Thompson & Anor t/as Staunton and Thompson Lawyers v Schacht - [2015] NSWCA 70 - NSWCA 2015 case summary — Zoe

Thompson & Anor t/as Staunton and Thompson Lawyers v Schacht - [2015] NSWCA 70 - NSWCA 2015 case summary — Zoe

Judgment

THE COURT: These proceedings involve a claim against solicitors (the appellants) by a former client, Mr Daniel Schacht (the respondent), for whom the solicitors had failed to provide a binding financial agreement to be concluded by him and his former wife, Ms Claudia Dieziger. Before this Court, the issues were limited to the calculation of damages, negligence being conceded.
The Court handed down its principal judgment on 30 July 2014: Thompson & Anor t/as Staunton and Thompson Lawyers v Schacht [2014] NSWCA 247. It reduced substantially the assessment undertaken by the trial judge. One element of the reduction concerned an allowance for spousal maintenance, contained within the original award of damages. This Court concluded that the respondent was not worse off with respect to payments of spousal maintenance, following a property settlement, than he would have been had there been a binding financial agreement in place.
Final orders were not made in the principal judgment. Rather, the parties were given an opportunity to reach agreement as to the necessary calculations, based on the findings of the Court. Agreement was reached, but on 5 September 2014, before any orders were entered, the appellants filed a motion seeking to reopen the judgment with respect to the allowance for spousal maintenance. Their short point was that the respondent did not merely suffer no loss in this respect, but obtained a quite significant benefit. The appellants said that the benefit which they had sought to quantify should have been applied by way of reduction of the damages payable to the respondent.
The parties both addressed in some little detail the principles to be applied by this Court in considering an application to reopen its judgment. However, those principles have been articulated in cases where orders have been entered and where orders have not been entered, both in intermediate courts of appeal and in the High Court. Except at the highest level of generality, principles will operate differently depending upon the court and the circumstances. For present purposes it is sufficient to say that, if there were a reasonably arguable issue raised expressly and at a timely stage by one of the parties, and in circumstances where orders have not been entered, this Court should be prepared to reopen its judgment. As has been said in the context of administrative decision-making, "[t]o fail to respond to a substantial, clearly articulated argument relying upon established facts was at least to fail to accord … natural justice." [1] There is no reason to suppose that the same principle would not apply to a court. Accordingly, absent some element of prejudice (none being relied upon in the present case) the Court should reopen its judgment if satisfied that the issue was clearly articulated for the Court's consideration.
The following matters demonstrate that there was indeed a live issue for the Court's consideration. The appellants (the defendants at trial) prepared written submissions for the trial judge which included a calculation as to the spousal maintenance which would have been payable under a valid financial agreement. The calculation was expressed as follows: "52. Thus there is then spousal maintenance: a. from April 2009 to April 2012 (3 years) at $500 per week, being $78,000; b. from April 2012 to December 2017 (5.67 years, multiplier 250) at $500 per week, being $125,000; c. from December 2017 to December 2026 (9 years, multiplier 380 discounted by 5.67 years for accelerated receipt) at $250 per week, being $72,000. 53. Those sums total $275,000. 54. The difference between the binding financial agreement executed in 2008 and the finding financial agreement that would have been executed in 2002 is therefore $982,200 - ($488,000 + $275,000) = $219,200."
The trial judge identified the point in the following passage: [2] "It was submitted for the Defendants that, if the Plaintiff succeeded in establishing an entitlement to damages, the sum to be allowed under this heading should be $219,200.00. A process of calculations was set out in the final written submissions for the Defendants, culminating in that figure which was said to be the difference between the binding Financial Agreement executed in 2008 and the Financial Agreement that would have been executed in 2002."
In this aspect of the case, the plaintiff submitted at trial that the amount he was required to pay to his former wife under the property settlement was almost $500,000 greater than that which he would have been required to pay under the hypothetical valid financial agreement. That included an amount of approximately $62,000 for spousal maintenance. In accepting the plaintiff's figure, the trial judge implicitly rejected the defendants' calculations. He did not, therefore, need to address the possibility that the plaintiff might in fact have been better off under the settlement than he would have been under the hypothetical binding agreement.
In this Court, the defendants (now the appellants) repeated the submissions they had made before the primary judge with respect to spousal maintenance. After setting out the calculations, the submission noted that "the settlement agreement was more advantageous to the extent of $198,800, so that the net loss taking into account the Balgowlah property and spousal maintenance was $219,200." The submission then proceeded to make various complaints about the way the matter had been dealt with by the trial judge.
The written submissions continued, noting that even had there been a financial agreement in place, the Family Court might have awarded spousal maintenance to the wife if she were otherwise unable to support herself. The submissions then noted how the plaintiff had articulated his claim for an allowance on account of spousal maintenance and concluded that, even on his figures, there was a credit to the appellants rather than a loss to the respondent. The credit, however, was some $1,800: no further reference was made to the credit of $198,800 previously identified.
