Permanent Custodians Limited v Geagea (No 4)

1. [1]

   HIS HONOUR: By motion on notice filed 12 December 2014, the fourth to sixth defendants sought orders that the proceedings be re-opened, that they be granted leave to make further submissions on the issue of whether the breach of warranty of authority is an apportionable claim pursuant to Part 4 of the Civil Liability Act 2002 and in relation to costs. If leave to re-open were granted and the Court was satisfied that the breach of warranty of authority is an apportionable claim, the fourth to sixth defendants seek an order that they pay 1.7% of the plaintiff’s costs on a party/party basis.

2. [2]

   It is necessary to set out some history of these proceedings and in the process understand the current status of them. The liability proceedings were determined by judgment on 13 May 2014, [1] in which the Court issued judgment for the plaintiff against the fourth, fifth and sixth defendants; ordered that the fourth, fifth and sixth defendants pay the plaintiff’s costs of and incidental to these proceedings; and granted leave to the parties (particularly the fourth, fifth and sixth defendants) to address any question of costs and the effect of proportionate liability on the amount of the damages to be awarded.

3. [3]

   In the proceedings on liability the plaintiff sued the first to third defendants for default under a mortgage and the fourth, fifth and sixth defendants (solicitors) in negligence, breach of warranty of authority and misleading or deceptive conduct.

4. [4]

   By the time the liability proceedings were concluded, the plaintiff had resolved its claim against the first, second and third defendants by those defendants paying $300,000 to the plaintiff plus $130,000 for costs. As a consequence of the leave granted in the liability judgment, the Court received submissions on proportionate liability and on costs. In short, the liability judgment found for the fourth to sixth defendants on the claim in negligence but found for the plaintiff arising from a breach of warranty of authority and for misleading or deceptive conduct.

5. [5]

   In short, the fourth to sixth defendants accepted that the breach of warranty of authority was not an apportionable claim for the purposes of Part 4 of the Civil Liability Act, but argued that the misleading or deceptive conduct, being a contravention of s 42 of the Fair Trading Act 1987 (as then enforced) was an apportionable claim and, as a consequence of that latter proposition, the whole of the damages was apportionable pursuant to the terms of s 34(1A) of the Civil Liability Act.

6. [6]

   The judgment on proportionate liability and costs, [2] recited and or summarised the provisions of s 34 and s 35 of the Civil Liability Act and concluded that a proportionate and non-proportionate claim did not allow for apportionment for the non-apportionable claim. Since the plaintiff had elected for the breach of warranty of authority claim, and that was the only claim on which damages would be assessed, no apportionment applied to the damages for the successful claim for breach of warranty of authority.

Brief Facts

1. [7]

   It is necessary to summarise in very short form the circumstances that gave rise to the proceedings. Permanent Custodians Limited were a mortgagee of residential property occupied by Mr and Mrs Geagea, the parents. The first defendant, Tony Geagea, one of three sons, retained the fourth to sixth defendants and, on the findings of the Court, more probably than not brought with him either the third defendant or a person who looked similar to his brother, the third defendant, and purported to mortgage property for which the mortgagors were each of the three brothers, each defendants, and the second of whom quite separately was purported to have signed documents giving rise to the mortgage.

2. [8]

   The Court found that the first defendant had defrauded the plaintiff and deceived the fourth to sixth defendants as to his authority to act on behalf of the second defendant and possibly the third, although the latter was unnecessary to decide.

3. [9]

   The Court determined that the fourth to sixth defendants were not negligent but that certain correspondence innocently represented that the solicitors acted for the third defendant in circumstances where, as a matter of fact, they may not have been. Further, one item of the correspondence misrepresented that they were acting for the second defendant. Nevertheless, at least in relation to the representation that the fourth to sixth defendants acted on behalf of the third defendant, there was a breach of warranty of authority, albeit innocent.

