Begbie v Michell [2003] NSWCA 149 (13 June 2003)

Last Updated: 17 June 2003

NEW SOUTH WALES COURT OF APPEAL

CITATION: BEGBIE v. MICHELL [2003] NSWCA 149

FILE NUMBER(S):

40092/02

HEARING DATE(S): 23/10/02; 12/12/02

JUDGMENT DATE: 13/06/2003

PARTIES:

Philip Begbie (Appellant)

Michael Michell (Respondent)

JUDGMENT OF: Meagher JA Handley JA Beazley JA

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC6552/99

LOWER COURT JUDICIAL OFFICER: Patten DCJ

COUNSEL:

W.H. Nicholas QC/M. T. McCulloch (Appellant)

G. Sirtes (Respondent)

SOLICITORS:

David Geddes (Appellant)

Mallesons Stephen Jaques (Respondent)

CATCHWORDS:

Lease - option to purchase - valuation of property - rent capitalisation - existing use rights

Solicitor - whether negligent

Appeal - question of fact

Negligence - causation - 'but for' test

LEGISLATION CITED:

DECISION:

Appeal dismissed with costs.

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40092/02

MEAGHER JA

HANDLEY JA

BEAZLEY JA

13 June 2003

BEGBIE v. MICHELL

FACTS

A lease of premises, which had existing use rights as a veterinary clinic, also included an option to purchase. The lessee exercised the option. As the lessor and lessee could not agree on a purchase price, a valuation clause in the lease was invoked. Only one of the three valuers used a rent capitalisation basis to value the property.

The respondent had drafted one aspect of the valuation clause. The appellant claimed that the respondent had been negligent, by breaching his retainer in not drafting a clause that required the property to be valued on a rent capitalisation basis. The trial judge found that the respondent's retainer did not extend to drafting a rent capitalisation clause.

HELD per Beazley JA (Meagher and Handley JJA and agreeing)

(i) The negligence alleged was not causative of damage (if any) suffered by the appellant as there was unchallenged evidence that had the lease contained a rent capitalisation clause the lessee would not have entered into it.

(ii) There was no basis under the "Abalos principle" to displace the trial judge's acceptance of the respondent's evidence that his instructions were not to draft a rent capitalisation clause: Abalos v. Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167.

ORDERS

1 Appeal dismissed with costs;

2 Leave to amend Ground 21 of Appellant's Notice of Appeal refused.

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40092/02

MEAGHER JA

HANDLEY JA

BEAZLEY JA

13 June 2003

BEGBIE v. MICHELL

Judgment

1 MEAGHER JA: I agree with Beazley JA.

2 HANDLEY JA: I agree with BeazleyJA.

3 BEAZLEY JA: This is a plaintiff's appeal from a decision of Patten DCJ in which his Honour rejected the appellant's claim that the respondent, a solicitor, was negligent in the manner in which he acted for the appellant in relation to the terms of a lease of premises at Pendle Hill (the premises).

The lease agreement

4 The appellant initially granted a lease of the premises to Frenchette Pty. Ltd. for a period of twelve months commencing on 1 July 1993, with an option to renew for two periods, each of 3 years.

5 Frenchette is a company controlled by a Mr. Mark Stoker (Mr. Stoker). Both the appellant and Mr. Stoker are veterinary surgeons and the premises had been used as a veterinary clinic in the past and had existing use rights for that purpose. Prior to the time for the exercise of the first option to renew, Mr. Stoker indicated to the appellant on several occasions that he was only prepared to renew the lease if he had an option to purchase the premises at the end of the first 3 year period. The appellant, although reluctant to grant an option to purchase, agreed to do so. In August 1994 Mr. Stoker presented the appellant with a signed lease agreement dated 12 August 1994 (the Stoker document) incorporating a condition, which in legal form, was a right of pre-emption, but which was referred to by the parties as an option to purchase. It is convenient to retain that terminology, as the legal distinction between the two is not relevant to the matters in issue on the appeal. The rent specified in the lease was $1,522.50 per week subject to periodic review. Mr. Stoker gave evidence that he considered that this rent was high and he was only prepared to pay it because the appellant was required to offer him the premises for sale at the end of the first renewed lease term.

