McGeoch v Hendriks & Ors [2007] NSWSC 311 | Case summary

To which Jon McGeoch said: "Well mum and I had a talk a while ago that things should be tidied up". 11 At no time did Mr Hendriks advise Mr Jon McGeoch to obtain independent legal advice and, based upon what Mr Hendriks had said, that he was acting as the family solicitor, Mr Jon McGeoch said he believed Mr Hendriks was acting on his behalf. 12 Mr Hendriks said he did not recall using the expression "the family solicitor". It was not an expression he would normally use particularly as he did not regard himself as having instructions to act for Mr Jon McGeoch or his brother. 13 Mr Robert McGeoch swore an affidavit but it did not deal with his brother's assertion that Mr Hendriks introduced himself as the family solicitor. 14 Sometime after the commencement of the meeting, Mr Jon McGeoch recorded the conversations and had them transcribed. There was further conversation after the cessation of the recording in which Mr Jon McGeoch and his brother agreed to share the legal expenses associated with the transfers of the properties. 15 The transcript opens with Mr Hendriks explaining the proposition: "… I think that if you look at, my idea is that if you look at it from mum's point of view and she's asked for my comments and the thinking was well. Umm, there's a bit of logic in what she wants. Rightly or wrongly, that's the way it is, in the sense that there is Rob next door which is the logical one to ah sought of look at for this, and ah there is ah the Mollymook house. At current valuations the're not all that far apart. So, on the pure arithmetic Jon, it's ah it's looking pretty square. If you, … it can be left to you in the Will or it can be done straight away. You would have to pay stamp to get your, if you like, the, umm, share of the inheritance. Umm, but we can certainly get it across to Rob for no duty at all." 16 To Mr McGeoch's response that his brother got his property for nothing, but he had to pay for his, Mr Hendriks said that the Mollymook transfer would cost money so it would have to be left to him in the will and there would be a clear balance between the one and the other. 17 When Mr Jon McGeoch asked why the Mollymook property could not be transferred at the same time as Wanganui, Mr Hendriks said it could, but someone would have to pay $5,500. 18 The now repealed Stamp Duties Act 1920, s 66H exempted duty on transfers of rural land from one generation to another. Mr Hendriks explained to Mr Jon McGeoch that the exemption applied to the transfer of Wanganui but not to the transfer of the Mollymook property. Mr Jon McGeoch asked: "No. But well what's the situation there Harry? What … ?" to which Mr Hendriks responded: "It is about five and a half. I've got it here, on two hundred it's five and a half grand, the stamp duty." 19 Mr Jon McGeoch said: "What you're meaning is, the two assets are of similar value, is that what you are saying?" to which Mr Hendriks agreed. 20 In cross-examination, Mr Jon McGeoch had said that he did not know the contents of his mother's 1993 will before the meeting and it came as a shock to him to learn that under it his brother was to receive a life interest in Wanganui, Mr Robert McGeoch's son Angus was to have the remainder and he was to have the Mollymook property. At the December 1995 meeting Mr Jon McGeoch said there were a couple of matters that he wished to bring up but there might be no point. He had hoped to relocate emus and ostriches on Wanganui: "But I mean that's, that's why it's come a bit of a shock to me that Wanganui is gone." 21 Mr Jon McGeoch said he had sold his property, Massadon, and if his income from farming Wanganui was to be brought to an end, he considered that a hardship. He said he had thought that his farming of Wanganui would go on for two, three or four years. He wished that he had been forewarned. After some discussion, Mrs McGeoch suggested that Mr Jon McGeoch should vacate Wanganui by 30 June 1996, to which he agreed. 22 Mr Hendriks commented that if Mr Jon McGeoch had sold Massadon and was flush with money he might be able to afford the $5,500. 23 To Mr Jon McGeoch's comment that Wanganui would have been worth a lot more if things had been sorted out earlier, Mr Hendriks responded: "It probably would have but I can't help that. I can only say that I am not buying into Wills in consideration but essentially the paperwork would include, and I have got to be fair to you Jon, that it would include mum signing a Will which would say: Mollymook house and contents to you, umm as I have, sort of linking in, as I have already transferred Wanganui to Rob." 24 Mr Robert McGeoch made the observation that his mother was executing the greater portion of her will during her life and that all that would be left were personal things, some cash and a few shares. Mr Hendriks commented: "We wouldn't even need probate actually probably". The assumption underlying those comments was that there would be no change in Mrs McGeoch's will. 25 Mrs McGeoch said that Mr Jon McGeoch had a choice of paying the stamp duty and he did not have to decide that day. Mr Hendriks asked whether any other relations used the Mollymook property. Mr Jon McGeoch said he would rather not have any provision with respect to the use of the property, to which Mr Hendriks responded: "Ah. Look no, no, no. I think Rob was suggesting that as of ah whatever, 30th of June then, that, that although it is in mother's name it is effectively yours." 