Richard Janson Allen and Phung Allen v Rudi Hendrik Vandenberg; John Ross Reid; John Pappas; Roderick William Macdonald and Brendan Lee Grosse Trading As Vandenberg Reid Pappas and Macdonald [1989] ACTSC 7 (17 February 1989)

SUPREME COURT OF THE ACT

RICHARD JANSON ALLEN and PHUNG ALLEN v. RUDI HENDRIK VANDENBERG;
JOHN ROSS REID; JOHN PAPPAS; RODERICK WILLIAM MACDONALD and BRENDAN
LEE GROSSE trading as VANDENBERG REID PAPPAS AND MACDONALD
S.C. No. 1377 of 1986
Contract of Retainer - Negligence

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Gallop J.(1)

CATCHWORDS

Contract of Retainer - claim for breach of contract in failing to act in accordance with the clients' instructions

Negligence - breach of a duty of care owed by solicitors to clients to take all reasonable steps to protect the interests of the clients.

Chitty on Contracts (Specific Contracts), 25th Ed., para.2221 and 2225

Cheshire & Fifoot, Law of Contract, 4th Aust. Ed., para.2028

HEARING

CANBERRA
17:2:1989

ORDER

There be judgment for the plaintiffs against the defendants in the sum of $42,000 plus costs.

DECISION

This is an action for damages brought by the plaintiffs, who are husband and wife, against the partners in a firm of solicitors carrying on practice in the Australian Capital Territory. During the course of the evidence it was established that the solicitor within the partnership who was acting for the plaintiffs was also a partner at all material times and I gave leave to amend the title to the proceedings so as to add as a defendant Brendan Lee Grosse.

2. The plaintiff's cause of action is in contract and in negligence arising out of the terms of the contract of retainer between the plaintiffs and the defendants, and an alleged duty of care owed by the defendants to the plaintiffs to take all reasonable steps to protect the interests of the plaintiffs in and about the completion of an agreement between the plaintiffs and Courtline Homes for the said Courtline Homes to build a dwelling on Block 3, Section 363, Rawlings Crescent, Fadden, sold to the plaintiffs by Mr and Mrs Meszes and to sell the same and from the sale proceeds to pay to the plaintiffs the price of the said land. The plaintiffs' allegation is that in breach of the said contract of retainer and of the duty of the defendants towards the plaintiffs, the defendants failed to take reasonable steps to protect the interests of the plaintiffs in and about the completion of the agreement, particulars whereof are as follows:
(i) On or about 24 August 1983 the plaintiffs

instructed the defendants to pay the sum of
$25,000 due to them from proceeds of the sale of
3/363 Fadden pursuant to an agreement between the
plaintiffs and Javelle Pty Ltd trading as
Courtline Homes into the bank account of the
Secondnamed Plaintiff with CPS Credit Union.
(ii) On or about 16 March 1984 the land referred to in
(i) hereof was transferred to Javelle Pty Ltd,
trading as Courtline Homes, and mortgaged to AGC
(Advances) Pty Ltd. The defendants acted for
Courtline Homes in respect of those transactions
but did not deduct the said sum of $25,000 from
the proceeds thereof due to the said Courtline
Homes and pay or otherwise secure payment of the
same as instructed by the plaintiff.
(iii) On or about 22 June 1984 the plaintiffs requested
advice from the defendants as to the payment to
the plaintiffs of the said sum of $25,000.
(iv) On or about the 11th day of April 1985 Javelle Pty
Ltd, trading as Courtline Homes, sold the land
referred to in (i) hereof to David Moran and Donna
Margaret Moran.
(v) The defendants acted for Javelle Pty Ltd in
respect of the transaction referred to in (iv)
hereof but failed to deduct from the proceeds
thereof the sum of $25,000 and pay or otherwise
secure the payment of the same as instructed by
the plaintiffs.

