Luo v Jemmeson & Fisher Solicitors & Accountants

APPLICANT'S EVIDENCE

1. At the hearing Mr Luo gave sworn evidence. He tendered the bundle of documents which were filed on 8 November 2016 as part of his case.
2. The bundle included the following documents: 1. position statement; 2. costs disclosure and cost agreement; 3. settlement adjustment sheet; 4. email correspondence; 5. complaint to the Legal Services Commissioner; 6. reply from the Solicitors dated 28 September 2016;
3. On 24 January 2017, Mr Luo filed a written submission in compliance with order 2 made by the Tribunal on 12 December 2016 regarding the application of the Civil Liability Act 2002 to the proceedings.
4. Mr Luo stated that in early July 2016 he contacted the Solicitors and spoke with Elizabeth Pecipajkovski ("Elizabeth") who was a solicitor employed by the firm. He told her that he planned to purchase a property. The Solicitors had previously acted for Mr Luo and his wife in respect of another purchase.
5. He says he sought her advice about the meaning of the term "tenants in common in equal shares" and that his parents were Chinese citizens and permanent residents in Australia. Elizabeth replied that was not a problem and the Solicitors could act on their behalf.
6. Mr Luo looked around for a property and decided to purchase 1/32-34 St Georges Parade, Hurstville for $706,000.00. He asked Elizabeth to review the contract and emailed a copy of the contract to her on 18 July 2016.
7. Following receipt of that advice, he contacted the real estate agent Century 21 Hurstville and made arrangements for exchange of contracts. The purchasers of the property were to be shown on the contract as Chengyue Luo, Hong Yu, Jiaxiang Luo and Suqing Liang.
8. On 20 July Elizabeth sent Mr Luo a Costs Agreement and Costs Disclosure. The scope of the work was described as: "to act on the purchase of 1/32-34 St Georges Parade, Hurstville".
9. Mr Luo and his wife signed the contract at the office of Century 21 Hurstville. As his parents Jiaxiang Luo and Suqing Liang were overseas, a copy of the contract was scanned to them for execution.
10. On 21 July contracts for the purchase of the property were exchanged subject to a 5 days cooling off period by the agent. Mr Luo paid the Solicitors a deposit of $440.00 to cover initial disbursements.
11. The Solicitors sent a letter to H Yu and CY Luo on 26 July. The letter provided information about the contract and asked for instructions about certain matters. Relevantly the letter advised that the amount of stamp duty payable on the contract was $27,280.00.00.
12. On 10 August Mr Luo received correspondence from Elizabeth advising him that he required approximately $666,000.00 for settlement on 1 September 2016. That advice included the following notation: "As previously discussed, we require an original certified copy of both your parent's passport in order to stamp the contract and transfer. Please ensure this is provided to us as soon as possible".
13. The advice stated that the stamp duty amount was $27,280.00
14. On 30 August Mr Luo sent to Elizabeth original certified copies of his parents' passports, stamp duty declarations and the original signature page of the contract. The passports included his parents' residence visas.
15. The purchase of the property was delayed until 9 September. Mr Luo was advised the amount required to settle after adjustments was $636539.99.
16. In an email to Mr Luo on 12 September, Elizabeth confirmed that the amount of stamp duty payable was $27,280.00.
17. On 13 September Mr Luo received a call from an employee of the Solicitors who asked him how long his parents had been resident in Australia. He says there was no mention of the Surcharge Purchaser Duty. In an email on the same day the amount for stamp duty was confirmed at $27,280.00.
18. He was advised later that an additional $14,200.00 was payable for Surcharge Purchaser Duty because of his parents status as foreign persons. He says that on 14 September Elizabeth telephoned him and said she was unaware of the change in the law and apologised for the mistake. She suggested to Mr Luo that he apply for a private ruling from the Office of State Revenue.
19. Mr Luo received a call from Greg Jemmeson on 19 September. He was a principal of the firm. They had a discussion about the payment of the additional duty. Mr Luo says that Mr Jemmeson denied responsibility for the incorrect calculation of the stamp duty.
