Plaintiffs Claim Negligence Against Solicitors
Manny v David Lardner Lawyers (No 2) [2021] ACTSC 289 (5 November 2021)
The plaintiffs claimed that, in 2010 and 2011 when acting as their solicitors, Mr Lardner and Mr Power caused them economic loss. They allege that the solicitor acted without instructions and failed to provide proper advice to the plaintiffs. The Court, in determining whether the claims of the plaintiff should be upheld, relied upon Limitation Act 1985 and Bankruptcy Act 1966.
Facts:
Mr Manny and four companies (the 2nd to 5th plaintiffs) claimed that, in 2010 and 2011 when acting as their solicitors, Mr Lardner and Mr Power caused them economic loss. Mr Manny was the sole director, secretary, and shareholder of each of the plaintiff companies, and he ran the companies. The second, third and fourth plaintiffs were known collectively as the Jeff Manny Group (JMG). In 2009/2010, Mr Manny and the JMG had a large property portfolio that was heavily geared with the ANZ Bank (ANZ). Loan facilities in the total sum of $14,008,000 were due to expire on 17 October 2010.
In 2007, Ms Manny brought proceedings against Mr Manny in the Family Court of Australia (FCA) and JMG. On 5 February 2010, Faulks DCJ made an order restraining Mr Manny from selling or further encumbering the real estate assets of the JMG. On 13 July 2010, Faulks DCJ made final orders requiring Mr Manny to pay Ms Manny the sum of $1.258M within 14 days. In default, under order 14 the JMG properties were to be sold in three groups. The first group was to be listed for sale immediately and sold within 75 days or then listed for auction, and the last group was to be listed for sale within 150 days of the final orders.
On 20 July 2010, Mr Manny and the JMG retained DLL. On 8 October 2010, Mr Lardner signed an order “by consent” allowing Mr Manny to sell two of the properties the subject of a restraining order made on 27 August 2010. Despite numerous notifications by ANZ that the loan facilities would not be extended and must be paid in full on 17 October 2010, the facilities were not repaid. On 22 December 2010, ANZ appointed rent receivers to the JMG properties. On 21 January 2011, ANZ appointed receivers for the sale of the JMG properties.
On 28 February 2011, administrators were appointed. On 18 April 2011, liquidators were appointed to the JMG entities. DLL ceased acting for Mr Manny and JMG on or about 24 March 2011. The plaintiffs asserted that the stay application and the restraining orders that were made on 27 August and 10 October 2010 (by consent) had been made or obtained without instructions and in the absence of proper advice to the plaintiffs. They claimed that the orders had led to the ANZ issuing default notices, the appointment of rent receivers, and the liquidation of the companies. They alleged that DLL had failed to provide proper advice in relation to the orders made on 27 August and 10 October 2010 and in relation to the plaintiffs’ relationship with ANZ, including as to the plaintiffs’ capacity to refinance the ANZ facilities.
Issues:
I. Whether or not the defendants are protected from suit by advocates’ immunity.
II. Whether or not the claims are barred by Limitation Act 1985 (ACT).
III. Whether or not the claims are barred by Bankruptcy Act 1966 (Cth).
IV. Whether or not the harm pleaded was caused by the defendants.
Applicable law:
Bankruptcy Act 1966 (Cth) s 58 - provides that where a debtor becomes a bankrupt:
(a) the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and
(b) after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.
Bankruptcy Act 1966 (Cth) s 82 - provides that all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.
Bankruptcy Act 1966 (Cth) s 153 - provides that where a bankrupt is discharged from a bankruptcy, the discharge operates to release him or her from all debts (including secured debts) provable in the bankruptcy, whether or not, in the case of a secured debt, the secured creditor has surrendered his or her security for the benefit of creditors generally.
Civil Law (Wrongs) Act 2002 (ACT) - applies to all claims for damages for harm resulting from negligence, whether the claim is brought in tort, in contract, under statute or otherwise.
Evidence Act 2011 (ACT) s 140 - provides that in a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.
Land Titles Act 1925 (ACT) s 93(2) - provides that any mortgage or encumbrance under this Act shall, have effect as a security but shall not operate as a transfer of the land thereby charged.
Limitation Act 1985 (ACT) s 11 - provides that an action on any cause of action is not maintainable if brought after the end of a limitation period of 6 years running from the date when the cause of action first accrues to the plaintiff or to a person through whom he or she claims.
Partnership Act 1963 (ACT) s 38 - provides that subject to any agreement between the partners, a partnership is dissolved in relation to all the partners if a partner dies, becomes bankrupt, or executes a personal insolvency agreement under the Bankruptcy Act 1966.
Attwells v Jackson Lalic Lawyers Pty Ltd [2016] HCA 16; 259 CLR 1 - Edelman J stated that since the immunity attaches by the "participation of the advocate as an officer of the court in the quelling of controversies by the exercise of judicial power", it followed that the immunity did not extend to advice that leads to a settlement between the parties.
Badenach v Calvert [2016] HCA 18; 257 CLR 440 - provides that a solicitor owes a duty to their client in both contract (under the retainer) and tort.
