Respondent (Defendant) : Mr C L Zelestis QC & Mr N K Stewart

Autodesk Inc v Dyason (No 2) [1993] HCA 6; (1993) 176 CLR 300

David Syme & Co v Swinburne [1909] HCA 92; (1909) 10 CLR 43

Mallesons Stephen Jaques v KPMG Peat Marwick (1991) 4 WAR 357

Norman v Norman (1992) 6 WAR 372

Smith v NSW Bar Association [1992] HCA 36; (1992) 176 CLR 256

State Rail Authority of NSW v Codelfa Construction Pty Ltd [1982] HCA 51; (1982) 150 CLR 29

1 JUDGMENT OF THE COURT: On 30 October 2000 the Full Court delivered reasons for allowing, in part, an appeal from the decision of a Master who had ordered that the appellants' statement of claim against both respondents be struck out.

2 In substance the Full Court dismissed the appeal against the second respondent, but permitted the appellants to file a statement of claim limited to allegations of professional negligence against the first respondent, Mr M J McCusker QC. It will be convenient to refer to Mr McCusker as "the respondent". We shall continue to refer to the appellants as "the Smiths" when it is convenient to do so.

3 The respondent has now moved the Court to set aside certain of the orders affecting him on the ground that he was not given an opportunity to be heard in relation to various relevant matters and that the reasons delivered by the Court contain errors.

4 In the course of argument, the Court accepted that it has jurisdiction to recall orders which, as in this case, have not been perfected or acted upon: and that it may do so if persuaded, after further consideration, that its original decision was wrong. The jurisdiction must be exercised "with great caution": Wentworth v Woollahra Municipal Council [1982] HCA 41; (1982) 149 CLR 672, 684, per Mason ACJ and Wilson and Brennan JJ. See also, Seaman, P Civil Procedure Butterworths, Perth, 1990 par [34.8.5] and par [60.0.9].

5 It is not necessary to set out again the background or history of the matter. This is to be found in the previous reasons, Smith & Anor v McCusker [2000] WASCA 320 par 6-40. The allegations of negligence are summarised in par 160. They are that the respondent was negligent in the following respects:

(1) he failed to read or to take into account that part of his brief which disclosed that the Smiths did not rely on the 1977 cash flow budget, but on the Bank to provide proper advice as to the implementation of the Smiths' proposal for the expansion of their farming activities;

(2) he therefore placed undue emphasis in his opinion on the difficulties which the Smiths would face in seeking to prove that they had relied on the budget;

(3) he failed to read or to take into account that part of his brief in which Mrs Smith explained that she and Mr Smith had provided only approximate figures to Mr Danks for inclusion in the cash flow budget, on the basis that they would not be held to those figures;

(4) he therefore failed to point out that the allegation in the Bank's defence, that the figures had been provided by the Smiths, while true up to a point, was largely irrelevant to their case;

(5) he failed to recognise an inconsistency in the Smiths' statement of claim against the Bank, which would have been cured by omitting references to reliance on the budget and pleading reliance on the Bank to provide a proper budget;

(6) he failed to familiarise himself with that part of his brief in which it was explained how the actual costs for 1977 had exceeded the budget;

(7) he failed to familiarise himself with that part of his brief in which Mrs Smith described how the application to the Rural Adjustment Authority came to be made, thus explaining why, as he put it in his opinion (par 18) 'there is not a hint ... of any suggestion that the R & I Bank was responsible for [the Smiths'] difficulties'.

6 The Court then went on to consider the question whether "the allegedly negligent opinion ... caused the appellants to suffer loss by causing the Legal Aid Commission to terminate the grant of legal aid in reliance on the opinion so that the appellants lost the opportunity of having a trial of their action against the R & I Bank."

7 In answering that question the Court referred to the following factual allegation in the statement of claim, the truth of which must be assumed for present purposes:

"... in reliance upon the errors in the opinion and in view of the projected costs and the diminishing availability of legal aid money the Legal Aid Commission terminated [the Smiths'] grant of legal aid."

8 The Court then rejected the respondent's submission that the plea did not raise an arguable case on causation. The Court held:

"On the facts pleaded in the statement of claim, it is arguable that the opinion was prepared negligently, to a certain extent. It was unfavourable to the Smiths. It may be assumed that but for the negligence it would have been more favourable."

The respondent submits that it is "a clear error" for the Court to have assumed that, but for the negligence, the opinion would have been more favourable. Rather, it is submitted, it was for the Smiths to plead material facts showing an arguable case that a favourable opinion could and should have been prepared. That, it is said, necessarily required material facts which linked the breach of an alleged duty on the Bank to prepare a proper budget, to the Smiths' loss. It was contended on behalf of the respondent that he had been denied the right to be heard on the assumption made by the Court.

9 We do not think it can be said that the respondent was not given an opportunity to be heard in relation to this matter. It has been the Smiths' contention from the outset that the respondent's opinion should have been more favourable. This was an issue in the previous hearing.

