_Mantonella Pty Ltd v Thompson_

District Court of Queensland|2008-05-02

A Jorgensen (self represented) for the appellant company

**[1] This is an appeal from a decision of a Magistrate delivered on 18 September 2007. Her Honour found for the respondent/ defendant on the appellant's/ plaintiff's claim and for the respondent/defendant on his counterclaim.

[2] One Alan Jorgensen (Jorgensen) appeared on behalf of the appellant. He informed that he was the controlling mind of the appellant. For the purposes of this appeal it may be accepted that at all material times the appellant and at an earlier time when the transaction central to this proceeding occurred, another company Freeway Management Pty Ltd (Freeway) was the corporate vehicle of Jorgensen.

[3] The appeal is by way of rehearing.[1] It is a rehearing on the evidence before the Magistrate. The court has power to draw inferences from facts which are undisputed or which having been disputed are established by the findings of the judicial officer at trial.[2]

[4] The grounds of appeal set out in the notice of appeal all contend the Magistrate's findings of fact were erroneous. This necessarily involved the assertion that Her Honour should have accepted Jorgensen's evidence at trial rather than as she did, the respondent's.

[5] Her Honour's reasons for judgment were lengthy, detailed and thorough. She correctly directed herself about the law. She accepted the evidence of the respondent rather than that of Jorgensen about disputed factual matters central to her findings. Findings of fact based on credibility are not to be set aside by an appellate court unless it is shown the judicial officer at trial "has failed to use or has palpably misused (her) advantage"[3] or has acted on evidence which was "inconsistent with facts incontrovertibly established by the evidence" or which was "glaringly improbable".[4]

[6] Before dealing with the grounds of appeal it will be useful to provide a background.

[7] On 4 August 1994 Jorgensen became aware that a restaurant (Royce's Restaurant) was for sale. It had been operated from leased premises and Jorgensen was made aware of that on 4 August 1994 when he approached the respondent, interested in buying the business. Royce's Restaurant was part of a deceased estate. Mr Royce Dunbar whose business the restaurant had been, had died. The respondent had been Mr Dunbar's solicitor. He was acting as solicitor for the executor of Mr Dunbar's estate. On 5 August 1994, Jorgenson signed a contract of sale for the purchase of the business for $15,000 (the business contract). The purchaser was Freeway. The respondent signed the contract on behalf of the vendor. A condition of the contract reserved the right in the executor, to not ratify the contract, but rescind it.

[8] At an earlier time, the respondent had acted as the purchaser's solicitor for conveyance when Jorgensen purchased a substantial residential property at Clifton Beach. From that time and throughout the respondent had been of the view, Jorgensen was an experienced business man and financially very well-off.

[9] On 5 August 1994, Jorgensen gave the respondent 3 cheques; one for $500, for the respondent's fees, one for $5000 as a deposit, which the Magistrate found the respondent held as stakeholder for both parties pending completion and another post-dated 26 August 1994 for $10,000 for settlement funds. The price negotiated for the business was $15,000. It had been offered at $30,000. Trust account receipts were provided for the cheques, the funds being for the purpose of settlement with respect to the purchase from Dunbar.

[10] The lease of the restaurant premises was never assigned to Freeway by the lessor (the Sofia's). The Magistrate found on the evidence that was because a bank guarantee required under the lease was never provided by Freeway or Jorgensen and as it emerged Freeway was unable to satisfy the lessor of an acceptable financial status. The matter became mired in legal proceedings in an attempt to compel assignment.

[11] The inability of Jorgensen/Freeway to provide the bank guarantee required by the lease allied with their inability to satisfy the lessor of an acceptable financial status was a central aspect of the Magistrate' assessment of the evidence and of the appellant's claim. For a considerable period of time as she found the respondent continued to believe Jorgensen was financially very well-off and continued to accept his assurances that these requirements of the lessor would be attended to.

[12] As alluded to earlier, there was conflict between the evidence of the respondent and Jorgensen. Jorgensen contended the respondent was retained as his/Freeway's solicitor before he signed the business contract. The respondent denied that. According to him he was retained after the contract was signed. The Magistrate found that the respondent was not retained as Jorgensen's or Freeway's solicitor before the contract was entered into. Rather he was retained after the contract had been entered into to act for settlement of the business contract and to deal with the landlord and the landlord's solicitors in the assignment of the lease.

[13] The trial occupied 5 days in March and May 2007. The proceeding (which had been originally commenced in June 1997) was amended in 1998 by the substitution of the present appellant as plaintiff, by claiming a lesser amount of damages and by amendment of particulars of claim and after May 1999 was dormant until 2005 when the plaintiff applied for leave to proceed. Leave was finally granted in 2006.

