Entsch v Smith & Anor [1991] QSC 108

10 0 20 (7' 30 0 40 50 60 IN THE SUPREME COURT OF QUEENSLAND !fo ._ 2 7 ~ 9 c_°},,J-(/ CIVIL JURISDICTION BEFORE MR. JUSTICE SHEPHERDSON. , •. ,J le. l~, c, r BRISBANE, 29 APRIL 1991 ,, l .,.-('; 11' '1 (C ' ht ' th' t .Jt . d ' opyrig in is ranscrip is veste in the Crown. Copies thereof must not be made or sold without the written authority of the Chief Court Reporter,Court Reporting Bureau.) BETWEEN: GRAEME ENTSCH -and- MICHAEL A. SMITH -and- DOUGLAS KERR JUDGMENT Plaintiff First Defendant Second Defendant HIS HONOUR: In this matter I give judgment for the plaintiff against the defendants for $276,934.64 which amount includes interest. I publish my reasons. HIS HONOUR: I order the defendants to pay the. plaintiff's costs of and incide"ntal to tne action·inc1.uding reserved costs if any to be taxed. -C'11~. - 1 10 20 30 40 50 60 -- 1 of 19 -- IN THE SUPREME COURT OF QUEENSLAND Before Mr Justice Shepherdson BETWEEN: GRAEME ENTSCH AND: MICHAEL A. SMITH AND: DOUGLAS KERR JUDGMENT - SHEPHERDSON J. S(;CJ/ j 108 No. 2709 of 1989 Plaintiff First Defendant Second Defendant Delivered the Twenty-Ninth day of April, 1991 CATCHWORDS Solicitors - Negligence - Damages - Measure of. Counsel: Solicitors: Couper for Plaintiff. D.J.S. Jackson Q.C. defendants. with O' Shea for the Thynne & Macartney T/A. for Primrose Couper Cronin Rudkin, Southport for the Plaintiff Chambers McNab Tully & Wilson for the First and Second Defendants Hearing Dates: 9th and 10th April, 1991. -- 2 of 19 -- I~ \ ) IN THE SUPREME COURT OF QUEENSLAND BETWEEN: AND: GRAEME ENTSCH MICHAEL A. SMITH DOUGLAS KERR JUDGMENT - SHEPHERDSON J. No. 2709 of 1989 Plaintiff First Defendant Second Defendant Delivered the Twenty-Ninth day of April, 1991 The plaintiff has claimed against the defendants damages for breach of contract, negligence and interest. The claims arise out of the admitted retainer by the plaintiff of the defendants <~) to act as his solicitors in respect of the formalisation of an agreement relating to property and maintenance which he had reached with his wife. That retainer was admitted to have been 0 made on or about 3rd September, 1985. defendants did not call any evidence. At the trial the Shortly after the trial commenced Mr. D.J.S. Jackson Q.C. who, with Mr. O'Shea, appeared for the defendants, made an admission of liability. Later I shall refer to the details of this admission. The plaintiff, a specialist physician, gave oral evidence and I accept him entirely as a truthful and credible witness. He married in 1962 and for many years practised his profession -- 3 of 19 -- 2 at the Gold Coast and in Northern New South Wales. In 1985 he and his wife - they were then living together at Southport - discussed their separation and division of the assets of their marriage. At that time the two children of the marriage aged 20 and 23 were not living at home. Mrs. Entsch had been attending the University of Queensland in Brisbane as a student travelling from Southport to and from the University. Both the plaintiff and his wife wished to keep matters as cordial as possible. They had discussions with Mr. Geoffrey Butts a mutual friend who was also a solicitor about division of matrimonial property. I am satisfied that during these 0 discussions which occurred before early July 1985 Butts told the Q plaintiff and his wife to do their own valuations so long as they both agreed to them. Thereafter the plaintiff did valuations of various assets, in one case consulting a real estate agent via telephone. No formal real estate valuation was obtained. I am satisfied the plaintiff's valuations were, as he called them, "amateur valuations". The plaintiff and his wife did agree on what the plaintiff called a separation settlement. On about 6th September, 1985 Mrs. Entsch vacated the matrimonial home moving to a house and land at 215 ·stanley Terrace, Taringa in Brisbane which, at that stage the plaintiff had bought for her in her name. The settlement to which both the plaintiff and his wife had agreed was in summary that she be provided with a house, a car, furniture and sufficient maintenance to enable her to complete her University degree in Psychology. I am satisfied that a.fter the discussions with and advice from Butts the plaintiff and his C 0 -- 4 of 19 -- 3 wife discussed a division of assets on the basis of 45 per cent to the wife and 55 per cent to the plaintiff with the wife wanting her portion of the total assets by way of a house, a car, furniture and guaranteed maintenance which was to be tax free in her hands