Entsch v Smith & Anor [1992] QCA 16

IN THE COURT OF APPEAL [1992] QCA 016 SUPREME COURT OF QUEENSLAND No. 2709 of 1989 GRAHAM ENTSCH (Plaintiff) Respondent - and - MICHAEL A. SMITH (First Defendant) Appellant - and - DOUGLAS KERR (Second Defendant) Appellant The President Mr Justice Davies Mr Justice Byrne Judgment of the Court Delivered on 6th March, 1992 Appeal allowed. Judgment under appeal set aside, and in lieu thereof judgment should be entered for the respondent against the appellants in the sum of $205,703.95. Respondent to pay appellant's costs of and incidental to the appeal, including reserved costs, if any, to be taxed. -- 1 of 11 -- 2 IN THE COURT OF APPEAL SUPREME COURT OF QUEENSLAND No. 2709 of 1989 Before the Court of Appeal The President Mr Justice Davies Mr Justice Byrne BETWEEN: GRAHAM ENTSCH (Plaintiff) Respondent - and - MICHAEL A. SMITH (First Defendant) Appellant - and - DOUGLAS KERR (Second Defendant) Appellant JUDGMENT - THE COURT Delivered the 6th day of March 1992 MINUTE OF ORDER: Appeal allowed. Judgment under appeal set aside, and in lieu thereof judgment should be entered for the respondent against the appellants in the sum of $205,703.95. Respondent to pay appellant's costs of and incidental to the appeal, including reserved costs, if any, to be taxed. CATCHWORDS: APPEAL AND NEW TRIAL - FINDINGS OF FACT - Appellants negligently failed to inform respondent that an agreement registered under s.86 of the Family Law Act was not final - Respondent was awarded total sum wife claimed in second action plus costs - whether judge's findings can be sustained - that the judge's assessment otherwise appropriate. Counsel: Mr P.A. Keane Q.C., with him Mr P. O'Shea for the Appellants Mr R. Bourke for the Respondent Solicitors: Corrs Chambers Westgarth for the Appellants Thynne & Macartney t/a for Primrose Couper Cronin Rudkin for the Respondent. Hearing dates: 11 and 12 February, 1992 -- 2 of 11 -- IN THE COURT OF APPEAL SUPREME COURT OF QUEENSLAND No. 2709 of 1989 BETWEEN: GRAHAM ENTSCH (Plaintiff) Respondent - and - MICHAEL A. SMITH (First Defendant) Appellant - and - DOUGLAS KERR (Second Defendant) Appellant JUDGMENT - THE COURT Delivered the 6th day of March 1992 The Appellants are solicitors who were sued by the Respondent, a former client, for negligence. The Trial Judge awarded the Respondent damages in the amount of $276,934.64 and ordered the Appellants to pay the costs of the action. The Appellants in their appeal to this Court have asked the Court to set aside the award and assess the damages at a lower, unspecified figure. It is not disputed that the Appellants were negligent and are liable to the Respondent for whatever loss he suffered. The present action arises out of a matrimonial dispute between the Respondent and his former wife, who executed an agreement which was registered under s. 86 of the Family Law Act 1975 (Commonwealth). Some years later, on an application pursuant to s. 83 of that Act, the Respondent's former wife was awarded a further $205,000. Damages awarded by the -- 3 of 11 -- 2 Trial Judge to the Respondent against the Appellants consisted of that sum, plus the costs which the Respondent was ordered to pay in the Family Court proceedings with his wife, subject to a discount of $15,000 to reflect a contingency to which further reference will be made. The Appellants' negligence was their failure to inform the Respondent that the agreement which he entered into with his former wife and which was registered under s. 86 of the Family Law Act was not final, in the sense that it did not preclude her obtaining a further amount on a later application in the Family Court, as in fact occurred. The necessary connection in law between the Appellants' negligence and recovery by the Respondent of the additional amount obtained by his wife and the associated costs in the Family Court must be found in a conclusion that, if the Respondent had been properly advised, his wife's opportunity to recover the additional amount and his obligation to pay the costs could and would have been avoided. The central issue for determination in this appeal is whether the Respondent satisfactorily demonstrated that connection and consequently whether the Trial Judges' material findings should be sustained. The evidence indicated that there are only two ways in which the Respondent could have been rendered immune from a subsequent order by the Family Court in favour of his former wife; namely, either a consent order in the terms of their agreement under s. 79 of the Family Law Act or approval by the Court of an agreement embodying equivalent terms to -- 4 of 11 -- 3 those contained in the Maintenance agreement pursuant to s.87. By virtue of sub-s. 79(2), the Family Court was required not to make a consent order unless it was "just and equitable" to do so. Under sub-s. 87(3), the Family Court was required, before approving the agreement between the Respondent and his former wife, to be satisfied that it was proper. At its boldest, the Respondent's contention was not only that his former wife would have consented to an order by the Family Court under either ss. 79 or 87 but that the Family Court would have made the necessary order under either provision, being satisfied that it was "just and equitable" or "proper" as the case may be, substantially on the basis that legally represented parties had negotiated and voluntarily entered into a bargain. The Respondent faced the difficulty that the burden of the evidence was that the agreement between the Respondent and his former wife entitled her to at least $60,000, and perhaps $90,000, less than was likely to have been considered "just and equitable" or "proper "by the Family Court. However, there was clear evidence from the Respondent, whom the Trial Judge accepted as credible, that he would have been prepared to pay an additional $60,000 to procure finality. The Trial Judge expressed the confident opinion that the Respondent's wife would have agreed to a different procedure from that adopted to finalise their bargain in the -- 5 of 11 -- 4 Family Court and that her consent would have been forthcoming to an order which would have provided the Respondent with the finality which he required. Nonetheless, because of the possibility that the wife's consent would not have been obtained, he discounted the damages awarded to the Respondent by $15,000, as has been mentioned. The Appellants attacked the Trial Judge's conclusion but the evidence of the transaction between the Respondent and his former wife and the surrounding circumstances was sufficient to support his finding that the wife would have consented and this Court should not interfere. The question remains, however, whether the damages equivalent