[14] On 6 June 1997 Freeway through solicitors issued a plaint and summons in the Magistrates Court at Cairns claiming $20,000 from the respondent. The statement of particulars of claim, claimed damage was suffered by Freeway because:

▪ in 1994, when the respondent was acting as solicitor for the estate of Royce Stuart Dunbar, Freeway entered into a contract with the estate, executed on the estate's behalf by the respondent for the purchase of the business, Royse's Restaurant;

▪ that the respondent accepted instructions from Freeway and the estate to act as solicitor on the settlement and completion of the contract;

▪ that in accordance with the terms of the contract, Freeway paid to the estate $15,000;

▪ that the respondent breached his duty of care as solicitor for Freeway in negligently failing to properly complete a schedule of plant and equipment and chattels to be conveyed by the contract.

Additionally it was alleged that at the time of entering into the contract, Freeway was retaining the respondent as its solicitor and the respondent owed Freeway a duty of care to advise generally in relation to the transaction which duty was breached because of a failure to advise prior to entry into the contract that the lease of the restaurant premises required a bond in the amount of $20,000 be provided to the lessor.

[15] The same solicitors were acting for the appellant in September 1998 when the amendments mentioned above were made. The claim was amended to claim damages of $16,000, comprising $15,000 paid for the business and $1000 paid to solicitors other than the respondent to pursue acquisition of the business. The amended particulars of claim alleged that in accordance with the terms of the business contract, the appellant paid to the respondent's trust account $15,000. Additional breaches of a duty of care were alleged namely:

▪ that Freeway was not obliged to pay and should not pay the purchase price until the estate had obtained the consent of the lessor of the premises in which the business was operated to assignment of the lease;

▪ that the contract required the estate to procure at it's expense, the assignment of the lease;

▪ that Freeway could terminate the contract if the landlord did not assign the lease;

▪ that Freeway should obtain separate legal representation.

For advising Freeway to join with the estate in litigation to procure the landlord's consent to assignment of the lease and to indemnify the estate in respect of that litigation.

It alleged further, breach of fiduciary duty by the respondent by failing to advise Freeway of the likelihood that its interests and the estate's interests could diverge in view of the attitude of the lessor to consenting to assignment of the lease and that it should obtain independent legal advice. It alleged that if it had been properly advised, Freeway would have sought independent legal advice to the effect that it should not pay the purchase price for the business and the money paid to the respondent would have been recovered.

[16] The respondent's counterclaim related to payments to the respondent by cheque for legal work performed. The cheques were handed to the respondent by Jorgensen so as to obtain Freeway's file. Having obtained the file, Jorgensen cancelled the cheques.

[17] In her reasons for judgment the Magistrate dealt with each of the appellant's pleadings in the amended particulars of claim. She accepted the evidence of the respondent over that of Jorgensen where the evidence was in conflict about matters material to the pleadings. She found:

▪ that the respondent had not been retained by the appellant as its solicitor before entering into the business contract and consequently was under no duty to advise generally in relation to the transaction. The earlier retainer by Jorgensen relating to conveyance of the dwelling purchased had been completed. A further retainer arose only after the business contract was entered into when Jorgensen retained the respondent for settlement of the business contract including dealing with the lessor and their solicitor regarding assignment of the lease on Freeway's behalf;

▪ that the respondent had on 4 August 1994, before the business contract had been entered into and before he had been retained by Freeway to act for it on settlement of the business contract, given Jorgensen a copy of the original contract when Royce Dunbar had bought the restaurant to take with him when he went to inspect the restaurant. That contract contained the original lease, including special conditions which required the provision of a bank guarantee and also an inventory of plant and equipment;

▪ that the original of the business contract executed on 5 August 1994 by Jorgensen had annexed to it the schedule of chattels which were included in the contract;

▪ that the respondent had not breached any duty of care to the appellant, in particular he had not negligently failed to properly complete a schedule of plant equipment and chattels the subject of the business contract;

▪ that the respondent had advised Freeway through Jorgensen of the risk attendant upon settling the business contract before obtaining the lessor's consent to assignment of the lease;

▪ that the respondent had not breached his fiduciary duty as a solicitor in not advising the appellant that a conflict of interest could arise or had arisen and independent legal advice should be obtained.

