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[2012] NSWSC 255
mixed. The appeal was allowed in part; the Local Court decision was set aside insofar as it related to the cross-claim, and that matter was remitted to the Local Court for determination according to law....
The Supreme Court did not decide that Kent Attorneys were negligent. It held that the Magistrate had asked the wrong legal question when assessing the allegation that Mr Kent failed to seek joinder of Mr Senes. The proper question was whether Mr Kent acted with reasonable care, diligence and skill based on the information and instructions available at the relevant time. Because the evidence conflicted and the Supreme Court could not reassess the credibility findings, the cross-claim was sent back to the Local Court. The appeal concerning costs disclosure did not succeed.
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Philip Jacques appealed from a Local Court judgment involving a claim by Rodney Kent and Tim Orlizki, trading as Kent Attorneys, for unpaid legal fees. The fees were claimed under six invoices totalling $46,515.99 [11]. Mr Jacques was the defendant in that claim and brought a cross-claim alleging that Mr Kent had acted negligently by failing to seek to join George Senes as a defendant in related Supreme Court proceedings.
1 cited instrument linked from this judgment.
Mr Kent had acted for Mr Jacques in several matters. The relevant underlying litigation, described as the Forte proceedings, arose from a partnership connected with land at Collaroy Street, Collaroy [32]-[34]. Mr Jacques alleged that Mr Senes had breached fiduciary duties in connection with the sale of the land. The alleged professional failure was that Mr Kent did not seek joinder of Mr Senes when a transfer application was heard on 18 March 2008 [32], [43].
The appeal had two main parts. The first challenged findings about disclosure of costs under sections 309 and 317 of the Legal Profession Act 2004. The second concerned the negligence cross-claim about joinder [10]. The Supreme Court rejected the disclosure challenge: the challenge to service of the costs agreements was factual and did not raise an appealable question of law, and the Magistrate had evidence from which to make the service finding [25], [31].
The cross-claim produced a different result. The Supreme Court held that the Magistrate had asked the wrong legal question when considering negligence [50]. It set aside the decision only insofar as it related to the cross-claim and remitted that matter to the Local Court [60]. It did not itself find that Kent Attorneys were negligent, nor did it decide the amount of any loss.
The appeal provisions constrained what the Supreme Court could review. Section 39 of the Local Court Act 2007 permits an appeal on a question of law; an appeal on a mixed question of law and fact requires leave under section 40 [5]-[6]. The judgment noted that the appellant bore the onus of demonstrating legal error [5]. This distinction mattered to the disclosure ground. Whether costs agreements had been sent was treated as a factual question, not a question of law or a mixed question [25]. The Supreme Court therefore found that ground incompetent as an appeal ground and, in any event, observed there was a preponderance of evidence supporting the Magistrate's finding [31].
The central legal error concerned the test for solicitor negligence. The Magistrate had reasoned that if Mr Jacques succeeded in his claim against Mr Senes, he had arguably made out the negligence claim, whereas failure in the underlying action would arguably vindicate Mr Kent's appraisal of its merits [44]. The Supreme Court rejected that as the question to determine. The relevant issue was whether Mr Kent acted with reasonable care, diligence and skill when advising about whether Mr Senes should be joined [48].
The judgment stated that the solicitor's duty of care exists in tort and as an implied term of the retainer [46]. It described the applicable standard as that of a qualified, competent and careful lawyer in the circumstances [47]. Applying that standard required consideration of matters including Mr Kent's knowledge at the relevant time, any advice about Mr Senes, and Mr Jacques' instructions concerning joinder [48]. The ultimate result of the separate claim against Mr Senes was not a substitute for evaluating the solicitor's conduct at the time.
The court did not resolve the factual dispute. Mr Jacques said he had asked Mr Kent to join Mr Senes, while Mr Kent denied receiving such instructions [36]-[42]. Mr Jacques also referred to a fax that he said supported his account, but he had not produced it in evidence [38]-[39]. The Supreme Court could not resolve the conflicting evidence in light of the Magistrate's credibility findings [50]. It therefore set aside and remitted the cross-claim rather than deciding it.
Loss was also left open. Mr Jacques claimed a refund of part of the fees paid and costs of instructing new lawyers [51]. The evidence included a letter recording payments totalling $18,000, although the cross-claim sought $48,500 [54]-[55]. The court also noted the difficulty of separating costs of the joinder motion from costs associated with a motion for want of prosecution [56]-[58]. It considered the evidence scant, but said that if negligence were established, allowance should be made for loss suffered [59].
The judgment did not announce a new general rule of professional negligence. It applied established principles to the question before it. Before the decision, the relevant framework identified in the judgment was that a solicitor must act with reasonable care, diligence and skill, and that the professional standard is that of a qualified, competent and careful lawyer in the circumstances [46]-[47].
The decision clarifies how that framework was to be applied to this particular cross-claim. The Local Court's approach made the eventual outcome of the underlying dispute against Mr Senes central to whether Kent Attorneys had been negligent. The Supreme Court held that the inquiry should instead focus on whether Mr Kent's advice and conduct concerning joinder met the required standard, considering what he knew, what advice he had received, and what instructions Mr Jacques gave [48], [50].
The ruling is procedural as well as substantive. It demonstrates the boundary between factual disagreement and appealable legal error in an appeal from the Local Court. The costs-agreement service finding was factual and was not open to challenge under section 39 on the basis advanced [25], [31]. By contrast, the Magistrate's use of the wrong legal test for negligence constituted an error of law [50].