4. [10]

   The third judgment determined [3] that the first defendant’s liability would be at 65%, a mortgage broker, Yes Home Loans at 33.1/3% of the remaining liability and, as a consequence, the liability of the fourth to sixth defendants would be at 231/3% of the total liability.

5. [11]

   As a consequence, the difference between an order, that the fourth to sixth defendants pay the entire liability (less the amount received in the settlement) as against a proportionate liability is over 75% of damages.

6. [12]

   The only order or direction issued by the Court as a result of the reasons for judgment in the third judgment was an order that the plaintiff provide short minutes of order to reflect the judgment. No substantive order has issued and no order has been entered.

7. [13]

   The motion, with which the Court must now deal, seeks to re-open the proceedings in order to submit that the claim for damages arising from a breach of warranty of authority is an apportionable claim. Such a submission is contrary to the express or implied submissions on behalf of the fourth to sixth defendants made in the proceedings leading to the third judgment, in that the fourth to sixth defendants submitted that the Court was required to apportion liability in relation to misleading or deceptive conduct and in relation to the negligence claim, but made no such submission in relation to the plaintiff’s breach of warranty of authority claim.

8. [14]

   From the foregoing, it is clear that in terms of culpability and relative responsibility for the loss suffered by the plaintiff, the fourth to sixth defendants are not responsible for as much as one quarter of damage to the plaintiff, [4] but have been rendered liable for all or almost all of the damage. Further, it is clear that the Court has made no substantive order, other than a general order, being judgment for the plaintiff against the fourth to sixth defendants, and an order for costs in respect of which leave was reserved to reargue.

Principles of re-opening of proceedings

1. [15]

   Where, as here, the Court has not issued final judgment and judgment has not been entered, but the Court has issued reasons for judgment, the Court must determine, as a matter of discretion, whether to allow a party to re-open the proceedings and make further submissions. The discretion must be exercised judicially and such a discretion is governed, amongst other matters, by the provisions of s 56 of the Civil Procedure Act 2005 enjoining the Court, the parties and legal practitioners to “facilitate the just, quick, and cheap resolution of the real issues between the parties”.

2. [16]

   As the High Court has stated [5] :

3. [17]

   The judgment in Elliott & Blessington above, relates to a criminal prosecution, but the High Court in the passage above cites its judgment in Autodesk Inc v Dyason (No 2) [6] in which the High Court said:

4. [18]

   These principles were discussed by the Court of Criminal Appeal in relation to an appeal to that Court and, after considering both Elliott & Blessington and Autodesk, the Court of Criminal Appeal [8] said:

5. [19]

   The principles that have been recited above have been expressed in the context of appeals. The overriding purpose prescribed by s 56 of the Civil Procedure Act and the notion of the finality of judgments may require a slightly more flexible approach when dealing with a matter at first instance. The principle, however, is the same.

6. [20]

   In dealing with the facilitation of a speedy resolution of the issues between the parties, it may be appropriate to discuss the attitude that an appeal court may adopt, if any final orders were the subject of an appeal. If, for example, on appeal, the fourth to sixth defendants would be permitted to press an appeal on the ground that breach of a warranty of authority was, as a matter of fact and law, an apportionable claim, then no purpose (in terms of expedition) is served by refusing the fourth to sixth defendants the ability to re-open and address the issues at first instance.

7. [21]

   There can be no doubt that facilitating a just outcome would require that the Court deal with the matter on the basis of the law as it is, rather than any error based upon the failure to put submissions, or even concede, a particular aspect that was ultimately held to be wrong.

8. [22]

   As to “cheap” (in relation to these circumstances, this has no different meaning from “inexpensive”) the costs of the parties have already been expended in addressing the argument and no additional cost is occasioned by allowing the re-opening and deciding the matter on the basis of the law, as I hold it to be. If, as a consequence of the re-opening, error of law is identifiable or manifest, then that is a matter for any such appeal court.