3. By their amended defence the defendants denied that they were retained by the plaintiffs but admitted that they were retained by the plaintiffs in relation to the subject land in or about August 1983 in the following terms:

(a) the plaintiffs had an agreement with Courtline
Homes that Courtline Homes would build on the
property which was then registered in the name of
Mr and Mrs I.D. Meszes;
(b) the agreement was in the nature of a joint
venture;
(c) pursuant to the agreement the plaintiffs were to
procure a floor level transfer from Mr and Mrs
Meszes to Courtline Homes for the sum of
$25,000.00;
(d) the said sum of $25,000.00 was to be retained and
applied by Courtline Homes as a progress payment
towards the building of a further home on another
parcel of land owned by the plaintiffs in Fadden
ACT;
(e) the defendants would in due course receive
instructions in relation to the said transaction
from Mr Rod Sheather of Courtline Homes;
(f) the defendants should deal further in relation to
the said transaction with Mr Sheather.

4. The defendants say that they acted in accordance with the plaintiffs' instructions fully and properly. They also pleaded that if it be found that they acted contrary to the instructions of the plaintiffs (which is denied) then the plaintiffs subsequently ratified the actions of the defendants.

5. On the hearing of the action there was no dispute about the fact of retainer. The dispute revolved around the terms thereof and, in the event of failure to act according to the plaitiffs' instructions, alleged ratification of the defendants' actions.

6. It was common ground that the defendants had previously acted as solicitors for the plaintiffs prior to 1983. They had purchased a block of land in Appel Crescent, Fadden, in May 1982 from a finance company. They discussed construction of a house on that block with one Nobleza, an architect connected with Courtline Homes, which was the business name of Javelle Pty Ltd. They then discussed another block of land in Rawlings Place, being Block 8, Section 365, Fadden, and purchased that block over the counter from the Department of Territories. There was another block in Rawlings Place, being Block 3, Section 363, Fadden, which had been purchased by Mr and Mrs Meszes, a colleague of the husband plaintiff in the Department of Foreign Affairs.

7. In March 1983 the plaintiffs purchased another block in Fihelly Street, Fadden, being Block 8, Section 36, Fadden. The proposal was to build a house for the father of the husband plaintiff on the block in Fihelly Street. As events turned out, when the father came back from England he decided that the block in Fihelly Street did not suit him and the plaintiffs decided to sell.

8. On the evidence of the husband plaintiff, it was the plaintiffs' case that they arranged to build, through Courtline Homes, a home on the block in Appel Crescent and pay for the home by progress payments. It was further agreed that Courtline Homes would design and build a house on Block 8, Section 365, Fadden, in Rawlings Place, and be paid by the plaintiffs. It was further agreed that houses would be built by Courtline Homes to floor level on block 3, Section 363, Rawlings Place, and Block 8, Section 36, Fihelly Street, and then be sold. It was the plaintiffs' case that out of the sale proceeds of the Fihelly Street block, an amount of $26,000, being the amount which the plaintiffs had paid for the vacant land, would be applied to the construction costs of the Appel Crescent home. In relation to the second block, being Block 3, Section 363, Rawlings Place, Fadden, the agreement was that the sum of $25,000, being the amount which the plaintiffs had paid for the land to Mr and Mrs Meszes, would be paid into the plaintiff wife's account at the CPS Credit Union.

9. The husband plaintiff had received notice of posting to Jakarta, Indonesia, and about two weeks before the plaintiffs were due to leave Australia the husband plaintiff furnished instructions to the defendants in relation to the Appel Crescent and Block 3, Section 363, Rawlings Place properties. He said in evidence that he instructed Mr Brendan Lee Grosse, one of the partners in the defendants' firm, that Appel Crescent was to be purchased with mortgage moneys from CPS Credit Union which he had arranged through another firm of solicitors, and from the proceeds of sale of Fihelly Street and a van which he had sold to Courtline Homes. He said that in relation to the Rawlings Place property he instructed the solicitors that Courtline Homes were going to construct the premises to floor level, which would be done by October or November 1983, the premises would then be sold to a buyer and the land value of $25,000 was to be put into the wife's account at the CPS Credit Union. He said that he told Grosse that the land at that stage was in the name of Meszes. He said in evidence that he had told Grosse that he had reached an agreement with Courtline Homes that $25,000 was the value of the Rawlings Place land. At the same time he gave instructions to Grosse to prepare wills for his wife and himself and to send copies of the wills to his father-in-law.