6 The Stoker document contained the following clause:

"6. AGREEMENT FOR SALE AND PURCHASE OF THE CLINIC

6.1 (1) If during the term Begbie wishes to sell the premises and the Clinic (including assets) he may only do so if he sells the same to Stoker and only if he gives three months written notice to Stoker of his intention to sell.

If Stoker does not accept an offer to sell during the term of the lease, Begbie cannot sell to another person or Company, except under the conditions referred to in Clause 6.3.

(2) Notwithstanding Clause 6.1(1) Begbie shall make an offer to sell the premises and the Clinic (including the assets) to Stoker three months immediately prior to 30th June 1997, i.e. at or about the 1st April 1997, and again if the lease is renewed for a further term, three months prior to 30th June 2000, i.e. at or about the 1st April 2000.

(3) The sale price of the premises and the Clinic (including the assets) shall be calculated as set out hereunder:

(a) The goodwill of the Clinic for $104,545 ...

(b) the Equipment for $24,775.00 ...

(c) the Premises for the agreed market value of the premises. If Begbie and Stoker are not able to agree upon the market value for the premises they shall each without delay appoint a registered valuer to value the Premises (but not the Assets) to determine the market value of the premises. The two valuers so appointed shall without delay appoint a third valuer who shall also determine the value of the Premises. The price for the premises shall be the average of the three determinations. The costs of obtained (sic) the valuations shall be borne equally between the Parties irrespective of Completion.

Within seven days of completion of the calculation of the price (or such longer period as Begbie may agree to) Stoker must nominate if he wishes to purchase the Premises and the Clinic at the sale price as hereinbefore provided. If Stoker does not so nominate he will be deemed not to have accepted the offer to sell.

.........

6.3 If Stoker does not accept the offer referred to in Clause 6.1(2), within the stipulated time (or such longer time as Begbie may agree to) Begbie shall be at liberty to sell the premises and/or Clinic and the assets to any other person without any further liability to Stoker (but without prejudice to any rights accrued to Stoker) provided however that Begbie must not sell to another person for a price less than that offered to Stoker without first making a further offer to Stoker which Stoker must accept in writing within seven days."

7 Upon receipt of the Stoker document, the appellant made arrangements to consult the respondent, forwarding the document to him prior to a meeting arranged for 25 August 1994. This was the only face to face consultation between the appellant and the respondent relating to the terms of the lease.

8 The appellant and respondent differed as to what occurred at the consultation. The trial judge's resolution of this difference is at the heart of the appeal.

9 The appellant contended that during the course of the consultation the respondent advised him that a rent capitalisation provision was the normal way to value a commercial property and such a provision was missing from the Stoker document. He also asserted that the respondent advised him that if such a clause was inserted he would obtain a proper return on the property. The appellant said that he asked the respondent how rent capitalisation worked and that the respondent explained this to him. He then asked him what drafting was needed to achieve that result. The appellant contended that the respondent drafted a clause during the course of the consultation and assured him that that clause would "do the job".

10 The respondent said in his evidence that whilst he and the appellant had a conversation as to whether the valuers should be specifically directed to capitalise the rent, he was directed not to include such a provision, the appellant commenting "There's no point. Stoker would not agree to a clause like that anyway."

11 The respondent denied that he drafted any clauses during the course of the consultation and said that the only drafting he did was contained in a letter dated 6 September that he wrote to the appellant. In that letter the respondent confirmed his instructions in these terms:

"1. Apart from a number of specific matters referred to below you are happy with the commercial terms contained in the agreement; and

2. Any amendments to the documents should be kept to a minimum."

After commenting on certain other clauses in the draft agreement, the respondent made the following comments in respect of cl.6:

"2. Clause 6.1(2) as presently drafted compels you to offer the property for sale at the end of the second term. The arrangement with Stoker is that he should have a right of first refusal during the second term and no more. Accordingly, the last two lines of clause 6.1(2) should be deleted.

3. Clause 6.1(3)(c) deals with the valuation of the premises on a sale. We note that you are liaising with Council in relation to confirmation of the existing use rights. A further paragraph in the following terms should be included in ...