and with adjustments according to the Consumer Price Index - the maintenance was to last for four and a half years. On or about 3rd September, 1985 the plaintiff consulted the defendant Smith who was then in partnership with the second ~J defendant. He told the first defendant that he and his wife had ,, / 0 come to an agreement as to division of property and assets that they had between them and "that we would like him to put it in legal language encapsulating the divisions that we ourselves had decided and written in these documents to finalise our separation problems". The plaintiff then handed Smith a handwritten document which was headed "Separation Settlement Shirley and Graeme Entsch 3/9/85". That document set out in layman's terms how the property was to be divided. It also gave some abbreviated details of values of the total assets and what was called the "total theoretic worth - 7/7/85". Exhibit 7 before me consisted of three sheets, the first two sheets being in original handwriting and the third sheet being a photocopy. Exhibit 7 concluded:- "Shirley would like at least Taringa House & Stamp & Solicitor fee - Furniture (market value) Car (Mazda 323) Salary $15,000 x 4½ years (indexed to inflation in reality) $ 92,000 $ 5,000 $ 11 , 000 $ 67,500 $175,500 ? Access to further allowance if cannot get a job." -- 5 of 19 -- 4 The total nett worth of assets at 7th July, 1985 was said in Ex. 7 to be $383,600.00 I am satisfied that at the time the plaintiff first saw Smith he explained what.was the summary of their assets with the exception of insurance policies which he left Smith to sort out and that the two pages in the original handwriting (forming part of Ex. 7) contained the plaintiff's "wording as to how we wanted it split up and could he please put it in legal language and carry it out for us - for me". I should at this stage say that I am satisfied that both the plaintiff and his wife after discussions with Butts agreed that the wife was to receive 45 per cent of the property and the plaintiff 55 per cent and that both parties agreed that the 45 per cent was to take into account the value of the Taringa house, a motor car, certain furniture and income or maintenance to be paid by the plaintiff to her for four and a half years, that maintenance being at the rate of $1,250.00 per month. It is clear that the plaintiff and Mrs. Entsch in effect treated the maintenance total for four and a half years as a capital asset and both she and her husband applied the total maintenance for the four and a half years as pro tanto satisfaction of her 45 per cent share. After the plaintiff's initial retainer of the defendants, the first defendant caused a document to be prepared and sent it to Butts who was acting for Mrs. Entsch. I am satisfied that there were several drafts of that document and that in late September, 1985 the plaintiff saw the defendant Smith who said that the Judge who checked it over might consider that the 0 0 0 0 -- 6 of 19 -- n (J 5 plaintiff was getting off a bit too lightly and so he was altering the format of the agreement to make it a different format which was almost as good. At this stage Smith also told the plaintiff there was a slight risk which was negligible but the plaintiff was unable to recall any description as to the nature or quantity of that risk. Eventually, a document a copy of which is part of Ex. 8 was signed by the plaintiff and his wife. Exhibit 8 is a photocopy of an affidavit by the plaintiff filed in the Family Court of Australia at Brisbane, paragraph 1 of which affidavit contains the following statement:- "On the 24th day of March, 1986 my spouse and I executed a maintenance agreement which I desire toregister in this Court pursuant to regulation 169. 11 · That agreement was exhibited to the affidavit. Although in the affidavit it is called an agreement the document is described on its back sheet as "Section 86 Deed". It bears the solicitors' names - "Butts and Barkley". It is not necessary to refer in detail to this deed. The deed was registered under s. 86 of the Family Law Act. This (-'1 '.