The judgment did not finally resolve whether the conduct was negligent or whether damages were payable. Those questions remained for the Local Court after remittal. It would therefore overstate the decision to describe it as a finding that Mr Kent breached his duty or that Mr Jacques suffered a particular recoverable loss.
At paragraph 46, the Court said a solicitor has “a duty of care to act with reasonable care, diligence and skill”. In plain English, a solicitor must handle the work with the level of care, attention and competence required in the circumstances. The judgment relied on Astley v Austrust Ltd for the duty's character as a tortious duty and an implied term of the retainer.
At paragraph 47, the Court described the standard as “that of a qualified, competent and careful lawyer in the given circumstances”. That makes the assessment context-specific. The relevant question is not simply whether a particular step was taken, but whether the solicitor's conduct met the professional standard given the information and circumstances at the time.
At paragraph 48, the Court identified the question that should have been decided: whether Mr Kent acted with reasonable care, diligence and skill in advising about joinder. It also identified factual matters relevant to that inquiry, including Mr Kent's knowledge, any advice about Mr Senes, and Mr Jacques' instructions. In plain English, the negligence assessment had to focus on the solicitor's actual advice and conduct, not just on what happened later in the separate litigation.
At paragraph 50, the Court concluded that the Magistrate “did not pose the correct question” and that this was an error of law. But it did not decide the factual dispute itself. The passage explains why the appeal resulted in remittal rather than a final decision about liability.
At paragraph 59, the Court observed that the evidence of loss was “scant”, while also stating that if negligence were found, allowance should be made for loss suffered. This did not quantify damages or decide which claimed costs were recoverable. It left those matters for determination in the remitted proceedings.
The decision is relevant to professional-negligence claims alleging that a solicitor failed to advise about, or take steps concerning, joinder of a potential party. Its central point applies where a first-instance decision uses the eventual success or failure of an underlying claim as the decisive test for whether the solicitor was negligent. The judgment directs attention instead to the standard of care and the information and instructions available when the solicitor acted [48].
The decision is also relevant where a Local Court appeal attempts to challenge a factual finding as though it were a question of law. Here, the alleged failure to prove service of costs agreements was treated as a factual dispute and did not provide an appealable question of law [25], [31]. The judgment does not establish that factual findings can never raise legal issues; it determines only the character of this service challenge.
The case may be less directly informative where the evidence is undisputed, the alleged error concerns a different professional task, or the appeal concerns a different statutory route. The Supreme Court's result depended on the specific legal error identified and on its inability to resolve contested evidence and credibility findings [50]. It did not decide the underlying claim against Mr Senes, set a measure of damages, or determine the ultimate outcome of the negligence claim.
The judgment text supplied here contains no decisions subsequent to Philip Jacques v Rodney Kent & Tim Orlizki t/as Kent Attorneys [2012] NSWSC 255 and no account of later judicial treatment. On this source alone, it is not possible to say whether later courts have followed, applied, distinguished or questioned the decision.
What can be identified from the judgment is its own use of earlier authority. It cited Astley v Austrust Ltd for the solicitor's duty of care [46], and Bannerman Brydone Folster & Co v Murray, Hawkins v Clayton, Hanflex Pty Ltd v NS Hope & Associates and Twiddle v Bradley in describing the professional standard [47]. It also cited Swain v Waverley Municipal Council in discussing the role of a trial and appeals in the civil justice system [8]. The judgment's cited authorities support the framework it applied, but the supplied text does not establish how the decision has been received by later courts.
The most important unresolved issue was factual: what did Mr Kent know about Mr Senes and the potential claim at the relevant time, what advice had been given, and what instructions had Mr Jacques provided? The Supreme Court expressly identified these as matters relevant to the negligence inquiry and did not resolve the conflict between the parties' accounts [48], [50].
A further unresolved issue was whether Mr Jacques could establish causation and loss. The evidence about payments and legal costs was incomplete, and the claimed amount did not match the total recorded in the letter relied on [54]-[55]. The court also recognised that costs of the joinder motion might have to be separated from costs of the other motion [56]-[59]. It did not decide whether any particular sum was attributable to the alleged professional failure.
The judgment also left the pleading question open. The Court expressed a tentative view about the onus concerning service and non-disclosure, but expressly said it was unnecessary to decide the pleading ground [22]-[23]. It found that the Magistrate had considered the disclosure issue and that the appeal did not establish error on that ground [23], [31].
Finally, the judgment does not determine whether expert evidence would be useful in other professional-negligence cases. It says only that expert evidence on this topic would be helpful but was not necessary for the Court to determine the issue before it [49]. The decision therefore leaves the ultimate negligence and damages determinations to the Local Court on remittal.
