Secombs v Sadler Design Pty Ltd [1999] VSC 79

5. The appellant is a firm of solicitors. The respondent was a manufacturer of tiles, made for the architectural market, custom made and then cut to size. The respondent was at the relevant time a client of the appellant. Sadler was responsible, principally, for giving instructions to the appellant on behalf of the respondent.

8. On 11 March 1997 the appellant issued proceedings against the respondent in the Magistrates' Court at Melbourne seeking to recover $9,334.20 being the balance of amounts alleged to be due for professional services rendered by the appellant to the respondent between August 1996 and July 1997. The appellant also sought to recover interest in the sum of $278.75. The amount of $9,334.20 was particularised as being the amounts due on accounts rendered and in particular being with respect to file No. 97.1400 - $3,966; file No. 97.0234 - $4,745 and file No. 97.1707 - $623.20. The claim made against Sadler as identified by the appellant's particulars of claim was on a basis that he had requested the professional services to be rendered to the respondent. It was found by the Magistrate that he had incurred no personal liability and that claim and the counterclaim instituted by him may be put to one side and the proceedings may be considered on the basis of being between the appellant and the respondent.

11. By its notice of defence, the respondent denied liability to the appellant and by way of counterclaim alleged that the appellant had breached the duty owed to it as its solicitor to act on its behalf with reasonable skill and care in particular that on or about 16 May 1997, the appellant allowed Counsel to execute terms of settlement on its behalf at a mediation in relation to the matter the subject of file No. 97.0234 without its consent; that on or about 16 May 1997 the appellant failed to communicate to it the purported terms of settlement in a manner which was clear to it and that on or about 16 May 1997, the appellant failed to disclose to it the possible consequences of any failure to comply with the purported terms of settlement. It alleged that in consequence of the breach of duty owed by the appellant to it on or about 21 May 1997 the respondent was unable to comply with the terms of settlement and that in consequence thereof it suffered loss and damage in the total sum of $29,000. The matter, the subject of file No. 97.0234 were proceedings in the County Court between the respondent and Klaus Ceramic Tiling Pty Ltd. By its reply and defence to counterclaim in the proceedings, the appellant denied that it acted in breach of the duty owed by it to the respondent. It admitted that the respondent was unable to comply with the terms of settlement signed by Counsel at the mediation on 16 May 1997 contending that that was due to a fact which was contrary to instructions given to Counsel at the mediation. The appellant further alleged that the respondent had failed to mitigate any loss suffered by it. By the reply and defence to counterclaim the appellant raised no issue against the respondent by way of contributory negligence.

14. In the proceedings before the Magistrates' Court the quantum of the balance of the accounts rendered the subject of the appellant's claim was not in dispute, nor was there any dispute as to the entitlement of the appellant to recover the amounts of $3,966 and $623.20 (total $4,589.20). There was, however, a dispute as to the sum of $4,745 being that amount in respect of file No. 97.0234 which related to services rendered by the appellant with respect to proceedings in the County Court. It was the respondent's contention in respect of that matter that the appellant had acted negligently and in breach of the duty owed by the appellant to it which was a cause of it suffering loss and damage and that in consequence the appellant was not entitled to recover fees claimed with respect to that matter.

17. After hearing evidence in the proceedings over a number of days, the presiding magistrate, on 19 August 1998, delivered his decision and gave oral reasons for the same.

20. The final order made by the Magistrates' Court on 19 August 1998 as produced on this appeal, records that the appellant's claim against the respondent was dismissed and that there be no order as to costs and that the respondent's counter-claim against the appellant be dismissed and that there be no order for costs.

23. From the evidentiary material filed with the court in these proceedings it would appear that such result was brought about by the Magistrate determining on the appellant's claim that the respondent was indebted to it in respect of the uncontested matters amounting to $3,966 and $623.20, together with interest in two amounts of $144.87 and $18.92 being in total $4,752.99 and that he further held and determined that on the counter-claim the appellant was in breach of the duty owed by it to the respondent as its solicitor in respect to the County Court proceedings, causing it to suffer damages in the sum of $2,721.20 by way of additional legal costs and $2,031.59 by way of general damages being in total $4,752.79. It would appear that in consequence of the Magistrate's decision and finding that each of the appellant and the respondent were indebted to the other in the same amount, which was in error by 20>, he set off one against the other in respect of both the claim and counter-claim and dismissed each of the same. From the evidentiary material filed on this appeal, it would appear further that the Magistrate in his discretion, determined that there should be no order as to costs on either the claim or counter-claim.

26. As I shall hereafter refer to, as part of the decision of the Magistrate, he determined that in consequence of the breach of duty owed by the appellant to the respondent with respect to the County Court proceedings the appellant was not entitled to recover the further sum in respect of services allegedly rendered to the respondent in the sum of $4,745 and being with respect to the matter of file No. 97.0234.

29. There is no cross-appeal brought on behalf of the respondent.

32. The crux of the appellant's appeal to this court on a question of law is that the Magistrate was in error in holding that there was negligence on the part of the appellant which was a cause of the respondent suffering loss or damage, that in the event of the Magistrate not being in error in determining that the appellant was in breach of the duty owed by it to the respondent, the latter had not proved that such breach of duty was a cause of it suffering any loss or damage and further that the Magistrate was in error in determining that the appellant was not able to recover against the respondent fees in the sum of $4,745 in respect of the matter the subject of file No. 97.0234.

35. Before the presiding magistrate there was evidence that the appellant acted as solicitors for the respondent in the proceedings brought in the County Court at Melbourne against Klaus Ceramic Tiling Pty Ltd which was instituted on 13 August 1996. The solicitor responsible for the day to day conduct of that matter was an employee solicitor of the appellant, one Jason Arnheim. The principal of the appellant responsible for the conduct of those proceedings was Neil Andrews.

38. By the statement of claim in those proceedings it was alleged that in or about June 1996 the respondent agreed to sell to and Klaus Ceramic Tiling Pty Ltd (Klaus) agreed to purchase from it, ceramic tiles. By the statement of claim the respondent alleged that it had manufactured tiles to the specifications of Klaus, that it had delivered part of the tiles ordered, as requested, but that Klaus had refused to accept delivery of the remaining tiles evidencing an intention not to be bound by the agreement, that the respondent had accepted that as a repudiation of the agreement claiming the balance owed as identified on invoice No. 533 dated 25 June 1996 in the sum of $28,044. The statement of claim in those proceedings in the County Court is among a bundle of documents exhibited to the affidavit of Andrews sworn on 15 September 1998 in these proceedings and said to be documents tendered on the hearing before the Magistrate. Among that bundle of documents appears to be an amended defence and counter-claim in response to the amended statement of claim of the respondent in those proceedings. That amended statement of claim is not among the bundle of documents and appears not to have been a document tendered before the Magistrate. However, by that amended defence and counter-claim it appears that Klaus denied liability to the respondent. While admitting that the respondent had delivered part of the quantity of tiles ordered, Klaus alleged, that the respondent had failed to deliver the tiles as ordered, that it refused to accept delivery of the same, that the tiles were not fit for their intended purpose, that they did not correspond in quality and description with the sample supplied, that they were not delivered in reasonable time and in accordance with the contract and that the same were defective. By way of counter-claim Klaus sought to recover the sum of $7,011 paid by way of deposit together with costs incurred by it and associated with the delay in obtaining alternate tiles for an identified project.

41. Further evidence before the Magistrate was that in the County Court proceedings, and on 16 May 1997, a mediation took place wherein Mr Berglund of counsel acted as mediator. The mediation was attended by Sadler and Ms Simper, the manager of the respondent. The respondent was represented by Counsel, briefed by the appellant. Neither Andrews nor Arnheim attended the mediation. Klaus was represented by Counsel and there was in attendance Klaus Masanek a director of that company. On that day and at the mediation, written terms of settlement of the County Court proceedings were executed by Counsel on behalf of the respondent and by Masanek on behalf of Klaus.