10. He said that Grosse agreed to accept those instructions and said he had acted for Courtline Homes for some time. He reminded Grosse that he had also acted for the plaintiffs for some time, to which Grosse replied that it was not ideal, but he would act for both parties in respect of the sale of Block 3, Section 363, Rawlings Place, Fadden.

11. When Grosse gave evidence he did not agree with that version of the plaintiffs' instructions. There was no dispute that he had acted for Courtline Homes and Javelle Pty Ltd and had attended to their conveyancing. Nor was there any dispute that he had acted for the plaintiffs from 1983 in a number of matters. He said that he could recall seeing the husband plaintiff in July and August 1983 in relation to the transfer of Block 8, Section 363, Rawlings Place, Fadden, and the improvements thereon in favour of Bealham. He said that his instructions in relation to that matter were to act for the plaintiffs on the sale and apply the proceeds to Javelle Pty Ltd. In relation to that evidence there was no dispute on the hearing.

12. The contentious matter now follows. He said that he saw the husband plaintiff again and received instructions that the plaintiffs had completed a number of arrangements with Courtline Homes, had paid $25,000 to Meszes in respect of the purchase of Block 3, Section 363, Rawlings Place, Fadden, and that when the sale of that block and the improvements to floor level took place, the sum of $25,000 was to pass notionally to the plaintiffs and then be credited to Javelle Pty Ltd. He said that it was part of his instructions that he should deal with Rod Sheather of Javelle Pty Ltd in relation to the block, which was appropriate as he had no other way of knowing when construction would reach floor level.

13. Grosse's file note made at the time was in evidence (A7, part of Exhibit 11). The relevant terms of the note read:

"Dick
- Ppty sold
- current owner wants to sign a.s.a.p.
- we to check with Rod about current position
- leaving 23/24 August
- $22,000.00 to Courtline
- Courtline were going to build for Mr Meszes - he
can't sell his own residence
- Sale proceeds to Dick then to Courtline for his
home."

14. Grosse said in evidence he believed that he would have advised the husband plaintiff of his firm's previous involvement with Courtline Homes but could not remember any further details of what he had said in that respect. He could not remember, for instance, whether he had told the husband plaintiff of the Law Society of the ACT being opposed to solicitors acting for both parties in conveyancing transactions except in special circumstances.

15. The plaintiffs subsequently furnished instructions to the defendants by letter dated 24 August 1983 (Exhibit 1) which was the very day when the plaintiffs left Australia to take up the overseas posting. It was in the following terms:

"I am expecting two payments to come to Phung and I
during September.
The first will be the CPS Credit Union mortgage
of $39,000. Please see the attached copy of a letter
to Mr. Peter Martin, the Credit Union's solicitor.
Would you please let him know the final payment figure
based on:
Contract price 87,000
Cash payments 8,700
12,000
22,000
Sale of 8 of 363
Fadden 26,000
Mazda van in lieu
of 1,300 70,000
Balance 17,000
plus variations to be
calculated.
The second will be the sale of 3 of 363 Fadden for
$25,000. Would you please arrange for this to be
credited to Phung's S7 account with the CPS Credit
Union, Account No. 121096."

A copy of the plaintiffs' letter to Martin (Exhibit 2) was attached.

16. At that time the construction of the plaintiffs' home in Appel Crescent was nearly completed. Construction on the Fihelly Street property was nearly to floor level and construction on the Meszes' block in Rawlings Place was, as the husband plaintiff thought, about to start. The sale of Fihelly Street was subsequently completed and the sum of $26,000 out of the sale proceeds applied to the construction costs of Appel Crescent in accordance with the plaintiffs' oral and written instructions set out in the letter of 24 August 1983. The husband plaintiff was adamant that the instructions in relation to the Rawlings Place block as set out in his letter of 24 August 1983 were the same as the oral instructions given earlier to the defendants.

17. Grosse said in evidence that, when he received the letter of 24 August 1983, he took no action as those instructions "flew in the teeth" of his previous instructions, he had no prior details of the wife's account and the husband plaintiff had instructed him to take further instructions from Rod Sheather of Javelle Pty Ltd. He conceded in cross-examination that he did not take the prudent step of checking his instructions from the plaintiffs. The effect of his evidence was that he simply ignored those written instructions.