`Any valuer appointed pursuant to clause 6.1(3)(c) shall in determining the value of the Premises:

(i) Have regard to the existing use rights attaching to the Premises and value the Premises on the basis that a Veterinary Clinic will be run from the Premises; and

(ii) have regard to the terms and conditions of the Lease.'"

This clause was subsequently incorporated into the lease as cl. 6.1(3)(d)(i) and (ii). The respondent further advised that a specific date for completion should be inserted.

12 The respondent gave evidence that in his opinion cl.6.1(3)(d) "enabled the valuation mechanism in cl.6 to achieve a market value without ignoring the fact that the building and property was used for income producing purposes, and had ... existing use rights", and that was the effect of his instructions.

13 The appellant forwarded the suggested amendments to Mr. Stoker without any further reference to the respondent. On 18 October 1994, the appellant, Mr. Stoker and Frenchette executed the agreement incorporating the new cl. 6.1(3)(d)(i) and (ii).

14 The essential point in issue in these proceedings is the extent of the respondent's retainer. This, in turn, focuses attention on the drafting of cl 6.1(3)(d)(ii). There is no dispute that the subclause is not a rent capitalisation clause.

15 The trial Judge preferred the respondent's evidence as to the instructions he was given at the consultation on 25 August and held that the respondent was not instructed to draft a rent capitalisation clause. His Honour concluded that

"[T]he retainer was limited to instructions requiring the defendant to act without negligence in advising upon the draft agreement and in settling the provisions which became paragraph 6.1(3)(d) of the agreement, having as its object that the valuers were directed to the fact that the premises had existing user rights as a veterinary clinic and were the subject of a lease at a particular rent".

The equity proceedings

16 The first renewed term of the lease expired on 30 June 1997. The annual rent at that time was $86,513.96. On 9 April 1997, the respondent, acting upon the appellant's instructions, wrote to Mr. Stoker and Frenchette offering to sell the premises and clinic for a total consideration of $757,200.00. The sum specified for the sale of the premises under cl.6.1(3)(c) was $615,000.00. The balance related to the amounts for goodwill and equipment. Mr. Stoker rejected the sale price nominated by the appellant. As he and the appellant were unable to agree as to the market value of the premises the valuation provisions of cl.6.1(3)(c) of the lease agreement were invoked and three valuers were appointed to provide a valuation of the premises.

17 It will be recalled that the lease contained a second option for renewal for a further term of 3 years. Mr. Stoker did not exercise that option and the lease term had expired by the date of the making of the earliest of the valuations. The valuation of the appellant's appointed valuer, Mr. Furney, who valued the premises at $581,500.00 was significantly greater than those of the other two valuers. Mr. Aitken, the valuer appointed by Mr. Stoker valued the premises at $260,000.00. The jointly appointed valuer, Mr. Good, valued the premises at $300,000.00. The average of the three valuations was $380,500.00, which, under cl. 6.1(3) became the sale price for the premises.

18 On 1 July 1997, the appellant purported to terminate the lease agreement for breach of a term relating to the provision of the books of account for the business. At that time, although the term of the lease had expired, a number of provisions remained operative, including the option to purchase provision contained in cl.6.

19 Mr. Stoker brought proceedings in the Equity Division of the Supreme Court relating to the termination of the lease. The proceedings were heard on 26 August 1997 by Windeyer J (the "Windeyer proceedings"), who found that there had been a breach entitling the appellant to terminate the agreement, but granted relief to Mr. Stoker against forfeiture. The appellant incurred solicitor/client costs in those proceedings which were not recoverable under the costs order made against Mr. Stoker.

20 A later dispute arose between the appellant and Mr. Stoker relating to the valuations obtained under cl.6.1(3)(c). By letter dated 9 October 1997, Mr. Stoker's solicitors had purported to act upon the option and specified a purchase price of $380,500.00 for the premises. The appellant contended however that the valuations of Mr. Aitken and Mr. Good did not conform to the requirements of cl.6.