26 Mr Jon McGeoch agreed but he did not want any other family using it, if it was in his name or being left to him, whichever way it went. Mr Hendriks said: "Yeh, you want full control." 27 Later in the discussion, Mr Jon McGeoch said he would sooner, probably, take the property straight away, to which Mr Hendriks responded: "Pay the stamp duty, get the thing done." 28 Mr Jon McGeoch complained that he had no option: "It's either take it or leave it". Mr Hendriks said: "It's even, it's very even. That's the only reason that I …". Mr Jon McGeogh cut him off by again asserting he had no option. 29 After a diversion with respect to other matters, Mrs McGeoch asked what the position was. Mr Hendriks summarised it: "Well dates … Robert takes Wanganui 30th of June, Jon takes Mollymook delivery 30th of June and Jon vacates Wanganui 30th of June. Is that, is that right? 30 The question was then raised whether Mr Robert McGeoch could commence repairs on Wanganui. Mr Hendriks said there was no reason why he could not. Mr Jon McGeoch asked about Mollymook, to which Mr Hendriks responded: "There's no reason you can't." 31 Mrs McGeoch referred to Mr Jon McGeoch definitely deciding what he wanted to do on 30 June 1996. Mr Jon McGeoch responded that he would make a decision long before then. 32 Mr Jon McGeoch made his decision to take the transfer of the Mollymook property and pay the stamp duty. Mr Hendriks said he had a telephone conversation with Mr Jon McGeoch on 21 December 1995 in which he was informed by Mr Jon McGeoch that he wished to take the transfer. 33 An instrument of transfer of the Mollymook property to Mr Jon McGeoch was signed in advance by Mrs McGeoch. 34 Mr Jon McGeoch received a letter from Mr Hendriks in February 1996 stating that if the Mollymook property was transferred to him, it would have a disastrous effect on his mother's pension and informing him that his mother's recently executed will provided that, should she own Wanganui on her death, it was to pass to Mr Robert McGeoch and should she own the Mollymook house on her death, it was to pass to him, the balance of the estate passing to him and his brother equally. 35 Mr Jon McGeoch said he had a telephone conversation with Mr Hendriks after he received this letter in which Mr Hendriks said: "Look, don't worry Jon. I am looking after your interests. Your mother's will provides that Mollymook will pass to you. This is all being done to save her pension. It won't affect your entitlement to Mollymook." 36 Mr Hendriks denied using the expression "I am looking after your interests" or words to that effect. 37 Mr Hendriks sent a memorandum of costs and disbursements to Mrs McGeoch and sent copies to Mr Jon McGeoch and his brother as they were to pay half each. The memorandum began: "TO our costs of acting for you and members of the family in respect of proposed transactions…". Mr Hendriks said this description was inaccurate and should have been: "TO our costs of acting for you involving members of the family in respect of proposed transactions…". 38 A deal of cross-examination was directed at the credit of Mr Jon McGeoch and Mr Hendriks to support submissions that the conversations that might ground an express retainer of Mr Hendriks by Mr Jon McGeoch should be accepted or rejected. 39 Mr McGeoch said he took the tape of the meeting to Mr Michael Kennedy of Walsh & Blair, Solicitors for transcription and he picked up the transcript in January or February 1996. After Mr Kennedy had given evidence that no tape was given to his firm until much later, Mr McGeoch was recalled and conceded that he was mistaken. 40 Mr Jon McGeoch had also seen Timothy James Abbott of Walsh & Blair. It was put to him that having retained Mr Abbott and having approached Mr Kennedy, he could not have regarded Mr Hendriks as his solicitor. He denied this assertion. He said Mr Abbott was his friend. Mr Abbot did not agree with this description. Mr Jon McGeoch saw Mr Abbott to obtain separate advice on Mr Hendricks' memorandum of costs and disbursements. He had identified a number of disbursements that he believed had been incurred by his brother prior to the meeting in December 1995. 41 In December 1990, Mr Jon McGeoch signed a letter on the letterhead of Walsh & Blair containing his address as well, giving notice that he would not be responsible for any debts or expenditure in relation to Wanganui. He sent the letter in that form to Mr Hendriks. Mr Abbott said it was typed up as a draft on scrap paper for Mr Jon McGeoch to re-type on his own letterhead. Mr Hendriks' response in January 1991 was not couched in the language of a solicitor writing to a client. 