 40 rendered the Lucantonios' case against the vendor unarguable - his Honour founded his conclusions on Standard Conditions 7 and 8, but as appears also from my discussion of the case against Mr Warren, I am unconvinced that it should have been apparent to counsel, let alone to Mr Stichter, that they posed an insuperable obstacle; as my discussion of the case against Mr Warren has also explained, there are grounds for a view contrary to that of Austin J in that respect. Perhaps more significantly for Mr Stichter's circumstances, both the expert solicitors - Mr Moses and Mr Tzannes - agreed that specific performance with compensation was a "possible remedy". 112Further, instituting the Equity proceedings was of itself a relatively low risk course, and was an appropriate positional response given the state of affairs between the parties, and the Lucantonios' preferred outcome. Doing so did not dictate that the contract would not be completed. Even if the prospects of success on the claim for specific performance with compensation were but slight, if successful it would produce exactly the result that Mr Lucantonio desired. The claim under the Fair Trading Act had reasonable prospects, if Mr Kleinert were correct; Bryson J's judgment acknowledges as much. And if the contract were in due course terminated, the proceedings could be amended, as they were, to claim return of the deposit. 113Moreover, Mr Stichter retained counsel with experience in the field of conveyancing litigation. In commencing proceedings, he acted in accordance with counsel's advice. The expert evidence of Mr Moses and Mr Tzannes confirms, if it needed confirmation, that in an area such as this, a solicitor is entitled to act in accordance with counsel's advice so long as it is not glaringly wrong or there is reason to suppose that something has been overlooked or misapprehended [see also Yates Property Corporation v Boland (1998) 85 FCR 84, 108C-F; Heydon v NRMA Ltd , [253] (Malcolm A-JA); Notaras v Sly & Weigall [2005] NSWCA 275, [161] (Mason P, Hodgson JA and Matthews A-JA agreeing)]. Even if Mr Warren were negligently wrong in the advice he gave in this respect - to the effect that specific performance with compensation may be an available remedy, as well as damages for misleading and deceptive conduct, and that it would be appropriate to commence the proceedings - there was nothing to alert Mr Stichter to that; it was not glaringly wrong. In particular, while Mr Stichter admittedly had reservations about specific performance with compensation because of special condition 40, he had drawn that provision to Mr Warren's attention, and Mr Warren had given reasons why in his view it was not necessarily fatal. Mr Stichter was entitled to rely on his advice. 114In my judgment, Mr Stichter is not guilty of negligence in respect of the institution of the Equity proceedings. 115Advice to continue the equity proceedings after the judgment of Austin J . The gravamen of this allegation is that Mr Stichter was negligent in advising the Lucantonios to continue the Equity proceedings after the decision of Austin J on 7 June 2002. While the evidence does not establish that Mr Stichter gave any such advice, at least expressly, the particular might not unreasonably be construed as complaining of failure to advise the Lucantonios to discontinue the proceedings. 116The first answer to that allegation is identical to the reasons given, above, for holding that Mr Warren was not negligent in the same respect: there remained, at least until Mr Bonser's critical evidence emerged, an arguable case for substantial damages under the Fair Trading Act , and an arguable case for return of the deposit under Conveyancing Act s 55(2A); in that context, it was not unreasonable to persist with the contractual case, however frail it might appear, as it did not significantly expand the scope of the continuing proceedings beyond that which they would have had if confined to the Fair Trading Act and s 55(2A) claims, and there was some basis for doubting Austin J's conclusion on standard condition 7, while his observations about special condition 40 gave some cause for optimism. 117The second answer is that Mr Warren had advised that he thought Austin J had erred in respect of standard condition 7, and (as explained above) this was far from a manifestly absurd view. As previously explained, Mr Stichter was entitled to rely on counsel's advice. 118Moreover, advice that the contractual claim had very poor prospects would have had no practical impact on the course that was followed. Even if Mr Stichter ought to have advised, after Austin J's judgment, that the contractual claim was most unlikely to succeed, such advice would have been inappropriate in respect of the Fair Trading Act and s 55(2A) claims. The Lucantonios would have persisted in any event with the Fair Trading Act and s 55(2A) claims, and in that context would not have discontinued the contractual claim. Mr Lucantonio was well aware that the outcome of the Equity proceedings was not assured. Mr Warren had told him as much at the outset. He knew the risks of litigation from his earlier Land and Environment Court proceedings [ Lucantonio v Concord Council [2001] NSWLEC 52]. Mr Stichter had advised him, in writing on 5 February, that "The issue is not clear cut", and Mr Lucantonio conceded that he understood this to mean that there was a possibility of losing the case. Mr Lucantonio's handwritten facsimiles of 5 February 2002 bespeak an appreciation of "risk" - including of losing the deposit, which was the Lucantonios' main risk in the circumstances. Austin J's judgment must have brought home to him in the clearest possible way that he might lose the case. On the other hand, discontinuance would have involved paying the vendor's costs. Even if advised that the contractual case was very weak, the Lucantonios would have continued the proceedings substantially as they did, in order to obtain a refund of their deposit and/or damages under the Fair Trading Act , and retained the contractual argument as an additional, if weak, string to their bow. 119Neither breach of duty nor causation is established in respect of this particular. 