21 This led to further Equity Court proceedings (the "Hamilton proceedings") between the appellant and Mr. Stoker in which the appellant sought a declaration that the valuations prepared by Mr. Aitken and Mr. Good had not been made in accordance with cl.6.1(3)(d). Mr. Stoker cross-claimed seeking specific performance of the contract for sale. The trial judge, Hamilton J, held that as the valuers had taken into account the existing use rights, the terms and conditions of the lease and that the premises had been used for many years as a veterinary clinic they had carried out the valuation exercise in accordance with cl. 6.1(3)(d).

22 In reaching his conclusion Hamilton J considered that a further question was involved in determining whether the valuers had properly undertaken their task, namely "[W]hether or not the market value of the premises has been identified by each of the valuers"). The appellant had argued that cl.6(3)(d) "compelled the valuers either to accept as the true market rental of the property the rent payable under the expired lease, or otherwise to make an allowance for a `site goodwill' attaching to the premises". On the appellant's argument, this should have resulted in both Mr. Aitken and Mr. Good valuing the premises at a higher value than they did.

23 His Honour rejected this argument. He considered that the valuers "were entitled to take the view as valuers that the rental paid under the expired lease was beyond what the market would now bear, even allowing for the fact that another veterinary surgeon might lease the premises if there were vacant possession and they were offered for lease". In reaching this conclusion, his Honour referred to Mr. Stoker's evidence that he considered that he was paying above market rental and was only doing so so as to obtain the advantages of taking over an existing practice and procuring for himself the opportunity to purchase it. His Honour considered that the valuers were not compelled to take the view that this would happen again.

24 The appellant was thus unsuccessful on his claim and specific performance of the agreement was ordered.

25 Having failed in the Hamilton proceedings, the appellant brought the proceedings in the District Court which are the subject of this appeal. These proceedings, as I have already indicated, were a claim in negligence. His Honour, Judge Patten, rejected the appellant's claim having found that the respondent's retainer was limited in the way to which I have referred in para. 13. His Honour considered that, although the valuers had adopted differing approaches to their task, and had reached "somewhat markedly disparate conclusions" they had made a valuation in accordance with the terms of the agreement by application of appropriate valuation principles. He considered that the fact that their conclusions differed merely reflected the fact that the task was complex and was one upon which expert minds could legitimately differ. His Honour concluded:

"In my opinion, even if clause 6.1(3)(d) could have been more happily expressed and in that sense arguably involved a breach by the Defendant of his obligation to exercise due professional skill, nothing flowed from such breach. Probably, on the evidence, the sub-paragraph drafted by the Defendant, added little of substance to clause 6.1(3) as it merely set forth matters which competent valuers would, in any event, have taken into account. However it did, at least, put this matter beyond doubt and, as Hamilton J found, each of the valuers took account of the matters which the sub-clause specifically drew to their attention.

The sub-clause drafted by the Defendant could, and probably should, have provided that, for the purposes of the valuations, it would be deemed that the option had been exercised but, in my view, nothing turns on this. As the evidence of Mr. McIntosh, I think, made clear in determining the market value of the premises, a valuer would appropriately discount artificial assumptions, including an assumption that contemplated the continuance of an above market rent for a relatively short term."

Issues on appeal

26 Three issues were argued on the appeal. They were categorised as the "Capitalisation of Rent" grounds (Grounds 1, 2, 7, 8, 14, 15 and 16); the "Ambiguity" grounds (Grounds 3, 4, 10, 11, 12, 13, 18 and 20); and the "Causation and Damages" grounds (Grounds 5, 6, 9, 10, 13, 17 and 19).

27 At the commencement of the hearing of the appeal, the appellant sought leave to amend his Notice of Grounds of Appeal to add a further ground 21 in the following terms:

"The trial Judge erred in failing to find that the respondent failed to explain the effect of clause 6.3(d)(i) and (ii) as drafted by him."

This ground of appeal was argued on the basis that the Court would determine, in the course of its determination of the appeal, whether the amendment would be allowed.

28 Counsel for the respondent submitted that the new ground raised factual issues which had not been the subject of evidence at the trial. In particular, he pointed out that, in order for the appellant to be able to make out the proposed amended ground, there would have to be evidence of reliance. This was not a case, on his submission, where reliance could be inferred. Counsel for the respondent further submitted that if the proposed ground was upheld it was likely that the Court would have to make a finding contrary to the respondent's evidence, which was accepted by the trial Judge, that he did not draft the clause during the course of the consultation with the appellant. I shall return to the question of the proposed amendment later in these reasons.