9. [23]

   This is not a case in which the parties have acted to their detriment on a basis of a position adopted by another party. Nor is it a case in which evidence has been adduced in circumstances where the party adducing the evidence could rely upon a position that is now sought to be withdrawn or substantially varied. There are and have been other proceedings in which, for example, parties seek to re-open after reasons for judgment but before entry of judgment in order to re-plead a defence in circumstances where the existence of that defence would or may have significantly affected the decision of an opposing party to adduce the evidence upon which that altered defence depends. [9]

10. [24]

    In these proceedings, and on the application for re-opening, all of the evidence was adduced in circumstances where liability was in issue, relative liability was in issue and the parties adduced all of the evidence upon which they could possibly have relied were this matter to have been argued in submissions at the conclusion of the trial or otherwise. Further, the pleadings in the proceedings do not permit the Court to draw an inference that any party could possibly have been misled in a way which would have prejudiced their, or its, position on this matter.

11. [25]

    Nevertheless, it is essential that the Court not allow parties to have an ability to reargue those matters upon which they were unsuccessful because some further argument has occurred to them, or they consider the Court has fallen into error. That, in any general sense, would not facilitate the just, quick and cheap resolution of issues between the parties, but rather prolong proceedings and undo the finality of proceedings at first instance.

12. [26]

    Ultimately, the determination of whether to allow these issues to be re-agitated is an exercise of the discretion of the Court. While the Court at first instance is not in the same position as an appellate court, some guidance may be taken, in the exercise of that discretion, from the attitude on appeal of intermediate courts of appeal. In Teoh v Minister for Immigration, Local Government & Ethnic Affairs, [10] a full court of the Federal Court (Black CJ, Lee and Carr JJ) allowed an amendment to the original proceedings to allow the point of law to be taken on appeal in circumstances where the point had not been argued before the first instance judge, because it was within the scope of the issues raised by the case as presented.

13. [27]

    In this court, the Court of Appeal had an undoubted discretion, in the interests of justice, to permit a point to be taken on appeal that was not taken at the trial. Generally, that is done in exceptional cases only and will not occur where evidence could have been adduced which would be, or could be, an answer to the point taken: see Coulton v Holcombe. [11] There are many cases dealing with what may be exceptions.

14. [28]

    Nevertheless, it has been decided that a pure question of law, raised for the first time on appeal, in circumstances where no further evidence could have been called at the trial or where the pleadings disclose that the point may have been a live issue upon which evidence should have been called, can be raised. [12] In Brown v Brown, Gleeson CJ dealt with the points sought to be raised on appeal for the first time, namely whether the presumption of advancement was available to rebut a presumption of a resulting trust, without discussing, in his reasons for judgment, whether the point should have or could have been raised. The other member of the Court, Cripps JA, agreed with Gleeson CJ. Only Kirby P discussed in any detail any issue associated with a difficulty in raising the legal argument before the Court on appeal for the first time and that was in the passage to which reference has been made. Otherwise, Kirby P was in dissent as to the orders that ought to be made. [13]

15. [29]

    In Pittalis and Another v Grant and Another, [14] Nourse LJ said:

16. [30]

    It is not for the Court as presently constituted to determine whether the Court of Appeal would or would not grant leave to raise the point on appeal. It is however, relevant that a court of appeal could allow the point to be raised and, given that the issue was a live one at the time that evidence was adduced and the parties argued apportionment generally, not being aware as to which course of action would succeed, it cannot be suggested that the plaintiff could have called evidence, otherwise available, that would answer the point that is now sought to be raised.

17. [31]

    Fundamentally, the issue concerns the balance between justice and expedition. Further, were I to refuse leave to re-open and the issues sought to be raised showed an error in the application of principle to the damages issue (even if on the basis of an implied concession in submissions at trial), the Court of Appeal, if there were an appeal, would be faced with an exercise of discretion as to the re-opening and the difficulties associated with an appeal on that basis.