120The Notice to Complete . In respect of the notice to complete, the allegations of negligence are that on 5 February 2002, the day before the notice expired, Mr Stichter advised the Lucantonios: (1) that the safest course was to settle the sale and argue the question of damages later, as to which the worst case scenario would be an adverse costs order, and the potential upside damages, interest and costs; when this did not permit sufficient time to arrange completion; (2) that the vendor had no right to terminate the contract because of the development approval; and (3) that he should treat the vendor's purported termination in the event that the sale was not completed as a repudiation founding a claim for damages. The gravamen of those complaints is that the advice given on 5 February 2002, the day before the Notice expired - in particular, that completing the purchase was the safest option - was not timely, but was too late for the Lucantonios to act on it and complete the purchase, as finance could not be organised in the very short time available. 121Upon receipt of the notice to complete, a reasonably competent and prudent solicitor in Mr Stichter's position was obliged to discuss with the client the possible courses of action in the context of the notice to complete, and their respective advantages and disadvantages, and the risks and opportunities associated with each, so as to enable the client to make an informed determination on a strategy, in sufficient time for it to be adopted. The "crisis" of 5 February was plainly foreseeable. It must have been plain to Mr Stichter, from the moment he received the notice to complete, that a decision would have to be made as to what course the Lucantonios would take in response to the notice. It must have been equally obvious that such a decision would have to be made sufficiently in advance to enable the requisite pre-conditions - such as availability of finance, if completing the purchase were a consideration - could be satisfied. Prima facie , 5 February was much too late for that to be done. Even with a relatively sophisticated client such as Mr Lucantonio, a solicitor cannot sit back in these circumstances and await an approach from the client: having been retained, the solicitor must position the client to deal with the looming crisis. A solicitor acting prudently would have taken steps to ensure that the client was positioned to make the relevant decision at least several days earlier, to permit finance to be arranged, if required, for 6 February. 122Mr Lucantonio did not dispute that, at an earlier point, Mr Stichter had described the option of completing the purchase to him, but not as the "safest" option; he says that the first time it was described as the "safest" option was when it was so described in Mr Stichter's 5 February facsimile. He claims that during the period between 17 January and 5 February, he constantly tried to telephone Mr Stichter, but that Mr Stichter was too busy to see him or take his calls. Like Mr Stichter, Mr Lucantonio - who bears the onus of proof - has no corroboratory contemporaneous record. Mr Lucantonio had received, and read, the notice to complete, and he understood the consequences of not complying with it, which were spelt out in it, and also by Mr Warren in their telephone conversation on 5 February, in which Mr Warren advised that if he failed to comply with the notice to complete and the notice was valid, then he would lose the deposit and may be liable for damages. In that telephone conversation - prior to Mr Lucantonio's receipt of Mr Stichter's 5 February facsimile - Mr Warren also responded to Mr Lucantonio's inquiry about settling and claiming damages subsequently by confirming that, in his opinion, it was an option, and Mr Lucantonio not only raised the issue, but also expressed no surprise at the response. Mr Lucantonio's response to Mr Stichter's 5 February facsimile, setting out his own analysis of the options, contains no hint of surprise that he was now being advised that the safest option was to complete. 123On the other hand, Mr Stichter claimed that he had advised Mr Lucantonio that completing the purchase was the "safest" option on many occasions - on 22 November 2001, 3 December, 18 December, mid-January 2002 and 4 February 2002. Given the demonstrable unreliability of Mr Stichter's unaided recollection of conversations so long ago, I would not readily accept that he could recall specific repeated references to completion being "the safest option". I have already specifically rejected, on the probabilities, that there was any reference to settlement being the safest option in the 3 December teleconference, or on 17 January; and while I have accepted that settlement was mentioned as an option on 22 November, I do not accept that it was then described as the safest option. Mr Stichter's only contemporaneous record - his 5 February facsimile - far from assisting him (in reciting the history it does not suggest any earlier reference to settlement being the safest option), points the other way - the context and use of the word "now" in para 14 suggests that the position "that the safest course for you now is to settle..." was one only recently reached. 