Supreme Court of the ACT|2019-01-29|Before: McWilliam AsJ

McLennan v Clapham & Ors [2019] ACTSC 1 (29 January 2019)

Judgment is entered for the plaintiffs in the sum of $37,638.34

PROFESSIONAL NEGLIGENCE - solicitors' failure to advise in relation to contract for sale of land - whether breach of duty caused loss claimed by plaintiffs - where plaintiffs subsequently substantially mitigated their loss

CONTRACT - breach of retainer - whether solicitors' failure to advise caused loss claimed by plaintiffs

TRADE PRACTICES - misleading and deceptive conduct - whether representation made by silence

Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; 250 CLR 640

Baltic Shipping Company v Dillon [1993] HCA 4; (1993) 176 CLR 344

Burns v Man Automotive (Aust) Pty Ltd [1986] HCA 81; (1986) 161 CLR 653

Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304

Capebay Holdings Pty Ltd v Sands [2002] WASC 287

Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594

G & M v Armellin [2008] ACTSC 68; 219 FLR 359

Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1

Henville v Walker [2001] HCA 52; 206 CLR 459

Heydon v NRMA Ltd [2000] NSWCA 374; 51 NSWLR 1

Hill v Van Erp (1997) 188 CLR 159

HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; 217 CLR 640

Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125

I & L Securities v HTW Valuers [2002] HCA 41; 210 CLR 109

Jennings v George Harcourt Management Pty Ltd [2018] ACTCA 50

Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; 77 NSWLR 205

Marks v GIO Australia Holdings Ltd [1998] HCA 69; 196 CLR 494

Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] Ch 384

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; 241 CLR 357

Monaghan v Australian Capital Territory (No 2) [2016] ACTSC 352; 315 FLR 305

Leitch v Reynolds [2005] NSWCA 259

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191

Rafferty v Madgwicks [2012] FCAFC 37; 203 FCR 1

Roberts v Westpac Banking Corporation [2016] ACTCA 68

Rogers v Whitaker [1992] HCA 58; (1992) 175 CLR 479

Rosenberg v Percival [2001] HCA 18; 205 CLR 434

Semrani v Manoun [2001] NSWCA 337

South Australian Stevedoring Company Ltd v Holbertson [1939] SAStRp 37; [1939] SASR 257

Sykes v Midland Bank Executor & Trustee Co Ltd [1971] 1 QB 113

Walmsley v Cosentino [2001] NSWCA 403

Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514

RA Clapham, PE Green, GT Brackenreg, RW McDonald, JR Reid, J Cudmore, K Scheul, CA Murray, A Tay and A Tsirimokos t/as Meyer Vandenberg ABN 55 028 339 509 (Defendants)

1. On 16 June 2009, the plaintiffs in the present proceeding purchased a Crown lease for a property in the suburb of Griffith (Griffith property) for the purchase price of $1,375,000.

2. The firm of solicitors who acted for them on the purchase are now the defendants in the present proceeding. They are in partnership and known as Meyer Vandenberg. The plaintiffs complain about the advice given to them relating to the contract for sale they signed in relation to Griffith property.

3. By way of overview, the complaint revolves around the fact that the Griffith property had previously been insulated with loose-fill asbestos material, which the ACT Government had purported to remove by the time the plaintiffs came to purchase the Griffith property. The plaintiffs allege they were not properly advised about the risks and consequences associated with buying such a property, and had they been so advised, they would not have purchased it.

4. In 2013, the plaintiffs suspected that there was still loose-fill asbestos present in the Griffith property as a result of carrying out minor renovations, and this was later confirmed by an environmental survey report in May 2014 which the plaintiffs requested following the receipt of correspondence from the ACT Government. The house was identified as a 'Mr Fluffy' home, as it is commonly described in the ACT, so called after the company that had used loose-fill asbestos to insulate homes in the Territory many years prior.

5. It was not in issue that the ACT Government subsequently conducted a scheme whereby it repurchased the leases for houses that were known to be contaminated by asbestos. On 30 June 2015, the plaintiffs duly surrendered their Crown lease back to the ACT Government for the price of $1,876,000.

6. Once the house upon the site had been demolished, the plaintiffs had the right to repurchase the land, and they did so on 15 November 2015 for the price of $1,210,000.

7. They then built a new house on the site of the Griffith property, living in rental accommodation throughout the period when the demolition of the existing house and the construction of a new one occurred. They moved into the new house in August 2017.

8. The plaintiffs have brought a claim in professional negligence against the defendants, and the same facts are said to give rise to claims for breach of contract and for misleading or deceptive conduct under s 12 of the Fair Trading Act 1992 (ACT) (Fair Trading Act), as in force in 2009. The Further Amended Statement of Claim dated 18 September 2017 (Claim) also refers to a claim for equitable relief, but that was not pursued at the hearing.

9. The Court had the benefit of helpful oral and written submissions prepared by the respective counsel for each of the parties. Parts of those submissions have been incorporated in setting out the relevant legislation and legal principles, and in addressing the arguments below.

10. The most salient parts of the Claim are that the plaintiffs entered into a retainer with the defendants on 17 March 2009, the terms of which included that the defendants would take all reasonable steps to:

(a) assess the contract for sale in relation to their proposed purchase of the Griffith property, as well as the attached document and provide advice to the plaintiffs;

(b) provide legal advice to the plaintiffs on the contract for sale, as well as what was disclosed in the attached documents; and

(c) take all necessary steps to facilitate the contract for sale if the plaintiffs intended to proceed.