42 Mr Jon McGeoch sent Mr Hendriks a letter in February 1997 enclosing a cheque for $500 in payment of the memorandum of costs and disbursements stating that he had been advised to pay this amount. Mr Abbott said he had no recollection of giving Mr Jon McGeoch a figure. He would not have known what work was done. He said he told Mr McGeoch to go back and talk to Mr Hendriks about the bill to sort it out. 43 Angus McGeoch was a client of Mr Hendriks. He was seeking security with respect to Wanganui before he expended moneys repairing and improving the cottage. It was his plan to have Wanganui transferred to his father for life with him as remainderman. Mr Hendriks did not reveal that he acted for Mr Angus McGeoch at the meeting of December 1995. 44 Mr Hendriks sent a different memorandum of costs and disbursements to Mr Jon McGeoch from that which he sent to Mr Robert McGeoch. In the document sent to Mr Robert McGeoch reference was made to "telephone attendance upon Mr Thompson acting for Angus McGeoch when he was to forward information to us, perusing copy of lengthy letter to Mr Angus McGeoch, consideration of and drawing response thereto, perusing reply …" Mr Hendriks could not explain why he omitted this material from the document sent to Mr Jon McGeoch. It was submitted that the only explanation was that Mr Hendriks wished to withhold from Mr Jon McGeoch the fact that he was acting for Mr Angus McGeoch. 45 The instrument of transfer of Wanganui from Mrs McGeoch to Mr Robert McGeoch was signed by Mr Hendriks as transferee without authority. 46 Attention was drawn to a letter of January 1996 from Mr Hendriks to Mrs McGeoch, enclosing a draft of a new will. In my view, it adds nothing to the issue whether Mr Hendriks was retained by Mr Jon McGeoch. Express retainer 47 The question whether Mr Jon McGeoch expressly retained Mr Hendriks as his solicitor depends upon findings of fact sufficient to constitute a contract between the two. 48 In my view, the evidence supports the existence of an express retainer. I prefer the evidence of Mr Jon McGeoch to that of Mr Hendriks with respect to the conversations. Contrary to his assertion, Mr Hendriks did act as the family solicitor at the December 1995 meeting. He did not confine himself to advising Mrs McGeoch alone at that meeting. He advised Mr Robert McGeoch and he advised Mr Jon McGeoch. Mr Jon McGeoch asked him a direct question in relation to stamp duty and Mr Hendriks provided his opinion without qualification. The statement in Mr Hendriks' memorandum of costs and disbursements was accurate. While Mr Jon McGeoch was criticised as being a poor historian he struck me as an honest witness and, indeed, his veracity was not challenged. It was his recollection that was challenged. I accept Mr Jon McGeoch's evidence that before he commenced to tape record the meeting Mr Hendriks told him that he was acting as the family solicitor. I also accept his version of the conversation with Mr Hendriks in which Mr Hendriks said: "I am looking after your interests." 49 I am also of the view that Mr Hendriks breached his duty under his retainer. He failed to draw up and have executed an agreement that would protect Mr Jon McGeoch's interests by binding his mother not to alter her will with respect to the devise of the Mollymook property. There is no doubt that had such an agreement been drawn, Mrs McGeoch would have signed it. She executed a transfer of the Mollymook property before the issue of the adverse effect on her pension entitlement arose. In failing to take that simple course, Mr Hendriks breached his duty to Mr Jon McGeoch. 50 Reference was made to Sharpe v Anderson (1994) 6 BPR 13,801 and it was submitted that there was no intention to form legal relations. It was submitted there was no more than a discretionary promise arising from the December 1995 meeting and reference was made to Stocks & Holdings (Constructors) Pty Ltd v Arrowsmith (1964-1965) NSWR 289 and Loftus v Roberts (1902) 18 TLR 532. In my view, these authorities are beside the point. Mr Hendriks was retained as family solicitor. He owed a duty to protect Mr Jon McGeoch's interests. He breached that duty by failing to draw up the simple document to which I have referred. There is no doubt that Mrs McGeoch would have executed it and bound herself not to alter the devise of the Mollymook property to Mr Jon McGeoch in her will. 51 It was submitted that any ongoing duty owed by Mr Hendriks to Mr Jon McGeoch if there was an express retainer, was limited to confidentiality and reference was made to Blythe v Northwood (2005) 63 NSWLR 531. That decision does not assist me. It was acknowledged that the extent of the fiduciary obligations owed by a solicitor to his or her client depends upon the scope of the applicable retainer. What was there in question was the retainer of a solicitor solely to explain terms and the effect of a transaction. That is quite a different context from that with which I am concerned. Implied retainer 52 In light of my finding that an express retainer existed between Mr Hendriks and Mr Jon McGeoch it is unnecessary for me to deal with the alternative bases upon which Mr Jon McGeoch put his case. In case I be wrong in the above findings, however, I deal briefly with the other grounds. 