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Judgment 1HER HONOUR: This is an appeal from the decision of a Local Court Magistrate in relation to the pleading of s 309 of the Legal Profession Act 2004, that a solicitor acted negligently. 2By summons filed 8 September 2011, the plaintiff seeks, firstly, leave to appeal from the whole of the decision of her Honour Magistrate Atkinson dated 8 July 2011; secondly, that the appeal be allowed; thirdly, judgment and orders of the court below be set aside; and fourthly, in lieu of the orders of the court below (a) verdict in favour of the plaintiff (defendant in lower court) on the statement of claim filed by the defendant (plaintiffs in lower court), (b) judgment for the plaintiff (cross claimant in the lower court) on the cross claim in the sum of $36,000 plus interest and (c) the defendants pay the plaintiff's costs of the lower court proceedings. 3In the present proceedings, the plaintiff is Philip Jacques (Mr Jacques), who was the defendant in the Local Court proceedings. The defendants are Rodney Kent and Tim Orlizki t/as Kent Attorneys (Kent Attorneys), who were the plaintiffs in the Local Court proceedings. For convenience I shall refer to the parties by name.
Extension of time to file summons 4The summons was filed about one month out of time. Kent Attorneys do not oppose an extension of time to file the summons being granted. Hence, I grant an extension of time to file the summons.
The appeal and leave to appeal 5Section 39 of the Local Court Act 2007 provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court, but only on a question of law. The onus is on the plaintiff to demonstrate that there is an error on a question of law. 6Section 40 of the Local Court Act provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to this Court on a question of mixed law and fact but only with leave of this Court. 7Section 41 of the Local Court Act provides that the Supreme Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal. 8In Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517, Gleeson CJ at [2] reiterated that in the common law system of civil justice, the trial process determines the issues between the parties. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal.
Grounds of appeal 9Mr Jacques appeals from the whole of the decision of her Honour Magistrate Atkinson and alleges that the Magistrate erred, firstly, in finding that Kent Attorneys were not properly put on notice that his defence under ss 309 and 310 of the Legal Profession Act 2004 (LPA) would be raised at trial; secondly, the Magistrate should have found that Kent Attorneys were properly put on notice that Mr Jacques' defence under LPA ss 309 and 310 and should have determined that defence; thirdly, the Magistrate erred in finding that Kent Attorneys were not given the opportunity to adduce evidence to meet Mr Jacques' defence under LPA ss 309 and 310; fourthly, to the extent that the Magistrate considered Mr Jacques' defence under LPA ss 309 and 310, her Honour erred in finding that Kent Attorneys had made the necessary disclosure under ss 309 and 310; fifthly, the Magistrate should have found that Kent Attorneys had not made the necessary disclosure under ss 309 and 310; sixthly, the Magistrate erred in finding on the cross claim that Kent Attorneys were not negligent and in breach of their duty of care; seventhly, the Magistrate should have found on the cross claim that the defendants were negligent and in breach of their duty of care; eighthly, the Magistrate erred in finding on the cross claim that Mr Jacques had not proved any loss; and ninthly, the Magistrate should have found on the cross claim that Mr Jacques had established loss and damage of $36,000 plus interest. 10Hence, the appeal falls into two main categories; the first category involves the disclosure issue (Grounds 1 to 5) and the second category involves the cross claim (Grounds 6 to 9). 11In the Local Court Kent Attorneys sought to recover moneys due for which six invoices were issued and remained unpaid from Mr Jacques in the sum of $46,515.99. 12It was common ground that Mr Kent, a solicitor, acted for Mr Jacques in three matters. (i)Norman Waterhouse Lawyers acted on his behalf in LC42203 from 21 July 2006 to 31 August 2006. (ii)Kent Attorneys acted on his behalf in LC42203 from 28 October 2006 to 16 November 2006. (ii)Kent Attorneys acted on his behalf of the transfer of Supreme Court proceedings 2400/2008 from 26 October 2006 to 21 November 2008. 13Mr Kent acted for Mr Jacques in the first matter when he was employed by Norman Waterhouse. Mr Kent then started his own practice and took the first file with him. He is currently practising in partnership with Tim Orlizki.
The pleading of the disclosure issue - whose obligation? 14Paragraphs 2 and 3 of the amended statement of claim dated 1 February 2001 in the Local Court pleaded: 2.Pursuant to various agreements entered into between the parties, the Plaintiffs carried out certain legal work on behalf of the Defendant at the request of the Defendant in relation to three separate legal matters. 3.The Plaintiffs issued various invoices for the legal work which was done on behalf of the Defendant in the amount of $65,505.99. Particulars Invoice dated 30 June 2008 (Parenting matter) in the sum of $6,600.00 Invoice dated 30 June 2008 (De facto matter) in the sum of $3,056.63 Invoice dated 30 June 2008 (De facto matter) in the sum of $6,923.00 Invoice dated 30 June 2008 (Forte Enterprises matter) in the sum of $6,267.00 Invoice dated 30 June 2008 (Parenting matter) in the sum of $35,155.32 Invoice dated 1 February 2009 (Forte Enterprises matter) in the sum of $5,339.40 Invoice dated 10 February 2009 (Forte Enterprises matter) in the sum of $2,163.84 15At [2] of the amended defence, Mr Jacques "denies any agreement". 16At the Local Court hearing, counsel for Mr Jacques sought to put in issue that Kent Attorneys had not complied the disclosure provisions namely LPA ss 309 and 317. However, as the submission on that issue developed in the Local Court, it was conceded that Kent Attorneys had sent three costs agreements to Mr Jacques and the disclosure requirements outlined in s 309 were satisfied because they were set out in those agreements. If the costs assessment had not been served then, the disclosures had not been made with the result that the Local Court proceedings could not be maintained (see s 317(2)). 17The legal argument before the Magistrate was whether this issue had been properly pleaded and, if it had not, which party had the obligation to plead compliance/non compliance with the disclosure requirements.