44. By those terms of settlement it was recited that the respondent had commenced the proceedings to recover $31,884 alleged to be owing in respect of an agreement to supply to Klaus certain tiles, that Klaus had counter-claimed against the respondent and that the parties had resolved the proceedings in the manner set out thereafter. By its terms, Klaus consented to judgment for the respondent's claim together with interest and costs but it was further agreed that notwithstanding that agreement the respondent agreed to accept the sum of $18,000 in full and final settlement of the proceeding which sum was to be paid by way of bank cheque to the respondent's solicitors on or by 4.00 p.m. on 20 May 1997. It was agreed that subject to compliance with the provisions of a paragraph identified in the terms of settlement the sum of $18,000 was to be held in the respondent's solicitor's trust account, to be released unconditionally to the respondent on 30 May 1997. However, it was further agreed that subject to Klaus complying with the provisions of the agreement requiring it to pay the sum of $18,000 into the trust account of the respondent's solicitors by 4.00 p.m. 20 May 1997, "The plaintiff [respondent] shall make available for collection by the defendant as and from 9.00 a.m. on 21 May 1997 the goods described in invoice No. 528 dated 6/6/96 and invoice No. 533 dated 25/6/96 which goods shall hereafter be kept available for collection until 4.00 p.m. on 7 June 1997".

47. By the terms of settlement it was further agreed that in the event of Klaus failing to pay the sum in accordance with the agreement referred to the respondent should be entitled to enter judgment against it and should be entitled to produce the terms of settlement as consent thereto. Further, it was agreed that in the event of the respondent failing to comply with the agreement to make the tiles available for collection as provided by the term previously referred to, the respondent's solicitors should upon written notice from the solicitors of Klaus pay to those solicitors, as directed, the sum of $18,000 forthwith and further, that the respondent would consent to its claim being dismissed and there being judgment on the counter-claim.

50. The evidence before the Magistrate as to the events which occurred before the execution of those terms of settlement and after were central to the outcome of the proceedings before the Magistrate and are also central to this appeal.

53. Called as a witness before the magistrate was Mr Berglund of counsel who conducted the mediation between the respondent and Klaus in the County Court proceedings. He was called to give evidence and gave evidence with the consent of each of the appellant and the respondent. His evidence was that on 16 May 1997, during the course of the mediation, the County Court proceeding was settled. He said that settlement was reached at lunch time or late lunch time between 1.00 and 1.30 p.m. He gave evidence that Sadler had left the mediation after the major terms were resolved but before the terms were put on paper. He said that while Counsel for the respondent, Mr Herskope, was writing the terms of settlement he spoke on the telephone. He said that he spoke to Sadler. He said that he recalled that Sadler had to go to lunch that day but that he had managed to persuade him to stay until the substantial terms were settled.

56. Counsel who appeared for the respondent on the mediation was also called as a witness. He identified the terms of settlement as being in his handwriting. He said that clause 4 of the terms of settlement indicated that the tiles should be ready for collection on 21 May and that Klaus had two weeks to collect them. He gave evidence that there was no indication that the tiles needed to be cut but that Sadler had indicated that the tiles were immediately available. He was asked why the terms provided that the tiles were to be collected on 21 May rather than 16 May and he said that Sadler said that they could be collected, that the terms were discussed between himself and Counsel for Klaus, that he was working on the assumption that the tiles were lying on the factory floor to be collected, that Sadler had been extremely agitated at the mediation and that he put off the collection of the tiles for a few days to allow Sadler to cool down. He gave evidence that the default clause, clause 6, was explained to Sadler and that it was agreed to. He further said that he spoke to Sadler by telephone and that he went over the terms with him. He said that Sadler did not get a copy of the terms from him.

59. In cross-examination he said that during the mediation Klaus wished to inspect the tiles and that there was an issue whether the same existed. This, he said, caused Sadler to be very annoyed and agitated and he protested that the tiles did exist and were manufactured. He said that when Sadler left the mediation he instructed him, "You wrap it up", saying that Sadler meant that he was to finalise the terms. It was put to him that Sadler would say that when he left the mediation he asked if the terms of settlement could be faxed to him. Counsel said that that was possible and that he would have said that the solicitors would fax it. He said that he recalled speaking to the appellant after the mediation but could not recall whether he spoke to Arnheim or Andrews. He said he could not recall when he faxed the terms of settlement to the solicitors. Counsel further gave evidence that he recalled speaking to Sadler and discussing the terms before finalising the same. He said it would have been consistent with discussing the provision of a forklift which was also the subject of the terms of settlement. He said that the relevant date in the terms of settlement, 21 May, was selected by him. He was asked whether it would be necessary for the client to read the terms to understand them, to which he replied he could have done so had he not gone to lunch.

62. In re-examination he said that Sadler was aware of the date in paragraph 4 of the terms, that is, 21 May 1997, and that he agreed with that date being inserted in the terms.

65. The solicitor, Arnheim, also gave evidence, producing the Writ and Defence in the County Court proceedings and the invoices the subject of the same. As best I can ascertain from the bundle of exhibits produced and exhibited to the affidavit of Andrews, such invoices were invoice 533 in respect of tiles, amount due - $35,055, less deposit paid $7,011, total amount payable $28,044, together with the further invoice 528 for $4,800, less deposit paid $960, being total amount payable $3,840.

68. He said that he did not attend the mediation but briefed Counsel to appear for the respondent. He gave evidence that on 16 May Counsel who was briefed telephoned him and told him that the matter had settled for $18,000 and that the tiles needed to be ready on 21 May 1997. He gave evidence that on that day he received by fax transmission, a handwritten copy of the terms of settlement. Further, in substance his evidence was that the appellant on 19 May received the sum of $18,000. He said that on 20 May he received a telephone call from Ms Simper and that that which was discussed was that the tiles must be ready from 21 May at 9.00 a.m., that she indicated that the tiles were at the back of the warehouse and requested him to communicate with the solicitor for Klaus and asked that they be communicated with before arriving to collect the tiles. He said further that he had a telephone conversation on 20 May with Sadler who was not happy with the settlement and that he informed Andrews of that matter. The witness said further that in his conversation with Ms Simper she had said that there were two tiles in Counsel's office which needed to be retrieved and that he had said to her that the tiles had to be collected from 21 May to 7 June.

71. He gave evidence that on 20 May he did not send to the respondent the terms of settlement and when asked why not, he said that they were all talking about the same thing, that they all knew that they had to be available by 9.00 a.m. on 21 May. He gave evidence that he sent the terms of settlement to the respondent on 23 May and that on that day he wrote two letters. They were tendered. I shall later return to them. He said that the first time he knew there was a problem was on 23 May, and that after that Andrews took over the file. He further gave evidence that at one point Sadler had said to him, "You stuffed up because you didn't send terms", to which he replied, "You knew the terms", to which Sadler had said that he did not, that he had never had them.

74. In cross-examination he said that he received the terms of settlement from Counsel on 16 May and that it was probable that he read them. He said that on 19 May he telephoned the respondent and said that the $18,000 had arrived and he left a message for Sadler to return the call. He denied that on 21 May he was telephoned by Ms Simper.

77. There was tendered the first of the two letters sent by fax transmission to the respondent by the appellant on 23 May 1997. The first, bearing a transmission time of 11.40 a.m. enclosed a copy of the handwritten terms of settlement stating, "Please note that the tiles are to be made available from 9.00 a.m. 21 May 1997 until 4.00 p.m. 7 June 1997." At 1733 that same day the appellant by fax transmission sent the second letter to the respondent advising the respondent, "You are in default of the terms of settlement in that the tiles are to be made available for collection from 21 May 1997 to 7 June 1997.

