Court of Appeal (Qld)|2008-08-19|Before: Holmes JA, Muir JA, Philippides J

Mantonella Pty Ltd v. Thompson [2008] QCA 241 (19 August 2008)

HOLMES JA: The applicant for leave to appeal, Mantonella Pty Ltd, with Freeway Management Property Ltd, Mantonella's predecessor as trustee of a family trust, sued the respondent, Mr Thompson, a solicitor, in the Magistrates Court claiming damages for negligence and breach of fiduciary duty arising out of Freeway's purchase of a restaurant business from the executor of a deceased estate. Mr Jorgensen, the secretary of Freeway, acted on its behalf in negotiating the purchase and executing the contract. The Magistrate found that Mr Thompson acted for Freeway as well as the executor of the estate after the contract was executed.

One of the clauses of the contract required the vendor to assign the lease in respect of the premises and to obtain the landlord's consent to the assignment before settlement. As matters fell out, the landlords did not consent to assignment of the lease and Freeway was never able to conduct its restaurant at the premises.

Freeway and Mantonella failed in their action in the Magistrates Court against Mr Thompson, and Mantonella failed again in an appeal to the District Court against the Magistrate's judgment.

Mantonella now seeks leave to appeal in this Court. The proposed grounds are somewhat obscure, but I think it is fair to say their gist is that the Magistrate and District Court judge should have found that Mr Thompson owed and breached a duty of care to protect Freeway's interest in the completion of the sale contracts and thereafter.

Mr Thompson, on the other hand, resists the application.

Freeway and Mantonella sued Mr Thompson for damages of $15,000, reflecting the purchase price Freeway had paid under the contract, together with $1000 in legal costs paid to Melbourne solicitors, claiming, among other things, that Mr Thompson had acted for Freeway as well as the vendor, and negligently had failed to advise it, Freeway, not to pay the purchase price until the assignment was procured by the vendor. A breach of fiduciary duty was alleged, that Mr Thompson failed to advise Freeway to obtain independent legal advice, despite his conflict of interest in acting for both parties. It was also alleged that Mr Thompson had been negligent in failing to advise Freeway that the lease required it to provide a $25,000 bank guarantee.

Mr Thompson entered a defence in which he denied having acted for Freeway prior to its execution of the contract, but admitted that he had accepted instructions to act for it, as well as for the executor of the estate, to effect settlement of the contract. The Magistrate accepted Mr Thompson's assertion for a number of reasons: her adverse view of Mr Jorgensen's credit, the fact that he had not, at the stage at which the contract was entered, given Mr Thompson adequate information for him to act on Freeway's behalf, the relatively low fees charged by Mr Thompson, and the form of the plaint as originally filed, which was consistent with Mr Thompson's assertion.

The finding was appealed, but the Magistrate's reasoning in this regard was adopted by the learned District Court judge who heard the appeal. It seems to me unassailable and I do not understand Mr Jorgensen, who appeared for Mantonella, now to take issue with it.

As a consequence of that finding, the Magistrate went on to conclude that Mr Thompson had no duty to advise Freeway that the lease would require him to lodge a bank guarantee for $25,000 and, given the acceptance of her finding that Mr Thompson did not act prior to the execution of the contract, it does not seem there is any longer any issue in that regard.

The contract was executed on 5 August 1994. Remarkably, it did not contain any date of settlement. Mr Thompson maintained at different times that it had settled on various dates, including 12 August 1994 and 8 February 1995. The purchase price of $15,000 was credited to Mr Thompson's trust account for the estate in amounts of $5000 and $10,000 on 5 and 26 August, the date on a post-dated cheque, respectively; those were the only funds held on the estate's account. The deposit was transferred to Mr Thompson's general account on 12 August; the balance monies were progressively drawn down to zero between October and December 1994.

The Magistrate found that the contract had settled on 26 August, given the tenor of the correspondence. That finding was the subject of one of Mantonella's grounds of appeal to the District Court. The learned District Court judge, however, rejected its argument; he regarded the finding as appropriate on the evidence.

Mr Thompson gave evidence that he had instructions from Mr Jorgensen to proceed to settlement without the assignment of lease. The Magistrate quoted this passage from the evidence: "With regards [sic] the issue of settlement, Mr Thompson says,"He told me that he wanted to settle, end of story. Yes?-- And I said, well, you can't settle without the lease, and he gave me a guarantee that he would settle without it - without being in sight, but-----

She found from that evidence that Mr Thompson "did warn Mr Jorgensen of the consequences of proceeding, and that Mr Jorgensen nonetheless wished the settlement to proceed without the formal assignment having been effected." The learned District Court judge concluded that the Magistrate's assessment of Mr Jorgensen explained her finding.

The Magistrate went on to find that Mr Thompson had continued to act for Freeway and the estate for a period after settlement, in negotiations with the landlords to procure an assignment of the lease. However, as to the allegation of breach of duty in failing to advise Freeway that it ought to get independent representation, given the conflict between Mr Thompson's obligations to it and those owed to the estate for which he acted, the Magistrate found that Mr Jorgensen was not naive, recognised the conflict of interest and chose to have Mr Thompson continue to act for him. Her judgment says that Mr Jorgensen "was advised of the conflict"; it is not clear whether she means by Mr Thompson, or, if so, when, but she does not cite the evidence for any such conclusion. The District Court judge again accepted the Magistrate's reasoning as sufficient to support her findings.

Although it is impossible to reach firm views without the benefit of the transcript, there does seem to be an argument available that the passage earlier quoted in relation to Mr Jorgensen's desire to settle was not an adequate basis for the Magistrate to conclude that Mr Thompson had discharged his duty to advise Freeway about the risk in settling prior to assignment, particularly in circumstances where he acted for both parties. It would not be an answer that Mr Jorgensen wanted to do so, if he were given no advice that in doing so Freeway might find it had paid the purchase price only to find that it could not lease the premises. Similarly, it would not be an answer to the allegation that Mr Thompson failed to advise Freeway to obtain independent advice to say merely that Mr Jorgensen wished him to continue to act.

There is also, in my view, considerable scope for argument as to whether the Magistrate correctly found the settlement date relying on the correspondence, given that the exhibits before us (which are far from complete) reveal a number of references by Mr Thompson to settlement not yet having occurred in late 1994 and early 1995.

It appears to me that there is a reasonable argument that the Magistrate erred in those regards and that the District Court judge erred also in upholding those findings, with the obvious prospect of an injustice having occurred if those errors are made out.

I would give leave to appeal on grounds concerning these findings of the Magistrate: that Mr Thompson was not negligent in failing to advise Freeway it was not contractually obliged to, and should not, settle until clause 7 of the contract relating to the assignment of the lease was satisfied; that settlement occurred on 26th of August 1994; and that Mr Thompson was not in breach of any duty in failing to advise of his conflict of interest in acting for both parties and the advisability of separate representation.

That leave to appeal should be subject to the filing of a notice of appeal within a specified time, which could be the subject of discussion with the parties.

HOLMES JA: The applicant has leave to appeal by filing a notice of appeal with reference to the grounds notified within seven days of today's date.

Mantonella Pty Ltd v. Thompson [2008] QCA 241 (19 August 2008)

At a glance

Court

Decision date

Before

Source

Judgment (24 paragraphs)

Mantonella Pty Ltd v. Thompson [2008] QCA 241 (19 August 2008)

Mantonella Pty Ltd v. Thompson [2008] QCA 241 (19 August 2008)