The Magistrate's decision - pleading and disclosure 18The Magistrate's in her reasons for judgment dated 8 July 2011 at [62] to [66] stated: "62I do not accept that the plaintiff was on notice that the defendant intended to raise the issue of non-disclosure at trial. In my view, the defendant was raising an issue about the plaintiff's failure to produce a signed copy of the relevant costs agreement when he wrote to the plaintiff on 19 March 2010. 63.In any event, the defendant filed a defence (on 6 April 2010) and an amended defence (on 19 May 2010) after he sent the letter dated 19 March 2010. Neither of these documents raised the issue of non-disclosure or that the defendant had not received any costs agreements from the plaintiffs. The only Legal Profession Act issue raised in the defence was that the bills were not in the correct form, and this issue was not pursued at trial. 64.Importantly, even though the defendant was unrepresented when he filed his defence, he was legally represented when the amended defence was filed by leave and with the plaintiff's consent. 65.The defendant signed both defences and he also verified the amended defence. No further application was made to amend the defence to plead non-disclosure and the operation of s 317 of the Act. 66.The above authorities make it quite clear that a party must plead matters upon which it wishes to rely and that it cannot ambush the other party at trial. A party cannot raise matters that have not been pleaded unless the other party consents. Accordingly I find that the defendant's failure to plead non-disclosure under the Legal Profession Act precludes him from relying on this issue at trial." (Magistrate's emphasis) 19Parts 14.7 and 14.14 of the Uniform Civil Procedure Rules 2005 ("UCPR") read: "14.7Pleadings to contain facts, not evidence Subject to this Part, Part 6 and Part 15, a party's pleading must contain only a summary of the material facts on which the party relies, and not the evidence by which those facts are to be proved. 14.14General rule as to matters to be pleaded specifically (1)In a statement of claim, the plaintiff must plead specifically any matter that, if not pleaded specifically, may take the defendant by surprise (2)In a defence or subsequent pleading, a party must plead specifically any matter: (a)that, if not pleaded specifically, may take the opposite party by surprise, or (b)that the party alleges makes any claim, defence or other case of the opposite party not maintainable, or (c)that raises matters of fact not arising out of the preceding pleading. (3)Matters which must be pleaded pursuant to subrule (2) include (but are not limited to) fraud, performance, release, statute of limitation, extinction of right or title, voluntary assumption of risk, causation of accident by unknown and undiscoverable mechanical defect and facts showing illegality." 20In McGuirk v The University of New South Wales [2009] NSWSC 1424, Johnson J set out the function of pleadings. His Honour at [21] - [29] stated: Principles Concerning Pleadings [21]The function of pleadings is to state with sufficient clarity the case that must be met by a defendant. In this way, pleadings serve to define the issues for decision and ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her: Banque Commerciale SA En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 296 and 302-3. The issues defined in the pleadings provide the basis upon which evidence may be ruled admissible or inadmissible at trial upon the ground of relevance: Dare v Pulham [1982] 148 CLR 658 at 664; Banque Commerciale at 296. [22]In Perpetual Trustees Victoria Ltd v Dunlop [2009] VSC 331, Forrest J observed at [24] that the rules of pleading are "the servants of the interests of justice", with those interests demanding that a party have every opportunity to plead out an arguable case against other parties, but that those other parties have, at an early point in the proceedings, the opportunity to be properly appraised of the case against them. ... [26]The need for clarity, precision and openness in the conduct of litigation and the responsibility of parties and their legal representatives therefore flows most clearly from the statutory duty of a party and the duty in civil proceedings to assist the court to further the overriding purpose to facilitate the just, quick and cheap resolution of the real issues in dispute: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at 161. The need for clarity, precision and openness as part of this co-operation has been emphasised in the context of ambush or surprise: White v Overland [2001] FCA 1333 at [4]. [27]For a Statement of Claim to comply with the rules of court, a party should plead, in a summary form, a statement of the material facts upon which the party relies, but not the evidence by which those facts are to be proved: r 14.7 UCPR. In doing so, the pleadings should be as brief as the nature of the case admits: r 14.8 UCPR. [28]In Kirby v Sanderson Motors Pty Ltd (2001) 54 NSWLR 135, Hodgson JA (Mason P and Handley JA agreeing) said at 142-143 [20]-[21], with respect to the requirement for a pleading to state material facts: It might appear that these rules [the Supreme Court Rules] do not require that causes of action be stated in pleadings; the requirement is to have a statement of material facts, and indeed to have only such a statement. However, in my opinion - "Material" means material to the claim, that is, to the cause or causes of action which are relied on. (2) The requirement of a statement of material facts does not exclude the allegation of legal categories, such as duty of care, fiduciary duty, trust and contract. (3) The general requirement to avoid surprise means that material facts must be stated in such a way that the defendant can understand the materiality of the facts, that is, how they are material to a cause of action. Accordingly, even on the basis of these rules which are common to the District Court and the Supreme Court, I do not take cases such as Konskier as establishing that there is a danger of surprise, which arises particularly where there is lack of precision and clarity in the pleading, it may well be appropriate to require a Plaintiff, either in a statement of claim or in particulars, to explicitly relate the facts it pleads to specific causes of action. [29]In Gunns Ltd v Marr [2005] VSC 251, Bongiorno J observed at [57]: Not only must the pleading inform the defendants of the case they must meet now, but it must clearly set out the facts which the plaintiffs must assert to make good their claim with sufficient particularity to enable any eventual trial to be conducted fairly to all parties. Vague allegations on very significant matters may conceal claims which are merely speculative. If this be not the case, the plaintiffs must put their allegations clearly. 21After legal argument between the parties as to who should have pleaded the disclosure issue, in the end, what was really in dispute was whether or not the costs agreements were served. That being the situation, it is not a matter that would catch a party by surprise, nor is it a matter that the parties could not deal with at the hearing. 22My tentative view is that the onus was on Mr Kent to prove service of the costs agreements. Then the onus was on Mr Jacques to put in issue that the disclosure provisions had not been met and that the Local Court proceedings could not be maintained. 23In any event, I do not find it necessary to decide this ground of appeal because the Magistrate went on to consider the disclosure issue.