2. Enter judgment on their counter-claim for a refund of the deposit, legal costs and damages.

We note that the defendant's solicitor has demanded a refund of the sum of $18,000 and has obtained the original terms of settlement for the purpose of entering judgment."

83. There was further tendered in evidence the letter received by the appellant from the solicitors for Klaus on 23 May by fax transmission with a time 1415 in which the solicitors for Klaus referred to the terms of settlement and stated, "Your client is in default of paragraph four of the terms of settlement in that your client has not made available for collection by our client as at 9.00 a.m. on 21 May 1997 the goods described on invoice No. 528 dated 6 June 1996 and invoice No. 533 dated 25 June 1996. Indeed our client was informed by your client that the goods had not even been manufactured and would not be available for another two weeks.

In those circumstances we have been instructed by our client and now demand that the monies paid by our client to yours and retained in your trust account be returned to us pursuant to clause 6(a) of the terms of settlement.

We request that the cheque be made payable to our client.

We also advise that we shall be reinstating the matter for the purpose of dismissing your client's claim and seeking judgment on the counter-claim."

86. The witness Arnheim agreed in cross-examination that on 23 May Sadler had spoken to him and said that they did not have the terms of settlement, that they should have had them on 16 May. In re-examination Arnheim said that on 16 May 1997 when he spoke to Counsel there was no indication that the client was not aware of the terms and there was no indication that the client did not understand the dates.

89. The solicitor Andrews also gave evidence. He said that he did not have any involvement with the mediation on 16 May other than speaking to the barrister for Klaus who telephoned requesting a trust account number. The witness said that he spoke to Sadler on 21 May and that in that conversation Sadler said nothing about the tiles not being cut or not knowing about the tiles or the scope of the terms of settlement. He said his next involvement was on 23 May when he spoke to Ms Simper who said that 18 pallets were ready and that they could piece it together. He said that this time Ms Simper said they had told Counsel at the mediation that the tiles needed to be cut. This, he said, surprised him because the whole tenor of the matter was that the tiles were ready and that Sadler wanted to get money for them.

92. Through this witness the subject three bills of costs from the appellant to the respondent were tendered. He said that the accounts had not been paid.

95. In cross-examination the witness Andrews said that the first time he had a belief that Sadler had left the mediation early was on 23 May. He said that on 16 May the first time he knew that the matter had been settled was when he spoke to Gleeson, the barrister for Klaus, who said that they were sending money to him. He said that he did not ask Counsel for Klaus for the details of the settlement. He said he did not see the terms of settlement that day. He said that with respect to a practice as to notifying clients as a result of litigation it would vary from case to case. He was asked, "Where there is a settlement what is the proper practice?", to which he replied, "There is probably a need to send the terms to the client". He was asked what was the appropriate time frame for that to happen, he replied, "If I was in my office and if it was my matter I would send it that day or the next day".

98. He agreed that on 27 or 28 May he told Ms Simper that she "was legally stuffed". He said that he first became aware of the problem on 23 May but said he could not say whether that was so because of the letter received from the solicitors for Klaus that day.

101. The witness also said that he had been told that the County Court action had subsequently and further been settled by a return of the sum of $18,000 to the solicitors for Klaus and by the payment of a further sum of $6,000 to Klaus.

104. Further details of that matter were provided in the evidence of the respondent's solicitor, Ms Penberthy. She gave evidence that she received instructions to act for the respondent on 11 June 1997 with respect to the County Court proceedings between the respondent and Klaus. She said that in those proceedings an affidavit was filed by one Dawes on behalf of Klaus which was sworn 2 June 1997. The affidavit was in support of a summons dated 27 May 1997 wherein Klaus sought an order that the proceedings be reinstated, that the respondent's claim be dismissed, that there be judgment in favour of Klaus on its counter-claim and that the respondent pay the costs of Klaus.

107. By the affidavit of Dawes which was tendered, he deposed that he was the principal of "Dawes Transport Services". He swore that on 16 May 1997 he received instructions from Klaus to collect 50 tonnes of tiles from the respondent on behalf of Klaus and that on 21 May 1997 in the morning he contacted the respondent by telephone to discuss the loading of the tiles but was informed by a man named "Peter" that he knew nothing about the tiles being collected. He swore that later on 21 May 1997 he again communicated with the respondent and was informed that the tiles were not ready, they had to be cut and packed and that it would be a couple of weeks before they were available for pick up.

110. Ms Penberthy gave evidence that on the return of the summons she attended the County Court and appeared on behalf of the respondent in opposition to the summons of Klaus. She gave evidence that the County Court proceedings were further settled that day on it being agreed between the respondent and Klaus that the respondent would re-pay to Klaus the sum of $18,000 held in the trust account of the appellant and that the respondent would pay a further sum of $6,000 to Klaus by 30 June 1997. Ms Penberthy gave evidence that the sum of $18,000 was transferred to the solicitors for Klaus and that the further sum of $6,000 was paid to Klaus in accordance with those terms of settlement. She said that the fees of her firm in acting for the respondent in those proceedings were $2,721.20. Her evidence was the respondent had paid that amount.

113. Sadler was called as a witness in the proceedings before the Magistrate. He gave evidence that the respondent made tiles for the architectural market, that he was a sculpture and that they manufactured custom made tiles and then cut them to size. He said that the order from Klaus was for 740 metres of tiles comprising about two to three semi-trailer loads. He said that all the tiles could not go at once because too much space was required and that they are usually taken progressively in parcels. He said that 80mý had been cut and shipped to Klaus but they had been rejected and it was then that they instructed the appellant to commence proceedings against Klaus. He gave evidence that he attended the mediation with Ms Simper and that they had met Counsel retained before going to the mediation. He gave evidence as to the negotiations that took place at mediation. He said that he thought that he had communicated to Counsel the requirement in relation to the pick up of the tiles, that they needed to prepare four loads, that they had some available immediately and some had to be cut. He said that he tried to explain to Counsel the process of cutting tiles. He said that he told Counsel that the tiles were in slab form and they would have difficulty getting access to them and that if Klaus was to inspect them they were not going to see what they wanted, namely, tiles cut and put on pallets because they did not operate like that.

116. Sadler was asked what warning was needed, which I take to be a question directed to him as to the warning needed with respect to the collection of tiles by Klaus. Sadler said that he was happy with the tiles being made available immediately, that immediately is two weeks, that the cutting is an extrinsic part of the process and that they need notice to cut. He said that they could not leave three semi-trailer loads on the factory floor but if they had to deliver immediately he would require warning of two to three days and would have to alter the schedule of cutting. It was put to Sadler, "Did Alan Herskope [who was Counsel retained at the mediation] say 100% had to be available at 9.00 a.m. on 21 May?" He replied, "No, I would have said, 'Not possible, can't do'".

119. Sadler said that on the day of the mediation he and Simper had a luncheon appointment, that he left before the mediation was completed, that his instructions to Counsel, when he left, were in principle with respect to the specifics there were dollars to be paid and there were to be terms and conditions and that we would exchange dollars for tiles. He said that Counsel was to handle the details in his interest and that he indicated that he required two weeks to cut the tiles.

122. Sadler further said that tiles were to be made available immediately but not all the tiles. He said that no date was given. He gave evidence that he asked Counsel to send him the terms of settlement and that Counsel said that the terms would be sent to him that day and that they would come through his solicitor. The witness Sadler said he did not receive the terms of settlement. He said that he spoke to Andrews early in the following week, that he did not discuss the matter in detail with Andrews and could not remember asking for the terms in writing. He said that on 21 May Simper had said that a truck driver had rung her, that he had told her to tell the driver to give them proper warning. He said that on 23 May he was in Sydney when he received a telephone call from Arnheim who said that the terms were from 21 May to 7 June and that he told Arnheim to sort it out. Sadler said that Arnheim could not explain the problem. He said that he first read the terms of settlement on 26 May and formed a view in relation to their position.