Cummings v Claremont Petroleum NL (1996) 185 CLR 124 - provides that while a claim alleging breach of fiduciary duty is not a claim in contract, it is a claim “by reason of” a contract or breach of trust and it is a debt provable in bankruptcy
D’Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; 223 CLR 1 - states a rule which is consistent with, and limited by, a rationale which reflects the strong value attached to the certainty and finality of the resolution of disputes by the judicial organ of the State.
Hawkins v Clayton (1988) 164 CLR 539 - held that the scope of the duty in tort will usually be set by the terms of the retainer (which indicates the nature of the relationship that gives rise to the tortious duty of care).
Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; 247 CLR 613 - held that the proper identification of damage should usually point the way to the acts or omissions which were its cause.
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; 210 CLR 109 - provided that it is enough to demonstrate that the conduct in question was “a cause” (rather than “the sole cause”) of the loss or damage sustained.
Jack v Kipping [1882] UKLawRpKQB 14; (1882) 9 QBD 113 - held that framing a claim as a claim in tort does not conclude the question whether the demand arises by reason of a contract or promise.
Jennings v George Harcourt Management Pty Ltd [2018] ACTCA 50; 14 ACTLR 27 - provides that reasonable care is to be judged prospectively.
Keddie v Stacks/Goudkamp Pty Ltd [2012] NSWCA 254; 293 ALR 764 -where in the circumstances a particular case, the content of the duty of care extends beyond the legal services that are the subject of a retainer to providing additional advice or taking some additional or positive step beyond the scope of the retainer.
Lovell v Penkin (a bankrupt) [2008] FCA 637; 101 ALD 335 - where the tort claim arises because of the existence of—“by reason of”—the retainer.
Pawley v Pawley (No 2) [2017] FamCAFC 136 - where reconsideration of the substance of a ruling was not allowed.
Pool (a pseudonym) v Trustees of the Marist Brothers Property Group & Anor (No 3) [2021] ACTSC 89 - held that once there has been “a significant and identifiable loss”, the cause of action has accrued.
Read v Burns [2017] ACTSC 184 - where doubts have been expressed concerning whether a duty of care may extend beyond the retainer.
Rogers v Whittaker [1992] HCA 58; (1992) 175 CLR 479 - provides that the standard of reasonable care and skill required of a solicitor is that of the ordinary skilled person exercising and professing to have that special skill; in this case, the skill of an experienced family law practitioner.
Sykes v Midland Bank Executor & Trustee Co Ltd [1971] 1 QB 113 - provides that a solicitor’s advice should address matters of particular relevance to the client, or which may influence the client in deciding on a course of action.
Wardley Australia Limited v Western Australia [1992] HCA 55; (1992) 175 CLR 514 - relied upon in arguing that, as with other forms of damage, with economic loss, prospective or contingent loss is not enough; the cause of action does not accrue until there is “actual loss”.
Watson v Foxman (1995) 49 NSWLR 315 - held that a claim arises by reason of a contract or promise only if a contract or promise is an “essential element” of the cause of action pleaded.
Analysis:
The plaintiffs asserted that, because of the restraining order, the plaintiffs had lost the opportunity to dispose of properties and that each had suffered a loss of income, alleging that DLL had failed to properly advise in relation to the ANZ default notices and had failed to take steps to set aside the statutory demands and restrain ANZ from appointing receivers.
The defendants said that they were protected from suit by advocates’ immunity as the plaintiffs’ complaint concerned work in court or work done out-of-court that contributed to the judicial determination of proceedings in court. In the proceedings before Faulks DCJ on 27 August 2010, Mr McGrath and Mr Lardner acted in accordance with their instructions, which were set out in Mr Lardner’s supporting affidavit and supplemented on the afternoon of 27 August. The restraining order was imposed by judicial determination.
The orders made on 10 October 2010 reflected a consent position regarding disposition of the appeal against the 27 August 2010 orders of Faulks DCJ, reached without judicial determination. The consent orders reflected Mr Manny’s instructions and, rather than harming the plaintiffs, they significantly improved the plaintiffs’ position. DLL claimed that the right to bring any action was statute barred because the limitation period of six years had expired prior to the commencement of proceedings on 25 November 2016 (by Mr Manny) and 2 April 2019 (when the Court ordered joinder of the JMG).
The restraining orders were made on 27 August 2010, pursuant to final order 14 the Group A properties should have been listed for sale on 28 July 2010. The plaintiffs could have listed the Group B and Group C properties for sale at any time. Any loss of opportunity first occurred on 27 August 2010.
Conclusion:
The advocates’ immunity applies to the conduct of Mr Lardner on 27 August 2010. The actions of the plaintiffs are not maintainable as they were brought after the expiry of the limitation period. DLL did not act negligently in relation to the filing of a stay application and appeal from the final orders, the hearing before Faulks DCJ on 27 August 2010, the agreement that resulted in consent orders on 10 October 2010, the foreclosure by ANZ and the appointment of receivers, or otherwise. Consequently, the claims in contract, tort and for breach of fiduciary duty are not made out. The conduct of DLL did not cause harm (economic loss) to the plaintiffs. The claims against Mr Lardner cannot succeed because the proceedings were commenced against a bankrupt without leave and they concerned debts provable in the bankruptcy of Mr Lardner, but Mr Lardner has been discharged from bankruptcy.