11. The plaintiffs further plead that the terms of the retainer included providing the plaintiffs with all reasonable and necessary advice to ensure the Griffith property was free from known or discoverable defects and fit for occupation and use as a family home.

12. The plaintiffs allege that the defendants did not at any time prior to the execution of the contract for sale advise them:

(a) Of the full terms of the contents of the contract for sale and the documents contained therein;

(b) That asbestos had been present in the Griffith property;

(c) That the form of asbestos was loose-fill asbestos;

(d) That residual fibres may still be present in the house;

(e) Of the nature and risk associated with loose-fill asbestos;

(f) That prior approval of the building controllers may be required for renovations to the Griffith property;

(g) That further inquiries regarding the presence of asbestos would assist, including an asbestos assessment report obtained in accordance with s 47K of the Dangerous Substances Act 2004 (ACT);

(h) That the plaintiffs could obtain the building file for the Griffith property;

(i) That the certificate of clearance of asbestos was inconsistent with other documents attached to the contract for sale;

(j) That the contract for sale was incomplete, incorrect and/or deficient in several material respects, including its provisions and representations regarding asbestos and asbestos-related investigation;

(k) That the building report attached to the contract for sale did not comply with Australian standards and was likely unreliable as a result; or

(l) That the plaintiffs should not sign the contract for sale but instead, should return it to the vendor's solicitors for amendment or correction in light of the deficiencies identified.

13. The plaintiffs allege that this was a breach of the defendants' retainer and of their duty of care. The plaintiffs further allege that the failure to advise them in respect of the matters above was conduct that was misleading or deceptive or likely to mislead or deceive.

14. The plaintiffs collectively claim approximately $1.83 million by way of damages, which they allege was caused by the professional negligence of the defendants. This includes a claim for the costs of relocating when the family moved out in October 2014, holding costs, and the costs of building a new house on the site of the Griffith property once it had been demolished. Also part of that sum is a claim for $150,000 for the disappointment and distress the plaintiffs claim to have suffered, although the amount of that aspect of the claim was reduced during the hearing of oral arguments.

15. The damages sum claimed further includes a component of $800,000 in lost income for the first plaintiff, who alleges that she took time away from other employment to deal with the issues arising for owners of asbestos contaminated properties in relation to the ACT Government's response and then to deal with overseeing the construction of the new house on the site of the Griffith property.

16. The plaintiffs each gave evidence and I have generally accepted them as being credible witnesses. The first plaintiff was the primary witness and her recollection of conversations was confirmed at a general level by the second plaintiff. His evidence was that he was involved in the discussions and deliberations with the first plaintiff as to buying the Griffith property, taking legal advice, accepting the buy-back offer from the ACT Government and then deciding to repurchase and build on the same site. He relied upon the first plaintiff's evidence in this regard, although the decisions made with the first plaintiff were all joint decisions.

17. The plaintiffs have two children. At the time of the hearing, they were 13 and 16 years old. Over 2008/2009, the plaintiffs had been searching for a family home to purchase. They identified the Griffith property, a four-bedroom heritage style house in an established area; a house that was not at risk of being surrounded by unsympathetic over-scale residential development, due to it being located in a heritage area in the Territory.

18. The plaintiffs expressed interest in the Griffith property and consulted a firm of solicitors, the defendants. On 2 March 2009, they sent the unsigned contract to the defendants for advice. The period for expressions of interest closed on 11 March 2009. The plaintiffs' offer was accepted. They then proceeded to sign an engagement letter with the defendants on 18 March 2018, and apparently on the same day attended at the offices of the defendants to go through the contract. They saw only one person, who was a conveyancing clerk, not a qualified solicitor, but that was not indicated to the plaintiffs at the time.

19. The only discussion the plaintiffs had with the conveyancing clerk about asbestos arose from an asbestos advice fact sheet that was attached to the contract for sale. The conveyancing clerk pointed to it and asked the plaintiffs to read it. The conveyancing clerk then pointed to a removal certificate in the contract document which the plaintiffs skim read. They did not read any of the asbestos information in detail.

20. As a result of reading those documents, the plaintiffs knew that asbestos had been removed from the Griffith property. The first plaintiff thought the asbestos was 'standard asbestos' and had no doubt about the safety of the house. Had she at that time had any concern about the safety of the house, she would not have moved to the Griffith property.

21. In 2013, a tradesman came to replace a skylight in the ceiling and he said, "Is this a Mr Fluffy house?" The plaintiff did not know. The tradesman then informed her that the white spray in the roof indicated it was a Mr Fluffy house. Then in February 2014, the plaintiffs received a 'dear resident' letter from the ACT Government, Workplace Safety Commissioner. The letter advised the plaintiffs to get the Griffith property tested by a licenced asbestos assessor to see whether loose-fill asbestos had come into the house.

22. For the first time, the plaintiffs learned of what loose-fill asbestos was, that it was a significant health risk and safety risk to the community and that it may still be present in their house.

23. The plaintiffs followed the advice from the ACT Government and engaged Robson's Environmental to provide a report, which they received on 16 June 2014. The report indicated that loose amosite asbestos fibres had been found on the top of the hallway closet and rated this as high risk.

24. The children had been using the cupboard on a regular basis as it housed their sporting equipment and school bags. This caused considerable anxiety and stress for the plaintiffs. Through March to May 2014, the plaintiffs also read a number of media articles in relation to Mr Fluffy homes.

25. In October 2014, the ACT Government announced a buy back scheme for the houses contaminated by loose-fill asbestos. The plaintiffs and their family moved out of the Griffith property around that time. They did not consider the house to be safe, and a sticker was to be put on the front of the house identifying it as a 'Fluffy house'. The plaintiffs had obligations to tell people who came to the door about that fact and the plaintiffs considered it would be advantageous to have the house demolished as early as possible.