Service of the costs assessments 24Counsel for Mr Jacques submitted that the Magistrate's consideration of whether the costs agreements were served was deficient in a number of respects. Firstly the issue of credibility, where the Magistrate preferred Mr Kent's evidence to that of Mr Jacques. Counsel submitted that the Magistrate failed to give adequate weight to Mr Kent's evidence (T27-28) where he conceded that he did not recall generating the letters, that it was customary for his administrative staff to generate these letters, that he could not identify any system to confirm that the letters had been sent and that they were not sent by registered post. 25Counsel for Kent Attorneys submitted that the question of whether Kent Attorneys served the costs agreement is a factual question. I agree. This ground of appeal does not raise a question of law nor a mixed question of fact and law. It is incompetent and cannot be raised here. Nevertheless, in any event, I shall deal with it briefly. 26The starting point is the Magistrate's findings as to credibility. Her Honour at [83] stated: "83Having considered all of the material that was before me, I am of the view that on the balance of probabilities, that the defendant's evidence is less reliable then Mr Kent's evidence. His evidence has arguably been tailored to suit his version of events with the aim of avoiding liability for the disputed invoices. Where I was unable to resolve conflicts in the evidence by reference to the objective material or by an assessment of the inherent logic or probability of events, I have preferred Mr Kent's evidence to that of the defendant." 27Mr Kent deposed (Aff, 31/1/2011 at [8] and [9]) that he sent Mr Jacques a written retainer agreement/costs disclosure document by Kent Attorneys in relation to each of the files where Kent Attorneys were subsequently instructed to do work on his behalf. They comprised of the retainer agreement in relation to the Forte Enterprises Pty Limited dated 14 October 2006; the retainer agreement in relation to the property dispute against Mr Jacques' de facto partner dated 26 May 2007; and the retainer agreement in relation to Mr Jacques' parenting dispute dated 26 November 2007. 28Mr Kent's evidence is that Mr Jacques did not return signed copies of the retainer agreements, nor did he raise any query or concern in relation to them. Mr Jacques provided Mr Kent with instructions in relation to reach of the matters and Mr Kent considered that he was bound by the terms of the retainer agreements. 29Mr Jacques denied receiving the agreements (T56.15-18; 56.34-36; 57.14 18). 30The Magistrate at [96] to [108] stated: "96.The defendants did not argue that the costs disclosure document that was attached to each costs agreement did not comply with s.309 of the Act although having examined them, I am of the view that they did contain the information that was required to be disclosed by s.309 of the Act. 97.There is no evidence before me to suggest that the plaintiffs did not prepare the costs agreements at all, and neither was this put to Mr Kent in cross-examination. 98.The costs agreements were addressed to the defendant's residential address, which is the same address to which Norman Waterhouse and Kent Attorneys sent other correspondence. For example, the plaintiffs wrote to the defendant at this address on 30 July 2007 enclosing Mr Lander's bill for $220. The defendant must have received this invoice as he acknowledged that his daughter paid the bill later that year. 99.I am of the view on the balance of probabilities that the plaintiffs did disclose the estimated costs of the Forte proceedings to the defendant. (This is part of the information that must be disclosed to the defendant pursuant to s.309 of the Act.) In his letter to the plaintiffs of 2 June 2008, the defendant indicates that "In our discussions concerning the Supreme Court civil dispute it was explained to me that I would be responsible for costs in the region of $30,000 to $50,000 which I felt would be fair...." (Reply affidavit of Philip Jacques dated 10 December 2010, annexure D). This sum is consistent with the amount disclosed in the costs agreement in relation to the Forte proceedings for professional fees. 100.Each of the invoices that were issued by Norman Waterhouse and the plaintiffs contained an express reference to the costs/retainer agreement previously forwarded to the defendant. During cross-examination, the defendant acknowledged that the statement was on the invoices and that when he had received each of the bills he had never raised with the plaintiffs that he had not received a costs agreement (transcript 2 February 2011, page 60 line 5 to page 61 line 39). 101.In my view, it is relevant that the defendant asked to be provided with copies of the signed (my emphasis) costs agreements when he sent a letter to the firm dated 19 March 2009. If he had not received any costs agreements then in my view, it is more likely that he would have asked for copies of the costs agreements. 102.When I consider all of the letters written by the defendant that are in evidence, it is clear that his awareness of business and legal affairs is more detailed that that of many of the litigants who appear before this court. 103.It is not credible that Mr Kent would fail to sent any costs agreements from Kent Attorneys to the defendant given his many years of experience as a legal practitioner, the uncontested evidence that he had already sent one costs agreement to the defendant (while employed by Norman Waterhouse), and the contents of and regularity of his bills. 104.Once the plaintiffs had provided the costs agreements to the defendant, they were entitled, pursuant to s.322 of the Act, to assume that the defendant had accepted the agreement. It is clear that the defendant continued to instruct the plaintiffs well after the costs agreements were said to have been sent to the defendant. (The costs agreements themselves contained a statement that is consistent with s.322 of the Act. 105.The solicitor who carried out much of the work on the defendant's files was not called to give evidence and I was invited to draw a Jones v Dunkel inference in that regard. ... 