to the total which the Respondent had to pay in consequence of his former wife's application under s. 83 of the Family Law Act was sufficiently reduced by a discount of $15,000 related to the possible difficulty in obtaining his former wife's consent, or whether it should have been concluded that it would have been necessary for him to pay a large sum over and above the amount agreed in order to have obtained an order from the Family Court which would have precluded the possibility of a later application by his wife. This part of the case was complicated by evidence which was given that, at the material time, there was a procedure in the Family Court whereby a Registrar would enter a consent order under s. 79 without regard to the requirements of sub-s. 79(2) on the sole basis that the parties had -- 6 of 11 -- 5 consented. The Respondent relied upon this practice to support a conclusion that a consent order could have been obtained pursuant to s. 79 without payment of any amount other than that needed to obtain his wife's consent. The Appellants sought to meet this by arguing that such a consent order would have been a miscarriage of justice within the meaning of s. 79A(1) and that, in its discretion, the Family Court would have set aside the Registrar's consent order under sub-section.That the discretion to set aside the order would have existed seems plain enough, for a consent order entered by the Registrar in the circumstances described would have amounted to a miscarriage of justice: see the cases referred to in re The Marriage of Clifton and Stuart (1991) 14 Fam LR 511. In contrast to the extreme position for the Respondent that the Family Court would have accepted the agreement entered into with his former wife as "just and equitable" and "proper", the Appellants submitted that the Family Court would have required a payment of at least an additional $90,000 by the Respondent to his wife and that, since the evidence demonstrated that he was ready to pay only an additional $60,000, he had failed to establish an essential element of his claim. The decisions of the Family Court to which this Court was referred do not provide a sufficient basis for a conclusion one way or the other and the evidence on this aspect of the case is unsatisfactory. Certainly, it could not be concluded that the Respondent had established that, -- 7 of 11 -- 6 although the Family Court properly carrying out its function in accordance with sub-s. 79(2) of the Family Law Act would have refused to make a consent order in the terms of his agreement with his wife because it was not just and equitable, it would have acted differently in the exercise of its discretion under sub-s. 79A(1) and would have refused to set aside an order which it would not have initially made. The Plaintiff's evidence that he would have paid an additional $60,000 for finality establishes that, but for the Appellants' negligence, he would have obtained finality if he could have done so. Consistently with the trial judge's findings in connection with the discount which he applied to the respondent's damages, it should be concluded that, if paid that sum, his wife would have been prepared to forego her right to make a later application for further payment by the Respondent and consented to the different procedure which would have provided him with the desired finality. It is more probable than not that in circumstances such as these both parties would have wished matters between them to have been finalized. The remaining question is whether there is sufficient evidence that the respondent could have obtained or defended a consent order under s. 79 (or section 87) if his agreement with his wife provided for her to be paid that additional sum. Although such material evidence as there is was probably not really directed to the issue, it broadly -- 8 of 11 -- 7 indicates that, if the Family Court had considered the agreement between the respondent and his former wife as it was required to do, it would not have been satisfied with the agreement unless the respondent's former wife was entitled to a sufficient percentage of their assets. That would have necessitated an additional payment from the respondent to his former wife. Since there is some flexibility in deciding what is the appropriate division of the assets, there is obviously some scope for variation concerning the additional amount which the respondent would have been required to pay. The range of the additional payment needed seems to be from $60,000 to $90,000. On such evidence as there is, this Court should conclude that it is more probable than not that the additional payment of $60,000 which the respondent was prepared to pay to his former wife in order to procure finality would have been sufficient to satisfy the Family Court. Although the Family Court might have considered that the Respondent's former wife's entitlements under such a bargain were the minimum, or close to the minimum acceptable, it seems improbable that it would have rejected a bargain voluntarily entered into by legally represented parties which was in the range of what was ordinarily considered acceptable. On one view, the result of this conclusion is that the damages awarded to the Respondent should be reduced by $45,000 being the additional $60,000 which he would have been required to pay to procure finality less than discount -- 9 of 11 -- 8 of $15,000 already applied by the Trail Judge. However, because there is a possibility that the Respondent might have had to pay his wife more than $60,000 in order to obtain finality, the discount should be allowed to stand and the deduction should be the full $60,000 which this Court has concluded he would have been required by the Family Court to pay. Consistently otherwise with the approach adopted by the Trial Judge, the Respondent's loss should be assessed as follows: Amount ordered by the Family Court on 2nd May, 1989 $ 205,000.00 Less amount which the respondent would have been required to pay initially to obtain finality $ 60,000.00 Less discount $ 15,000.00 $ 130,000.00 Plus Family Court costs and outlays $ 37,981.00 $ 167,981.00 Plus interest at 12% per annum on $130,000 from 2nd June 1989 to 29 April 1991 $ 29,618.63 Plus interest at 12% per annum on $33,731 from 20 June 1989 to 29 April 1981 $ 7,210.08 Plus interest at 12% per annum on $4,250 from 28 July 1989 to 29 April 1991 $ 894.24 $ 205,703.95 The appeal is allowed. The judgment under appeal is -- 10 of 11 -- 9 set aside, and in lieu thereof judgment should be entered for the respondent against the appellants in the sum of $205,703.95. The respondent is to pay the appellants' costs of and incidental to the appeal, including reserved costs, if any, to be taxed. -- 11 of 11 --