26. On 9 January 2015, the plaintiffs received a valuation from the ACT Government of the Griffith property at $1,876,000. They had also obtained an independent valuation which was less than that figure. They accepted the buy-back offer and settled on the transfer on 30 June 2015.

27. The plaintiffs decided that it was more cost effective to then repurchase the land and to rebuild. Accordingly, they repurchased the site of the Griffith property for $1.21 million.

28. The plaintiffs then spent approximately $1.386 million (including planning approval fees) building a new home on the site. As at August 2017, the Griffith property site with the new house was valued at $2.45 million.

29. In relation to the claim for lost income, the first plaintiff was a management consultant and had finished employment with Courage Partners at the end of 2012 with a view to commencing her own business in the future. At that time, she took long service leave. The first plaintiff believes she would have been able to start a consulting business in February 2014, working full time and earning $200,000 per year. She based that figure on the fact that her time had previously been charged out by Courage Partners at anywhere between an average of $1,600 and $1,800 a day.

30. The first plaintiff thought she would have incurred only $10,000 of costs in earning that income, a figure that she had estimated based on the professional indemnity costs of a former colleague who had set up his own consulting business. She had not factored in any other business expenses.

31. The first plaintiff had not worked full time in the five-year period between 2012 and 2016. She had undertaken some limited casual work as a business analyst during that period. She was not working as at the date of the hearing.

Critical documents concerning the presence of asbestos

32. There were a number of documents attached to the contract for sale which are relevant to what advice should have been given to the plaintiffs.

33. The first is a Certificate of Completion of Asbestos Removal Work dated 25 August 1993. It records "tests carried out on 15 July 1993 established that the National Health and Medical Research Council Worksafe Australia Standards of Safety for Asbestos Removal have been met".

34. Underneath that statement, in fine print, the following is recorded:

Residual fibres may still be present in the wall [cavities] of the building. Prior approval of the Building Controller is to be obtained for any building work involving the alteration or removal of internal wall sheeting or external brickwork. It may be necessary for a licensed asbestos removalist to attend this work.

35. There was also an "Important Asbestos Advice" attached as part of a special condition. It did not make any mention of loose fill asbestos. It was in more general terms, alerting the buyer to the fact that asbestos is hazardous. It set out three steps for managing materials containing asbestos in the home. The first step was to identify where the asbestos may be. Common locations were noted. The second step was to assess the risk visually, and if it is in 'good condition and left undisturbed, it does not pose a health risk'. The third step was to 'manage safely' by, among other things, keeping an eye on 'any material containing asbestos to make sure it remains in good condition'.

36. There was a building and pest inspection report dated 11 February 2009. It expressly excluded any consideration of asbestos and 'strongly recommended' that potential purchasers obtain a number of other reports so as to make an informed decision.

37. There was also included in the contract for sale a copy of a scope of work for removing loose asbestos fibres from the ceiling, wall cavities and subfloor of the residence.

38. The expert evidence before the Court also referred to a lease conveyancing enquiry (LCE), which recorded under the heading 'Asbestos Search" the following: "ACT Planning and Land Authority records indicate that a form of Asbestos is or has been present on this land...". These are the documents that form part of the circumstances known to the defendants at the time they were engaged by the plaintiffs.

Evidence of conveyancer employed by the defendants

39. The conveyancing clerk attended to give evidence. She did so voluntarily despite no longer working for the defendants. At the time she was working for the defendants, she was described on her email signature block as a paralegal, but she was clearly a very experienced conveyancer and the effect of her evidence was that she essentially ran the conveyancing aspect of the defendants' practice with little to no supervision. One example of this was that she signed the costs disclosures and letters of engagement.

40. She did not recall acting for the plaintiffs in 2009. She confirmed that she generally did not provide the contracts for sale that she had received from clients to a solicitor or partner at the law firm to review, unless she thought there was something unusual. How she would form a view as to what might be unusual was not explored in the evidence. She further confirmed that no one with any legal qualification to give advice sat with her during the conferences with clients.

41. The conveyancing clerk gave evidence of what her usual practice was in relation to asbestos affected properties. She said she would draw to the buyer's attention the fact that there had been asbestos removal work done and recommend that the buyers should contact the people who had done the removal to make inquiries about it.

42. Whether that was the conveyancer's usual practice in 2009 or not, I do not accept that was what occurred in the present case. It would have been very odd advice to give in this case, where the removal work had been carried out by an unknown contractor in 1993. The plaintiffs had a clear recollection of what they were and were not told in relation to the contract for sale during their meeting with the conveyancer and it did not include any such advice. There is no file note of any such advice given and the conveyancing clerk had no actual recollection of any interactions she had with the plaintiffs.

43. Section 40 of the Civil Law (Wrongs) Act 2002 (ACT) (the Act) defines negligence as the failure to exercise reasonable care and skill.

44. The defendants properly accepted that they owed the plaintiffs as their clients a duty of care to advise them in relation to the contract for sale.

45. The standard of care is that of a reasonable person in the defendant's position who was in possession of all the information that the defendant either had, or ought reasonably to have had, at the time of the incident out of which the harm arose: s 42 of the Act.

46. In this case, the standard of that duty was that of a reasonably competent conveyancing solicitor who had read the documents included in the contract for sale.

The content of the solicitor's duty to exercise reasonable care and skill

47. A solicitor's duties will depend upon the terms and conditions of that retainer and any duty of care to be implied must be related to what he or she is instructed to do: Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] Ch 384 at 402; Hill v Van Erp (1997) 188 CLR 159.