[18] The Magistrate's reasons for judgment reveal an awareness she was deciding an issue of credibility between a solicitor and client regarding whether the respondent was retained as the appellant's solicitor to advise on the contract before it was entered into. There was no written retainer. Although the issue was whether or not the respondent had been retained at that time rather than the terms of the retainer, she recorded she was conscious of the weight to be attached to the word of the client against that of the solicitor.[5] Her reasons for preferring the respondent's evidence over that of Jorgensen are lengthy and thorough and based upon the evidence.

[19] The first ground of appeal focussed on settlement of the business contract proceeding before assignment of the lease by the lessor to the appellant. The Magistrate found that the respondent warned Jorgensen about proceeding before consent to assignment was provided, but that Jorgensen was confident there would be no problem and was eager to proceed.

[20] At first glance this may seem odd, but the Magistrate saw and heard the witnesses and her reasons for judgment which included her assessment of Jorgensen explain why she reached that view.

[21] This ground of appeal asserted that particular advice should have been given by the respondent explaining what the risks were and the appellant's options namely:

▪ that the lease could be terminated by the landlord for breach of the covenant to assign without consent;

▪ that the purchase price need not be paid until an assignment was completed;

▪ that Freeway risked paying for the business but having no premises in which to conduct the business.

[22] The Magistrate's findings of fact are against this ground of appeal. These findings, which were open on the evidence included that Jorgensen was an experienced businessman with significant prior experience with leaseholding.

[23] Ground 2 was that the Magistrate was wrong in finding the respondent's retainer as Freeway's solicitor was only for settlement of the contract. In fact the Magistrate found that the respondent was also retained to deal with the landlord and its solicitors regarding assignment of the lease.

[24] Resolution of the question raised by this ground depended on credibility. At the risk of repeating myself, the Magistrate gave extensive reasons why she accepted the evidence of the respondent.

[25] Ground 3 was that the Magistrate was wrong in finding the business contract ever settled, or alternatively she was wrong in finding that the respondent had advised Freeway through Jorgensen not to settle until assignment of the lease was complete.

[26] I have already dealt with the assertion the Magistrate was wrong in finding the respondent had advised of the inadvisability of settling before assignment of the lease. She was entitled on the evidence to make that finding.

[27] The question of settlement was dealt with at length in the Magistrate's reasons for judgment. On 8 August 1994, three days after the business contract was executed, the respondent wrote to the lessor's solicitors enclosing the business contract, proposing settlement occur that week and requesting the appropriate transfer documents. He advised that for the purposes of the sale he was acting for the purchaser as well as the vendor. On 10 August 1994 the lessor's solicitors responded forwarding a draft deed of consent to assignment of the lease, and advising of the information required for determining whether the proposed assignee was a respectable, responsible and financial person and informing that the assignee was required to provide a substitute bank guarantee complying with clause 21 of the lease. On 24 August 1994 the respondent wrote to the landlord's solicitors forwarding the signed deed of assignment and advising that the proposed assignee was taking steps to obtain the bank guarantee required under the lease which should be available "for you on Friday. My clients are obtaining the other information you require and will present that to me tomorrow morning. I shall deliver it as soon as it is to hand". However that did not eventuate. In the meantime according to the Magistrate's findings, Jorgensen was keen to push ahead and settle the purchase despite the respondent's note of caution about that before assignment of the lease.

[28] The Magistrate found that pinpointing the date of settlement of the business contract was elusive on the evidence. She found that the respondent initially contemplated settlement had occurred on 12 August 1994, that is, 2 days after the landlord's solicitor's letter of 10 August 1994 forwarding a draft deed of consent to assignment of the lease. As she found, at that stage the respondent was of the view Jorgensen was a man of substance eager to press ahead with operation of the restaurant. 12 August 1994 was also the date when the $5000 was disbursed from the respondent's trust account to his general account. However it was apparent settlement did not occur on that date and the respondent later had indicated an awareness of that. By 26 August 1994 the date of the post-dated cheque for the balance of the purchase price, the respondent had received an assurance from Jorgensen the bank guarantee would be provided together with a statement of assets of the proposed assignee required by the lessor. This is reflected in the respondent's letter of 24 August 1994 to the lessor's solicitors. Based on that and subsequent correspondence, the Magistrate found the business contract probably completed on or about 26 August 1994.

[29] It has not been shown that conclusion was not open to Her Honour on the evidence accepted by her nor am I persuaded I should reach a different view on that evidence.