125. Sadler was asked whether the tiles had a dollar value to him. He replied, "They had an invoiced amount". He was asked, "Do they have a market value?" He replied, "Yes". He was asked, "Do you have a buyer for the tiles?" He replied, "No". He was asked, "Could you sell the tiles?" He replied that he would have to turn his mind to that. He further gave evidence-in-chief that it would take 16 to 20 hours of cutting time to cut the tiles in dispute.

128. As to the evidentiary material before the court relating to the cross-examination of Sadler there is dispute between the account deposed to in the affidavit of Ms Penberthy sworn on 21 October 1998 and filed on behalf of the respondent and that deposed to by Andrews in an affidavit sworn 15 September 1998 and filed on behalf of the appellant. In these proceedings I propose to follow the arbitrary rule of practice that I should accept the version of the facts which support the magistrate's decision in the absence of any fair and practical method of resolving the conflict - Bazuta v. Vournazos [1970] VicRp 63; [1970] VR 476 Newton, J at 478. Following that practice I propose to rely on that set out in Exhibit JLP1 to the affidavit of Ms Penberthy.

131. Sadler, in cross-examination, said that he did not agree with the delivery dates. He was specifically cross-examined as to whether the tiles could have been made available for delivery to Klaus on 21 May. The following questions were asked and answers given.

"Q: Was it not possible for material to be available immediately?

A: Not three semi-trailer loads but material can be available to him

"Q: Is it not possible for the terms to be complied with?

A: I would put different emphasis on different words. Yes, it can be

"Q: You said to Alan Herskope that all the tiles were available at 9.00 a.m.

on 21 May, from its conception it was impossible for you to perform?

A: If I had received the terms on 16 May I would have made sure they

"Q: You said it was not possible to put all the pallets in your factory?

A: Yes, I thought 'immediately' meant with 14 days and that was with

"Q: You never agreed to settle this dispute unless you had two weeks for

"Q: You thought you conveyed to Alan Herskope that some tiles needed

A: I actually said that Klaus could come to the factory and it was very

difficult logistically when slabs were uncut and unpalletised. I had

a long truncated discussion with Alan Herskope about the issue of

162. In further cross-examination the witness Sadler said that on 21 May he was made aware that a truck driver had turned up and that he had told Ms Simper to ring Andrews or Arnheim. He said that when he read the terms of settlement he understood them. It was patently obvious, he said. The witness further said that on the day of the mediation he arrived at the restaurant where he was having lunch at around 2.00 p.m. that he finished the meal around 4.00 p.m. and returned to his factory at around 4.30 p.m. He said that the factory was closed but the office was not closed.

165. The further witness called on behalf of the respondent was Ms Simper, the manager of the respondent. She gave evidence that she attended at the mediation on 16 May 1997 and that she left before it was concluded stating that at the time she left an offer of $16,000 had been made. She said that at the time she left an issue had been raised by Klaus who wanted to inspect the tiles. She said that there was no problem with the tiles but when they manufactured them they cover them with plastic and store them in slabs and that it was difficult to see them as they prioritise each job and that they need notice before the tiles were cut. She was asked whether she conveyed the respondent's requirement for collection to Counsel to which she replied, "We need a few days so we could cut, palletise and strap and make them more accessible to the transport company." She said that she told Counsel that they needed time to have it all organised, that there were seven pallets that had been returned by Klaus, that they were ready except they needed new straps.

168. This witness said that on the Monday following 16 May (19 May) she was told by the respondent's receptionist that $18,000 had been deposited with the appellant. She said that on 21 May she received a phone call from a truck driver. She was surprised because he said he was coming to pick up a semi trailer load of tiles, that she said to him he could pick up seven pallets and that if he would like to wait they would have a semi trailer load and that it would be more economical for Klaus in terms of transporting them to Queensland. She said that prior to receiving that call she did not know the tiles were to be collected that day.

171. The witness said that she had telephoned Arnheim that day and told him about the communication with the truck driver and asked him why they were not told that a truck driver was coming that day. She said that Arnheim went "quiet" and said, "Didn't you know?" She said that she replied, "No, we have not been informed". She said that she asked him where were the terms of settlement and he replied, "Haven't you got the terms of settlement?" She said she replied, "No". The witness said that Arnheim then started to read them over the phone to her, that he said it was difficult to read because they were in handwriting, that he got to the part in relation to the pick-up and that he said, "From 21 May to 7 June". The witness said that she asked him, "Do you mean between 21 May and 7 June?" and that he replied, "Yes". She said that she felt more relaxed that they had more time. She said that Arnheim said that they would fax the terms to them.

174. She gave evidence that the terms of settlement were received on 23 May and that they were in handwriting.

177. The witness said that the second letter sent by the appellant to the respondent on 23 May was first seen by her on the following Monday, 26 May and that prior to receiving them nobody from the appellant had told them that they were in breach of the terms.

180. The witness further said that had they received the terms of settlement earlier they would schedule cutting as soon as possible and have the factory workers work overtime to meet the dates. She was asked, "If you had to have the tiles ready by 21 May how much notification would you need?" She replied, "Only a few days to have a semi-trailer load ready. As it was, no priority was actually given to the Klaus tiles because we had other jobs to do". In cross-examination the witness said that she could not recall ever telling anyone at the appellant's before 16 May that the tiles had not been cut. She said that she definitely told Counsel because they were in slabs. The witness further said that if they were told of the terms on 19 May they would have re-scheduled the cutting. She was asked, "On 19 May could you have cut half a semi-trailer load?" She replied, "Yes, if we had known Klaus was to collect on 21 May". She was asked, "Half a semi load would take greater than two days?" She replied, "We would do it in a day. I know for a fact we could have made delivery. We've done it before". She was asked, "Could you have made all the tiles available by 6 June?" She replied, "Yes".

183. The witness denied that she had spoken to Arnheim on 20 May. She said she spoke to him on 21 May. She said that that was the first time she asked for the terms of settlement and that they arrived on 23 May.

186. The witness was shown a fax transmission from the respondent to the appellant on 28 May from her in which she stated that they should have received instructions of settlement by 19 May and that, "This has put us under a lot of pressure and we have continually been cutting the material, so that we can meet the final date of dispatch being 6 June 1997". It further stated, "As already mentioned 17 pallets are ready for dispatch, another 15 pallets will be ready on Monday 2 June and the balance will be ready for dispatch on 6 June". Having seen that document the witness said that by 28 May they would have had two semi trailer loads ready.

189. At the outset of his reasons for decision the presiding Magistrate noted that the claim of the appellant for $4,589 in respect of fees was not in dispute, nor was the sum of $163.79 claimed by way of interest on that amount. In precise terms the amount of the appellant's claim not in dispute was in total $4,752.99, as identified by the Magistrate in his reasons.