Damages/Causation

29 It is convenient to deal with the damages/causation issue first. The issue itself may be stated shortly. The appellant argued on the appeal, that at the time he consulted the respondent, he instructed him that he wanted the proposed option agreement to contain a rent capitalisation clause. It was submitted that on the appellant's evidence, which it was contended ought to be accepted, the respondent drafted cl.6.3(d)(i) and (ii) and the appellant asked the respondent whether "the clause as drafted would `do the job'". The respondent advised him that it would. It was further submitted that the clause did not achieve its purpose of being a rent capitalisation clause and therefore the respondent was in breach of his retainer.

30 This submission encounters two related difficulties. First, it requires a finding that the respondent's retainer was not limited in the manner found by his Honour. That, in turn, would require an acceptance of the appellant's evidence over that of the respondent's on the very issue in respect of which the trial judge rejected the appellant's evidence. This poses the second difficulty, namely, that the trial judge's rejection of the appellant's evidence was credit based and, for that reason, is protected from appellate review unless the appellant is able to bring himself within one of the exceptions to the Abalos principle (Abalos v. Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167).

31 Senior counsel for the appellant sought to meet this latter difficulty by submitting that his Honour's credit finding as such did not need to be disturbed because this part of the appellant's case was based upon evidence which the trial Judge did not consider. I will, for the moment, proceed upon the assumption that that submission is well founded and that the respondent was instructed to draft a rent capitalisation clause.

32 There is no dispute between the parties that cl.6(3)(d)(i) and (ii) did not achieve that end. On the assumption upon which I am presently proceeding, the respondent thereby breached his duty of care to the appellant, entitling him to claim damages. That raises the question as to whether the respondent's negligence caused any damage. His Honour found, and the evidence was all one way, that Mr. Stoker would not have entered into an agreement that contained a rent capitalisation clause. Mr Stoker gave evidence to that effect. The appellant conceded in cross-examination that Mr. Stoker would never have accepted an agreement that contained a rent capitalisation clause. He also conceded that he made that known to the respondent.

33 It follows, that even had the respondent followed his instructions as alleged by the appellant and drafted a rent capitalisation clause, nothing would have flowed from it because, on the unchallenged evidence, Mr Stoker would not have accepted it and therefore would not have entered into the lease. Accordingly, the appellant has not demonstrated that he had suffered any loss causally related to this assumed basis of negligence.

34 The appellant cannot, however, in my view, overcome the Abalos principle. Although senior counsel for the appellant referred to various parts of the appellant's evidence that he said were not considered by his Honour, that evidence related to the precise terms of the respondent's retainer and was to the same effect as the evidence expressly considered by his Honour, and in respect of which his Honour preferred the evidence of the respondent. It is well established that the trial judge does not have to refer to every piece of evidence given on a particular issue. In this case the appellant and respondent gave different accounts of their conversation on 25th August. His Honour's preference of the respondent's version cannot be overcome by reference to other portions of the evidence that did not find voice in his judgment but was to the same effect as that which did.

35 There is another aspect of the appellant's submission on this point that calls for comment. The appellant's argument before this Court was that the appellant's instructions were to draft a clause which was a rent capitalisation clause in substance but not in form. It was submitted that this was apparent from the appellant's evidence. This raises a novel spectre in legal drafting. If the appellant's supposed instructions were followed, it would have required the respondent to draft a clause in terms that were so camouflaged that Mr Stoker, who not only knew the significance of a rent capitalisation clause but who also had legal advice, would not recognise it as such. It is difficult to see how any clause could have achieved that purpose. There are other problems with the appellant's submission on this point. For example, had the respondent been successful in drafting a clause in terms so chameleon that its true meaning was hidden, it may have been attacked as being uncertain or may even have involved the respondent aiding conduct that was misleading. There was no suggestion to this effect in the cross-examination of the respondent. But in any event, having regard to the conclusion to which I have come, such matters need not be explored.