__/ registration had no effect in preventing the plaintiff's wife from making a property application pursuant to s. 79 of the Family Law Act 1975. In pleaded particulars of negligence and breach of contract the plaintiff has alleged:- (a) The first defendant failed to advise that an agreement registered pursuant to s. 86 of the Family Law Act 1975 would have no effect in preventing the plaintiff's wife \\ -- 7 of 19 -- 6 from making a property application pursuant to s. 79 of the said Act. (b) The first defendant failed to advise that a maintenance agreement pursuant to s. 86 of the said Act could be varied by the Family Court upon application pursuant to s. 83 of the said Act. (c) The first defendant failed to advise that the s. 86 agreement brought about no finality in property and maintenance matters between the plaintiff and his wife. ( e) The first defendant failed to advise that the plaintiff ought seek the approval of the Family Court of an agreement made pursuant to s. 87 of the said Act. As I have already said the defendants made an admission of liability - this was in the following terms:- "It is admitted that the first defendant was in breach of his duty of care and in breach of contract in failing to advise the plaintiff: (a) that an agreement registered pursuant to s. 86 of the Family Law Act 1975 would have no effect in preventing the plaintiff's wife from making a property application pursuant to s. 79 of the said Act; (b) that a maintenance agreement registered pursuant to s. 86 of the said Act could be varied by the Family Court upon application pursuant to s. 83 of the said Act so far as it related to the maintenance of a party thereto; (c) that the s. 86 agreement brought about no finality in property and maintenance matters between the plaintiff and his wife." These admissions effectively proved the plaintiff's allegations in paras. (a), (b) and (c) above. As to para. (e) I heard evidence from Mr. Michael Gary Habermann a solicitor well . I/ I 0 0 0 0 -- 8 of 19 -- n 7 experienced and expert in the practice of Family Law under the Family Law Act and I am satisfied that the defendants, by the first defendant, failed to advise that the plaintiff ought to have sought the approval of the Family Court of an agreement made pursuant to s. 87 of the Family Law Act 1975. Thus, the matters of negligence and breach of contract, being effectively disposed of shortly after the trial began, the trial was concerned with the measure of damages. The evidence before me disclosed that shortly after 15th December, 1987 the plaintiff received from the first defendant, who by then was practising on his own account, having dissolved partnership with the second defendant, a bundle of documents served on him by Hopgood and Ganim, solicitors then acting for Mrs. Entsch. By that stage no steps had been taken to dissolve the marriage. The documents served were Mrs. Entsch's application for the settlement of matrimonial property and lump \ sum maintenance and a hearing date had been set for 5th ( . ', _ _/ 0 January, 1988. It appears from the first defendant's letter of 15th December, 1987 addressed to the plaintiff (Ex. 9) that Mrs. Entsch was alleging some coercion and concealment of assets. Exhibited before me were copies of affidavits filed by the plaintiff and his wife in the application commenced in late 1987. It is unnecessary to refer to these copy affidavits in any detail. On 2nd May, 1989 in the Family Court of Australia at Brisbane the Hon. Mr. Justice Lindenmayer ordered by consent (inter alia):- "1. The husband shall pay to the wife the sum of $205,000.00 on or before the 2nd June, 1989. -- 9 of 19 -- 8 2. That upon payment to the wife in terms of paragraph 1 hereof the provisions of paragraph 5 of the maintenance agreement entered into by the parties on 24th March, 1986 shall be revoked. 6. Section 77A of the Family Law Act shall apply to this order and the portion of the payment made to the wife pursuant to this order which is attributable to her maintenance is $100,000.00 and the portion of the property retained by the husband which is attributable to his maintenance is $100,000.00." On 2nd June, 1989 the plaintiff paid to Mrs. Entsch the $205,000.00. He incurred costs in defending his wife's 1987 application. The defendants admit that up to 20th June, 1989 the plaintiff had paid costs and outlays totalling $33,731.00 and that on 28th July, 1989 he paid his solicitors a further sum of $4,250.00 on account of costs and outlays. The total costs and outlays claimed are $37,981.00, a sum which the defendants admit is reasonable. 0 0 The plaintiff bears the onus of proving his damages, whether Q in contract or in tort (Pennant Hills Restaurants Pty. Ltd. v. Barrell Insurances Pty. Ltd. (198J) 145 C.L.R. 625 at p. 635). In the same case Gibbs J. (as he then was) in speaking of the defendant's failure to arrange insurance cover said (at pp . 