107.The plaintiffs did not have the opportunity to properly consider whether they should call the solicitor with carriage of the proceedings and adduce additional documentary evidence to prove that they had complied with the disclosure requirements of the Act. For example, it is quite possible that the advice that was given prior to the solicitor providing the certificate under s.47 (1)(d) of the Property (Relationships) Act satisfied the disclosure requirements of s.313 of the Act. 108Having considered all of the above including the issue of the credibility of the witnesses, I am satisfied on the balance of probabilities that the plaintiffs made the necessary disclosure under s.309 of the Act as I am satisfied that they sent the costs agreements to the defendant. The letters are then presumed by s. 160(1) of the Evidence Act 1995 to have been received at the nominated address on the fourth working day after having been posted." 31Counsel for Mr Jacques placed emphasis on the fact that Mr Kent could not prove the dates on which he sent the costs agreements to Mr Jacques by direct evidence. However, there was a preponderance of other evidence from which the Magistrate could make findings that the costs agreements were served. There is no error of fact or law. This ground of appeal is incompetent and fails.
Second Category - Cross Claim (Grounds 6-9) 32Mr Jacques claimed that Mr Kent was negligent in failing to seek leave to join Mr George Senes as a defendant when the transfer application was heard in this Court on 18 March 2008 by Associate Justice McLaughlin in the matter of Philip Jacques v Forte Enterprises Pty Limited & Ahtram Nominees Pty Limited (the Forte proceedings). 33The Forte proceedings concern a partnership established in 1988 between Mr Jacques, his wife, Fort Enterprises Pty Ltd and Ahtram Nominees Pty Ltd. The partnership was concerned with the development of land at Collaroy Street, Collaroy. Mr Jacques and his wife prior to that time had owned the land. In 1988 Mr Jacques and his wife sold a one third interest in the land to Forte Enterprises and Ahtram Nominees. At the relevant times, Mr Senes was a director and shareholder of both Forte Enterprises Pty Limited and Ahtram Nominees Pty Limited. 34The pleading has since undergone a number of refinements. It is now pleaded [second further amended statement of claim] that Sterling Estates (SA) Pty Limited made an offer to the partnership in August 1996 for the purchase of an interest in the property that would have netted the partnership a profit in excess of $4.7M. In September 1996, at the suggestion of Forte Enterprises and Ahtram Nominees and Mr Senes, who was a director of Forte Enterprises, the land was sold to a company Landmark Forum Pty Limited for $2.8M. It is now alleged that at the same time Mr Senes was a director of Landmark and held an interest in Landmark. It is alleged that Mr Senes breached his fiduciary duty to Ahtram Nominees and Mr Jacques. 35Counsel for Mr Jacques submitted that there was no express finding by the Magistrate in relation to the question of breach of duty. He referred to the following passage of transcript where Mr Kent was cross examined. 36The transcript at 47.15-28 and 48.19-41 read: Q. If you believed, Mr Kent, that Mr Jacques had a good cause of action against Mr Senes, you should have told Mr Jacques to join Mr Senes as a defendant. Do you agreed with that? A. If I formed that conclusion? Q. Yes. A. Quite clearly. Q. The time to join him, the obvious time, I suggest to you, was when you were drafting the new pleading when the proceedings were being transferred to the Supreme Court in 2008. A. Obviously, it's preferable to make one application rather than two. And particularly in a matter that's been around some ten years before I'd even got it." ... Q. The information in paragraph 3 was information that you could have uncovered prior to bringing the transfer application to the Supreme Court in the earlier part of 2008, correct? A. I'd probably agree with that but I'm not a hundred per cent sure because it may have been - I'm not suggesting it was, but it may have been that between bringing the application and writing this letter - this letter I think was written after the application had been granted, so it may well have been that we sought - and I have no recollection, as part of answering this letter, further instructions to allow us to answer it. Or it may well have been that we did have that information back at the time of October 06. Q. The proposition I'm putting to you is that even if you assume that you sought that information from Mr Jacques around the time of answering the letter, there is nothing to stop you from asking him about those matters and getting that information prior to the transfer application. A. No, I'd agree with that. Mr - he was a director and - no, I'd agree with that. Q. Finally Mr Kent, I just put to you formally that on a number of occasions, Mr Jacques raised with you whether Mr Senes should be included as a defendant. What do you say to that? A. No, never. He was sent the document that we proposed to rely upon. At no stage did he come back to me and there's not one letter and there's certainly not any telephone or other discussions with him." 37Counsel for Mr Jacques also referred to his client's evidence that he asked Mr Kent to join Mr Senes as a defendant in those proceedings. Mr Jacques when asked when the instructions were given to Mr Kent, answered "It was made sometime in the previous 12 months". 38Mr Jacques said that he had complained verbally and sent a fax to Mr Kent before he went back to the Supreme Court a second time. When asked where the fax was, he said (T70.45-71.3, 2/2/2011): "Q. And where's the fax? A. I don't know where it is at the moment, I've got one somewhere. Q. But you didn't put it in your evidence? A. I looked for it today actually and it's been misplaced for the time being. I presume. It's either at Mr Lloyd's place or Mr Orphid's place. Q. If you just go back to-- A. It says that in my affidavit somewhere too, I believe. One of the affidavits." 39On 1 April 2011, when the hearing resumed before the Magistrate, Mr Jacques was asked if he had located the fax and he indicated that he had tried to locate it on the earlier hearing day but he had not tried to locate the fax since then. He indicated that he believed that the fax was in his evidence. It was not. This evidence does not portray Mr Jacques in a favourable light. 