Tassie DPP liable for fat negligence award

DPP Tim Ellis will have to shoulder his portion of a $1 million damages award by the Van Diemen's Land full court ... Grossly expensive spat with former client of Clarke & Gee ... Teeth gnashed across the Map of Tasmania    

DPP Ellis: blameless, yet liableTaswegian DPP Timsy Ellis and the old boys at Launceston law shop Clarke & Gee have gone down in a full court damages and professional negligence defeat.

The damages bill is anticipated to be close to $1 million, for which the four former partners are liable - Bruce Doolan, Tim Ellis, Phillip Welch and David Smith.

This has been a hideously expensive and long-winded adventure in litigation, essentially involving who said what to whom and how many telephone calls the client made to the firm.

The case is also a showpiece of Launceston's finest.

The chief justice Ewan Crawford was at Douglas & Collins, Stephen Estcourt (for the respondent) was at Archer Bushby, as was one of the other judges on the appeal, David Porter.

Crawfo, Estcourt, Porter, Timsy and the other lads at Clarke & Gee all practised with and against each other. 

Doolan, who used to open the batting for Tasmania, has remained with the old shop, while the other partners have moved on.

The troubling aspect is that their insurance is problematic, as some of the cover was with the now defunct HIH.

Ouch.

This must be particularly troubling for the DPP, who is blameless. However, this is what happens when people who should know better get into bed with commercial lawyers or "form fillers".

Crawford CJ, Porter and Alan Blow dismissed an appeal by the former partners against a finding by Justice Shan Tennent that Doolan had breached his duty of care to his client, a hotel-motel business owned by Renkon Pty Ltd.

The full bench allowed a cross appeal by Renkon and increased the damages awarded against the lawyers.

On every major point the appellants failed. As this is an important professional negligence case for Taswegia, with significant implications for all the failed appellants, we'll provide you with as many details as possible.

Background

Renkon's  hotel-motel operated at premises leased from the Ross Ambrose Group Pty Ltd.

Doolan was the solicitor with carriage of Renkon's matters.

The business was purchased by Renkon from Deming No 80 Pty Ltd, but before the purchase was completed it emerged that the land was burdened by a restrictive covenant prohibiting sale of liquor to the public.

Ambrose, as landowner, sought to obtain an exemption from the covenant, but it became clear that this could not be completed prior to settlement of the sale of the business.

The parties agreed that if an exemption was not obtained within two years of purchase, Ambrose would accept a surrender of the lease and together with Deeming would pay Renkon $1 million.

Renkon's purchase was finalised on June 30, 1989. Contrary to expectations at the time of purchase, the land was never exempted from the covenant.

In May 1991, a director of Renkon and licensee of the business, Suzanne Rees, received licensing notices requiring extensive and expensive work to be done on the premises.

She phoned Doolan seeking advice as to whether she could avoid having to comply.

Doolan's advice did not include the possibility that Renkon could avoid complying with the notices by obliging Ambrose to surrender the lease (and obtain $1 million from Ambrose and Deming) as the exemption to the covenant had not been obtained within the time stipulated in the agreement.

In September 1992, Renkon was provided with that advice from a Hobart solicitor, who informed the directors that the land had not been exempted and drew their attention to the terms of the agreement.

Renkon instructed Doolan to write to Ambrose demanding that a surrender of the lease be accepted.

Ambrose refused. Renkon reduced the amount of its monthly rent payments, and fell into arrears.

Procedural history

Ambrose commenced proceedings against Renkon to recover the arrears. Renkon counter-claimed, seeking specific performance of the covenant agreement.

At trial, Justice Christopher Wright held that the agreement contained an implied term that Renkon was only entitled to oblige Ambrose to surrender the lease within a reasonable time, and that the reasonable time had expired.

When Doolan wrote to Ambrose in September 1992, it was over a after the expiry of the two year period following purchase.

Judgment was entered in favour of Ambrose in the sum $304,485 and Renkon was ordered to bear the landlord's costs.

Renkon commenced third party proceedings against Doolan and his partners, claiming they were responsible for negligently providing incomplete advice.

Tennent J found in favour of Renkon and awarded $762,588 in damages.

Doolan and his partners have appealed on both questions of liability and quantum. Renkon cross-appealed, contending that bigger damages should have been awarded.

Appeal

Liability

The trial judge held that Doolan had a duty to advise Rees in relation to the covenant agreement, and the specific possibility that it might provide Renkon with a right to surrender the lease and avoid compliance with the licensing notices.