The rent capitalisation grounds

36 My conclusion in respect of the causation issue also disposes of the rent capitalisation grounds. Once his Honour accepted the respondent's evidence in preference to the appellant's, it followed that the respondent was not instructed to draft a rent capitalisation clause. The appellant has not succeeded in having that finding displaced. Accordingly, these grounds must also fail.

The ambiguity grounds of appeal

37 The remaining issue on the appeal raised what were categorised as the "ambiguity grounds". This part of the appellant's case is independent of the "capitalisation of rent" issue and relates to the appellant's claimed entitlement to recover from the respondent the costs, charges and expenses involved in the both the Windeyer and Hamilton proceedings. In order to properly deal with these grounds, it is necessary to have specific regard to the grounds of appeal which underpinned the general ground.

38 Grounds 3 and 4 directly attack the drafting of cl.6.1(3)(d) on the basis that it was ambiguous (Ground 3) and was drafted negligently (Ground 4). Ground 10 is a more specific allegation of negligence in that it contends that the respondent breached his duty of care in that cl.6.3(d)(ii) was meaningless given that it was intended to operate at a time when the term of the lease would have expired or would be about to expire. Ground 11 is that the trial Judge erred in failing to find that the respondent should have obtained the opinion of a valuer as to the meaning of cl.6.1(3)(d) before inserting it into the agreement. Ground 12 appears to go to the same issue. Ground 13 is a "failure to give adequate reasons" ground. Senior counsel for the appellant conceded however that the appeal was not going to be determined on that ground. That is an insight with which I agree and accordingly it is not necessary to give that ground any further consideration. Grounds 18 and 20 appear to raise the same point as ground 10, namely, that as cl.6.1(3)(d) failed to achieve anything beyond that which a valuer would normally do, the respondent had drafted a meaningless clause and thereby breached his retainer.

39 It is important at this stage to distinguish the appellant's claims for relief under this section. There were two claims for damages - one arising from the proceedings before Windeyer J and the other from those before Hamilton J.

The Windeyer proceedings

40 I have already referred to these proceedings. The point sought to be made by the appellant may be simply expressed. He entered into the lease with Mr. Stoker in circumstances which, had he known cl.6.1(3)(d)(ii) was not a rent capitalisation clause, he would not have done so. However, having entered into the agreement, he then got into dispute with Mr. Stoker in respect of another clause in the lease. That dispute led to litigation before Windeyer J in which the appellant was successful and was awarded costs on a party/party basis. He has "lost" however, the difference between the party/party costs and his solicitor/client costs. He claims that "but for" the respondent's negligence and breach of retainer, he would not have entered into the agreement and therefore would not have incurred costs in the Windeyer J litigation.

41 As argued, the appellant's case is a classic case of the "but for" test of causation. As a test of causation the "but for" test is rarely sufficient to establish that a particular breach has "caused" the claimed damage (see March v. Stramare [1991] HCA 12; (1991) 171 CLR 506). The appellant contends however that this case falls within the principles as discussed in Barnes & Ors. v. Hay (1988) 12 NSWLR 337.

42 In Barnes v. Hay, the plaintiff occupied premises in a shopping centre complex. After several years occupation he changed shops within the complex and had been offered a lease of the new shop by the owner. He consulted the defendants, a firm of solicitors, for advice relating to the proposed lease. The owner of the premises was at that time negotiating to sell the premises to a new owner.

43 The premises were sold to the new owner who having taken possession, commenced on a programme of works, and it was found, a campaign of harassment, directed at driving out all occupants of the premises so that it could undertake the complete refurbishment of the premises. The plaintiff was thereby forced to vacate the premises and lost what had been a thriving business.

44 The defendants conceded they had been negligent in failing to warn the plaintiff of the legal consequences of his not entering into the lease then offered to him by the previous owner, which lease would have bound the new owner. The solicitors claimed however that any loss suffered by the plaintiff was not caused by their negligence, but by the conduct of the new owner.