40Counsel for Mr Jacques also referred to a passage from a letter written by Mr Kent to Tibby Morgenstern dated 17 October 2008 where Mr Kent states: "Part of the res gestae is that Mr George Senes was a director and shareholder of both Forte Enterprises Pty ltd and Ahtram Nominees Pty Ltd and also of Landmark Forum Pty Ltd. In his position as Director and shareholder of all the abovementioned companies he funnelled information and facilitated the transfer of the partnership property to Landmark Forum Pty Ltd at a significantly discounted amount. This makes this statement either "directly or indirectly" relevant in accordance with the provisions of section 55 of the Evidence Act 1995 (NSW)." 41Counsel for Mr Kent pointed out that Mr Kent stated categorically that Mr Jacques never instructed him to join Mr Senes. When cross-examined on this point, Mr Kent also denied this (T48.40). Counsel further submitted that, the suggestion Mr Kent was asked to give advice in relation to the joinder or possible joinder of Mr Senes, is unsustainable. The reason for this is there is no evidence detailing when and how the request was made, and there is no evidence detailing the documents and information which Mr Jacques provided to Mr Kent, upon which Mr Kent could provide such advice. But in my view, even if this is right, it does not dispose of the issue, because a solicitor has to exercise skill and knowledge to inform the client that there may be a cause of action against another party. 42Mr Kent briefed Mr Moschoudis, of counsel, in relation to the proceedings (with the knowledge of Mr Jacques). Mr Jacques gave evidence that the issue of joinder was never discussed during his conference with Mr Moschoudis (T75.5-19). Counsel for Mr Kent submitted that it was inherently improbable that such an important matter, if it had been identified as an issue, would not have been discussed with Mr Moschoudis. Further they submit there is no evidence of any contemporaneous complaint as to any failure on the part of Mr Kent to give the advice as to the joinder of Mr Senes. 43Returning to the issue of whether the solicitor was negligent, for Mr Jacques to have succeeded it was necessary for him to prove that, as at the time the hearing of the summons to transfer the Forte proceedings to the Supreme Court on 18 March 2008, Kent Attorneys had sufficient information to advise Mr Jacques that a viable cause of action lay against Mr Senes and that he should be joined as a defendant. 44Her Honour considered whether Kent Attorneys had breached that duty of care by stating at [118] to [120]: "118... there are major difficulties for the defendant in proving that the duty of care has been breached, or that he has suffered the claimed loss or any loss at all. 119Although Mr Senes has now been joined as a party in the Forte proceedings, this does not mean that Mr Jacques will be successful in his claim against. Macready AsJ indicated that he could not form a firm view on the prospects of success given the fact that evidence had not been filed in the proceedings (see paragraphs 36 and 37 of his judgment). 120If Mr Jacques succeeds in his claim against Mr Senes then he has arguably made out his claim that Kent Attorneys breached their duty of care. Conversely, If Mr Jacques fails in his claim against Mr Senes then Mr Kent's appraisal of the merits of the case is arguably vindicated with the result that Mr Jacques may not be able to prove that Kent Attorneys have breached their duty of care." 45The test to join a party is set out in UCPR 6.24(1). It reads: "6.24Court may join a party if joinder proper or necessary (1)If the Court considers that a person ought to have been joined as a party, or is a person who joinder as a party is necessary to the determination of all matters in dispute in any proceedings, the court may order that the person be joined as a party." 46The claim for negligence involved whether the solicitor breached his duty of care by not seeking to have Mr Senes joined as a defendant when the transfer application was heard in this Court. The loss and damage claimed was for the legal costs incurred by Mr Jacques due to the necessity of him having to bring an additional notice of motion in this Court. The Magistrate found the claim for negligence failed on the basis it was not known if Mr Jacques would ultimately be successful in his claim against Mr Senes. However, this is not the correct test. A solicitor has a duty of care to act with reasonable care, diligence and skill which is a duty in tort and which is also a implied term of the retainer: see Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1. See also Stephen Walmsley et al, Professional Liability in Australia, 2nd ed, (2007) Lawbook Co at [3.110], [7.4.390]-[7.4.440] and [33.1.140]. 47The relevant standard of care is that of a qualified, competent and careful lawyer in the given circumstances in the practice of his or her profession: see Bannerman Brydone Folster & Co v Murray [1972] NZLR 411 at 430 per Woodhouse J; Hawkins v Clayton (1988) 164 CLR 539 at 580 per Deane J; Hanflex Pty Ltd v NS Hope & Associates [1990] 2 Qd R 218 at 266 per Demack; Twiddle v Bradley [1990] 2 Qd R 464 at 482 per Cooper J. See generally Ben Zipser, "Professionals and the Standard of Care" (1999) 7 Torts Law Journal 167. 48The issue that should have been determined is whether Mr Kent acted with reasonable care, diligence and skill when giving advice as to whether Mr Senes should be joined as a defendant in the Forte proceedings at the time of the transfer proceedings. Whether Mr Kent was negligent depends on the state of Mr Kent's knowledge of the facts as at November 2008 (the date upon which his instructions were withdrawn), what was the advice given to Mr Kent in relation to Mr Senes (if any) and what were the instructions given by Mr Jacques in relation to joining Mr Senes. 49Counsel for Mr Kent submitted that Mr Jacques submission depends on there being evidence from a properly qualified expert legal practitioner. This was not provided. It is my view that expert evidence on this topic, while helpful, does not mean that the Court cannot determine this issue. 50It is my view that the Magistrate did not pose the correct question. This constitutes an error of law. As there is a conflict of evidence between Mr Kent and Mr Jacques, where credibility findings have been made this Court is not in a position to resolve this issue.