20. Subsequently Mr Luo made enquiries with the Office of State Revenue and ascertained that the stamp duty had not been paid on the transaction. He sent several emails to the Solicitors requesting a copy of the stamped transfer but received no response.
21. On 28 September the Solicitors sent a letter to Mr R Yu regarding the payment of the 4 per cent Surcharge Purchaser Duty introduced in the New South Wales 2016 Budget. Based on the information provided to them the Solicitors concluded that Jiaxiang Luo and Suquing Liang were foreign persons for the additional duty. Relevantly the letter states: "We note that Jiaxiang and Suquing do not meet the test of an individual who ordinarily resides in Australia and therefore are liable to pay a Surcharge Purchaser Duty in the amount of $14,120.00."
22. Mr Luo's complaint is that the Solicitors did not know about the Surcharge Purchaser Duty. He argues that if he and the other purchasers been made aware of the legislation, they could have purchased the property in a different way to avoid the additional duty.
23. On 20 January 2017 Mr Luo provided a submission on the application of the Civil Liability Act 2002 to the present proceedings. He submitted that the Solicitors had breached the standards of care for professionals in that they did not know their customers and provided advice based on assumptions, did not know the law and adopted a "cookie-cutter" approach to conveyancing transactions.
24. Mr Luo requested the the Tribunal order the Solicitors pay him $15,000.00.

RESPONDENT'EVIDENCE

1. The Solicitors called Elizabeth to give evidence on their behalf. She was the solicitor in the firm who had carriage of the transaction and took instructions from Mr Luo.
2. She had sworn an affidavit on 25 November 2016 which was read onto the record and was her evidence in the proceedings.
3. There was common ground with Mr Luo's evidence on most aspects of the mechanics of the transaction. She confirmed that she had previously acted for Mr Luo and his wife Hong Yu in a conveyancing transaction.
4. In her affidavit Elizabeth recites a conversation which she had with Mr Luo on 18 July 2016 wherein she received instructions to review a contract for the purchase of the Hurstville property. She disputed Mr Luo's evidence about the contents of the conversation she had with Mr Luo prior to exchange of contracts and the information given to her about his parents.
5. On 20 July she sent him a Costs Agreement and Costs Disclosure. She claims that Mr Luo told her to hold off reviewing the contract until he had sorted out the loan approval for the purchase.
6. On 26 July she received a Sales Advice from Century 21 Hurstville and a contract for sale dated 21 July 2016. She observed that the purchasers were described as Chengyue Luo, Hong Yu, Jiaxiag Luo and Suqing who resided at 55 Ponyara Road Beverly Hills. The contract was due for completion on 1 September 2016.
7. On the same day she sent a letter of advice to H Yu and CY Luo.
8. On 26 July Mr Luo instructed the Solicitors to act on behalf of the purchasers. He requested that the spelling of his mother's name be amended.
9. On 1 August Elizabeth sent Mr Luo an email in which amongst other matters she advised him that the stamp duty payable was $27,280.00. The assessment was made on the basis that all purchasers were Australian citizens or permanent residents.
10. Mr Luo responded to this email on the same day and requested clarification on various issues. He asked if the stamp duty could be paid on 1 September 2016.
11. Later on 1 August Elizabeth and Mr Luo had a telephone discussion regarding the identification documents. She recites her recollection of the conversation which was confirmed in part in an email she sent after it.
12. On 10 August Elizabeth sent an email providing an estimate of the funds required for settlement. The stamp duty on the transfer and contract was to be paid at settlement.
13. On 29 August Elizabeth advised Mr Luo that settlement would be delayed by a few days.
14. Brenda Yu replied to this email on 30 August confirming there was no objection to the delayed settlement and attaching copies of the identification documents for the purchasers.
15. Completion of the purchase took place on 9 September.
16. Mr Luo sent an email to Elizabeth on 12 September enquiring about surplus funds. She replied later that day and clarified that the funds would be applied to payment of stamp duty, registration fees and legal costs.
