Doolan, Bruce Richard v Renkon Pty Ltd

• Jurisdiction: Tasmania
• Judge: Blow J,Porter J
• Judgment Date: 24 August 2011
• Docket Number: 733/2010
• Court: Full Supreme Court
• Date: 24 August 2011

[2011] TASFC 4

[2010] TASSC 37

SUPREME COURT OF TASMANIA (FULL COURT)

Crawford CJ, Blow and Porter JJ

733/2010

Doolan, Bruce Richard

Ellis, Timothy James

Welch, Phillip Andrew

Smith, David Anthony

and

Renkon Pty Ltd

REPRESENTATION:

Counsel:

Appellants: K B Procter SC

Respondent: S P Estcourt QC, S Tatarka

Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Tabet v Gett (2010) 240 CLR 537; Price Higgins & Fidge v Drysdale [1996] 1 VR 346; G W Sinclair & Co Pty Ltd v Cocks[2001] VSCA 47; Australian Medic-Care Co Ltd v HamiltonPharmaceutical Pty Ltd (2009) 261 ALR 501, State of New South Wales v Burton[2008] NSWCA 319; Lahoud v Lahoud[2009] NSWSC 623; Olympic Holdings v Lochel [2004] WASC 61, followed.

Hungerfords v Walker (1989) 171 CLR 125, applied.

Duke Group Ltd v Pilmer (1999) 73 SASR 64; Pooraka Holdings Pty Ltd v Participation Nominees Pty Ltd (1991) 58 SASR 184; Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358; State Bank of New South Wales Ltd v Yee (1994) 33 NSWLR 618; Hutt v Cascade Brewery Coy Ltd [1991] TASSC 98 (judgment No 99/1991); Commonwealth v Chessell (1991) 101 ALR 182, referred to.

Aust Dig Damages [22]

Rogers v Whitaker (1992) 175 CLR 479; Carradine Properties Pty Ltd v D J Freeman & Co (1982) 126 SJ 157; National Home Loans Corporation v Giffen Couch & Archer[1998] 1 WLR 207; Austrust Pty Ltd v Astley (1993) 60 SASR 354, referred to.

Aust Dig Professions and Trades [1175]

Damages — Measure and remoteness of damages in actions for tort — Remoteness and causation — Proof of causation — Loss of opportunity — Opportunity to surrender lease and demand a payment — Whether a need for proof on the balance of probabilities that the plaintiff would have taken up the opportunity — Assessment of the value of the lost opportunity — Estimation of the value if the opportunity had been pursued to a successful outcome — Proof of a loss in accordance with the principles in Hungerfords v Walker (1989) 171 CLR 125.

Professions and Trades — Lawyers — Duties and liabilities — Solicitor and client — Negligence — In relation to property transactions — Advice as to status of lease — Incomplete advice — Inexperienced client.

Orders of the Court

• 1 Appeal dismissed.

• 2 Cross-appeal allowed.

• 3 The Court will hear further from counsel concerning the amount of the judgment sum to be substituted.

REASONS FOR JUDGMENT

FULL COURT

Blow JPorter J

1 The appellants were the partners in a Launceston legal firm, Clarke & Gee, as at May 1991. The respondent, Renkon Pty Ltd, was then a client of that firm. Renkon was the operator of a hotel/motel known as the Olde Tudor Motor Inn. It was leasing the premises of that business. During May 1991 a director of Renkon named Suzanne Rees phoned the firstnamed appellant, Bruce Doolan, and sought some advice on behalf of Renkon. Mr Doolan gave advice over the telephone. Subsequently, the landlord of the premises sued Renkon; Renkon took third party proceedings against Mr Doolan and his partners alleging that he was negligent in providing incomplete advice; there was a trial of the third party proceedings before Tennent J, and her Honour gave judgment for Renkon against the four appellants for $762,588 damages.

2 Mr Doolan and his partners have appealed, on grounds relating to both liability and quantum. Renkon has cross-appealed, contending that the award of damages should have been greater.

Background

3 At all material times the business premises were owned by Ross Ambrose Group Pty Ltd (‘Ambrose’). Until 30 June 1989 the business was carried on by an associated company, Deming No 80 Pty Ltd (‘Deming’). Renkon purchased the business from Deming for $1 million plus the value of the stock in trade. The purchase was completed on 30 June 1989. Renkon leased the premises from Ambrose for four years commencing on 1 July 1989. The lease provided for Renkon to have a number of options for renewal.

4 Renkon had four shareholders – Suzanne Rees, her partner Peter Shipton, and a couple named Plunkett. It was incorporated as a vehicle for the four of them to lease the premises and operate the business. Their shareholdings were equal. They each gave personal guarantees to Ambrose as to Renkon's performance of its obligations under the lease.

