Two solicitors have successfully defended claims for professional negligence in the New South Wales Supreme Court on the basis that, although breach of duty was established, causation of loss was not.
In issue
The two key issues before the Supreme Court were:
- Whether the solicitors breached their duties of care in failing to advise the Plaintiff of relevant terms in a contract of sale of commercial property.
- Whether the plaintiff had proven that the alleged failures caused his alleged loss.
The background
The plaintiff, Mr Fussell, contracted to purchase a large industrial property in Western Sydney on 10 May 2012 for $1.7 million, with a delayed settlement of 5 years. Mr Lockrey was the vendor. He was an elderly gentleman who lived in a house on the property and sought to remain there until his death.
The two relevant contractual issues were:
- Clause 33.2 – permitted either party to rescind the contract if either party died before settlement.
- Life estate – the plaintiff purported to grant Mr Lockrey a life estate over the house on the property, however, the effect of section 23F(2) of the Conveyancing Act 1919 (NSW) was that this was not possible in circumstances where the house was not shown on a current plan.
Mr Lockrey died on 12 May 2017, and his executor thereafter rescinded the contract under clause 33.2. The plaintiff commenced proceedings in the New South Wales Supreme Court seeking specific performance. He was successful at first instance, however, that decision was overturned on appeal on the basis that ‘either’ party could rescind the contract under clause 33.2
Having failed in the specific performance action the plaintiff sued the two separate sets of solicitors that assisted him in his dealings with Mr Lockrey – Mr Hanrahan and then Mr Brown.
The plaintiff alleged the two solicitors failed to properly advise him in relation to clause 33.2 and/or of the defect in granting Mr Lockrey a life estate over the house on the land only.
The decision at trial
The three critical findings were:
- Mr Hanrahan breached his duty of care to the plaintiff, not because he did not advise the plaintiff of the effect of clause 33.2, but because he did not take the additional and necessary step of advising him to seek removal of the clause.
- Despite that breach, the plaintiff could not prove it was causative of loss. This was because Mr Hanrahan led evidence from Mr Lockrey’s solicitor that he would not have agreed to delete the clause where Mr Lockrey was elderly and in poor health, and Mr Lockrey would have followed that advice. This was despite the plaintiff giving evidence that his discussions with Mr Lockrey suggested he wanted to sell the property before he died.
- Mr Brown did not breach his duty of care in failing to finalise the property settlement prior to Mr Lockrey’s death because, even if he had, the plaintiff could not establish he had sufficient funds available to complete the purchase in any event. Again, the plaintiff failed to establish any breach caused his loss.
One interesting aspect of the judgment which may have influenced the court’s findings on causation, was the finding the plaintiff lacked credibility. This flowed from concessions that he had been untruthful in sworn affidavit evidence and meant the court preferred the evidence of Mr Hanrahan and Mr Brown on critical aspects relevant to causation.
Implications for you
The decision is a helpful reminder of the importance of proving causation in professional negligence claims, and for defendants to marshal compelling evidence to disprove a plaintiff’s causation ‘theory’ if possible.
With that in mind, and in the context of contracts for the sale of property, it is important to interrogate the likely position each party would have taken if properly advised by their solicitor, i.e. where it is alleged that advice was lacking.
Fussell v Hanrahan t/as Dignan & Hanrahan Solicitors [2024] NSWSC 1388