17. On 13 September Elizabeth had a conversation with Mr Luo in which she says he told her "…my parents are Chinese Citizens and have Australian Visas…is there another duty payable…". Elizabeth replied that his parents were not Australian citizens and would be liable for Surcharge Purchaser Duty unless they met certain exemptions. She responded: "..you should have instructed me to give advice about this before signing the contract or when you first spoke to me…I'll have a look..".
18. Elizabeth then carried out research and confirmed that the 2016 New South Wales Budget introduced a 4% Surcharge Purchaser Duty on the purchase of residential real estate by foreign persons who entered into contracts for the purchase of residential real estate from 21 June 2016. She says that Mr Luo had instructed her that his parents had been in Australia for a period of 180 days in the period of 12 months immediately preceding the contract date. The requirement is that the person must have been resident in Australia for 200 days or more in the 12 months period immediately preceding the contract date otherwise they will be considered to be a foreign person and liable to pay the surcharge.
19. On 19 September Elizabeth telephoned Mr Luo and informed him that his parents would be liable to pay the Surcharge Purchaser Duty of $14,120.00. He enquired if she could apply for a private ruling. She suggested that as the contract and transfer had not been stamped his parents had options to minimise or avoid paying the surcharge. She offered alternatives which were rejected by Mr Luo. He said he would let her know his decision.
20. Mr Luo requested copies of the stamped transfer on 22 and 27 September. Elizabeth responded on 28 September by email in which she advised Mr Luo that the contract and transfer could not be stamped until the issue of the purchaser surcharge duty had been resolved. She sent him a letter on the same day outlining the Solicitor's position regarding the issue.
21. Mr Luo replied to this email on 28 September. He alleged that he had been misled about the true cost of the transaction and demanded that "JF reimburse us the full amount of this surcharge in the amount of $14,120 due to this negligence and breaching duty of care".
22. Elizabeth provided further advice to Mr Luo in an email on 29 September. She stated that "this firm is not responsible to pay your liabilities".
23. Following receipt of this email Mr Luo demanded payment of the surcharge by the Solicitors and accused the firm of negligence and breach of duty.
24. In October 2016 the purchasers paid the Surcharge Purchaser Duty in the sum of $14,120.00. The purchasers became registered as the proprietors of the property on 27 October 2016.
25. Elizabeth denies that she gave any advice to Mr Luo about Surcharge Purchaser Duty because he was not liable to pay it. She submits that as soon as she became aware that Mr Luo's parents were not ordinary residents of Australia she provided him with options. She argues that Mr Luo has not suffered any loss.

CONSIDERATION

1. Mr Luo seeks an order for the Solicitors to pay him $15,000.00. He alleges that the Solicitors are guilty of professional negligence and breach of fiduciary duty which have resulted in his loss.
2. He argues that because he was not properly advised by Elizabeth, he was denied an opportunity to act differently and therefore was required to pay the Surcharge Purchaser Duty.
3. The Solicitors deny that Mr Luo's claims and argue they are not guilty of professional negligence or that there has been a breach of fiduciary duty. They deny that Mr Luo has suffered any loss.
4. There was no dispute that the Tribunal has jurisdiction to hear and determine the application. I find that the claim is a "consumer claim" as defined in section 79E of the Fair Trading Act 1987.
5. Mr Luo as the applicant bears the onus of proof. He must produce sufficient evidence to satisfy the Tribunal on the balance of probabilities that the orders he is seeking in his application should be made. If he cannot provide that evidence his application will either be dismissed or some other order made.
6. In New South Wales the law of professional negligence is governed by the Civil Liability Act 2002 ('the Act"). Section 5O of the Act provides as follows: Standard of care for professionals (1) A person practising a profession ( "a professional" ) does not incur a liability in negligence arising from the provision of a professional service if it is established that the professional acted in a manner that (at the time the service was provided) was widely accepted in Australia by peer professional opinion as competent professional practice. (2) However, peer professional opinion cannot be relied on for the purposes of this section if the court considers that the opinion is irrational. (3) The fact that there are differing peer professional opinions widely accepted in Australia concerning a matter does not prevent any one or more (or all) of those opinions being relied on for the purposes of this section. (4) Peer professional opinion does not have to be universally accepted to be considered widely accepted
7. According to section 5O of the Act a professional does not incur a liability in negligence if it is established that the professional acted in a manner which was widely accepted in Australia by peer professional opinion as competent professional practice at the time the service was provided.