192. As to the counter-claim the Magistrate referred to paragraph 4 of the terms of settlement in the County Court proceedings and in particular the agreement that the respondent was to make the tiles available for collection from 9.00 a.m. on 21 May 1997 until 4.00 p.m. 7 June and that in default of the tiles being available at 9.00 a.m. on 21 May the sum of $18,000 paid by Klaus was to be returned to it. He found that only a partial semi-trailer load of at least three semi-trailer loads was ready on 21 May and that Klaus had immediately invoked its rights under the terms of settlement which resulted in the $18,000 being transferred back to it. He identified the claim as that being for damages for breach of contract or negligence, and being a loss alleged to be $24,000 together with the sum of $2,721.20 being the amount paid by way of costs in the re-settlement of the County Court proceeding. He identified that the central issue to the claim on the counter-claim was whether the appellant was negligent in failing to inform the respondent on 16 May or failing to send to it terms of settlement or to describe to it until after 21 May, the necessity of the respondent to have available all tiles for delivery on 21 May. He held that such failure did amount to negligence and that the proximate cause of the failure of the settlement of the County Court proceeding was the failure of the appellant to communicate the terms of settlement to the respondent by reading them out or sending them to the respondent. The Magistrate found that Sadler believed that he had some leeway even until 6 June to organise the delivery of the tiles whereas Herskope and Berglund had believed that Sadler had agreed to the delivery of the tiles on 21 June. He held that Sadler was not adequately consulted, that he was not asked what was achievable. He found that Arnheim did not read the terms of settlement until it was too late, although he had been told by Counsel on 16 May that the proceeding had been settled and that the tiles needed to be ready by 21 May. He held that what was important was that on that day, 16 May, Arnheim had been told that the tiles needed to be ready on 21 May. He found that Sadler was not acquainted with the terms of settlement so intimately that the solicitors were excused from reading them to him or sending them to him. He referred to the fact that it was the appellant's case that they were excused because Sadler knew or understood the terms of settlement, however, he noted that in cross-examination Arnheim had agreed that Sadler did not have the terms of settlement until 23 May. He stated that Arnheim's evidence fell short of convincing him that Sadler was in the picture to the extent that there was no need to brief him on the outcome of the settlement on 16 May. He noted that the outcome of the settlement was the production of a legal document, that being the terms of settlement.

195. Dealing with Sadler's evidence the Magistrate found that Sadler did not know his legal obligations under the terms of settlement. He referred to the evidence-in-chief of Sadler that he needed 16 to 20 hours to cut the tiles with six men and made the finding that Sadler could have had the tiles ready. That I take as a finding by the Magistrate on the facts that had Sadler been told of his obligation under the terms of settlement, that all the tiles were to be available for delivery to Klaus on 21 May 1997, the respondent could have had them for delivery that day. The Magistrate further found that if the solicitor had done what he should have done on 16 May and told the client (of his obligation under the terms of settlement) Sadler could have extricated himself. He found that the proximate cause of the failure to deliver the tile was the failure to acquaint Sadler with his predicament. He found that Sadler was in a predicament from which he could have extricated himself. The Magistrate noted that Sadler had conceded that he was not ready and that he could not be ready when he found out about the terms. This was clear because the date had passed. He said, however, that Sadler had asserted in evidence-in-chief that he could deliver in a panic with six men and in 16 to 20 hours and said that he was not "cross-examined out of that position". As to the question of damages the Magistrate stated that there was one abiding principle that if a solicitor was negligent then he was at least deprived of his costs. He referred to authority for that proposition. He found that $2,700 "odd" had been expended by way of costs on the further settlement of the County Court proceeding and that in that settlement the respondent had sacrificed the sum of $18,000 which had been paid to the respondent's solicitors pursuant to the terms of settlement and had paid $6,000, being the amount paid by the respondent to Klaus on the re-settlement of the County Court proceedings.

198. The Magistrate in his reasons for decision addressed the question whether mitigation of loss arose on the evidence. It appears that he found that on the evidence he did not get to the point of being concerned about the question of mitigation of damages. As to contributory negligence the presiding Magistrate held that the question did not arise. He held that it did not constitute contributory negligence on the part of the respondent for Sadler to go to lunch or to use the phone stating that it was difficult to say that the client was negligent unless it was expected to be wiser than the advisers. He found that contributory negligence was "ruled out in any event".

201. It appears that at about this point in the Magistrate delivering his reasons for decision he was subjected to a number of interruptions and submission being made relevant to the question of damages. This should not have occurred. The notes of the Magistrate's finding as comprised Exhibit NAA4 to the affidavit of Andrews and Exhibits JLP5 and JLP8 to the affidavits of Ms Penberthy make it exceedingly difficult to isolate the findings of the presiding magistrate relevant to damages. This appears to be particularly so by reason of the interruptions that the presiding Magistrate was subject to at this point when giving his reasons for decision. The presiding magistrate found that the respondent had lost the opportunity to be rid of the tiles for $25,000 to Klaus, that he did not have the money and that he had lost the opportunity to be rid of the tiles which he did not want. I gather the reference to $25,000 was a broad reference to the fact that the respondent had received some $7,000 by way of deposit on the tiles and under the terms of settlement it was to be paid a further $18,000. The Magistrate held that the respondent had lost the advantage of the settlement, that it had the tiles and that until it tried to sell them there could be no other evidence other than they were worth $35,000. That, as I understand it, is the invoice value. He found that the loss of opportunity to be rid of the tiles could be compensated for, that it could not get rid of the tiles overnight and therefore there was some ability to claim for a loss of opportunity which had been lost. The presiding Magistrate assessed the appellant's loss as being $2,031.59. That amount appears to have calculated that on a basis that what was not in dispute with respect to two files the respondent was indebted to the appellant in the sum of $4,752.79 from which sum he deducted the amount of $2,721.20 being the damages suffered by the respondent in consequences of the negligence of the appellant and being that which the respondent was liable to pay to its solicitors who took over the conduct of the County Court proceedings and effected a further settlement of the same. Having arrived at the figure when assessing the damages which the magistrate found to be the loss of opportunity suffered by the respondent to be rid of the tiles and to recover the sum of "$25,000", he stated that it was difficult to quantify the loss in an objective way "but the justice of the situation requires resort to an obvious figure which is the $2,031.59 which [the respondent] already owes". He commented that the respondent should not be compensated lavishly and that the figure was appropriate and off-set entirely the appellant's claim. The amount that was not in dispute as stated was $4,752.99, not $4,752.79.

204. Before turning to the specific questions of law raised on this appeal as identified by the order of the Master made 16 September 1998 it is important to re-state that an appeal lies to this court from a final order of the Magistrates' Court on a question of law only pursuant to s.109 of the Magistrates' Court Act 1989. In Keep v. Pozzenbon (No. 6091-1994 unreported 1 September 1994) I held that it was not competent for a court on an appeal such as this to consider whether the order below was against the evidence or the weight of evidence. In Spurling v. Development Underwriting (Vic) Pty Ltd [1973] VicRp 1; [1973] VR 1 Stephen, J at p.11 said -

"In the case of decisions of magistrates the position in Victoria is well established by a line of decisions culminating in Taylor v. Armour and Co Pty Ltd [1962] VicRp 48; [1962] VR 346, in which the Full Court of this State held that in the case of any question of fact the court should treat the matter as an appeal from the verdict of a jury and should not make up its own mind upon the evidence but rather confine itself to seeing whether there was evidence upon which the magistrate might, as a reasonable man, come to the conclusion which he did."

208. In Green v. Victorian Workcover Authority [1997] 1 VR 364 Tadgell, JA having held at p.369 that the right of appeal conferred by s.52(a) of the Accident Compensation Act 1985 was 'a right of appeal to the Court of Appeal from (or against) a judgment or decision of the County Court on a question of law raised during the proceedings before the County Court and which is involved in the judgment or decision' his Honour at p.372 said -

"Upon my interpretation of s.52(1) the appeal cannot raise the question whether the conclusion was against the evidence or the weight of the evidence. In order to succeed the appellant must demonstrate that there was no basis on which the Chief Judge could reach the conclusion that he did."