124On balance, while I find that Mr Lucantonio knew, and had always known, that completing the purchase and thereafter suing for damages was an available option, I am satisfied that Mr Stichter had not, before the 5 February facsimile, advised the Lucantonios that it was their safest option in the circumstances. 125Mr Stichter's belated attempt, in his 5 February facsimile, to give such advice, was manifestly too late. Mr Moses and Mr Tzannes agreed that if Mr Stichter had not, prior to February 2002, given Mr Lucantonio reasonable advice of the available options following the issue of the notice to complete, he would have fallen short of the standard expected of a reasonably competent and prudent solicitor in the circumstances. In my judgment, in substance this particular of negligence is established, in that Mr Stichter failed to give timely advice to Mr Lucantonio of the courses open to him in the light of the notice to complete, and their respective advantages, disadvantages and risks. The advice that completing the purchase was the safest option came too late to be acted upon, at least so far as the protagonists were and could reasonably be expected to be aware (even though it now transpires that the Bank might have been able to act more swiftly than they then assumed). 126Assuming - as I have concluded - that the Lucantonios ought to have been, but were not, given timely advice about the courses open in response to the notice to complete, and their respective advantages, disadvantages and risks, would a different course have ensued? Mr Lucantonio's case on causation is that, had Mr Stichter advised them that completion was the "safest" option even a few days earlier, they would have taken that option and settled the conveyance prior to expiry of the notice to complete. In the light of the evidence adduced as a result of the re-opening, I accept that the Lucantonios could have funded the balance purchase price if they were minded to complete, upon a couple of days notice; indeed funds could probably have been arranged within hours, but as the Bank did not make that facility widely known, neither the Lucantonios nor Mr Stichter could reasonably have been expected to know of it. 127Causation is to be determined subjectively, in the light of all relevant circumstances [(NSW) Civil Liability Act 2002, s 5D(3)(a)]. In a case of negligent advice, it is necessary to determine what the plaintiff would have done if properly advised. Inherent in that is determining what in the circumstances would have amounted to "proper advice". And on the causal question what would a person properly advised have done, the plaintiff bears the onus and the question is determined on the balance of probabilities [ Heenan v Di Sisto (2008) 13 BPR 25,213; (2008) Aust Torts Reports 81-941; (2008) NSW ConvR 56-214, at [28] - [31] (Giles JA, Mason P and Matthews AJA agreeing)]. 128It is notorious that the evidence of a plaintiff as to what, properly advised, he or she would have done - which is evidence of hypothesis rather than of recollection - is highly vulnerable to the influences of unintentional bias and perception. That is all the more so when it is given seven years after the relevant events. Contemporaneous statements, and the relevant surrounding circumstances, provide a sounder basis for evaluating what the particular plaintiff properly advised would have done, than self-serving statements made, even with the most honest of intentions, years after the event in the context of litigation that depends on them. 129Proper advice to the Lucantonios in the circumstances would have been, in ample time to make and implement their decision, that they could either: (1) complete the purchase for the full price, with the problems associated with the development approval, and bring proceedings for damages for misleading and deceptive conduct after completion; or (2) refuse to complete and, in the event of termination by the vendor and forfeiture of the deposit, bring proceedings for recovery of the deposit under s 55(2A) and for damages for misleading and deceptive conduct. Of these options, the first involved the least legal risk, as they would be performing their legal obligations under the contract, but they might end up with a property worth significantly less than the price they were paying for it, and their ability to recover moneys from the vendor if their claim succeeded could not be assured; whereas the second risked loss of the deposit and potential exposure to damages if their position proved to be incorrect. 