45 The Court of Appeal found that the plaintiff's loss was causally related to the negligence. Hope and Priestley JJA found that had the plaintiff entered into the lease offered by the previous owner, the lease would have been binding on the purchaser as successor in title and that, even if the purchaser had sought to evict the plaintiff it would have been readily restrained by court order from so doing. Their Honour's concluded at 340-341

"But for the negligence of the defendants, the plaintiff would have had the security which proper advice from the defendants would have given him. It was that security that the defendants were engaged to give him; it was to get protection against loss resulting from the lack of it that the plaintiff sought advice and assistance from the defendants. Undoubtedly the actions of the purchaser were a cause for his loss, but equally the negligence of the defendants was also one of the causes of that loss, and without it the probability is that the loss would not have occurred."

46 Mahoney JA also found that the solicitors' negligence was "a cause" of the plaintiff's loss. His Honour said at 356

"In the present case the reason why the Court should select the defendant's faulty advice as the, or a, cause of the plaintiff's loss is that that loss was the thing, or one of the things, which the advice ought to have been directed to avoid: the reason why the advice given was faulty was because it was apt to lead to the kind of loss which in fact was suffered."

47 The present case is quite different. The respondent's drafting of cl. 6.1(3)(d)(ii) had nothing to do with the dispute with Mr. Stoker that was the subject of the litigation before Windeyer J. This is aptly illustrated by the statement of Tucker LJ in Stansbie v. Troman [1948] 2 KB 48 at 51-52 (in a Judgment agreed in by Somervell LJ and Roxburgh J) and cited by Mahoney JA in Barnes v. Hay at 356:

"Tucker LJ, in the judgment with which Somervell and Roxburgh J agreed (at 51.52) said:

`Mr. Brown (for the plaintiff) referred to Weld-Blundell v. Stephens (1920) AC 956 and, in particular to a passage in the speech of Lord Sumner (at 986): `In general (apart from special contracts and relations and the maxim responeat (sic) superior) even though A is in fault, he is not responsible for injury to C which B, a stranger to him, deliberately chooses to do. Though A may have given the occasion for B's mischievous activity, B then becomes a new and independent cause.' I do not think that Lord Sumner would have intended that very general statement to apply to the facts of a case such as the present, where, as the judge points out, the act of negligence itself consisted in the failure to take reasonable care to guard against the very thing that in fact happened. The reason why the decorator owed a duty to the house-holder to leave the premises in a reasonably secure state was because otherwise thieves or dishonest persons might gain access to them; and it seems to me that if the decorator was as I think he was, negligent in leaving the house in this condition, it was as a direct result of his negligence that the thief entered by the front door, which was left unlocked, and stole these valuable goods.'"

48 In this case, the respondent's negligence (if any) gave rise to no more than the circumstance that the appellant entered into the lease which subsequently gave rise to litigation in respect of a different provision. It is difficult, in any event, for reasons I have already given to see how the respondent could be said to be negligent in the drafting of a clause which, on the appellant's case was meant to be a camouflaged rent capitalisation clause.

The Hamilton proceedings

49 This leads directly to the proceedings before Hamilton J. The history of those proceedings is discussed at paragraphs 19 and following. The appellant was ordered to pay costs of the litigation and damages to Mr. Stoker and the appellant sought to recover those monies by way of damages from the respondent. The appellant also claimed, that he suffered a loss, being the difference between the sale price to Mr. Stoker and the valuation of Mr. Furney. The appellant contends this loss was causally related to the respondent's "negligence". The negligence identified was the failure to draft a clause that, unambiguously, was a rent capitalisation clause. It barely requires repeating, but, on his Honour's finding, the respondent was expressly instructed not to draft such a clause.

50 The appellant then further contended that, having consulted the appellant, he was entitled to have drafted a clause which did not admit of competing interpretations and therefore the possibility that differing valuation methods might be adopted. The appellant's case on this point assumes that the respondent was negligent in his drafting of cl.6.1(3)(d). The trial judge made no such finding. During the course of the argument on the appeal, Handley JA, identified, as a possible case of negligence, a failure to advert to the fact that there may not be a lease in existence at the time the valuation exercise had to be undertaken. This formulation arose out of earlier discussion between the Court and counsel for the appellant that one reason different valuation methodologies were valid was because there was no provision in the lease that required the lease to be on foot at the time of the valuation, or alternatively, no provision that required such an assumption to be made. Senior counsel for the appellant submitted that the consequence of such an omission whatever the cause, was that cl. 6.1(3)(d) was "simply a meaningless collection of words" because, there was no lease in existence upon which it could operate. That argument, however, cannot succeed, given the unchallenged expert evidence in the case that a valuer would most likely discount any artificial assumption as to rent nor would a valuer value the property on the basis of an artificially high rent. There also remains the problem that Mr. Stoker would not have entered into a lease which included a clause, the effect of which would have increased the value of the premises by reference to what he considered to be an artificially high rental value.