5 Before the completion of Renkon's purchase, it became apparent that part of the land that it proposed to lease was burdened by a restrictive covenant which provided that no intoxicating liquor could be sold to the public on the affected land. The covenant was contained in a schedule of easements forming part of a sealed plan. Arrangements were initiated for a petition to amend the sealed plan so as to exempt the leased land from the operation of the covenant. For practical purposes it was up to Ambrose, as the landowner, to take steps to get the sealed plan amended. There was no reason to think that the petition would be unsuccessful since Ambrose apparently owned all the land to which the benefit of the covenant attached. As the date for the completion of the purchase approached, it became clear that it would not be possible to get the sealed plan amended in time. Renkon therefore entered into a supplementary agreement (‘the covenant agreement’) with Ambrose and Deming. In consideration of Renkon completing the purchase of the business and entering into the lease of the premises, Ambrose and Deming agreed that, if the Recorder of Titles did not amend the sealed plan to exempt the leased land from the operation of the covenant within two years after the completion of Renkon's purchase, then Ambrose would accept a surrender of the lease, and the two companies would pay Renkon $1 million, less an adjustment sum relating to plant, equipment and stock. With the covenant agreement in place, completion of Renkon's purchase of the business occurred on 30 June 1989. Renkon entered into the lease and it commenced to operate the business.

6 The appellants acted for Renkon and its shareholders in relation to the purchase of the business, the incorporation of Renkon, the leasing of the premises, and the making of the covenant agreement. Mr Doolan had carriage of all those matters.

7 Things did not go according to plan in relation to the exemption of the land from the operation of the covenant. The two years went by without the Recorder of Titles having amended the sealed plan. It seems that nobody noticed that until late-1992, more than a year after the two years expired.

8 At a much earlier stage in this litigation, Wright J held that the covenant agreement contained an implied term ‘that Renkon would exercise its right to call upon Ambrose to accept the surrender within a reasonable time of the triggering event on 1 July 1991’: Ross Ambrose Group Pty Ltd v Renkon Pty Ltd, unreported, 72/1998, at 6. His Honour went on to express the view that a period of ‘about three months’ would have been a reasonable time for the purposes of the implied term. The context of his Honour's judgment will be explained later in these reasons.

9 In May 1991 Ms Rees was the licensee of the premises under the Liquor and Accommodation Act 1990. In that capacity she received two notices, apparently from a delegate of the Commissioner for Licensing, both dated 13 May 1991, requiring a great deal of work to be done in relation to the premises, particularly as to the repair and replacement of plant and equipment. She was concerned about the cost of the required work.

10 The receipt of the two notices prompted Ms Rees to phone Mr Doolan and request advice. In their evidence before the learned trial judge, Ms Rees and Mr Doolan gave different versions of what Ms Rees asked. She gave evidence that she asked Mr Doolan, amongst other things, to see if there was a way out of the lease. Mr Doolan gave evidence that she did not ask him to do that. The learned trial judge rejected the evidence of Ms Rees as to that point, and found that she ‘did not specifically seek advice about avoiding the lease altogether’. Renkon is not challenging that finding in these proceedings.

11 Her Honour made further findings, also unchallenged in these proceedings, that Ms Rees told Mr Doolan about the licensing notices, and asked him if there was any way she could avoid having to comply with them; that Mr Doolan agreed to look into the matter and get back to her; that he did not go to his archived file in relation to the 1989 transactions; and that he told her there was nothing she could do to avoid complying with the ‘orders’ unless Ambrose had breached the lease. It is common ground that Mr Doolan did not give Ms Rees any advice as to the possibility that the sealed plan might not have been amended to exempt the land from the covenant, and that Renkon might consequently acquire a right to surrender its lease on 1 July 1991.

12 In September 1992, Renkon was provided with some advice by a Hobart solicitor. He informed Renkon's directors that the land was still burdened by the covenant, and reminded them of the terms of the covenant agreement. As a result of that advice, Renkon instructed Mr Doolan to write to Ambrose on its behalf, calling upon Ambrose to accept a surrender of the lease pursuant to the terms of the covenant agreement. Mr Doolan wrote accordingly on 30 September 1992, but Ambrose refused to agree to the surrender of the lease.

13 The lease required Renkon to make monthly payments of rent to Ambrose. After Ambrose refused to accept the surrender, Renkon unilaterally reduced the amount of its monthly rent payments. Ambrose commenced this litigation by bringing an action for arrears of rent. Renkon counterclaimed against Ambrose and Deming, seeking specific performance of the covenant agreement. Proceedings were taken against third parties and a fourth party in respect of that counterclaim, but nothing now turns on that.

14 The lease expired on 30 June 1993. Renkon vacated the premises...