18. He proceeded to prepare a memorandum of transfer from Mr and Mrs Meszes to Javelle Pty Ltd which was executed in March 1984. The transfer to Javelle Pty Ltd was registered on 16 March 1984. There was no formal conveyancing settlement and no funds changed hands. After accounting to Javelle Pty Ltd, Grosse closed his file and rendered an account to Javelle Pty Ltd. He did not inform the plaintiffs of what had happened, nor render them an account. The fact that the plaintiffs thereby lost their security in the land did not occur to Grosse.

19. In February 1984 the plaintiffs sent a letter to Courtline Homes enquiring about the progress of construction on the Meszes block in Rawlings Place but received no reply. As a result of information received from Meszes, the plaintiffs then wrote to the defendants on 22 June 1984 (Exhibit 3) in the following terms:

"re FADDEN Block 3, Section 363
You may recall that I paid the purchase price for
this block intending to build a house for my father
when he returned to Australia following the death
overseas of his wife. He returned, but preferred to
purchase an already constructed house nearer to where
we were then living. The block was in Jim Meszes'
name.
Courtline wished to build on it, submitted plans
that were approved, but were delayed in the
construction by the wet spring. I spoke to Rod Sheaver
by phone in early December 1983 and at that time he was
expecting to build to floor level by the end of that
month. As yet, however, I have still had no word
whether the title has been transferred. Meanwhile I am
still $25,000 light and have lost a year's interest]
Would you mind checking where we stand?
We are settled in Jakarta, have a reasonable house
and are enjoying life. If you ever feel inclined to
spend a few days in Jakarta, welcome to stay.
With all good wishes,"

20. At that stage the plaintiffs had still not received any advice whether construction on the block had been completed to floor level or whether at that stage of construction the block had been sold.

21. The defendants replied to the plaintiffs by letter of 19 July 1984 (Exhibit 4) in the following terms:

"re Block 3 Section 363 Fadden
Thank you for your letter dated 22 June 1984.
We have requested Courtline Homes advise (sic) in
relation to the sale proceeds for the abovementioned
property as we understood same were to be applied to
progress payments on your own property in Fadden.
We understand Mr Sheather has written to you in this
regard but we would be pleased to hear further from you
should this not be the case."

22. By letter dated 3 November 1984 (A24, part of Exhibit 11), the defendants wrote to Javelle Pty Ltd for information about the sale proceeds for Block 3, Section 363, Fadden, in the following terms:

"re Block 3 Section 363 Fadden
Mr & Mrs Allen
We refer to the writer's recent telephone conversation
with your Mr Rod Sheather.
We confirm Mr & Mrs Allen have enquired regarding the
sale proceeds of Block 3 Section 363 Fadden and we note
that the total funds were drawn by yourselves from
A.G.C. and no funds changed hands on settlement. We
understood you would be separately accounting to Mr
Allen in relation to progress payments for Appel
Crescent.
Would you please contact Mr Allen in relation to the
provision to him of the sale proceeds which he
understands to be $25,000.
Would you please advise the writer of further
developments."

23. In the meantime, the plaintiffs were pursuing their own enquiries from Courtline Homes.

24. Eventually Nobleza sent a letter dated 30 August 1984 to the plaintiffs. The terms of which are not relevant except for the post-script, which reads:

"P/S Rod tells me that there has been some stuff up on
your payment for 3/363 Fadden - however interest will
be paid to you for the delay in paying."

25. By letter dated 14 January 1985 the plaintiffs again requested Courtline Homes to ensure that the proceeds from Block 3, Section 363 were put into the Credit Union account, in the following terms:

"Several simultaneous happenings prompt me to
write to you now. The first and most urgent is funds.
I need some quickly since I can see a chance of raising
the $54,000 you estimated as the cost of the Rawlings
house. Would you mind leaning on Rod to ensure that he
puts the proceeds from Block 3 of Section 363 into the
P.S.E. Credit Union, Account No. 11444, in the name of
Phung Allen. I was reassured to have your handwritten
note that Courtline would pay interest lost on this,
and would otherwise have been content to leave it with
you as working capital until our house commenced
building. But I may need to draw on it by very early
next month. I'm using it to purchase a luxury car at
diplomatic rates upon which I can make a substantial
amount once I have owned it for three months. I know
that it's no use my writing directly to Rod about this
- I have learned from experience that he never gets
around answering my letters] Would you make sure that
this gets organised."