130Mr Laughton SC, for Mr Lucantonio, goes further, contending that they should never have been given the choice, but should have been told that they needed to complete the purchase and, if they incurred a loss, subsequently claim damages under the Fair Trading Act . However, that contention overlooks that it is for clients, not lawyers, to make commercial decisions; that Mr Lucantonio was not an unsophisticated client; that he had a strong preference to acquire the property, but only on a basis that made allowance for the problems with the development approval; that equity provided a remedy which could possibly deliver the precise outcome he preferred; and that even if the prospects of success for that remedy were slight, there was, on the evidence then available, a well arguable claim under the Fair Trading Act . It also overlooks the risk, pointed out by Mr Warren, that if left to a remedy in damages after completing the purchase, there was no assurance that the vendor would retain funds sufficient to meet the claim; and the risk, apparent to the Lucantonios, that they might end up with a property worth less than the price. 131Properly advised, what would the Lucantonios have done? 132If they were to complete the purchase, they would have to borrow and pay over the balance purchase moneys (which exceeded what Mr Lucantonio now thought the property was worth), incur interest on those funds, pursue a s 96 amendment application (if not a new development application), and incur substantial additional construction costs, as well as holding costs in the meantime. As a result of his past experiences, Mr Lucantonio was strongly disinclined to acquiring properties without development approval, because of the associated risks and delays, and averse to being the named applicant in any application to the Council, believing that any application to Council from him would not be well received. Nor did he want to be in the position of having purchased a building that would then require substantial additional unanticipated expenditure to rectify the problems that had arisen with the development approval plans - so substantial as to make the project "uneconomical". Nor did he wish to hold the property for 6 months while the Council considered any s 96 amendment application, let alone a new development application. 133On the other hand, if they did not complete and the vendor purported to terminate, there were - assuming the correctness of Mr Kleinert's advice - apparently at least reasonable prospects of recovering the deposit pursuant to s 55(2A) (an outcome which the Lucantonios had been prepared to accept on 4 February 2002), and/or damages for contravention of the Fair Trading Act . 134While, from a legal perspective, it may have been safest to complete, in that the alternative of not completing risked that the vendor might terminate and forfeit the deposit, leaving any chance of a successful outcome to the vagaries of litigation, the risk in completing was commercial - that (by reason of the problems with the development approval) the purchaser might acquire a property worth significantly less than he had assumed and was prepared to pay (and in addition that the vendor might dissipate the proceeds so as not to be able to satisfy a judgment). In the simplest terms, it was the difference between whether, in the interim, he had to part with the balance purchase price of $2 million, in circumstances where he did not believe that the property was worth it, and whether the vendor would have the benefit of that sum. It is noteworthy that the additional construction costs and the diminution in value of the property in contemplation as a consequence of the problems with the development approval equalled or exceeded the amount of the deposit at risk - the early estimates of $200,000 in additional building costs were followed by later estimates of $500,000; the amount of provision for compensation proposed (in the 4 February negotiations) to be retained in trust from the purchase price was $300,000; Mr Warren's 5 February file note contemplates that the property might now be worth only $1.5 million ($700,000 less than the price). On the other hand, in the event of not completing, the risk of losing the deposit was mitigated by the availability of remedies under the Fair Trading Act and s 55(2A). If the property were worth less than about $2,000,000, then commercially the Lucantonios would seem to have been better off to forfeit the deposit than to pay over the balance purchase price to complete. 135Underlying the message in Mr Lucantonio's 6.05 pm 5 February facsimile to Mr Stichter is a disinclination to complete by paying over the full balance purchase price: Mr Lucantonio's desire to acquire the property was not so great as to justify, in his mind, parting with the whole of the balance purchase price. The statements attributed to him in paragraphs 9 and 12 of Mr Stichter's 5 February facsimile evince the same intention: that in paragraph 9 shows that while he would like to keep the property, it was no longer worth the price; and in paragraph 12 - to the effect that "because it was less risky" he would prefer to settle with $300,000 retained in trust - indicates an appreciation that completing the purchase was the safer course, so long as some provision could be made to secure his prospective claim in respect of additional cost/diminished value; the alternative of rescinding and recovering the deposit indicates an appreciation that there were commercial risks associated with paying over the whole price in the circumstances. Even when admittedly told, on 5 February 2002, that the safest option was to "settle and argue the damages issue later", Mr Lucantonio does not appear to have given that course serious