212. The first three questions raised on this appeal all relate to the finding of the Magistrate that the appellant was negligent or acted in breach of its contractual duty to the respondent. Those questions are -

(a) On the evidence was it open to the Magistrate to hold that the appellant was negligent and/or in breach of contract;

(b) Whether the Magistrate erred in law in finding that any conduct of the appellant had caused any loss or damage to the respondent;

(c) Whether any reasonable Magistrate could have concluded on the evidence before him that it was possible for the respondent to comply with the 'terms of settlement ... '"

218. On this appeal no issue was raised that there did not exist a duty of care owed by the appellant to the respondent as its solicitors in the conduct of the County Court proceedings on its behalf whether arising directly from the contractual relationship existing between the respondent and its solicitor the appellant or at common law arising from the proximity of relationship between the appellant as the solicitors for the respondent. Rather, the matter to be addressed on these three questions of law was whether it was open on the evidence before the magistrate for him to find as he did that the duty owed by the appellant to the respondent was breached and that that was a cause of the respondent suffering loss and damage. In Hawkins v. Clayton (1988) 164 CLR 539 Deane, J at p.574 said -

"The clear trend of modern authority is to support the approach that the duty of care owed by a solicitor to a client in respect of professional work prima facie transcends that contained in the express or implied term of the contract between them and includes the ordinary duty of care arising under the common law of negligence. ... That approach is also supported by principle in that, in the context of the general scope of the modern law of negligence to which members of this court have long sought to give effect ... , there is no acceptable ground for refusing to recognise the liability of a solicitor in tort for negligence in the performance of professional work for a client. That liability prima facie corresponds with what Windeyer, J described in Voli v. Inglewood Shire Council [1963] HCA 15; (1963) 110 CLR 74 at p.84, a case concerning the liability of an architect for negligence in the performance of professional work as 'the ordinary liabilities of a man who follows a skilled calling'".

222. As referred to by Deane, J at p.575 Windeyer, J in Voli went on to examine the content of those "ordinary liabilities". Windeyer, J at p.84 further said -

"He is bound to exercise due care, skill and diligence. He is not required to have an extraordinary degree of skill or the highest professional attainments. But he must bring to the task he undertakes the competence and skill that is usual among architects practising their profession. And he must use due care. If he fails in these matters and the person who employed him thereby suffers damage he is liable to that person. This liability can be said to arise either from a breach of his contract or in tort".

226. In Rogers v. Whittaker [1992] HCA 58; (1992) 175 CLR 479 at 483 the majority of the court when dealing with the standard of care required of a medical practitioner at p.483 said -

"The standard of reasonable care and skill required is that of the ordinary skilled person exercising and professing to have that special skill ... "

230. In this case the standard of reasonable skill and care required of the appellant in the conduct of the County Court proceedings on behalf of the respondent was that of the ordinary skilled solicitor exercising and professing to have the skill to conduct litigation in a court on behalf of a client. In the circumstances of this case Counsel who had been retained by the appellant to act for the respondent on the mediation reported to Arnheim on 16 May that the case had settled for $18,000, that the client had left early. From that it ought reasonably to have been concluded by Arnheim that Sadler was not present when the written terms were signed. Arnheim also received at that time a faxed copy of the written terms signed by Counsel for the respondent whereas it had been signed on the other side by a director of Klaus. Had Arnheim read those terms on that day he ought reasonably to have concluded that all the tiles the subject of the claim and that identified in the two invoices were to be made available by the respondent for collection by Klaus as and from 9.00 a.m. 21 May 1997 and to be kept available for collection until 7 June 1997 thereby creating an obligation in the respondent to have such tiles available for collection at the commencement time and date. It further ought to have been appreciated by Arnheim that in the event of the respondent failing to comply with such term then on the solicitor for Klaus giving written notice to the respondent's solicitor the respondent was required to re-pay the sum of $18,000 to be lodged in its trust account and that the respondent consented to its claim being dismissed and there being judgment on the counter-claim.

233. In my view these facts alone ought to have brought to the attention of the solicitor the need to ensure that the client was aware of the final terms of settlement and was aware of its obligation under the same and the consequences that would flow if clause 4 was breached. In my view the duty of care cast upon the solicitor in the circumstances required that the appellant communicate with the respondent on the afternoon of 16 May or at the very latest the first thing on the morning of 19 May to ensure that the respondent was aware of the terms of settlement in their final form and appreciated the effect and the significance of the same. That this was a reasonable requirement was recognised by the principal Andrews in his evidence in cross-examination in which he said that had it been his matter and had he been in the office he would send terms of settlement to his client that day or the next day. On the evidence it would seem clear that Arnheim had no real appreciation of the effect of the terms and the significance of the respondent failing to have all tiles available for collection at 9.00 a.m. on 21 May 1997. From 4.30 p.m. on 16 May Sadler was available in his office. On the evidence it was open to be concluded, that in the absence of the appellant, by Arnheim communicating with the respondent before 21 May, it had no appreciation that all the tiles were to be available for collection on 21 May and the consequences that would flow to the respondent that if in breach of the terms of settlement all the tiles were not available that day.

236. In my view it was open to the Magistrate to conclude that in the circumstances, the appellant breached the duty that it owed to the respondent as its solicitor.

239. It was submitted on behalf of the appellant that on the evidence it was not open to the Magistrate to find that the respondent could have complied with clause 4 of the agreement and to have had the tiles available for collection at 9.00 a.m on 21 May. It was submitted that the evidence of Sadler and Simper was that even had the respondent been informed of the terms of settlement and the obligation of it consequent upon the same it was not possible to comply with clause 4 and therefore as such was the case the respondent could not establish and had not established that any breach of duty or failure on the part of the appellant caused it to suffer any loss as no act of the appellant was a cause of the respondent failing to comply with the terms of settlement and being in breach of the same as at 9.00 a.m. 21 May. In his evidence Sadler had said that he was happy with the tiles being made available immediately and that immediately was two weeks. He said that the cutting was an extrinsic part of the process and that they needed notice to cut. He said also that if they had to deliver it would require warning of two to three days and he would have to alter the schedule of cutting. When he was asked, "Did Alan Herskope say 100% had to be available at 9.00 a.m. on 21 May?" he replied, "No, I would have said, 'Not possible, can't do'". Further, Simper in her evidence said had they been told on 19 May of the terms they would have re-scheduled cutting and they could have cut a semi-trailer load in a day. However, it is to be noted in his evidence Sadler further said that it would have taken 16 to 20 hours of cutting time to cut the tiles in dispute. In addition, when cross-examined and it was specifically put to him that from its conception it was not possible for the respondent to perform its obligation under the terms of settlement he said if he had received the terms on 16 May he would have made sure they were ready. It was put to him that he said it was not possible to have all the pallets in his factory. He said that was creative and he would have found a way.

242. In March v. Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506 Mason, CJ at p.515 said -

"The common law tradition is that what is the cause of a particular occurrence is a question of fact which 'must be determined by applying common sense to the facts of each particular case' in the words of Lord Read: Stapley v. Gypsum Mines Ltd [1953] UKHL 4; [1953] AC 663 at 681."

"For the purpose of the law of negligence, the question of causation arises in the context of the attribution of fault or responsibility whether an identified negligent act or omission of the defendant was so connected with the plaintiff's loss or injury that, as a matter of ordinary common sense and experience, it should be regarded as the cause of it ... . The 'but for' (or 'causa sine qua non') test may well be a useful aid in determining whether something is properly to be seen as an effective cause of something else in that sense. In particular, the test will commonly exclude causation for the purposes of the law of negligence if the answer to the question it poses is that the accident which caused the injuries would have occurred in the same way and with the same consequence in any event."

250. In Medlin v. State Government Insurance Commission [1995] HCA 5; (1995) 182 CLR 1 Deane, Dawson, Toohey, and Gaudron, JJ at p.6 said -

"For the purposes of the law of negligence, the question whether the requisite causal connection exists between a particular breach of duty and particular loss or damage is essentially one of fact to be resolved, on the probabilities, as a matter of common sense and experience. And that remains so in a case such as the present where the question of the existence of the requisite causal connection is complicated by the intervention of some act or decision of the plaintiff or a third party which constitutes a more immediate cause of the loss or damage. In such a case the 'but for' test, while retaining an important role as a negative criterion will commonly (but not always) exclude causation if not satisfied, is inadequate as a comprehensive positive test. ... The ultimate question must, however, always be whether notwithstanding the intervention of the subsequent decision, the defendant's wrongful act or omission is, as between the plaintiff and the defendant, as a matter of common sense and experience, properly to be seen as having caused the relevant loss or damage."