53 It was submitted that Pegrum v Fatharly (1996) 14 WAR 92 was in point. In that case prospective lenders suggested that the borrower's solicitor draw all documents with respect to a loan. The parties attended on the solicitor and gave him information. The lenders confirmed that the respondent was the only solicitor involved in the transaction. The solicitor knew that the borrowers were a bad risk and the securities given were inadequate. In an action by the lenders against the solicitor it was held that a professional engagement might be implied and would be presumed if the conduct of the party showed that the relevant relationship had been established. In that case it was held that the circumstances led to the inference that the solicitor had tacitly agreed to act as the lenders' solicitor and owed professional duties including the duty to advise the lenders that the proposed borrower was probably insolvent and that the securities were probably inadequate. 54 It was submitted that the decision is distinguishable because the lenders entered into an arrangement that affected their rights and obligations whereas Mr Jon McGeoch's rights and obligations were not affected. But the point of the decision is not the findings of fact but, rather, the principle that a professional engagement may be implied if the relevant relationship is established. In my view, in the circumstances of this case, the proper inference is that, if Mr Hendriks was not expressly retained by Mr Jon McGeoch, he tacitly agreed to act for him. The recording of the December 1995 meeting establishes that Mr Hendriks advised both Mr Robert McGeoch and Mr Jon McGeoch of the benefit to each respectively of their mother's proposal. He did not advise them to seek independent advice. And when asked for advice on stamp duty by Mr Jon McGeoch, Mr Hendriks freely gave it. Mr Jon McGeoch acted on that advice by informing Mr Hendriks in December 1995 that he would take a transfer of the Mollymook property forthwith and pay the requisite stamp duty. Duty of care 55 So far as the claim that, in the absence of a retainer, Mr Hendriks was under a duty of care to Mr Jon McGeoch, reference was made to Watkins v Da Varda [2003] NSWCA 242. In that case, the appellants, a firm of solicitors, acted for the vendor of an interest in a Cambodian property. The vendor, the purchaser respondent, and a member of the solicitors' firm met and the solicitor drew agreements that were ineffective. It was held that while the respondent was not contractually a client of the appellants, the solicitor knew that the respondent was relying on him to proceed in accordance with the respondent's interests. Once that situation arose the solicitor was in a position of conflict and should have expressly said that he could not protect the respondent's interest and the respondent should obtain independent legal advice. 56 The High Court has recognised that in certain circumstances a solicitor may owe a duty to a third party not being the solicitor's client. In Hawkins v Clayton (1987-1988) 164 CLR 539 a solicitor retained a will after the death of a testatrix and made no effort to find the executor. It was held that the solicitor was under a duty to take reasonable steps to find the executor and inform him of the existence, contents and custody of the will. (See, also, Hill v Van Erp (1995-1997) 188 CLR 159 at 187). 57 Reference was made to Talbot & Olivier v Witcombe (2006) 32 WAR 179. In that case a client of the solicitors, for whom they were prosecuting a claim for damages, died before trial. Limited damages were thus available to his estate. The widow, executrix, sued the solicitors alleging a breach of duty to her by failing to prosecute her late husband's claim expeditiously. It was held that the circumstances did not establish that the solicitors assumed any responsibility to the widow to prosecute her husband's claim with diligence. That is a set of circumstances far removed from the present. Mr Hendriks chose to give advice, not only to Mrs McGeoch, but also to Mr Robert McGeoch and to Mr Jon McGeoch. He thereby assumed a responsibility for that advice. He knew that Mr Jon McGeoch was relying on him to provide appropriate advice and in doing so to look after his interests. Mr Hendriks failed to look after Mr Jon McGeoch's interests and in so doing he was in breach of a duty of care. Misleading or deceptive conduct 58 So far as the alternative claim under the Fair Trading Act 1987 and the Trade Practices Act 1974 (Cth) is concerned, for the reasons set out above Mr Jon McGeoch has made out his reliance upon misleading or deceptive conduct in that, without informing Mr Jon McGeoch, Mr Hendriks did not safeguard his interests. Conclusion 59 Mr Jon McGeoch has made out an entitlement to damages. The parties have indicated that I should stand the matter over to enable them to arrive at agreement with respect to the amount of those damages and the question of costs. I will hear the parties on these matters. I direct the parties to bring in short minutes of order reflecting these reasons.

McGeoch v Hendriks & Ors

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Judgment (15 paragraphs)

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