Apportionment

1. [32]

   In dealing with the question of apportionment, one must first deal with the basis upon which liability has been determined.

2. [33]

   The fourth to sixth defendants rely upon the evidence of the fourth defendant that he did not intend to represent the second defendant or that the second defendant was a client of his firm. The Court did not determine that the fourth defendant represented he was acting for the second defendant. It did determine that he represented or warranted that he had authority to act on behalf of the third defendant.

3. [34]

   Further, the Court held that the scenario that was more probable than not is that the first defendant, Tony Geagea, attended on the premises of the fourth to sixth defendants in the company of a person who looked like and represented he was the third defendant. As a consequence, the fourth defendant, on behalf of the fourth to sixth defendants, represented or warranted that he had authority to act on behalf of the second defendant, in circumstances where, on the evidence before the Court, he did not.

4. [35]

   The submissions on behalf of the fourth to sixth defendants assume that a claim for a breach of warranty of authority is a breach of a collateral contract and is a claim “in contract”. The precise classification of a claim for a breach of warranty of authority is not quite as clear as is submitted.

5. [36]

   On one view, the basis for liability for breach of warranty of authority is that there is a collateral contract or that the agent (the person who warrants that authority exists) is bound by the contract otherwise executed. However, even where the warranty is given in such terms that the agent is not and cannot be a contracting party with the person to whom the warranty is given, the agent is liable, to the same extent, as the principal (if the principal were to exist) would have been. As Lord Herschell made clear:

6. [37]

   In Collen v Wright, [16] Willes J said:

7. [38]

   On one view of the comment of the majority in Collen v Wright, speaking, as it does, of promise and consideration, it may well be a contract. But the true basis of it has been the subject of much debate and academic writing.

8. [39]

   An equally valid basis, given that it applies even in circumstances where there is an express prohibition on any contract with the agent or person warranting and given that it can apply to an agent in circumstances where the principal does not exist, is that it is a remedy based upon unconscionable conduct and akin to an estoppel. In other words, the person who warrants that authority exists is then liable for the conduct of the party to whom the warranty is expressed for damages that arise from that other party’s reliance upon the warranty or undertaking. [17] In Leggo, Isaacs J, described the elements of the action in the following manner:

9. [40]

   Notwithstanding the uncertainty referred to above, the provisions of the Civil Liability Act applies to all claims for economic loss arising from a failure to take reasonable care. In the view I take, it matters not whether breach of warranty of authority is a cause of action in contract. It does matter whether it causes economic loss (which has been found) and whether it arises from a failure to take reasonable care.

10. [41]

    Damages for breach of warranty of authority do not depend upon negligence or a failure to take reasonable care. It is a strict liability, in the sense that it requires no actual intention, no fraud, no negligence, or any fault on the part of the agent. It requires only that a warranty of authority was given upon which the recipient of that warranty relied and the conduct in reliance on the authority caused damage.

11. [42]

    Further, there is no finding by the Court in any of the judgments on liability, that the fourth defendant, himself or on behalf of the fourth to sixth defendants, failed to take reasonable care.

12. [43]

    Thus, even if, in a cause of action that depends on strict liability, a factual finding of a failure to take reasonable care would be sufficient to invoke the provisions of s 34 of the Civil Liability Act, [19] no such finding has been made and the economic loss does not depend upon such failure having arisen.

13. [44]

    The determination of liability does not depend upon any failure to take reasonable care, either as an element of the claim or as a matter of fact in determining this particular liability.

Conclusion

1. [45]

   As a consequence of the foregoing, the Court makes the following further orders or declarations:

   1. (1)

      Leave is granted to the fourth to sixth defendants to re-open to argue apportionment;

   2. (2)

      The damages assessed on the basis of a breach of warranty of authority were not, in the circumstances of this claim, apportionable;

   3. (3)

      The plaintiff will bring in short minutes of an order reflecting the judgments of the Court in this matter within 7 days of the delivery of this judgment.