254. Having regard to the evidence of Sadler elicited in cross-examination that had he been informed on 16 May of the respondent's obligations under the terms of settlement that he would have found a way to have all the pallets in the factory, taken particularly in conjunction with his evidence as to the period needed to cut the tiles and the evidence of Ms Simper as to the respondent's ability to schedule cutting times and for overtime to be worked to meet dates, it was open on the evidence for the Magistrate as a reasonable person to conclude that had the appellant on 16 May or even the 19 May informed Sadler as to the terms and the respondent's obligation under the same as a probability the tiles would have been available for collection on 21 May.

257. In my view it was clearly open to the Magistrate to conclude in this case that the appellant's breach of duty as identified by him was the operative cause of the respondent being unable to comply with its obligation under the agreement to Klaus as contained in the terms of settlement to have the tiles available at 9.00 a.m. on 21 May and thereby to be in breach of the agreement contained in the settlement with the consequences that flowed therefrom, namely, the respondent was obliged to re-pay the $18,000 paid by Klaus to it and held by the appellant, that its claim in the County Court proceedings was dismissed and judgment was entered against it on the counter-claim.

260. The next question to be addressed is whether there was error in law in the Magistrate finding that negligence on the part of the appellant was a cause of the respondent suffering economic loss and damage. It was following the appellant's breach of the duty owed by it to the respondent that the respondent engaged solicitors other than the appellant to handle the matter of the County Court proceedings on its behalf. The fees of those solicitor were $2,721.20 as identified in the evidence of Ms Penberthy which were paid by the respondent. To that extent alone, in my view, the evidence established that the respondent suffered economic loss and damage as a result of the negligence of the appellant. Accordingly, the Magistrate did not err in law in finding that the negligence of the appellant had caused loss and damage to the respondent. That finding of fact was a finding open to him on the evidence. That was the case regardless of whether on the evidence it was established by the respondent that it had suffered further economic loss and damage consequent upon it being obliged to repay the sum of $18,000 and agreeing to pay $6,000 to Klaus on the counter-claim of the County Court proceedings while retaining the subject tiles. The question of law raised on this appeal and numbered (e), must be answered no.

263. The next question of law raised on this appeal is "whether the Magistrate erred in law in holding that mitigation of loss was not a relevant matter in these proceedings".

266. There was a conflict between reasons for decision as set out in Exhibit NAA4 to the affidavit of Andrews and that set out in JLP8 to the affidavit of Ms Penberthy sworn 30 November 1998 as to what the Magistrate said concerning the question of mitigation. Some parts of the two versions are similar. Whether the Magistrate at the outset said, "Is there a mitigation of loss issue here?" or said, "I don't know that mitigation of loss is an issue here" to my view does not really seem to the point. However, when looking at both versions it appears that what the Magistrate said relevant to this issue, in concluding that mitigation was not an issue in the case, was that in substance that if on the settlement of the County Court proceedings the respondent achieved a profit, then by it being deprived of such advantage in consequence of the appellant's negligence it may have been entitled to damages for the loss of profit, but there wasn't any evidence that the respondent received a profit at settlement, therefore the question of mitigation did not arise. In other words, as I understand that which the Magistrate was saying was that the respondent had not established that it suffered a loss of profit consequent upon it being obliged to re-pay to Klaus $18,000 and pay it a further sum of $6,000 on resettlement of the County Court proceedings but while at the same time retaining the stock of tiles. Sadler had said when asked did the tiles have a dollar value to him, that they had an invoiced amount and said that they had a market value. When asked did he have a buyer for the tiles he said no and again when asked could he sell the tiles he replied, "I'll have to turn my mind to that". Consequent upon the respondent being in breach of the terms of settlement, while it was required to refund $18,000 and pay a further $6,000 to Klaus on re-settlement of the County Court proceedings the respondent retained the tiles. Notwithstanding that they were tiles of the nature described by Sadler and identified in the invoices, Sadler conceded in his evidence-in-chief that they had a market value. It was for the respondent not only to prove that it suffered economic loss and damage consequent upon the negligence of the appellant but also to prove the nature and extent of such economic loss and damage and the amount of the same. As I understand that which the Magistrate said when dealing with the question of mitigation of damages was that on the evidence it had not been established by the respondent that it suffered economic loss consequent on repaying the sum of $18,000 to Klaus and paying a sum of $6,000 to it while retaining the tiles which had a market value. It was for the respondent to establish by evidence what the market value of the tiles was and then by having regard to that fact establish what its loss was in consequence of repaying to Klaus $18,000 and on re-settlement of the County Court action the further sum of $6,000. On the basis that the Magistrate concluded that as a head of damages the respondent had not proved that it suffered economic loss while repaying to Klaus $18,000 and paying to it a further sum of $6,000 but otherwise retaining the tiles, I am of the view that the Magistrate was correct in concluding that the question of mitigation of damages did not arise. This was not a case, in my view, where the respondent had established that while retaining the tiles but being obliged to repay to Klaus $18,000 and agreeing to pay it a sum of $6,000 it had suffered damage and where in such circumstances it was contended by the appellant that the respondent had failed to mitigate its damage, for example, by selling the tiles. In such circumstances the burden of proof would have been on the appellant to establish that the respondent had failed to mitigate its loss - Watts v. Rake [1960] HCA 58; (1960) 108 CLR 158 Dixon, CJ at p.159; Metal Fabrications (Vic) Pty Ltd v. Kelcey [1986] VicRp 52; [1986] VR 507. It was the Magistrate's conclusion that on the evidence the respondent had not established on the evidence that while retaining the tiles it had suffered economic loss and damage. In my view that conclusion was open to the Magistrate on the evidence before him. Consequently no error of law arises in the decision of the Magistrate in that he put mitigation to one side.

269. The next two questions of law raised on this appeal as identified in the order of the Master were -

- whether the Magistrate erred in law in finding general damages for loss of opportunity in favour of the respondent arising from the negligence and/or breach of contract found by him;

- whether the Magistrate erred in law in assessing the damages found by him in the sum of $2,031.79 (being the exact sum owing by the respondent to the appellant by virtue of his findings on the appellant's claim).

274. It is convenient, before considering these two matters to consider the further question of law identified by the Magistrate as being raised on the appeal, namely -

- whether the Magistrate erred in finding that as a consequence of his finding of negligence and breach of contract, the appellant was disentitled to any part of the fees in respect of the counter-claim proceedings settled by virtue of the 'terms of settlement'.

278. As I understand that last matter, it raises the question whether as a matter of law the Magistrate erred in determining that in consequence of the negligence of the appellant it was deprived from recovering against the respondent its costs as claimed in the sum of $4,745. As to this matter the fees and disbursements claimed by the appellant from the respondent with respect to that amount was in respect to the County Court proceedings, being the subject of file No. 97.0234. As appears from the account tendered before the Magistrates' Court the amount claimed was for the sum of $7,255 less $2,510 paid on account. These fees and disbursements related to work apparently done by the appellant up to and including the mediation and included for example counsel's fee on appearance at the mediation and a payment of a fee to the mediator. In my view, on the evidence before the Magistrate it was open to be concluded that the work done by the appellant in instituting the proceedings in the County Court against Klaus was rendered valueless in consequence of the negligence of the appellant. Similarly, the value of the work performed by Counsel and the cost incurred in engaging the mediation had been rendered valueless. Before the proceedings were issued by the appellant on behalf of the respondent the latter held tiles as manufactured to the order of Klaus but in respect of which it had only been partially paid. The respondent in those proceedings was seeking to recover the balance of the monies due from Klaus. By the terms of settlement entered into on 16 May the respondent was to be paid $18,000, it was to retain the deposit monies paid and in addition the tiles were to be made available for Klaus to collect. In consequence of the negligence of the appellant the representative lost the benefit of the settlement of that action on the terms set out in the terms of settlement, it was obliged to re-pay $18,000 to Klaus paid under the terms of settlement and in further settlement of the proceedings it was required to pay a further sum of $6,000. The negligence of the appellant rendered the work that it had done for the respondent in respect of the County Court matter useless. That negligence also rendered the work performed by Counsel and the work of the mediator, the fees in respect of which the appellant sought to recover against the respondent, to be useless also.