48. There was no suggestion in this case that the costs retainer signed by the plaintiffs excluded legal advice in relation to the contract for sale. The defendants were expressly engaged to act on the purchase.

49. It was also not in dispute that a solicitor owes a duty of care to those whom they advise, or for whom they act. The duty of a solicitor is to exercise reasonable care and skill in the provision of professional advice. In the case of practitioners professing to have a special skill in a particular area of law, the standard of care required is that of the ordinary skilled person exercising and professing to have that special skill: Heydon v NRMA Ltd [2000] NSWCA 374; 51 NSWLR 1 (Heydon v NRMA) at [146].

50. A solicitor owes a general duty to explain legal documents to the client, or at least to ensure that the client understands the material parts. In particular, a solicitor should explain any unusual provisions or any provisions of particular relevance to the client's proposed activities, or which might influence the client in deciding to enter the contract: Sykes v Midland Bank Executor & Trustee Co Ltd [1971] 1 QB 113, applied in Australia in Fox v Everingham (1983) 76 FLR 170 (Fox v Everingham) at 174.

51. In the case of property transactions, a solicitor should explain both the relevant risks attending the purchase of the property and the consequences of that risk to the client: Capebay Holdings Pty Ltd v Sands [2002] WASC 287 (Capebay) at [97]-[100] per Pullen J.

52. Earlier at [89] in Capebay, Pullen J had referred to two further propositions which are relevant to the present case, namely that a solicitor acting for the buyer of property is paid not only for what the solicitor, in fact, does, but also for the responsibility he or she assumes in trying to protect clients from financial loss if things go wrong: Fox v Everingham at 175. A solicitor has a duty to warn a client of a material risk inherent in the proposed purchase: Rogers v Whitaker [1992] HCA 58; (1992) 175 CLR 479; Heydon v NRMA at [146].

Was the duty breached - what advice should have been given in the circumstances?

53. Ultimately, on the expert evidence discussed below, there was no difference of significance as to what the plaintiffs should have been advised in relation to the contract for sale of the Griffith property.

54. Mr Mark Phillips, Partner at Symons Phillips Lawyers with experience as a solicitor practising in the field of residential and commercial conveyancing and property work in the Territory since 1981, gave a detailed and thorough report of what a reasonably competent solicitor ought to have advised the plaintiffs.

55. He recorded the contents of the various documents to which reference has been made above. His opinion was as follows:

Based on the materials provided in the contract:

(1) It was obvious [that] a competent solicitor/conveyancer ought to have advised a prospective buyer of the risk of discovery of asbestos in cavity walls in the property; and

(2) A competent solicitor ought to have advised that preventative measures and additional cost would be involved in any alteration to the structure.

A competent solicitor or conveyancer ought to have known and drawn these matters to the attention of a prospective buyer and advised at the minimum that there had been a "stigma" attached, that this may or may not affect market value, that he expressed no view as to whether the Government's removal program had been successful although he may note (and [Mr Phillips] did in fact on many occasions note) that a buyer may choose to presume that the Government had properly removed the asbestos, but however the previous presence of loose asbestos insulation would mean that any subsequent alterations that were undertaken may or may not involve the release of further loose asbestos and/or will involve significant additional cost in compliance with the regulations for any such work which may disturb "fibre asbestos".

If a client indicated that they intend to undertake substantial renovations to a property it was my practice, and I believe the normal practice, for a solicitor or conveyancer acting to recommend that the client consider making further enquiries.

58. Mr Phillips was of the view that a competent conveyancer would have raised:

(a) the fact that whilst it was accepted that the Government believed that loose asbestos removal had been undertaken properly, there was no guarantee and this may be of concern to a buyer;

(b) that any alterations to the property involving structural matters would expose an owner to additional costs; and

(c) that the market value of the property may be affected as a result of these factors which should be drawn to a buyer's attention.

59. Mr Phillips did not consider that, in 2009, a solicitor would have advised that there was a great risk that the property would contain asbestos material, nor would the advice have been to get an independent asbestos report, although Mr Phillips believed it would then be a matter for the client to consider if they were particularly concerned.

60. Mr Phillips' view was that the defendants had not met the standard of a reasonably competent solicitor in identifying the issue for the plaintiffs or specifically advising them of the matters Mr Phillips had discussed in his report. His view was that as a result of not being adequately advised in relation to the previous presence of loose-fill asbestos, the plaintiffs were deprived of giving an informed instruction to their solicitors as to whether to proceed with the purchase.

61. Mr Mark Tigwell had experience as a solicitor practising in conveyancing and property law in the Territory since 1984. His opinion of the standard practice of conveyancing solicitors in March 2009 advising on contracts for sale was:

... to identify to buyers of affected properties:

- That loose asbestos fibre insulation had been present in the house;

- That it had been removed to a certain standard by ACT Government;

- That there was no certainty that all Asbestos had been removed, particularly in wall cavities, subfloor areas and other inaccessible parts of the improvements; and

- That if there was concern as to the presence of Asbestos, a further enquiry including the commission of an expert report should be considered.

62. Mr Tigwell also did not consider that, in 2009, a solicitor would have advised potential purchasers of a house such as the Griffith property to make further inquiries regarding the presence of asbestos in the house and to obtain an Asbestos Assessment Report. However, he too qualified that opinion, stating:

Certainly if a potential purchaser expressed specific concerns about the presence of Asbestos in a house after receiving the advice I outlined above ... I would recommend they investigate the availability of an Asbestos Assessment Report. However, commonly it was not practical to obtain such a report because of time pressures being imposed on a buyer by the seller, or seller's real estate agent, to exchange contracts, or the lack of availability of licensed inspectors to provide a report promptly. In those circumstances I would advise the potential buyer they had two practical choices - to either put aside their concerns about the possible presence of Asbestos and proceed to purchase the property or to withdraw from the proposed purchase and look for another property.