The appellants submitted on appeal that the duty of care did not extend to providing that advice.

The full Supremes were satisfied that Rees, as representative of Renkon, made an enquiry of Doolan as to whether the lease was in force when she telephoned him.

Accordingly, the scope of the duty of care owed by Doolan is informed by that request.

The full court noted that Rees' request was "vague and imprecise", but importantly Doolan made no attempt to clarify or limit the scope of the matters upon which he was being retained to advise.

In that context, Doolan's duty was to provide thorough advice. His failure to advise Rees that Renkon could avoid compliance with the licensing notices by way of seeking to enforce the covenant agreement constituted a breach of duty in contract and tort.

The appellants also appealed on the grounds that Rees' obligations as licensee and Renkon's repair obligations under the lease were separate sets of obligations, and that failure by the trial judge to consider that distinction constituted an error.

The full court had no difficulty in finding that this distinction had no bearing on the determination of the appellant's liability.

The appeal against the finding of liability was dismissed.

Failure to draw an adverse inference

Crawford CJ: part of the Launceston old-boys' unionThe appellants also contended that Renkon's failure to call their Hobart solicitor as a witness, who swore an affidavit joining the appellants to the proceedings, required the trial judge to infer that his evidence would have been adverse to Rees' credibility and Renkon's case.

The full court gave that one short shrift, on the basis that Renkon's Hobart solicitor could not have testified as to the substance of Doolan's advice because any such testimony would be inadmissible hearsay.

Crawford, Blow and Porter also noted that in relying on Rees' credibility, the trial judge preferred her testimony that there had been two telephone conversations rather than Doolan's evidence that there had only been one, and that the affidavit did not address this point.

Quantum of damages

Availability for damages for loss of chance

The trial judge did not find that it was a certainty that Renkon would have exercised its right to surrender the lease within a reasonable time, or use that right as leverage in negotiations with Ambrose.

HH awarded $410,000, being slightly less than half of what Ambrose would have had to pay Renkon if there had been an effective surrender under the agreement.

The appellants argued that in awarding less than 50 percent of that sum, her Honour indicated a finding that there was a less than 50 percent chance that Renkon would have availed itself of the otherwise lost opportunity, i.e. that the burden of proof required to award damages under that head (whether the opportunity would have been taken up on the balance of probabilities) was not met.

The appeal judges found that the trial judge's analysis of Renkon's evidence – i.e.  testimony by Rees and two employees in support of the fact that Renkon desperately wanted to "get out of the lease" – implied that her Honour was satisfied that Renkon would have been more likely than not to avail itself of the opportunity.

Even if this was not her implicit finding, the full court was otherwise satisfied of this.

The appeal bench noted the "difficulty" in answering this point directly in that, "oddly enough the direct question of what Renkon would have done had it been advised of the opportunity was not asked" on appeal.

The appellants also claimed that the trial judge should not have included the judgment obtained by Ambrose against Renkon in the sum to be paid by Doolan to Renkon in damages, because Renkon's failure to pay rent was not caused by the appellants' breach of duty.

This argument was also rejected on the basis that the appellants conceded those items of damage at trial and that evidence was not lead on this point, so it could not be taken on appeal as matter of general principle.

Cross appeal

Renkon contended in a cross-appeal that Tennent underestimated the chance that it would have taken-up the opportunity to have Ambrose surrender the lease or used it as a bargaining tool in negotiating a better arrangement with the landlord.

Renkon contended that the possibility was actually far greater than 50 percent.

The full court allowed the cross-appeal, referring again to the evidence of Rees and an employee, and held that the probability was actually 75 percent of the value of the original covenant agreement, subject to some other "adverse contingencies" (such as the fact that the covenant agreement provided that certain costs be subtracted from the sum of $1 million).

Damages for loss of chance were awarded in the sum of $615,378.75.

Renkon raised a further cross-appeal on the basis that the trial judge should have awarded damages by way of interest, for loss of the use of the money as a result of the appellants' breach of duty.

The trial judge did not make such an award at first instance on the basis that Renkon had not established this type of loss.

The appeal judges were satisfied, in consideration of Renkon's submission that the money lost would have been applied to the significant debts the business had incurred, that such a loss was established.

Renkon was awarded damages in the nature of interest calculated on the new sum of $615,387.75.

The court will hear further submissions on the amounts that should constitute the new judgment sum.