281. In Heywood v. Wellers [1975] EWCA Civ 11; [1976] QB 446 at 458 it was held by Denning, MR, that where a solicitor by his fault rendered work done for a client to be useless, the solicitor cannot recover remuneration for the same. See also Bracey v. Carter (1840) 12 Ad. and El 373; d. El 373; Symes v. Wipper (1840) Ad. and El 377; Saffery v. Wray (1846) 7 LT 183. In my view the negligence of the appellant in that it rendered the County Court proceedings of no benefit to the respondent and useless to it, there was no error in law on the part of the Magistrate determining that the appellant was unable to recover against the respondent the fees in respect of that action including disbursements incurred.

284. In his reasons for decision the Magistrate concluded that in consequence of the negligence of the appellant the respondent had lost the opportunity to be paid by Klaus $18,000 and also to have it take the tiles. At one point the Magistrate in his reasons for decision identified that as the respondent having "lost the advantage of the settlement". In his reasons for judgment the magistrate stated, when dealing with the assessment of damages for the loss of opportunity - "It is difficult to quantify in an objective way but the justice of the situation requires resort to an obvious figure which is $2,031.59 which he already owes. It would be highly artificial and open to criticism if it was somewhere above or below that figure. He should be compensated but not lavishly. The figure is appropriate and off-sets entirely the solicitor's claim". By reference to "he" clearly the Magistrate was referring to the respondent. The reference to $2,031.59 being the amount that the respondent "already owes" appears to be a reference to the fact that it was accepted that the appellant was entitled to recover against the respondent fees for work done otherwise than in respect of the County Court action. Against that the Magistrate held that the respondent on the counter-claim was entitled to recover by way of damages in consequence of the appellant's negligence, $2,721.20. Setting of the latter sum against the former, the balance in favour of the appellant was $2,031.79, not $2,031.59 as appears to have been calculated by the Magistrate.

287. In Price Higgins v. Drysdale [1996] VicRp 22; [1996] 1 VR 346 at 354 Winneke, P (with whose judgment Ormiston and Charles, JJA agreed) said -

"Where it is alleged that, as a result of negligent conduct, a plaintiff has lost a valuable opportunity, the courts have required the plaintiff to prove, in making good his or her claim, that the negligence has caused the loss of opportunity of 'some' value as distinct from a 'negligible prospect' ...

While the plaintiff is required to prove to the appropriate standard of proof the existence of a valuable loss of opportunity and the fact that it was caused by the defendant's negligence, the plaintiff is not required to prove, on the balance of probabilities, the value or extent of the loss because of the difficulties associated with proof of past hypothetical fact situations; in those circumstances the value or extent of the loss is to be ascertained by reference of the degrees of possibilities or probabilities."

291. In this case in consequence of the appellant's negligence the respondent failed to comply with its obligation as imposed upon it under the terms of settlement. It lost the clear opportunity of having the County Court action resolved by agreement in a manner which would have Klaus pay to it $18,000 while it retained the benefit of the deposits paid previously and further having Klaus remove from it the tiles made pursuant to order. In consequence of that the respondent was obliged to re-pay the $18,000 paid to it by Klaus and eventually on further settlement of the County Court action was required to pay a further $6,000 to Klaus on the counter-claim. The question to be addressed is whether on the evidence it was as a matter of law open to the magistrate to conclude that this loss of opportunity was a loss of "some value" to the respondent.

294. The fact that the Magistrate assessed the value of that loss of opportunity to be precisely what he calculated to be the same sum as that which was on his findings owed by the respondent to the appellant gives rise to the critical comment that the assessment was artificial. On the evidence before the Magistrate which as held by him demonstrated that there was value to the respondent in the tiles held by it and that he was not satisfied that it had been established that the respondent suffered loss other than the additional legal expenses incurred, I am of the view that although it had been established that the respondent had suffered a loss of opportunity of the nature described, there was no evidence on which the Magistrate could conclude that that loss was of "some value" to the respondent. In my view the Magistrate was in error, as a matter of law, in concluding that the respondent had suffered a loss of some value and further that that loss should be assessed at $2,031.59 or in any other amount.

297. The final question of law raised on this appeal as identified by the Master was - "Whether the Magistrate erred in law in concluding that contributory negligence was not open as a defence to the counter-claim. In his reasons for judgment the Magistrate said that contributory negligence did not arise. He further held that, "It was not contributory negligence to go to lunch or to use the telephone". The Magistrate further referred to in Read v. Nerey Nominees Pty Ltd [1979] VicRp 6; (1979) VR 47. In that case it was held that contributory negligence was not available as a defence to the contractual claim. Be that as it may it is apparent from the reasons of the Magistrate that he found no contributory negligence on the part of the respondent.

300. It is first to be noted that in the proceedings before the Magistrate in its defence to the counter-claim the appellants did not plead that there was contributory negligence on behalf of the respondent. The issue of contributory negligence was not raised on the pleadings before the Magistrates' Court. However, it is clear that the magistrate had regard to the issue of contributory negligence, finding there was no contributory negligence.

303. On behalf of the appellant in these proceedings it was submitted that the Magistrate erred in rejecting contributory negligence in the circumstances where both Sadler and Simper left the mediation early and where Sadler failed to return to the mediation or offer to return to sign off the terms of settlement.

306. Those facts were known to Arnheim when he spoke to Counsel, who had been retained, during the afternoon of 16 May and when the former received a copy of the handwritten terms of settlement. The negligence of the appellant was failing that day to communicate with Sadler as to the final terms of settlement and to draw to his attention his primary obligation under the same, namely, to have the tiles available for collection by Klaus at 9.00 a.m. on 21 May. On the evidence, it was open to the Magistrate to conclude that there was no contributory negligence on the part of the respondent which ought to have reduced the damages that it was otherwise entitled to recover against the appellant. There was no error of law on the part of the Magistrate in concluding as he did that there was no contributory negligence on the part of the respondent as claimed.

309. For these reasons the appellant's appeal succeeds on the one issue, that is, that there was error in law in determining that the respondent had suffered damages in the sum of $2,031.59 in consequence of the negligence of the appellant resulting in the respondent losing the opportunity to successfully conclude by settlement the County Court proceedings.

312. In the result the appellant was entitled to receive against the respondent $4,752.99 and in turn the respondent on its counter-claim was able to recover against the appellant $2,721.20.

315. From my research it does not appear that the Magistrates' Court Civil Procedure Rules contains a rule relating to the set-off of a money claim or claim for damages equivalent to or in similar terms to Rule 13.14 of the Rules of this court. However, by application of Rule 1.14(a) of the Magistrates' Court Civil Procedure Rules, at the discretion of a Magistrate, Rule 13.14 of this court may be applied. In the circumstances of this case that would permit it being ordered that the amount that the respondent is entitled to recover by damages on its counter-claim ($2,721.20) be set-off against the amount that the appellant was entitled to recover on its money claim, namely, $4,752.99. It is appropriate that such a step be taken on the determination of this appeal and that the amount which the respondent is entitled to recover on its counter-claim in damages be set-off against that amount which the appellant is able to recover on its money claim. In the result and for these reasons

2. That the orders of the Magistrates' Court made in the proceedings on 19 August 1998 be set aside and in lieu thereof it be ordered that the respondent pay to the appellant $2,031.79.

321. I shall hear Counsel on the question of costs of the proceedings before the Magistrates' Court and in respect of this appeal.