consideration. Although it might be said that there was (in his mind) insufficient time to pursue it, as (so far as he reasonably knew) funds could not be arranged with the Bank in the few hours remaining until 2.00 pm on 6 February, it is particularly striking that he did not adopt Mr Stichter's suggestion that a short extension of a day or two could be sought to permit them to complete - a course which one would have expected him to explore if he were at all inclined to the "safest" course. Given his position that he always believed that he would be able to reach a settlement with the vendor - even until 7 June 2002 - the contention that a favourable answer could not realistically be anticipated, as the vendor had already rejected a proposal to defer settlement for a week, and allow $300,000 of the purchase money to be retained in Mr Stichter's trust account until the issues were resolved, does not carry persuasion. Even though settlement with a subsequent claim for damages was an option of which he was fully aware - he had asked Mr Warren about it earlier on 5 February, as well as its being mentioned as the "safest" course by Mr Stichter - his review of the options did not include it at all. 136In my view, the reason why Mr Lucantonio did not pursue that option was that his perspective was not only legal but also commercial. Although he was keen to acquire the property, in the light of the difficulties with the development approval he was not prepared to complete without a reduction in the purchase price, or at least retention of sufficient of the purchase money to cover his claim, because otherwise the problems with the development approval would have a serious impact on the economic viability of the acquisition, and he believed the property was no longer worth the price. He knew that completion was an option, but appreciated that it might involve paying much more than $200,000 in excess of the property's worth; he also knew that failure to complete might result in the vendor terminating, and forfeiting the deposit of $220,000. He was significantly influenced by what he perceived to be the substantial commercial risk associated with purchasing other than at a discounted price, in circumstances where he believed that the property was now worth significantly less than he had contracted to pay for it. Moreover, he believed that he would be able to settle his differences with the vendor - a view to which he adhered even up until 7 June 2002. 137In my view, properly advised, the Lucantonios would nonetheless not have completed the purchase by the payment of the undiscounted purchase price, but would have assumed the risks of not completing, and embarked on the consequential litigation, on the basis that this was the more commercial approach, and in the belief that they would in due course reach a compromise with the vendor - notwithstanding that completion of the purchase may have involved less legal risk. 138Accordingly, breach of duty on the part of Mr Stichter is established in respect of this particular, but causation is not. 139Conclusion . Mr Stichter failed to give timely advice to the Lucantonios as to the courses open to them in the light of the notice to complete, and their respective advantages, disadvantages and risks. But properly advised, the Lucantonios would still not have completed the purchase by the payment of the undiscounted purchase price, and would have assumed the risks of not completing, and embarked on the consequential litigation. The other particulars of negligence alleged against Mr Stichter are not established.
Damages 140The assessment of damages does not therefore arise, and in any event it was agreed at the trial that, due to issues pertaining to the availability of certain expert witnesses, the quantification of damages would be determined subsequently if necessary, although the principles were argued at the trial. 141In the circumstances, it suffices to record at this stage that if Mr Lucantonio had succeeded against Mr Warren and/or Mr Stichter on the complaints concerning advice in respect of the notice to complete, and it were concluded that properly advised they would have completed the purchase and pursued proceedings under the Fair Trading Act against the vendor, then their damages would comprise (1) the forfeited deposit, and (2) the costs incurred in and occasioned by the proceedings before Austin J (but not the general costs of the Equity proceedings including the hearing before Bryson J, which would have been incurred in any event, in pursuit of the Fair Trading Act claim). 142Had Mr Lucantonio succeeded against Mr Kleinert, their damages would also have included the general costs of the Equity proceedings, including the hearing before Bryson J, which would not have been commenced or continued but for his advice. 143Although, in principle, the loss of the purchase bargain, represented by any excess of true market value over purchase price would be an element of Mr Lucantonio's damages, the evidence of resale at the same price suggests that there was no differential. I do not accept that such damages would include, as an additional component, the lost opportunity of making profits from the development of the property: the profit potential of the property is an element to be taken into account in fixing its market value [ Jenmain Builders Ltd v Steed & Steed [2000] Lloyd's Rep PN 549 (CA), [32]-[35] (Chadwick LJ, Beldam LJ agreeing].