This Court, in the principal judgment, broadly accepted the reasoning of the appellants, but simply removed from the award of damages the amount for spousal maintenance: no credit was given for the benefit to the respondent.
The respondent opposed the motion to reopen. Two points should be identified now as they do not require an analysis of the substance of the application. First, he submitted that the appellant's application was not made promptly. The Court's judgment was delivered on 30 July 2014, while the application was not made until 5 September 2014. However, in the absence of any evidence or submission pointing to prejudice, there is nothing in this slight delay. The orders made by the Court on 30 July 2014 contemplated a 21 day period for the parties to confer with a view to reaching agreement, failing which a further 14 days was allowed to file and serve documents identifying the orders sought. The application was made substantially within the time period envisaged by the Court's orders.
Secondly he submitted that the evidence available was not sufficient to allow the Court to quantify the benefit and, accordingly, reopening would be futile. In response, the appellants contended that relevant findings had already been made and there was no call for this Court to revisit the evidence. On the assumption that this argument might be accepted (an assumption made good below), and subject to the respondent's remaining objections (also addressed below) it is appropriate that the Court reopen its judgment in order to allow the issue to be determined.
It is convenient to turn more precisely to the way in which the issue arose. The primary judge had awarded damages in the amount of $804,420 against the appellants for negligently preparing an unenforceable financial agreement (the "2002 agreement") between the respondent and Ms Dieziger. Husband and wife separated in April 2006, and entered into a settlement in 2008 (the "2008 deed"). In awarding $63,200 by way of spousal maintenance, the primary judge concluded that if the 2002 agreement had operated, spousal maintenance payments would have come to an end in April 2009, so that, as at November 2008 (when the 2008 deed was entered into) there would have been only six months of payments ($13,000) remaining instead of the $76,200 provided for in the 2008 deed. The primary judge therefore held that the difference ($63,200) should be included in the damages ordered.
On appeal, this Court set aside the component of damages representing the $63,200 payment of spousal maintenance. All members of the Court considered that the payments under a hypothetical valid financial agreement would have exceeded the $76,200 in fact required to be paid under the 2008 deed, so that the solicitor's negligence did not, in that respect, cause any loss. All members of the Court identified the limited evidence available on the basis of which to determine the terms of the hypothetical valid financial agreement. The reasons of Barrett JA, with which Leeming JA agreed, included the following: [3] "97 In these circumstances, I think that the court's duty to "do its best" (Fink v Fink [1946] HCA 54; 74 CLR 127, Paino v Paino [2008] NSWCA 276; 40 Fam LR 96) requires it to work on the basis that spousal maintenance at the rate of $500 per week would have continued until the younger child turned 12, that being an age specifically contemplated by the respondent (at [83] above) and an age at which it might reasonably be expected that a child would be entering secondary school and could travel to and from school unaccompanied and wait at home with an older sibling for a sole parent to return from work. 98 On that basis, spousal maintenance under a repaired version of the 2002 Agreement should be calculated at the rate of $500 per week for an initial three year period from separation in mid-2006 and thereafter until the younger child's twelfth birthday in December 2017 - that is, a total period of 11 years and seven months, or 602 weeks. Simple adoption of a weekly rate of $500 for that period produces a total of $301,000. Alternatively, if the sums in items (a) and (b) at [90] above are considered appropriate for the period April 2009 to December 2017 and there is an added component for the period from separation in mid-2006 to the start of the period in (a) at [90], the total is $277,000, being $78,000 in (a) at [90] plus $125,000 in (b) at [90] plus $74,000 for the added component. On each such basis - and also on an alternative basis that ignores any added component for the period mid-2006 to (but excluding) April 2009 - the financial impact under the spousal maintenance provision of a repaired version of the 2002 Agreement must be taken to be more onerous on the respondent than the spousal maintenance regime embodied in the 2008 Agreement. (For completeness, it may be noted that the appellants put at trial that there was at least a chance that, even if a repaired version of clause 21 had been in force, a court would have exercised jurisdiction under s 90F of the Family Law Act to award spousal maintenance in addition to that for which the hypothetical agreement provided; but, for the reasons already given, it is not necessary to say anything more about that submission.)"
Basten JA did not quantify what the greater obligation under the hypothetical valid financial agreement would have been. [4]
The appellants submitted that in light of what had been said by Barrett JA at [98], the firm should not merely have obtained the benefit of not having damages of $63,200 for additional payments of spousal maintenance ordered against them, but should have an offsetting benefit. As refined at the hearing on their motion, the appellants acknowledged that they had primarily advanced a case at trial based upon the calculations leading to the $277,000 emphasised in [98] above, rather than the $301,000 amount. The former amount would have been paid by the husband for the period after April 2009. In order to determine the benefit (in terms of lesser obligation to pay spousal maintenance) flowing by reason of the solicitor's negligence, it was necessary to subtract from the $277,000 two components: $76,200 and $60,000. The former was the amount actually paid by way of spousal maintenance pursuant to the 2008 deed. The latter reflected a proportion of the payments of $3,000 per month to Ms Dieziger from mid-2006 until December 2008, a period of thirty months. Those payments of $3,000 per month did not distinguish between spousal maintenance and the maintenance of the children of the marriage. However, Barrett JA said at [100] that it seemed reasonable to assume that a greater amount would be attributable to an adult than a child, given that the adult, as parent, would attend to numerous household expenses that would be of benefit to all as a family, and that it therefore seemed "appropriate to work on the basis that, say, about $2,000 per month - or $500 per week - should be regarded as consisting of spousal maintenance."