8. Mr Luo bears the onus of proving on the balance of probabilities any fact relevant to the issue of causation. Section 5E of the Act provides: In proceedings relating to liability for negligence, the plaintiff always bears the onus of proving, on the balance of probabilities, any fact relevant to the issue of causation.
9. The general principles governing negligence are set out in section 5D of the Act which provides: (1) A determination that negligence caused particular harm comprises the following elements: (a) that the negligence was a necessary condition of the occurrence of the harm ( "factual causation" ), and (b) that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused ( "scope of liability" ). (2) In determining in an exceptional case, in accordance with established principles, whether negligence that cannot be established as a necessary condition of the occurrence of harm should be accepted as establishing factual causation, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party. (3) If it is relevant to the determination of factual causation to determine what the person who suffered harm would have done if the negligent person had not been negligent: (a) the matter is to be determined subjectively in the light of all relevant circumstances, subject to paragraph (b), and (b) any statement made by the person after suffering the harm about what he or she would have done is inadmissible except to the extent (if any) that the statement is against his or her interest. (4) For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party
10. In its submission the Solicitors argue that Mr Luo has the onus of proving on the balanceof probabilities any fact relevant to the issue of causation. They assert that a reasonably competent solicitor would have acted in a similar manner as Elizabeth did if placed under the same circumstances. The Solicitors deny a breach of any duty of care.
11. There was no dispute that the Solicitors practice a profession and are for the purposes of Section 5O of the Act are considered "a professional" who provides "a professional service". Both parties agreed at the hearing that the Civil Liability Act 2002 applied to these proceedings.
12. Mr Luo seeks a finding of negligence against the Solicitors. He contends that he was given the wrong advice about the stamp duty payable on the transaction and was not told about the Surcharge Purchaser Duty.
13. It was common ground at the hearing that prior to the exchange of contracts on 21 July 2016 there had been no discussion regarding the payment of stamp duty.
14. Mr Luo's evidence is that in early July 2016 and prior to the exchange of contracts he sought the advice of Elizabeth about the contract. He claims that in a telephone conversation he told her he planned to purchase a property with his parents who were Chinese citizens and permanent residents in Australia. When giving her evidence, Elizabeth denied that this conversation took place.
15. In her affidavit, Elizabeth recites her version of the same conversation which she says occurred on or about 18 July 2016. She says she was asked to review the contract and there was no discussion about Mr Luo purchasing the property with his parents or that they were Chinese citizens or permanent residents. I prefer her version of the conversation which is consistent with the events following the exchange of contracts.
16. Elizabeth's evidence is that on 1 August 2016 she had a conversation with Mr Luo about identification documents for the other purchasers and himself. There was no discussion about the status of Mr Luo's parents. She assumed based on information in her possession that they were Australian citizens.
17. Elizabeth states that when she received the contract on 26 July, the names of Mr Luo, his wife and parents had already been noted on it as the purchasers. The address shown for the purchasers was Mr Luo's home address at Beverly Hills in New South Wales. Mr Luo did not challenge this evidence.
18. On 30 August 2016 Brenda Yu provides Elizabeth with the identification documents for the purchasers. The documents for Jiaxiang Luo and Suqing Liang were certified copies of their Chinese passports. Their residency visas were in the passports. This evidence was not disputed.
19. The purchasers were cash buyers and Elizabeth decided to pay the stamp duty at or after settlement. The evidence shows that only when the contract for sale and transfer were submitted for stamping prior to registration, did the question of the Surcharge Purchaser Duty arise. Until that point, Elizabeth had operated on the assumption that only stamp duty of $27,280.00 was payable on the transaction.