63. Neither Mr Phillips nor Mr Tigwell was required for cross-examination and I accept their expert evidence, which I have endeavoured to show in the foregoing paragraphs was largely consistent to the extent set out above as to what advice should have been given.

64. From a comparison of the summarised expert evidence that has been accepted with the pleaded case as to what advice should have been given, it will be apparent that there are aspects of the plaintiffs' pleaded case as to what advice should have been given that were not supported by the evidence.

65. Section 43 of the Act is relevant in this regard. Section 43(1) provides:

(1) A person is not negligent in failing to take precautions against a risk of harm unless -

(a) the risk was foreseeable (that is, it is a risk of which the person knew or ought to have known); and

66. As has recently been pointed out by the Court of Appeal in Jennings v George Harcourt Management Pty Ltd [2018] ACTCA 50 at [40]-[41], it is important not to judge a duty owed by a defendant with hindsight. The position with regard to the nature and health risks associated with loose-fill asbestos, and its ability to permeate habitable areas of the home, was a risk that a solicitor in 2009 was unlikely to have known, and it is not something that the evidence suggested a reasonably competent solicitor ought to have known such that advice should have been given about health risks of loose-fill asbestos. If that was part of the plaintiffs' case (the defendants believed it was, based on the evidence, although the pleaded case did not expressly refer to 'health' risks), then it is not made out.

67. Similarly, an allegation that the solicitor should have advised the contract for sale was incomplete, incorrect and/or deficient in several material respects, including its provisions and representations regarding asbestos and asbestos-related investigation, is one that was not supported by the expert evidence. Even if it were proven that the allegation was correct in that the contract was incomplete or deficient in some way, such a finding appears to me to be based in part on knowledge gained in 2014, rather than forming part of the appropriate advice to be given to a purchaser in 2009.

68. The legal advice that I have accepted ought to have been given is that which seeks to guard against the risks that were reasonably foreseeable in 2009.

Breach of Duty - was the requisite legal advice given?

69. It is clear from the evidence of the plaintiffs and from the conveyancing clerk that the requisite advice that should have been given was not provided.

70. No person with any qualification to give legal advice either met or corresponded with the plaintiffs. The engagement letter was not even signed by a solicitor of the firm. It was signed by the conveyancing clerk.

71. The conveyancing clerk may have been a very experienced clerk, but not being a lawyer, she was not in a position to appreciate what legal advice should have been given, nor to provide it. On the evidence that I have accepted, she did not provide any advice.

72. The plaintiffs were simply shown the contract for sale and the pages of the document were turned over, allowing the plaintiffs the opportunity to only skim read each page.

73. That does not amount to the provision of competent legal advice. The plaintiffs could have sat in their own lounge room and read the contract for sale document for themselves. Reading a document and appreciating its consequences are two different things. What they were paying the defendants for was a professional legal opinion on the risks and consequences arising from the contents of that particular contract for sale. The asbestos information in the contract required someone to properly explain to the plaintiffs exactly what the risks and consequences were, so as to allow them to make an informed decision about whether to make further enquiries and ultimately whether to purchase the property. That finding is consistent with the evidence of both expert witnesses.

74. A current partner of the defendant gave evidence to the Court that other law firms in the Territory similarly employed conveyancing clerks; evidence which I took to be directed in some way to the standard the Court should apply, and whether it was breached, having regard to peer law firms in the Territory. However, the partner admitted that he had not worked at other law firms and it is difficult to see how he would have any knowledge of what supervision arrangements there were at other law firms or who was providing the legal advice to clients of such unnamed firms, as opposed to whether conveyancing clerks were routinely employed to undertake the procedural aspects of a conveyancing transaction. The lay evidence of the defendant partner did not speak to the critical issue, and certainly not to the extent where it would outweigh the independent expert evidence that I have set out above.

75. Accordingly, I am satisfied that the defendants breached their duty of care to the plaintiffs in the information or service that the plaintiffs received.

76. Sections 45 and 46 of the Act govern the issue of causation. Section 45 is in the following terms:

(1) A decision that negligence caused particular harm comprises the following elements:

(a) that the negligence was a necessary condition of the happening of the harm ('factual causation');

(b) that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused (the scope of liability).

(2) However, if a person (the plaintiff) has been negligently exposed to a similar risk of harm by a number of different people (the defendants) and it is not possible to assign responsibility for causing the harm to 1 or more of them -

(a) the court may continue to apply the established common law principle under which responsibility may be assigned to the defendants for causing the harm; but

(b) the court must consider the position of each defendant individually and state the reasons for bringing the defendant within the scope of liability.

(3) In deciding the scope of liability, the court must consider (among other relevant things) whether or not, and why, responsibility for the harm should be imposed on the negligent party.

77. Section 45(1)(a) of the Act may be viewed as a statutory statement of the 'but for' test of causation: Roberts v Westpac Banking Corporation [2016] ACTCA 68 at [146].

78. Section 46 provides that the plaintiff always bears the burden of proving, on the balance of probabilities, any fact relevant to the issue of causation in negligence.