Accordingly, the appellants sought a further reduction in the damages awarded against them of $140,800 (being $277,000 - $76,200 - $60,000).
It may fairly be said that this way of putting the appellants' case (which involved a number of contested calculations on a range of issues) was not at the forefront of their submissions when the appeal was heard. However, it was squarely advanced in the appellants' written submissions [5] and at no time was it resiled from.
Against the application to reopen, the respondent made a number of points in writing, but only developed two orally. In writing, the respondent submitted that the Court had already considered the matter sought to be the subject of the re-opening, and should not do so again. That, with respect, is no answer to the submission that the logical consequence of the Court's findings yielded a different outcome, being an outcome which did not address one aspect of the appellants' submissions.
The respondent also submitted in writing that the application involved a general re-opening of the matters raised on appeal. Subject to the principal oral submission, which is addressed below, it is plain from what has already been said about the nature of the application that that submission is not well founded.
The respondent's principal objection was that there was no inconsistency between the reasoning in [98], reproduced above, and the failure to give the appellant a credit for the relatively advantageous position in respect of spousal maintenance which flowed from the solicitor's negligence. It was said that it was one thing for the Court to make findings so as to reject one head of damages claimed by the plaintiff husband and awarded by the primary judge; it was another to award a credit in favour of the appellants based on the same findings. He pointed to the shifting onus of proof: the plaintiff husband bore the onus of showing that he was $63,200 worse off by reason of the solicitor's negligence, while the appellants bore the onus of showing that in fact the solicitor's negligence had resulted in a benefit to the husband with respect to spousal maintenance. He pointed at some length to the uncertainties in the evidence as to the terms of the hypothetical valid financial agreement, and the steps which could have been taken, but which were not taken, by the appellants, to adduce evidence as to its terms.
The respondent's principal submission should be rejected. All members of the Court were conscious of the difficulties inherent in the task of determining the terms of a hypothetical valid financial agreement. But those terms were in issue at all stages during the litigation. By way of defence the appellants denied loss and alleged that "the likely entitlement of Ms Dieziger pursuant to the totality of the provisions of the [2002 agreement] if given effect at or about the date of her separation from the Plaintiff was either more than or at least equal to her entitlement pursuant to the [2008 deed]". The parties chose at trial to advance evidence bearing upon that issue. At [98] in its principal judgment, this Court, despite acknowledging the difficulties, made findings as to its terms. Those findings are consistent with the appellants' case on appeal. What is more, those findings result in the contradiction, highlighted by the appellants, between rejecting the head of damages ordered by the primary judge, and not acceding to the appellants' submissions for a credit for the significantly lesser amount of spousal maintenance for which Mr Schacht became liable following his solicitor's negligence. There is no sound basis for contending that the findings at [98] relate only to the rejection of a head of damages awarded in favour of the plaintiff. Rightly, the respondent points to a difference in onus, but the findings having been made, their consequences flow through to the balance of the judgment.
Finally, the respondent submitted that a significant discount for vicissitudes, in the order of 50%, should be made in respect of spousal maintenance. That submission must be rejected. The calculations at [98] reflected an estimate of the difference between actual and hypothetical spousal maintenance. Just as spousal maintenance pursuant to a hypothetical valid financial agreement could have been more, so too it could have been less. There is no warrant for a discount for vicissitudes.
For those reasons, the appellants' application should be granted. A credit in the amount of $140,800 should be allowed to the damages otherwise calculated. The judgment sum should be reduced from $523,288 to $382,488. It will be necessary to make consequential orders dealing with the calculation of interest and the repayment of part of the judgment ordered at first instance. The respondent should pay the costs of the appeal including the costs of the motion to reopen. Noting that the orders made on 30 July 2014 allowed the appeal and set aside order 1 made in the Common Law Division, the Court's orders are:
Give judgment in the amount of $382,488 in favour of Mr Schacht, in lieu of the judgment entered on 21 May 2013.
The respondent to pay the appellants' costs in this Court on the ordinary basis, including costs of the notice of motion filed 5 September 2014.
The parties to provide agreed consequential orders within 14 days of today, with a view to their being made in chambers. Failing agreement, the parties are to provide within 21 days of today a short document identifying the further orders sought and the reasons for those orders, with any remaining issues to be determined by a Judge of Appeal.