20. According to Mr Luo's testimony he received a call from the Solicitors on 13 September enquiring how long his parents had been in Australia. This was 4 days after the settlement on 9 September. This is consistent with the evidence that the Solicitors did not become aware of the status of Mr Luo's parents until after settlement.
21. It was common ground that the purchasers paid Surcharge Purchaser Duty of $14,120.00 and the property was registered in their names about 27 October 2016.
22. The Solicitors submit that Mr Luo has not suffered any loss. They deny they have breached any of their duties or misled him. They argue that they have exercised reasonable skill in the performance of their retainer. They contend that Mr Luo's parents are liable to pay the Surcharge Purchaser Duty which is a statutory obligation and cannot be avoided.
23. The general principles applicable to determining issues of negligence involving solicitors were discussed in Richtoll Pty Ltd v WW Lawyers (in Liquidation) Pty Ltd [2016] NSWSC 438 where Hoeben CJ at 160-163 stated: "160 Part 1A and in particular s 5B CLA apply to determine questions of negligence and related claims in contract for failure to take reasonable care. The application of the statute must be undertaken in the context of the common law - in this case the common law relating to solicitors' duties. Solicitors owe their clients a concurrent duty in tort and contract (Astley v Austrust Ltd [1999] HCA 6; 197 CLR 1). In each case the duty is to apply the relevant degree of skill and exercise of reasonable care in carrying out the particular task in which the solicitor has been engaged (Heydon v NRMA Ltd [2000] NSWCA 374; 51 NSWLR 1 at [147]). The starting point in determining the scope of the duty is to ascertain what the client engaged the solicitor to do or advise upon. 161 In advising clients entering into commercial contracts a solicitor does not have a duty to give opinions about the financial prospects of the proposed arrangements (Citycorp Australia Ltd v O'Brien (1996) 40 NSWLR 398 at 418). Generally speaking a solicitor does not owe duties in tort to the client going beyond the duties arising from the retainer to perform the task in question. This is in some circumstances referred to as a "penumbral duty" (Kowalczuk v Accom Finance [2008] NSWCA 343; 77 NSWLR 205 at [294]; Dominic v Riz [2009] NSWCA 216 at [89]; Winnote Pty Ltd v Page [2006] NSWCA 287; 68 NSWLR 531 at [84]). 162 If, however, a solicitor becomes aware of facts during the execution of the retainer putting the solicitor on notice that the client's interests are at particular risk, the solicitor may be obliged to provide further advice, or at least suggest that further advice be obtained (David v David at [76]; Dominic v Riz at [91], Keddie v Stacks/Goudkamp Pty Ltd [2012] NSWCA 254 at [104]; Provident Capital Pty Ltd v Papa at [75]). Ordinarily unless provided for by the retainer, a solicitor acting for a commercial lender will be responsible for the legal efficacy of any security for the loan, but not the value of the security, or the creditworthiness or capacity to make repayments of the borrower (Nationwide Building Society v Balmer Radmore (a firm) [1999] All ER (D) 95; Kayteal Pty Ltd v Dignan at [36] - [38]; White v Illawarra Mutual Building Society Ltd [2002] NSWCA 164 at [128]; National Home Loans Corporation plc v Giffen Couch and Archer) nor is a lender's solicitor necessarily obliged to disclose information acquired in confidence before the commencement of the retainer by the lender in respect of the borrower's poor financial status (Omega Trust Co Ltd v Wright Sun & Pepper (No 2) (1998) PNLR 337; Maes Finance Ltd, Mac No 1 Ltd v Sharp & Partners (a firm) [1999] EWHC Technology 209; Kayteal Pty Ltd v Dignan at [37]). 163 The onus of establishing the existence in terms of a retainer rests on the party so asserting, usually the client plaintiff. Obviously a written retainer or other document purporting to outline the terms of the retainer will be weighty evidence. It has been said that solicitors who seek to limit their retainer ought to do so clearly and usually in writing as a matter of prudent practice (Minkin v Landsberg (T/A Barnet Family Law) (2015) EWCA Civ 1152 at [38] - [39])".