79. If a breach of a duty of care is established, the plaintiffs must show, on the balance of probabilities, that if the proper information or advice had been given, the client would have taken the advice and would not have entered into the relevant transaction: Rosenberg v Percival [2001] HCA 18; 205 CLR 434 (Rosenberg). The test is subjective, namely, whether the plaintiffs (as opposed to the reasonable person) would have taken the advice and not entered into the relevant transaction: Rosenberg at [24].

80. Recalling s 42 of the Act, causation is not only to be determined subjectively, but in the light of all relevant circumstances.

81. Relevant to the chronology of this case is the intervention by the ACT Government in creating a scheme for buying back properties from affected owners, and whether that has any legal consequences for the plaintiffs' claim.

82. A superseding event is said to "break the chain of causation" where the event severs the link between the defendant's negligent action and the claimed injury. The question of whether a particular superseding event itself causes the loss is one of fact to be resolved as a matter of common sense: G & M v Armellin [2008] ACTSC 68; 219 FLR 359 per Bennett J at [165].

83. The defendant bears the onus to prove an intervening act: South Australian Stevedoring Company Ltd v Holbertson [1939] SAStRp 37; [1939] SASR 257 at 260.

84. Had the plaintiffs received the advice the experts considered should have been given, the counterfactual permits three possibilities. Either the plaintiffs would have accepted the risks and consequences explained to them and proceeded with the purchase, or they would have paused to obtain further information regarding the presence of asbestos in the house, or they would have not proceeded with the purchase.

85. The defendants urged the Court that because of the time pressure, the plaintiffs would have proceeded anyway. However, on the balance of probabilities, I do not accept that submission.

86. The first plaintiff's unequivocal evidence was that had there been any doubt about the safety of the house she would not have moved her family into it. That is consistent with the plaintiff moving the family out of the Griffith property in 2014 when she did discover that there was loose-fill asbestos fibres remaining in the house and the safety of the house was an issue.

87. Had she been given any advice from a solicitor about the risks associated with asbestos and the consequences of buying such a property (in accordance with the advice the experts considered should have been given), I am persuaded that the plaintiffs would have had cause at least to pause for thought. The actions of the plaintiffs were those of cautious people, evidenced by the fact that they sought advice before signing documents and had been quite particular about the type of property they were prepared to buy. Hearing from a solicitor that there may be negative consequences for buying a particular property, I do not accept that they would have gone ahead regardless. When asked the question under cross-examination, the first plaintiff expressly denied that she would have proceeded to purchase the Griffith property had she been given the requisite advice, and I accept that evidence.

88. Noting that the certificate of removal was 16 years old, they would have either been sufficiently concerned upon receiving the advice to seek a current asbestos assessment report for themselves, or made the contract subject to a satisfactory report as to the presence of asbestos, or refrained from purchasing the Griffith property altogether. Had any delay while a report was obtained resulted in the plaintiffs losing out to another purchaser, that would have brought about the same result, namely that the plaintiffs did not purchase the Griffith property.

89. I accept that the lack of the provision of adequate advice may not have been the sole causative factor in the plaintiffs purchasing the Griffith property, but that is not the test. I am satisfied that it reaches the threshold of being a 'necessary condition' of the happening of the harm and that it is appropriate for the scope of the defendants' liability to extend to the harm caused, subject to the discussion that follows as to the various heads of damage.

90. Each of the components of damage claimed by the plaintiffs will be considered in turn. I will deal with all losses after the buy-back of the Griffith property on 30 June 2015 separately.

91. The plaintiffs first claim losses associated with the initial investigations to confirm the presence of asbestos, the relocation and holding costs of the Griffith property from the period 31 October 2014 (when the plaintiffs moved out of the Griffith property) until 30 June 2015, when they surrendered it to the ACT Government.

92. This included an asbestos assessment, independent valuation, compulsory house insurance, rates, utilities and interest on the mortgage. A figure of $14,038.91 is claimed and I accept that such loss was a reasonably foreseeable consequence of the negligence established.

93. The plaintiffs have also claimed moving costs of $2,643. I accept that such a claim is also justified as a reasonably foreseeable consequence.

94. The plaintiffs have claimed rent at $1,000 per week from 31 October 2014. I allow that claim up until 30 June 2015, which equates to 34 weeks and 4 days or $34,571.43.

95. However, account must be taken of the fact that the ACT Government partially mitigated this aspect of the plaintiffs' loss, by paying them a relocation assistance grant in the sum of $13,615.

96. In total then, I allow $37,638.34 for asbestos investigation, rent, relocation and holding costs.

The buy-back of the Griffith property on 30 June 2015

97. In many cases where a plaintiff purchases an asset following negligent advice, the plaintiff is saddled with an asset they do not want and cannot sell without significant loss. That was not what occurred here.

98. On 30 June 2015, the ACT Government paid full current market value for the Griffith property, valued on the basis that it was uncontaminated by asbestos. The price received was significantly more than what they had paid for the Griffith property in 2009.

99. At that point, the plaintiffs were fully restored to the position they were in before buying the Griffith property. The buy-back of the Griffith property was a superseding event that broke the chain in causation from that date. The intervention of the ACT Government and the plaintiffs' acceptance of the offer had the effect of entirely mitigating any ongoing or further loss the plaintiffs may have suffered in entering into the initial conveyance.

100. Accordingly, losses claimed after that date (such as additional rent, storage and removal costs) are not allowed.

101. The plaintiffs claim the subsequent costs of buying the site of the Griffith property and building a new house on it. I do not accept that any of those costs were properly referrable to the negligence of the defendants.

102. The plaintiffs had the money to buy whatever other property they saw fit, or to continue to rent and to invest their money elsewhere. They were not bound to repurchase the site of the Griffith property.