26. Not having heard from Courtline Homes the plaintiffs sent another letter to Nobleza dated 18 February 1985 (Exhibit B), in the following terms:

"I'm finding it increasingly difficult to keep
track of affairs in Canberra from this distance. This
weekend I have received simultaneously your letter of
26 November saying that plans for 8 of 365 were
submitted, and the Dept of Territories letter of 6
February saying that they have been approved.
As a result I am raising funds locally for the
balance on the car, and facing the high interest rate]
If you have not transferred the proceeds of 3 of
363, it would be better to credit them to the
building. Would you let me know when you can start on
the foundations. We are both anxious now to get
started."

27. The plaintiffs letter of 18 February 1985 prompted a letter in reply from Nobleza dated 8 March 1985 (Exhibit C), in the following terms:

"Thank you for your letter of 14 Jan '85 and just
recently received 18 Feb '85. I must ask you to
forgive me for not replying promptly. I assure you my
intentions were very good but alas I have been working
like a dog lately.
Firstly, there is a reorganisation in Courtline Homes.
I am going to operate without Rod by the end of the
month. To cut a long story short, Rod is sick of the
building game, and the BLF & TLC bans on the industry P3N
the last two months on jobs and projects we are
involved in, just proved too frustrating.
None the less, I shall soldier on as a one man show
with Drewe Brophy and Terry Allen (not your relation)
to assist me, and of course Max Mom's as well.
So, on with the show. I shall now take a building
permit out on your behalf and commence work on site and
footings. I am trying to get Rod to sit down and
summarise the accounts as they stood in relation to
your money. I believe Rod is suggesting that money
owed to you from the time that the settlement of the
block on 3/363 Fadden accrues a 15% Flat p.a. interest
and continue to accumulate on a yearly roll over. I
have not got the figures from Rod yet but I should
before the end of this month and I will write on the
subject again.
As you can see from the copy of your approved drawing,
there are conditions related to the 'STORE ROOM' and
the max. heigh of 1.8m above ground limitation. A
sample of the roofing materials is also required for
NCDC approval. Please confirm your selection.
The other main issue is the cost of building that the
estimates indicate to us. I enclose a print out
spelling out the itemised costing. The budget total
indicate a cost of 64,017.30. This does not include
the Builder's margin and inflation cost. What I would
prefer to indicate is for the building be constructed
on a 'cost & profit margin' basis. The margin is
currently 15% including overhead costs and inflation.
Meaning that I shall present you with an itemised
account of expenses associate with materials & labour
at the time that progress payment is requested, and a
15% margin then added on to that account.
I shall take pictures of progress to keep you informed
of conditions. I shall prepare and send you a Building
Contract to sign when we come to an arrangement.
Regards for now."

28. The plaintiffs replied by letter dated 29 March 1985 to Nobleza (Exhibit D), the relevant portion of which reads:

"At this point I think I can find the $64,000 for
the house with the funds from the other block as part
payment. I may need a small mortgage to cover the last
$10,000 or so, but this should not be a problem. I'll
fix it while in Canberra."

29. It appears that during March 1985 Javelle Pty Ltd was trying to clarify the contract price and settlement figures in relation to Block 3, Section 363, Rawlings Place, Fadden, and requested confirmation of those matters from the defendants, the solicitors. The defendants replied to their request by letter dated 20 March 1985 (A29, part of Exhibit 11), in the following terms:

"re Block 3 Section 363 Fadden
Transfer from Meszes - Mortgage to A.G.C.
(Advances) Limited
We refer to your recent request for confirmation
regarding contract price and settlement figures in this
matter.
We enclose, for your information, a copy of our letter
to you dated 15 March 1984. As we had been advised by
A.G.C. that the funds were advanced to you on 13 March
1984 settlement of the transfer and mortgage was
effected as at that date. As you will recall the
contract and transfer executed by Mr & Mrs Meszes was
undertaken without their receiving either deposit or
balance of purchase monies and with Javelle Pty. Ltd
bearing the rates liability.
We note that the total advances drawn against the
subject property from A.G.C. have been retained by the
company and that no funds have been paid either to Mr &
Mrs Meszes or, at their request, to Mr & Mrs Allen.
For your further records we enclose a photocopy of the
Agreement for Sale executed by Mr & Mrs Meszes and also
a copy of our letter dated 3 July 1984 in relation to
the funds expected by Mr & Mrs Allen.
Should you have any further questions regarding either
of the above matters please do not hesitate to
telephone the writer."

30. Javelle Pty Ltd went into liquidation on 26 April 1985. At about that time the plaintiffs received a note from the husband's father enclosing a cutting from "The Canberra Times". I infer that it was by that means that the plaintiffs became aware of the liquidation of Javelle Pty Ltd. The husband plaintiff immediately arranged to return to Australia, which he did, and after talking the matter over with his father, instructed his present solicitors. At the time of liquidation the amount of $25,000 had still not been paid into the wife's Credit Union account, nor had the plaintiffs been informed that their account with Javelle Pty Ltd in the sum of $25,000 had been acquitted by building work on the Rawlings Place property. The official liquidator of Javelle Pty Ltd has advised the plaintiffs that there appears to be no likelihood of a dividend being declared in the liquidation (Exhibit 8) and as at 13 February 1989 that was the current position (Exhibit 12).

31. By letter dated 1 May 1985 (Exhibit 5) the plaintiffs' solicitors gave notice of demand to the defendants for reimbursement of the sum of $25,000 plus interest from the date of settlement of the sale of Block 3, Section 363, Fadden. The defendants replied by letter of 10 July 1985 (Exhibit 6) rejecting the plaintiffs' claim and inviting the plaintiffs "to test the metal (sic) of the preposterous propostion (sic) by instituting the appropriate proceedings", which is precisely what the plaintiffs did.

32. It was submitted on behalf of the plaintiffs that if the plaintiffs' instructions to Grosse were to apply the proceeds of the sale of Block 3, Section 363, Fadden, to the wife's account with the CPS Credit Union, Grosse clearly breached the terms of his contract and was negligent in not acting in accordance with those instructions. In my view it should have been obvious to Grosse that Javelle Pty Ltd had an opposite interest to that of the plaintiffs and that, as he was acting for both parties in the conveyancing transaction, he should have taken special care in obtaining instructions and implementing those instructions.

33. I find that at all material times the plaintiffs' instructions to Grosse were to pay the proceeds of the sale into the wife's account with the Credit Union. They were the original instructions and they were confirmed in writing by letter of 24 August 1983 (Exhibit 1). That Grosse failed to comply with those instructions cannot be excused on the basis that he had to communicate with the other party to the conveyancing transaction, Javelle Pty Ltd, to ascertain when construction had reached floor level and a sale negotiated. At least when the letter of 24 August 1983 was received by the defendants, the plaintiffs' instructions as to the disposition of the $25,000 from the sale were quite clear and were not countermanded at any time prior to settlement of the transaction on 13 March 1984. It should have occurred to Grosse that it would not be appropriate and, indeed, would be a breach of his duty to the plaintiffs to take instructions from Javelle Pty Ltd about the disposition of the sum of $25,000.

34. In my judgment, the defendants breached their contract of retainer with the plaintiffs in applying the proceeds of sale in a way which was contrary to their instructions and were negligent in their duty to the plaintiffs to protect the plaintiffs' interest in and about the completion of the sale in failing to deduct from the proceeds the sum of $25,000 or otherwise secure the payment of that sum in accordance with their instructions.

35. It was submitted on behalf of the defendants that even if the defendants had failed to follow the plaintiffs' instructions, their actions had been ratified by the acquiescence of the plaintiffs in what took place.