6 3 7 -8 ) : - "The learned trial Judge found that this failure was due to the negligence of Barrell and further that it constituted a breach of contract between the parties. It seems to me immaterial whether damages are assessed in tort or in contract. In both cases the general principle is that 'the injured party should receive compensation in a sum which, so far as money can do, will put him in the same position as he vmul~d have been in if the contract had been performed or the tort had not been committed': (Butler v. Egg and Egg Pulp Marketing Board (1966) 114 C.L.R. 185 at p. 191." 0 -- 10 of 19 -- ,, l ' 9 In the present case there is no issue of remoteness of damage - the defendants accept that "it is not necessary for the plaintiff to show that the precise manner in which his injuries were sustained was reasonably foreseeable; it is sufficient if it appears that inju+Y to a class of persons of which he was one might reasonably have been foreseen as a consequence" (Chapman v. Hearse (1961) 106 C.L.R. 112 at p. 120-121). Mr. Jackson has submitted that if in 1985/1986 the plaintiff 1~ had been made aware that an agreement registered pursuant to s. 86 would have no effect in preventi,ng the plaintiff's wife making a property application pursuant to s. 79 or if the () plaintiff had then been made aware that he ought to seek the approval of the Family Court of an agreement made pursuant to s. 87, then the plaintiff must show that on the balance of probabilities he could and would have been able to protect himself from the claim subsequently made by his wife. To support (-~ this submission he relied on Norwest Refrigeration Services Pty. \___j CJ Ltd. v. Bain Dawes (W.A.) Pty. Ltd. (1984) 157 C.L.R. 149 and especially at pp. 160-161. He relied also on Gates v. City Mutual Life Assurance Society ~td. (1986) 160 C.L.R. 1 at p. 13. I am satisfied that the plaintiff at no stage was made aware by the first defendant of any of the four matters earlier mentioned in respect of which the defendants were negligent and/or in breach of contract. I am also satisfied that had the plaintiff been aware of any of these matters he would and could have protected himself from his wife's subsequent claim. I make that finding for the following reasons:- -- 11 of 19 -- 10 1. In 1985 and in early 1986 the plaintiff and his wife were in agreement as to the manner of distribution of their assets and payment to her of maintenance. 2. Both the plaintiff and his wife from and including early September 1985 and up to and including April 1986 were separately legally represented and dealing at arm's length. 3. The Family Law experts called by the plaintiff Mr. Habermann and Mr. Page both agreed that the matters of property and maintenance could have been dealt with in March and April, 1986 by a consent order under s. 79 of the Family Law Act. On 15th April, 1986 when the Section 86 Deed was filed in the Family Court the practice of the Family Court in Brisbane was:- ( a) According to Mr. Habermann - all that was required to obtain a consent order was to file an application seeking the consent order, a copy of the consent order signed by the solicitors for the parties and/or the parties, a notice of address for service of the parties - all these documents were usually filed together and sometimes the marriage certificate and sometimes a letter to the Registrar. (b) According to Mr. Page - under O. 31, r. 8 of the Rules of the Family Court passed and promulgated in December of 1985 parties could file a memorandum of their consent order and all that was needed was an application and a signed form of order with the Family Court accepting the memorandum of the consent order and the application and issuing its order under s. 79. 0 0 0 0 -- 12 of 19 -- 1 1 I accept the evidence of both Messrs. Habermann and Page on the above practice of the Family Court and especially the evidence of Mr. Page that "certainly early in 1986 all that was needed was an application and a signed form of order". I am satisfied that the abovementioned practice of the Family Court in Brisbane did not change until late 1986. I think it is certain that had the first defendant properly advised the plaintiff in respect of the matters on which /\ ( /; liability has been either admitted or proved the plaintiff would have told the first defendant that he required a consent order under s. 79, that in that event there would have been a different document prepared and signed by both the plaintiff and his wife and that that document would have been a memorandum of the consent order of the plaintiff and his wife and that there would have been compliance with 0. 