Conclusion 144My conclusions may be summarised as follows. 145Causative negligence on the part of Mr Kleinert can be established, only if he ought to have appreciated that some such solution as Mr Bonser's 2 degrees inclination of the piling could be employed, to gain extra space in the proposed basement and render an additional basement level unnecessary. That none of the various consultants adverted to such a solution earlier than the hearing before Bryson J in September 2003 bespeaks a conclusion that it was not one that a reasonably competent and prudent architect in Mr Kleinert's position should have discerned in late 2001. It has not been established that Mr Kleinert departed in any material way from the standards of practice of reasonably competent and prudent architects in the circumstances. 146Nor do I accept that Mr Kleinert's advice was misleading in the relevant sense. In particular, his opinion that compliant construction in accordance with the development approval plans was impossible, while ultimately proved to be incorrect, was an opinion, recognisable as such, which he genuinely held, and which was not without grounds: it was incorrect only because an alternative solution which itself would involve "unusual pains and trouble, and high expense" was ultimately discovered; and it was not unreasonable for Mr Kleinert, in the circumstances with which he was confronted, to fail to discern that solution. 147Accordingly, Mr Lucantonio fails on liability against Mr Kleinert, although had he succeeded on breach of duty, causation would have been established. 148Although, in my view, the proposition that a "buildable development approval" was part of the subject matter of the contract was very weak, and thus the claim for specific performance with compensation very frail, Austin J allowed that the alternative "strict" construction advanced by Mr Warren was arguable, and where judicial opinions differ, it would be holding counsel to too exacting a standard to impose, as the arbiter of professional standards, one judge's contrary opinion. Moreover, the institution of the Equity proceedings must be viewed in the context that they included a manifestly arguable claim under the Fair Trading Act ; that specific performance with compensation was a remedy which, if gained, provided the Lucantonios with precisely the result they preferred; that two experienced conveyancing solicitors considered that it was a potential remedy in the circumstances; and that Mr Warren's advice was then in effect no more than that it would be appropriate to institute the proceedings and that specific performance with compensation may be an available remedy. In that context, I do not accept that no reasonably competent and prudent barrister would have advised, to the extent that Mr Warren did so, the institution of the proceedings. Mr Warren's later advice on 5 February 2002 that he thought Mr Lucantonio's prospects were good, was qualified with the caveat that he could give no assurances because there were too many vagaries, and is not itself the subject of a particularised allegation of negligence. In the context of the viable Fair Trading Act claim, and the potential amendment adding the s 55(2A) claim - the frailty of the contractual claim did not deprive the Equity proceedings as a whole of reasonable prospects of success. 149As Mr Warren did not advise that the Lucantonios could terminate the contract, and as the Lucantonios did not purport to terminate the contract, the complaint that he failed to give advice that the Lucantonios were not entitled to terminate the contract on the basis of the problems with the development approval, goes nowhere. 150As the caveat lodged by Mr Stichter on behalf of the Lucantonios protected their position and had the same effect, pending the interlocutory hearing, as any injunction, and an application for an injunction would have suffered the same fate as the caveat met at the interlocutory hearing before Austin J, it was not incumbent on Mr Warren to advise an application for an injunction to restrain the vendor from reselling the property. 151As, when Mr Warren was informed (only a couple of days before it was due to expire) of the pendency of the notice to complete, he was also instructed that Mr Lucantonio's finance had lapsed, and that there would be difficulties with alternative finance because of the problems with the development approval, and Mr Stichter did not raise with Mr Warren, as one of the potential courses of action, completion of the purchase, he was not obliged to advise that the Lucantonios should complete the purchase. 152Given that there remained, at least until Mr Bonser's inclined piling proposal emerged, an arguable case for substantial damages under the Fair Trading Act , and an arguable case for return of the deposit under Conveyancing Act s 55(2A), I do not accept that a reasonably competent and prudent barrister must have advised discontinuance of the proceedings (with the concomitant costs consequences) after Austin J's judgment; and in that context, such a barrister could well also have persisted in the contractual case, which did not significantly expand the scope of the continuing proceedings beyond that which they would have had if confined to the Fair Trading Act and s 55(2A) claims, as an additional if weak string to the bow. 153It follows that I am not satisfied that Mr Warren departed in any material respect alleged from the standard expected of a barrister of reasonable competence and prudence, which relieves me of the need to resolve the question of advocate's immunity. For reasons given in connection with the claims against Mr Stichter, Mr Lucantonio would in any event have failed to establish causation against Mr Warren. 