36. Counsel relied upon the plaintiffs' letter to the defendants dated 22 June 1984 in which the husband asked the defendants to check with Courtline Homes about whether the title to Block 3, Section 363, Rawlings Place, had yet been transferred, and the defendants' reply of 19 July 1984 advising the plaintiffs that they had asked Courtline Homes to advise in relation to the sale proceeds for the abovementioned property as the defendants understood they were to be applied to progress payments on the plaintiffs' own property in Fadden. At least by the time the plaintiffs received the letter from Nobleza dated 30 August 1984 they knew that the $25,000 had been paid to Courtline and not into the wife's Credit Union account, yet they did nothing, preferring to accept what had happened until their letter of 14 January 1985 to Nobleza. Counsel argued that, even on the terms of that letter, the plaintiffs were accepting that the money had been paid to Courtline and not to the Credit Union account.

37. I am not persuaded that the plaintiffs ever ratified, whether by acquiesence or expressly, what the defendants had done. The husband said in cross-examination that when he sent the letter of 14 January 1985 he was not sure whether the funds were with Courtline or not. He knew from Meszes that they had signed the transfer but still had no information about whether the block had been sold. Rather than ratifying the transfer of funds to Courtline, I P]N think the proper construction of the letter of 14 January 1985 is that the plaintiffs were requesting Courtline to ensure that the money was paid into the Credit Union account in accordance with their original instructions to the defendants even if there had been what Nobleza had previously described as a "stuff up" in that respect.

38. There is certainly no evidence that the plaintiffs ever told the defendants that they would accept the defendants' failure to carry out their instructions. That the plaintiffs really did not know what was going on is evidenced by their letter of 18 January 1985 in which the husband told Nobleza that he was finding it increasingly difficult to keep track of affairs in Canberra from Jakarta. Admittedly in that letter he indicated that if the moneys had not been transferred into the Credit Union account it would be better to credit them to the building, but at that stage the plaintiffs still did not know whether building had commenced.

39. By his reply of 8 March 1985 Nobleza of Courtline did not answer the plaintiffs' requests for information about the moneys being transferred into the Credit Union account. Of course, at that stage Javelle Pty Ltd was heading for the liquidation which was ordered on 26 April 1985.

40. Counsel for the defendants relied upon the passages in Chitty on Contracts (Specific Contracts), 25th Edition, para. 2221 and 2225:

"2221 Proof of ratification. Ratification will be
implied from any act showing an intention to adopt
the transaction, and may be inferred in
appropriate cases even from silence or mere
acquiesence; and if an act is adopted at all, it
will be held to have been adopted throughout. ..."
"2225 Effect of ratification. The effect of
ratification is to put all the parties concerned
in the same position as that in which they would
have been if the act ratified had been previously
authorised. ..."

But it is clear law that a person ratifying a contract must, in order to be bound, know fully of all the material circumstances in which the act is done. The principal will be bound if he intends to ratify the act in any event (Chitty, para. 2223).

41. The principal is stated differently but to the same effect in Cheshire & Fifoot, Law of Contract, 4th Australian Edition at para.2028:

"The ratifying principal must have full knowledge of
what the agent has contracted to do or not to do or his
ratification must be in such unqualified terms that the
inference may be properly drawn that the principal
intended to assume responsibility for whatever the
agent contracted."

42. In my judgment, the plaintiffs could not be held to have acquiesced in what the defendants had done with the sale moneys simply because they had been told by Courtline in the post-script in Nobleza's letter that there had been "some stuff up" and that interest would be paid by Courtline for the delay. Nor did they ever manifest an intention to acquiesce in what the defendants had done in their correspondence with Courtline commencing with their letter of 14 January 1985. The letter of 18 February 1985 to Courtline should be construed as the plaintiffs' own effort either to get the money into the wife's account or obtain building work to the value of $25,000. Their efforts in that respect proved fruitless. I reject the defendants' plea of ratification.

43. The plaintiffs are entitled to recover the sum of $25,000 plus interest from the defendants for their breach of contract and breach of the duty of care owed by the defendants to the plaintiffs. Interest is to be calculated from the date of the settlement of the sale of Block 3, Section 363, Rawlings Place, Fadden, which was 13 March 1984. I apply the usual interest rate of 14% per annum which yields, for just under five years, an interest component of $17,000 in round figures.

44. There will be judgment for the plaintiffs against the defendants for the sum of $42,000 plus costs.