31, r. 8 of the Rules of the Family Court with the result that the Family Court would in April, 1986 (_) have made a consent order under s. 79. In my view, given the agreement between the plaintiff and his wife in 1985 and their being advised by independent solicitors and given the actual signing of the Section 86 Deed it is I think certain that the plaintiff and his wife would have signed the memorandum of consent order under s. 79. She possibly would have required more money from the plaintiff - a matter I shall later mention. I am satisfied the effect of registration of a consent order under s. 79 was that such an order could not be set aside or varied (other than by consent) unless the Court was satisfied of -- 13 of 19 -- 12 any of the matters set out ins. 79A(1) of the Family Law Act namely:- "A miscarriage of justice by reason of fraud, duress, suppression of evidence, the giving of false evidence or any other circumstance." There is no suggestion before me that• there has been a miscarriage of justice under s. 79(A) (1 )(a) and there is no suggestion that the plaintiff omitted from the agreement reached with his wife in 1985 and evidenced by the Section 86 Deed any asset which should have been brought to account. As far as I can see the plaintiff acted with scrupulous fairness towards his wife and each of them did agree on the subject matter of the agreement evidenced in Ex. 8. I must say that in the present case the plaintiff consulted what he believed to have been a solicitor competent in the practice of Family Law. Had that solicitor, the first defendant, advised him as he should have, of the matters in respect of which liability has been admitted or found, this present case would never have started. It seems rather strange that the plaintiff, who was a layman in Family Law and obviously quite ignorant of 0 0 0 what may be now thought to be a·complex of differing types of Q proceedings in the Family Court, has to prove that had the first defendant discharged his duty of care he could have secured in 1986 an agreement being a consent order registered pursuant to s. 79. Proof of such matter, and I am satisfied the onus lies on the plaintiff as required by the two earlier High Court authorities, namely Norwe-st and Gates, requires consideration of a number of hypothetical matters. I say hypothetical because I -- 14 of 19 -- 13 am required to speculate and draw inferences from facts which I am satisfied are proven. I have earlier set out the reasons for my conclusion that had the plaintiff been aware he would and could have protected himself from his wife's subsequent claim. It may be thought that the plaintiff is rather fortunate that in 1986 up until about October of that year there was a practice in the Family Court at Brisbane which enabled a consent order to be quite easily registered under s. 79 without any () inquiry by the Judge of the Family Court as to matters referred to ins. 79(2). That sub-section provides:- "(2). The Court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order." Because of the findings I have already made, there is no need to undertake the task which Mr. Jackson has asked of me. That task was to first find that in 1986 the plaintiff could not have obtained either a consent order under s. 79 or an approval under s. 87 and then to decide what, in 1986, was the amount which could reasonably have been expected to have been paid to the wife to finalise all matters of maintenance and property between the plaintiff and the wife. I should add that I am well satisfied that had an approval under s. 87 been obtained in 1986 then the wife would probably have failed in her later application. Because of the findings which I have already made the task which Mr. Jackson has asked of me does not have to be undertaken. I would add also that because of my findings as to the s. 79 consent order there is no need to consider whether in 1986 the plaintiff would and could have obtained an approval under s. 87. -- 15 of 19 -- 14 I do know that the plaintiff had to pay $205,000.00 in June, 1989 in order to achieve the finality he expected in 1986. He told me that had he been properly advised in 1986 and had there then been further discussions or negotiations between himself and his wife (through their solicitors or face to face) he would have been prepared to pay a further sum of money to her. As I have already said there is a certain amount of speculation in having to decide what, on the balance of probabilities, would have occurred in 1986 had the plaintiff been properly advised. In some ways I have had to undertake a task referred to by the High Court in Malec