24. In that case the Court considered whether there was a breach of the solicitor's duty and retainer by first requiring an assessment of the scope of the retainer and consequently the scope of the tortious duty. In these proceedings the scope of the retainer was as per the Costs Disclosure and Costs Agreement "to act on the purchase of 1/32-34 St Georges Parade, Hurstville". The retainer was limited and very specific.
25. The problem for Mr Luo in these proceedings is that the Solicitors were retained to act on the purchase of a property. They were not instructed to provide advice on whether the Surcharge Purchaser Duty applied to the transaction. The Solicitors provided an assessment of the stamp duty payable on the transaction based on information provided to them by Mr Luo and his instructions prior to exchange.
26. Until the identification documents were provided to the Solicitors on 30 August 2016, they were not aware of the status of Mr Luo's parents. Shortly thereafter the Solicitors advised Mr Luo of the requirement to pay Surcharge Purchaser Duty. The scope of the retainer did not specifically include a requirement to advise on the Surcharge Purchaser Duty. I find there was no breach of the retainer or the duty of care.
27. The Solicitors undertook the conveyancing transaction in accordance with the client's instructions. They submit that a reasonably competent solicitor would have acted in a similar manner as Elizabeth in similar circumstances.
28. The difficulty for the Solicitors is they have not adduced any evidence to establish that the Solicitors or Elizabeth "acted in a manner that (at the time the service was provided) was widely accepted in Australia by peer professional opinion as competent professional practice". How does the Tribunal objectively assess what is competent professional practice in the absence of expert evidence?
29. Mr Luo has argued that he had no opportunity to act differently and has suffered a loss. He made some vague references in his evidence as to how he may have acted differently. There was no evidence how he would have acted so as to avoid the payment of the Surcharge Purchaser Duty.
30. I do not accept that the purchasers would have acted differently. The contract had been exchanged, the cooling off period had expired and they were bound to proceed to completion. The opportunity to rescind the contract had passed when the identification documents were provided to Elizabeth.
31. I find that the Solicitors did not breach the retainer or the duty of care it owed to Mr Luo and the other purchasers by failing to advise them about the Statutory Purchaser Duty. They were not asked to provide about this matter until after completion. Mr Luo has not discharged the onus placed on him to prove the facts relevant to the issue of causation.
32. Even if I had found there was a breach of the retainer or duty of care , Mr Luo has not proved his loss. I am not persuaded he has suffered a loss . The obligation to pay the Statutory Purchaser Duty arose because of his parents' status. They are the foreign persons for the purposes of the legislation. They are not the applicants in these proceedings. Mr Luo did not incur any liability in his own right to pay the Surcharge Purchaser Duty.
33. Section 12 of the Duties Act 1997 sets out when the liability to pay duty arises. Relevantly that section provides: (1) A liability for duty charged by this Chapter arises when a transfer of dutiable property occurs. (2) However, if a transfer of dutiable property is effected by a written instrument, liability for duty charged by this Chapter arises when the instrument is first executed.
34. The purchasers' obligation to pay the stamp duty arose when the contract was exchanged on 21 July 2016. It was a statutory obligation imposed by legislation. The Solicitors made an assessment of the stamp duty and provided advice in accordance with information and instructions received from the purchasers. There is no evidence before me to suggest that the Solicitors provided incorrect advice based on instructions received which has resulted in a loss to Mr Luo. I find there was no loss suffered by Mr Luo or any of the purchasers.
35. In determining this application I have considered the consumer guarantees implied into the contract by section 60 of Australian Consumer Law that the services will be provided with due care and skill.
36. I find on the evidence that the Solicitors provided their legal services to the purchasers with due care and skill. There was no breach of the implied guarantee.
37. Having considered the evidence placed before it the Tribunal is not satisfied at the civil standard of proof that the grounds required to make the orders sought have been established and the application is dismissed. G.A Kinsey General Member Civil and Administrative Tribunal of New South Wales 19 April 2017 I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 07 June 2017