51 The appellant's case may be tested another way, namely, by asking, even if the clause was ambiguous, what damages would have flowed from the ambiguity. Put another way, what would the financial position have been had the ambiguity been removed. The question permits of one answer only. For the reasons explained in the preceding paragraph, Mr. Stoker would not have entered into the lease. That would have left the appellant with the property but with no lease. As there was no evidence of what the appellant could have sold the house for and no evidence of what rent he could have achieved had he leased it to someone else, there was no evidence he had suffered any damage. To the extent that there was any evidence on the issue, it pointed in the direction that he would have received a lower rental than that paid by Mr. Stoker.

52 Counsel for the respondent submitted that in any event the proceedings before Hamilton J. had very little to do with cl. 6.1(3)(d)(ii). Rather the focus of the proceedings was on the alleged failure of the valuers to appropriately take account of the existing use rights. The trial judge held that there had been no such failure. The respondent's submission on this is correct and it follows, for that reason as well, that the appellant's `loss' flowing from these proceedings was not causally related to the respondent's conduct in drafting the clause in the terms he did.

53 For all these reasons the appeal must fail. It is convenient for completeness however, to refer to certain of the submissions of the respondent. There is also the question of the appellant's proposed amendment.

54 Counsel for the respondent submitted that even if cl. 6.1(3)(d)(ii) was superfluous that did not bespeak negligence, for two reasons. First, the respondent was instructed to make as few changes to the lease as possible and secondly, he was specifically instructed not to draft a rent capitalisation clause. This submission of course is founded on an acceptance of the respondent's evidence. That is an unassailable starting point if the appellant cannot overcome the Abalos principle. Assuming that to be the case, the respondent submitted that his Honour's finding as to the extent of the retainer was clearly correct. When the appellant consulted the respondent, the lease was in an apparently complete form and in fact had been signed by Mr. Stoker, save for any amendments. Cl.6.1(3)(a) was already part of the agreement which it was submitted, allowed "for market rent to govern the outcome of the exercise". Cl.6.1(3)(c) does not mention market rent. Presumably, the import of the submission was that the requirement to assess the `market value' encompassed as a possible methodology a valuation based on market rent. The rent being paid by Mr. Stoker was above market rent. Accordingly, it was submitted, any amendment sought to be introduced by the appellant into the lease "could not transgress the overarching requirement that what was the result of the valuation process was going to be [based on] market rent".

55 Although this reasoning provides support for the trial judge's conclusion, it involves a degree of hypothesising which is unnecessary in the circumstances. The bottom line, in my opinion, remains that Mr. Stoker would not have entered into a lease which contained a rent capitalisation clause.

56 Counsel for the respondent also submitted that there was other evidence that supported the trial judge's finding as to the extent of the retainer. In a note to counsel appearing for him in the Hamilton proceedings, he wrote that the respondent "put [cl. 6.1(3)(d)(ii)] in, from a request by me to mention more specifically how much rent I was receiving". This comment is very close to the respondent's version of the extent of the retainer. But even if it could be argued that the appellant's version as reflected in this statement qualifies the scope of the retainer as found by his Honour, the result in the case would have been no different. There is nothing in that statement which required the respondent to draft a rent capitalisation clause.

57 That leaves only the proposed amended ground 21. In my opinion the amendment should not be allowed for the reasons advanced in argument by the respondent (see para. 26). Accordingly, I propose the following orders:

1. Appeal dismissed with costs;

2. Leave to amend Ground 21 of Appellant's Notice of Appeal refused.

**********

LAST UPDATED: 13/06/2003