10 In any event, we do not accept the respondent's submission on its merits. As stated in par 167 of the earlier reasons, the Smiths' complaint, in substance, is that they lost the opportunity of pursuing a case against the R & I Bank. That opportunity was denied them because the respondent wrote an unfavourable opinion which, they allege, caused the Legal Aid Commission to terminate their funding.

11 The Smiths contend that if the respondent had discharged his duty to them, he would not have focussed on the insuperable hurdles in the case as pleaded, but would have identified and explored the true case. This no doubt involved an expectation by the Smiths that the Bank would provide a proper budget. However, on our view of the Smiths' case, that was not the full extent of the Bank's obligation. On their case, the Smiths were relying on the bank for advice and guidance generally: see par 137 of the previous reasons. That being so, the Smiths' pleading did not necessarily require an allegation that their loss was caused by the Bank's failure to provide a proper budget.

12 It is not for the Court to formulate a pleading for the Smiths. However, it may be acknowledged that a failure by the Bank to give general advice and guidance, when relied on to do so, has the potential to found a claim for loss.

13 That is not to say, of course, that if the respondent had considered such a case, he would necessarily have been enthusiastic about it: there may have been other significant causes of loss. The point is, however, that as a result of his alleged negligence, the respondent did not consider this case. Had he done so, then, as stated in the earlier reasons, it is arguable, that the opinion:

" ... would not have given the impression that the question of reliance posed an almost insuperable hurdle. It would not have cast doubt on the Smiths' credibility in relation to their initial conversations with Mr Danks and in relation to their apparent failure to tell the RAA about the cause of their problems. It would not have given the impression that Mrs Smith had failed to provide information on which the calculation of damages had been based."

Thus, it may be assumed for present purposes that the opinion would have been more favourable. The Smiths are clearly entitled to plead a case on that basis.

14 It is then submitted by the respondent that the reasons contain an internal inconsistency in relation to reliance. The respondent points to par 124-129 of the reasons where it is said to have been prima facie unnecessary for the respondent to consider whether the Smiths placed reliance on the budget provided by the Bank. This is said to be inconsistent with the respondent's assertion in his opinion that the Smiths had to prove reliance on the budget.

15 There is no inconsistency. The statement of claim contains the allegation, in par 9.3.15.3, that the respondent discussed the Smiths' reliance on the budget, but did not address the issues raised in the proof of evidence from which their true case emerged.

16 Although the true case did not involve any considerations of reliance on the budget, the respondent's opinion was that such a proof was essential. It was essential for the case as pleaded: but that was not the true case. Hence, it was not a matter which the respondent needed to consider.

17 It is then submitted that the reasons contain a factual error in par 138 where it is said that the Smiths borrowed money from the Bank and then realised that the budget which had been provided by the Bank was inappropriate. It is said that the relevant proof of evidence conveys the clear impression that no money was borrowed until after the Smiths had received the budget and realised it was unworkable.

18 Whether or not that is the true construction to be placed on the evidence is a matter for trial. The question in this appeal is whether the pleading, properly understood, discloses an arguable case. The case which the Smiths wish to advance is that they relied on the Bank for such guidance and assistance as might be necessary in the circumstances as they existed from time to time. On one view of that cast it may not matter a great deal whether the Smiths borrowed money before or after receiving the budget.

19 In relation to the alleged delay of two years and seven months in delivering the opinion, it is submitted that no material facts were pleaded or identified which arguably established how the time taken to provide the opinion caused the Smiths to suffer loss. That is not so. As pointed out in the reasons at par 170:

"The statement of claim alleges facts which, if proved, would arguably establish that the Smiths did suffer loss. In summary, it is said that the Town & Country would probably not have exercised its power of sale as a mortgagee of the Smiths' property if it could have been satisfied that the action against the R & I Bank was proceeding and might result in the discharge of the Smiths' debt."

It must be assumed, for present purposes, that those facts are true.

20 The respondent also submits that the delay in delivering his opinion was not in fact two years and seven months because during that period he repeatedly sought instructions about events which had taken place some 11 years previously. Accepting that to be true, for present purposes, it is irrelevant to the question whether the statement of claim discloses a cause of action: it is a matter of defence.

21 For these reasons, we are not persuaded that any grounds exist on which the Court's jurisdiction to recall its orders should be exercised. The application should therefore be dismissed.

22 However, there is one matter to which we should draw attention. In Smith & Anor v McCusker at par 186 it is said that the answer to questions 6(1), (2) and (3) is, in each case, 'yes'. This matter was fully canvassed at the hearing on 31 January 2001. An affirmative answer to those questions is inconsistent with the reasoning in par 172 to par 185 and is clearly wrong. The error was not the fault of the author of the judgment. In each case, the answer should be 'no'. The order pronounced on 30 October 2000 allowing the appeal 'to the extent indicated by the answers to the questions formulated for the purposes of the appeal' should be understood accordingly.

23 The affirmative answer to question 5, contained in par 174, requires clarification. It is strictly correct (given the confined nature of the issue raised by the question) but it needs to be read in the context of question 6. Accordingly, if the Smiths had been permitted to bring an action of that nature it would not have failed solely by reason of a Limitation Act defence. Nonetheless, for the reasons set out in par 175 to par 184 they cannot now raise such a claim.