v. J.C. Hutton Pty. Ltd. (1990) 64 A.L.J.R. 314. () I particularly refer to the concluding sentences in the following (~ passage in the joint judgment of Deane, Gaudron and McHugh JJ. (at p. 318) :- "A common law court determines on the balance of probabilities whether an event has occurred." If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain; if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach. But in the case of events which it is alleged would or would not have occurred, or might or might not yet occur the approach of the court is different. The future may be predicted and the hypothetical may be conjectured." In the present case there is a possibility that the plaintiff may have had to pay his wife a further sum in order to achieve as. 79 consent order of the Court. I think I should take this possibility into account in assessing the plaintiff's damages (compare Hardware Services Pty. Ltd. v. Association Ltd. (1988) 1 Qd.R. 393 at p. 401). Primac 0 CJ -- 16 of 19 -- 15 Although it may be fairly said that whatever sum I take into account is largely a guess because there were no negotiations in 1986 the Court must attempt the task despite the difficulty of assessment. By not having had to pay this further sum the plaintiff was able to earn income on it for some three years before payment of $205,000.00. That income by way of interest, if one assumes it to have been 14.5 per cent (see Ex. 20), would be taxable in the plaintiff's hands and he was paying tax at the r') maximum rate. Mr. Couper has submitted that the amount which I ' / /~ might take into account should reflect a possibility anywhere between O and $70,000.00. I must say that in deciding on this figure I have taken into . account the fact that the deed presented for Mrs. Entsch' s signature was on its face a Section 86 Deed and Butts may well have told Mrs. Entsch that such a deed would not prevent her applying under s. 79. Whether or not he did so advise her I do not know. Certainly Mrs. Entsch appears not to have returned to his firm when she applied in late 1987. Had Butts so advised her it may be thought quite likely that she would have retained him ("-_) for her later application. He practised at Sunnybank, a Brisbane suburb. Of course, she may have approached him and he declined to act because he was a mutual friend of both parties. These are matters on which there is no evidence. Overall, I have decided to adopt a broad brush approach in making allowance for what I find was a possibility which I should take into account namely that the plaintiff would have had to pay and would have paid his wife a further sum - not a large sum at all - in order to obtain as. 79 consent order. Mrs. Entsch's attitude in 1985 and up -- 17 of 19 -- 16 until April 1986 was one of agreement. In arriving at a sum I have taken into account interest and tax on the basis already indicated. I propose therefore to deduct $15,000.00 for the possibility and in arriving at that sum I have, as I say, taken into account interest less tax. I therefore assess the plaintiff's damages at $227,981.00 made up as follows: Amount ordered by Court on 2nd May, 1989 ($205,000 less $15,000) Plus costs and outlays I award interest at 12 per cent per annum on $190,000 from 2nd June, 1989 to 29th April, 1991 - I award interest at 12 per cent per annum on $33,731 from 20th June, 1989 to 29th April, 1991 - I award interest at 12 per cent per annum on $4,250 from 28th July, 1989 to 29th April, 1991 - Total damages including interest $190,000.00 $ 37,981.00 $227,981.00 $ 40,849.32 $ 7,210.08 $ 894.24 $276,934.64 0 0 0 C) -- 18 of 19 -- l II I I I l l (j () 16 until April 1986 was one of agreement. In arriving at a sum I have taken into account interest and tax on the basis already indicated. I propose therefore to deduct $15,000.00 for the possibility and in arriving at that sum I have, as I say, taken into account interest less tax. I therefore assess the plaintiff's damages at $227,981.00 made up as follows: Amount ordered by Court on 2nd May, 1989 ($205,000 less $15,000) Plus costs and outlays I award interest at 12 per cent per annum on $190,000 from 2nd June, 1989 to 29th April, 1991 - I award interest at 12 per cent per annum on $33,731. from 20th June, 1989 to 29th April, 1991 - I award interest at 12 per cent per annum on $4,250 from 28th July, 1989 to 29th April, 1991 - Total damages including interest $190,000.00 $ 37,981.00 $227,981.00 $ 40,849.32 $ 7,210.08 $ 894.24 $276,934.64 I give judgment for the plaintiff against the defendants for $276,934.64. -- 19 of 19 --