Loss and damage 51If Mr Jacques was successful in satisfying the Court that Mr Kent was negligent, the damages claimed are the refund of half the moneys paid to Kent Attorneys, being $23,500 and the costs of instructing new lawyers in order to take action in respect of Mr Senes being $25,000. (Cross claim, 20 August 2010 at [11]). 52Counsel for Mr Kent submitted that there is no evidence upon which damages in any particular amount could be properly based. 53The Magistrate shared this view and stated at [121] to [125]: "121I am also concerned about how the cross-claimant has quantified his claim. 122The defendant sought a refund of half of the monies that he had paid to Kent Attorneys (i.e. $23,500). It is clear from the evidence that Mr Jacques had paid Kent Attorneys more than $47,000 in relation to all three proceedings. If Mr Jacques is quantifying his loss by reference to the amount of the outstanding invoices then it is relevant that only $13,770.24 of that amount relates to the Forte proceedings. In my view, it would be unreasonable for Mr Jacques to seek him to calculate his loss by reference to invoices that were issued in relation to complete different proceedings. 123The defendant had not annexed copies of the invoices from his new lawyers to his affidavits so it is difficult to ascertain what legal work those invoices covered. 124If the joinder application was as simple as the defendant appears to be asserting then I find it difficult to see how he would be entitled to much more than minimal costs. However the joinder of Mr Senes was clearly complex issue and I have no way of knowing whether it could have been resolved as part of the transfer application. 125If it has been possible to resolve the joinder issue as part of the transfer application then I do not consider that it would be reasonable for the plaintiffs to bear the legal costs associated with the two applications that it took to resolve the joinder issue in the Supreme Court." 54On any view the evidence on loss and damage is scant. It consists of a letter dated 9 June 2010 from John Orford & Associates to Mr Jacques where it relevantly states: "a.Legal Costs - John Orford & Associates $1,100 paid on the 4th of March 2009 and $4,420.00 paid on the 16th of October 2009. b.Payments to David Lloyd as follows: i.$1,595.00 on the 12th March 2009, ii.$5,885.00 on the 15 August 2009 iii.$5,000.00 on the 12th of 2009 (sic)." [The month in (iii) is not specified] 55The total claimed in that letter is $18,000 not the $48,500 claimed in the cross claim. 56The notice of motion seeking to join Mr Senes was heard together with the notice of motion seeking to strike out Mr Jacques' statement of claim for want of prosecution on 18 November 2009. On 18 December 2009, judgment was delivered. 57While on 18 December 2009, no order for costs was made in relation to the notices of motion, on 29 June 2010, Macready AsJ made an order that: "The plaintiff is to pay the defendants' costs of the first and second defendants' notice of motion filed on 30 March 2009, the plaintiff's notice of motion filed on 3 September 2009, and any costs thrown away by the amendments to the pleadings, on a party/party basis." 58It is difficult to discern what fees and costs are attributable to the notice to motion to join Mr George Senes as a party, however, there would need to be a reduction for what ever fees were actually incurred to reflect the time spent on the motion for want of prosecution. 59While the evidence on loss or damage is scant, if the solicitor is found to have been negligent allowance should be made for the loss Mr Jacques suffered. 60The result is that the appeal is allowed in part. The decision of her Honour Magistrate Atkinson dated 8 July 2011, in so far as it relates to the cross claim, is set aside. The matter is remitted to the Local Court to be determined according to law. 61Costs are reserved.
The Court orders that: (1)The appeal is allowed in part. (2)The decision of her Honour Magistrate Atkinson dated 8 July 2011, in so far as it relates to the cross claim, is set aside. (3)The matter is remitted to the Local Court to be determined according to law. (4)Costs are reserved.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 March 2012
Philip Jacques
Rodney Kent & Tim Orlizki t/as Kent Attorneys
[2009] VSC 331
[2005] VSC 251
(1999) 197 CLR 1
(1988) 164 CLR 539
(2005) 220 CLR 517
(1990) 169 CLR 279
(2001) 54 NSWLR 135
The appeal was allowed in part; the Local Court decision was set aside insofar as it related to the cross-claim, and that matter was remitted to the Local Court for determination according to law. Costs were reserved.