103. There was some attempt to demonstrate to the Court that the property was unique and there were no other similar properties available to purchase in late 2015 and that the plaintiffs considered it would be cheaper to rebuild. They may have been sound reasons why the plaintiffs chose to repurchase the Griffith property site. However, it is not a choice that they were locked into, nor can it be said that any negligent advice of the defendants had any continuing operative effect at that point. That is the significant question for the Court. At the point when the plaintiffs made the decision to repurchase the Griffith property site, they were in full position of all the facts relevant to an asbestos affected property. The impact of any lack of advice on the part of the defendants had thus been reduced to zero. Moreover, the Griffith property was demolished and certified as free of asbestos before the plaintiffs repurchased and took possession of the site. Again, that fact makes the lack of any advice from the defendants about asbestos risks and consequences irrelevant by the time the plaintiffs repurchased the site.

104. Putting the same point a different way, I am not satisfied that it is appropriate for the scope of the defendants' liability to extend to losses resulting after the point in time when the plaintiffs had been fully restored to the position they were in before the conveyancing transaction that was the subject of the defendants' retainer.

105. For the same reasons, I am not satisfied that the rental accommodation, internet and storage costs claimed post June 2015 are properly referrable to the negligence caused and those claims are also rejected.

106. In any event, even if I were wrong in the above reasoning, Mr Angus Howell of Herron Todd White valued the property at $2.45 million as at 24 August 2017. Having seen him under cross-examination and without any contest to that figure, I have accepted Mr Howell's valuation evidence.

107. The plaintiffs cannot claim the costs of building a property without taking account of the end result, namely, that they now own a new, very valuable asset. The plaintiffs repurchased the land for $1.21 million. They then claim they spent approximately $1.386 million building the new house. However, notwithstanding the plaintiffs' assertions that they were only replacing what was previously built, having viewed the photos and the expenses in evidence, some allowance in that figure claimed must be made for the plaintiffs' personal choices. The detail was not traversed by the parties, but examples were architect and design fees of approximately $52,000, pendant and wall lights to the value of $5,928 and French door screens which were additional to the building contract price. The plaintiffs have also claimed costs such as the payment of interest on the building and construction loan as part of the cost of rebuilding the property.

108. Even if I had accepted that the building costs were referrable to the negligence as found, I am unable to discern that the plaintiffs suffered any significant loss in building the house. It is true that had the plaintiffs not bought the site of the Griffith property a second time, they would not have spent the money building the house. However, they also would not now have the asset valued in 2017 at almost the same cost of the build and the repurchase. That asset must be taken into account, including the probability that it continued to increase in value after the date of valuation.

109. Accordingly, the plaintiffs have not established this aspect of their claim.

110. The first plaintiff claims $800,000 for economic loss over the period July 2014 to 30 June 2017. However, there are a number of reasons why this aspect of the claim fails.

111. First, the evidence of the first plaintiff did not touch upon the reasons why she apparently could not work full time or even part time from 2014 to date. That was a significant issue given that as at the beginning of 2013, the plaintiff was not working at all. She had taken a year's leave and then she intended to start her own business at some point. Her evidence was that as at 2014 she was either going to continue working as an employee or set up her own business.

112. The first plaintiff was asked whether the financial information that she provided to the expert accountant was true and correct, and confirmed that it was. However, the first plaintiff gave no evidence about why she could not work or follow either of her contemplated paths.

113. In cross-examination, the first plaintiff was asked a question about being largely unable to work from 2014 to date 'because of asbestos issues', and she confirmed that was correct. That is the highest the evidence rises. Such evidence is not sufficient to establish that on the balance of probabilities, but for the negligence of the defendants, the first plaintiff would have been employed or working as a self-employed consultant earning up to $200,000 per year over the period 2014 to 2018. The case for economic loss was simply not proved on the evidence.

114. Second, for the reasons already given above in relation to the plaintiffs being fully restored to the position they were in prior to engaging the defendants at the point where they were paid $1.876 million for the asset, I do not accept that any economic loss was caused by the defendants from 30 June 2015 onwards.

115. In relation to the period claimed before that, being the financial year 1 July 2014 to 30 June 2015, even if I had been able to find a causal link between the negligence and an inability to work on the evidence, I am not satisfied that the first plaintiff would have worked during that year any more than what her taxable income disclosed, and specifically, I do not accept that she would have started a consulting business during that time. The evidence disclosed that the first plaintiff had taken no steps at all towards establishing a consulting business as at June 2014. For example, she had not paid any insurance, and there was no evidence of an ABN being obtained, which would have been necessary for the figures she claimed she intended to earn (and the PAYG payment summaries for the relevant period were for an 'individual non-business'). There was no evidence as to any communications with potential clients with a view to obtaining contractual work.

116. These examples are raised merely to highlight that Court was given very little from which it could draw any inference that it was probable a consulting business would have been started during that year. At the time when the first plaintiff alleges she would have been working, she had been out of the workforce for a year and was caring for her school-aged children. That was a lifestyle choice she made completely unaffected by any negligence of the defendants.

117. Even as at the date of the hearing, well after the plaintiffs had moved into their new home, there was no evidence that the first plaintiff had commenced any consulting business in any serious ongoing way, as opposed to casual sporadic jobs, and no explanation was offered as to why the first plaintiff was not then undertaking a greater level of work. That tends to confirm that the first plaintiff's lack of employment was the result of a choice not to work for lifestyle reasons, rather than any inability to work arising from the defendants' negligence.