154As the Lucantonios were not advised that they could rescind the contract, and did not purport to do so, the complaint that Mr Stichter failed to advise them that that they were not entitled to rescind the contract on the basis of the problems with the development approval, goes nowhere. 155Even if Mr Warren were negligently wrong in the advice he gave that led to the institution of the Equity proceedings - in particular that it was appropriate to institute the proceedings, and that specific performance with compensation may be an available remedy, as well as damages for misleading and deceptive conduct - there was nothing to alert Mr Stichter to that, and Mr Stichter was entitled to rely on his advice. Further, instituting the Equity proceedings was of itself a relatively low risk course, and even if the prospects of success on the claim for specific performance with compensation were but slight, if successful it would have produced exactly the result that Mr Lucantonio desired; the claim under the Fair Trading Act had apparently good prospects, if Mr Kleinert were correct (which there was then no reason to doubt); and if the contract were in due course terminated, the proceedings could be amended, as they were, to claim return of the deposit. Mr Stichter is not guilty of negligence in respect of advice given in connection with the institution of the Equity proceedings. 156As to the complaint that Mr Stichter was negligent in advising the Lucantonios to continue the Equity proceedings after the decision of Austin J, there remained, at least until Mr Bonser's critical evidence emerged, an arguable case for substantial damages under the Fair Trading Act , and for return of the deposit under Conveyancing Act s 55(2A); in that context, it was not unreasonable to persist with the contractual case, however frail, as it did not significantly expand the scope of the continuing proceedings beyond that which they would have had if confined to the Fair Trading Act and s 55(2A) claims, and there was some basis for doubting Austin J's conclusion on standard condition 7, while his Honour's observations about special condition 40 gave some cause for optimism. Moreover, Mr Warren had advised that Austin J had erred in respect of standard condition 7, on which Mr Stichter was entitled to rely. Further, advice that the contractual claim had very poor prospects would have had no practical impact on the course that was followed: the Lucantonios would have continued the proceedings substantially as they did, in order to obtain a refund of their deposit, and/or damages under the Fair Trading Act , while retaining the contractual argument as an additional, if weak, string to their bow. Accordingly, neither breach of duty nor causation is established in this respect. 157Upon receipt of notice to complete, a reasonably competent and prudent solicitor in Mr Stichter's position was obliged to discuss with the client the possible courses of action, and their respective advantages and disadvantages, and the risks and opportunities associated with each, so as to enable the client to make an informed determination on a strategy, in sufficient time for it to be adopted. In substance the complaint as to the timeliness of Mr Stichter's advice in this respect is established, in that he failed to give timely advice to Mr Lucantonio of the courses open to him in the light of the notice to complete, and their respective advantages, disadvantages and risks. The advice that completing the purchase was the safest option came manifestly too late to be acted upon. 158Properly advised, the Lucantonios would have been informed, in ample time to make and implement their decision, that they could either: (1) complete the purchase for the full price, with the problems associated with the development approval, and pursue proceedings for damages for misleading and deceptive conduct after completion; or (2) refuse to complete and, in the likely event of termination by the vendor and forfeiture of the deposit, bring proceedings for recovery of the deposit under s 55(2A) and for damages for misleading and deceptive conduct; of these, the first involved the least legal risk, as they would be performing their legal obligations under the contract, but they might end up with a property worth less than the price; whereas the second risked loss of the deposit and potential exposure to damages if their position proved to be incorrect. 159However, so advised, the Lucantonios would nonetheless not have completed the purchase by the payment of the undiscounted purchase price, but would still have assumed the risks of not completing, and embarked on the consequential litigation, on the basis that this was the more commercial approach, and in the belief that they would in due course reach a compromise with the vendor - notwithstanding that completion of the purchase may have involved less legal risk. 160Accordingly, in respect of the complaint pertaining to Mr Stichter's advice in respect of the notice to complete, breach of duty is established, but causation is not. 161It follows that Mr Lucantonio fails on liability against each defendant. 162On the plaintiff's claims, I give judgment for the defendants, with costs. The cross-claims for contribution therefore do not arise. I order that the first, second and third cross-claims be dismissed with costs, such costs to form part of the costs recoverable by the relevant defendant/cross-claimant from the plaintiff.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 July 2011
Lucantonio
Kleinert & ors
(1997) 42 NSWLR 710
(1999) 74 ALJR 209
(1985) 3 NSWLR 255
(1984) 2 FCR 82
(2000) 51 NSWLR 1
(1986) 64 ALR 347
(2001) 52 NSWLR 705
(1984) 3 FCR 426
(1998) 85 FCR 84