[30] On the hearing of the appeal Jorgensen submitted that the transfer of the money paid as the purchase price from the trust account to the general account of the respondent on 12 August 1994 and 26 August 1994 was evidence of dishonesty and a breach of duty. The Magistrate concluded that these transfers did not evidence dishonesty or fraud but arose out of confusion about when the business contract settled in the context of Jorgensen's wishing to push ahead. I am not persuaded by the evidence after taking into account the Magistrate's findings of fact that I should reach a different view

[31] Ground 4 asserted the Magistrate was wrong in not finding the respondent breached his fiduciary duty by not advising Freeway to obtain independent advice and thereby benefiting himself by obtaining access to the purchase money to pay fees owing to him.

[32] The Magistrate's reasons show she recognised the fiduciary relationship which exists between solicitor and client. She found that the respondent, not unreasonably in the circumstances was of the view Jorgensen was a wealthy person, easily able to meet the requirements of the landlord for assignment of the lease, a person who was keen to acquire the restaurant business and would honour his undertakings. Nothing was told to the respondent or came to his notice until later in the piece to suggest that Freeway and/or Jorgensen financial position in truth was not as he had believed and that Freeway may not be in a position to meet the landlord's requirements. The Magistrate found that at about the time of the failure to provide the bank guarantee, the respondent recognised there could be a conflict, but kept acting as he accepted Jorgensen's assurances that the guarantee would be provided. Jorgensen knew that the respondent acted for the estate from the outset and was aware he could seek legal advice elsewhere. She found that in truth, the reason the lease was never assigned, was because Freeway and/or Jorgensen never provided, apparently were never able to provide the bank guarantee required under the lease, nor satisfy the lessor of the potential lessee's financial standing.

[33] The Magistrate recognised that with the benefit of hindsight, it would have been wiser for the respondent to have refused to act any further for Jorgensen and Freeway in the matter once it became mired in dispute with the lessor about assignment of the lease. However she concluded that the respondent had been of the view and for quite a long time continued of the view from what he knew or thought he knew of Jorgensen from his earlier dealing with him, and from his assurances, that he was financially successful and eager to acquire and operate the restaurant.

[34] The Magistrate concluded that there was no breach of fiduciary duty as pleaded. Given the evidence she accepted, it has not been shown the conclusion was not reasonably open on the evidence. I am not persuaded I should reach a different view.

[35] Ground 5 was that the Magistrate should have found that the respondent failed to complete an inventory of plant equipment and chattels, failed to confirm on the date of completion that the appellant could identify the items of plant equipment and chattels being acquired and erred in not doing so.

[36] The Magistrate's findings of fact result in this ground of appeal not being sustainable. I have already referred to Her Honour's findings about the schedule of chattels/equipment provided to Jorgensen. She accepted the evidence of the respondent. The appellant's case as pleaded was that the respondent negligently failed to properly complete a schedule of plant equipment and chattels to be conveyed by the business contract. It was not as Jorgensen submitted on the appeal that the appellant was under a duty to ensure at settlement that the chattels etc. on the schedule were all delivered.

[37] Ground 6 was that the Magistrate was wrong in finding there was any consent to an assignment of the lease of the restaurant prior to the respondent paying the appellant's funds to the vendor.

[38] This ground assumes the Magistrate found there was consent to assignment of the lease. There never was and the Magistrate did not find there was. What she found was that at about 8 August 1994, the lessor, through solicitors was in all probability prepared to consent, subject to being satisfied the appellant was respectable and financial and the bond required by the lease was provided. This finding was plainly open on the evidence. Consent to assignment was available to Freeway and obtaining it was within the power (if not the ability) of Freeway and/or Jorgensen. The fact consent was not forthcoming was due to Jorgensen's/Freeway's failure to meet these requirements.

[39] It has not been shown that the Magistrate's findings were not reasonably open to her on the evidence. Her reasons for preferring the evidence of the respondent to that of Jorgensen do not demonstrate any error. They reveal a thorough consideration of the evidence after seeing and hearing the witnesses. There appears no misdirection about the law. Her conclusions regarding the appellant's pleaded case were reasonably available to her on the evidence she accepted. The criticisms Jorgensen made in argument on the appeal do not displace Her Honour's reasoning nor persuade me that I should reach a different view about the appellant's case as pleaded.

[1] Uniform Civil Procedure Rules1999 (Qld) rule 765.

[2] Warren v Coombes (1979) 142 CLR 513 at 551.

[3] Owners of the Steamship Hontestroom v Owners of the Steamship Sagaporak [1927] AC 37 at 47.

[4] Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479.

[5] Adamson v Williams [2001] QCA 38.

Civil Procedure Rules 1999

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