118. While I accept that there was a possibility that the first plaintiff could have been working during the period, that is insufficient to establish that on the balance of probabilities, 'but for' the negligence of the defendants, the first plaintiff would have been both working and that the nature of the work would have been the operation of a consulting business in 2014/2015 financial year.

119. The evidence was that, at best, the first plaintiff hoped or intended one day to start up a business or go back to regular employment either part time or full time. Such desire was yet to be acted upon in any material way that could sustain a finding that the first plaintiff lost any income because of any conduct of the defendants. Rather, the Court is left with the inference that it suited the first plaintiff not to be working throughout 2014 and beyond.

120. Third, the expert reports of Mr John McGuiness from McgrathNicol Advisory were in evidence. Mr McGuiness records that the income of the first plaintiff for the financial years ending 30 June for each of 2015, 2016 and 2017 was $44,272, $11,244 and $19,292 respectively.

121. Mr McGuiness was given two alternative scenarios on which to base his calculations as to lost income over the period July 2014 to 30 June 2017. One was to assume that the first plaintiff would have worked approximately three to four day per week with contracting rates of between $800 to $1,000 per day, and would incur costs of approximately $1,500 per annum in earning income.

122. The second set of assumptions was that the first plaintiff would have worked three to four days per week with daily contracting rates of between $1,400 and $1,600 per day, with a midpoint of $1,500 and costs of approximately $10,000.

123. There really was no evidentiary basis for those assumed figures whatsoever. The costs of running a consultancy business were a guess by the first plaintiff. The modelling and calculations by the accountant may well have been correct, but his opinion is only as good as the proven assumptions supplied to him, and on the evidence before this Court, none of the assumptions appeared to be based on anything more than speculation or guess work. Even the hearsay figures about what a former colleague who started up a consulting business was charging were not shown to be directly comparable to the first plaintiff's own circumstances, in terms of her seniority, reputation, or connections in the industry, and particularly having regard to the fact that she had been away from employment for the past year.

124. Accordingly, the claim for economic loss has not been substantiated.

125. The plaintiffs make a claim for disappointment and distress arising out of their discovery that the Griffith property was contaminated and all the consequences that followed. They base such a claim on the principle articulated in Baltic Shipping Company v Dillon [1993] HCA 4; (1993) 176 CLR 344 (Baltic Shipping). Such a claim is misconceived. In Baltic Shipping, the object of the contract was a pleasure cruise, which was characterised as a contract, the object of which was to provide for enjoyment and relaxation: Baltic Shipping at 366.

126. The facts here are inapposite. The object of the contract was the provision of legal advice in relation to the purchase of the Griffith property. The object of the legal advice was not to guarantee that the plaintiffs would enjoy living in their new home. The object of the legal advice was to ensure that the plaintiffs were aware of risks and consequences of buying the Griffith property.

127. There are cases in other jurisdictions where modest amounts have been awarded for distress arising from a solicitor's negligence, and the Court's attention was drawn to authorities such as Walmsley v Cosentino [2001] NSWCA 403 and Leitch v Reynolds [2005] NSWCA 259. However, the facts of those cases pre-date the introduction of the Civil Liability Act 2002 (NSW) and in particular s 31, which limited the liability to pay damages for pure mental harm resulting from negligence unless the harm consists of a recognised psychiatric illness.

128. To similar effect, I accept the submission of the defendants, relying on the decision of Monaghan v Australian Capital Territory (No 2) [2016] ACTSC 352; 315 FLR 305 at [162]- [164], [200], [207] and [212] that this claim, being one in negligence, is governed by the Act and that s 35 applies to it. It is in the following terms:

(1) Damages must not be awarded for pure mental harm to a person resulting from negligence unless the harm consists of a recognised psychiatric illness.

(2) Damages must not be awarded for economic loss for consequential mental harm to a person resulting from negligence unless the harm consists of a recognised psychiatric illness.

129. The plaintiffs claimed no personal injury arising from the negligence of the defendants in the sense that they did not claim to suffer a recognised psychiatric illness. Even if I found the principle derived from Baltic Shipping was applicable to the facts of this case as pleaded as a breach of contract (discussed below), the statutory prohibition set out above would, in my view, prevent the Court from making such an award, as the contractual breach was coexistent with the breach of duty of care in negligence (see, for example, the definition of 'wrong' in s 19 of the Act and the operation of s 41 of the Act, which applies the statute regardless of how negligent conduct is pleaded).

130. The duty in contract is the same as that in tort, requiring the solicitor to exercise reasonable care and skill in the provision of services: Heydon v NRMA at [146]. The same principles relating to the standard of care for professionals and causation apply.

131. As the plaintiffs have succeeded in establishing the facts that amount to negligence on the part of the defendants, I have little difficulty in finding that those facts also constitute a breach of the defendants' retainer with the plaintiffs.

132. The starting point for the assessment of damages for breach of contract is to place the innocent party in the same situation, so far as money can do it, as he or she would have been in if the contract had been performed, subject to the rules as to remoteness of damage and to the plaintiff's duty to mitigate his loss: Burns v Man Automotive (Aust) Pty Ltd [1986] HCA 81; (1986) 161 CLR 653 at 667, 672; Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 at 143.

133. This may include damages for loss of expectation, that is, the expectation created by the contract that it will be performed and for losses caused by reliance on the defendant's conduct that caused the plaintiff harm: Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 12.

McLennan v Clapham & Ors [2019] ACTSC 1

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (228 paragraphs)

McLennan v Clapham & Ors [2019] ACTSC 1 (29 January 2019)

Parties

Legislation Cited (4)

Cases Cited (10)

Cited By (1)