Lemongrove Services Pty Ltd trading as Reimer Winter Williamson Lawyers and Anor v Rilroll Pty Ltd and Ors

1. [1]

   BELL P: I have had the benefit of reviewing the judgment of Payne JA in draft. I agree with his Honour’s reasons and proposed orders. I, too, would dismiss the appeal with costs.

2. [2]

   PAYNE JA: In late 2014, the appellants, Lemongrove Services Pty Ltd trading as Reimer Winter Williamson Lawyers and a director of that firm Anthony Brischetto, provided legal services to the second and third respondents, Mr and Mrs Hanshaw and the first respondent, being the trustee of the Hanshaws’ self-managed superannuation fund, Rilroll Pty Ltd. Those legal services related to the aborted purchase of land at Huntleys Cove and a café business conducted on that land.

3. [3]

   At its heart, this appeal is focused on a challenge to a single factual finding, namely that at a conference on 27 November 2014 Mr Brischetto did not tell the Hanshaws that a “subject to finance clause” they had sought to have included in the contracts for sale of the land and business had been rejected by the vendors. The Hanshaws alleged that if they had been told that the contracts for sale did not contain a “subject to finance” clause, they would not have exchanged those contracts.

4. [4]

   On 19 November 2014, Mr Brischetto wrote to the vendors in these terms:

5. [5]

   On 20 November 2014, solicitors for the vendors replied by email, relevantly:

6. [6]

   It was common ground that, despite letters being sent on Mr Brischetto’s behalf to the Hanshaws following receipt of that email, and Mrs Hanshaw speaking to Mr Brischetto’s Executive Assistant Ms Catalano about the “subject to finance” clauses on 20 November 2014, prior to 27 November 2014 the Hanshaws were not informed that the vendors had rejected the “subject to finance” clauses which had been proposed. It was Mr Brischetto’s case, denied by the Hanshaws, that he told them of that matter at a meeting on 27 November 2014.

7. [7]

   The only participants at the critical meeting on 27 November 2014, Mr Brischetto, Mr Hanshaw and Mrs Hanshaw, each gave evidence before the primary judge and was cross-examined. The principal findings of the primary judge, Curtis ADCJ, were that:

   1. (1)

      the Hanshaws had asked for a detailed “subject to finance” clause to be sought from the vendors;

   2. (2)

      the appellants asked the solicitors for the vendors to include such a clause in the contracts but the solicitors for the vendors had refused to include such a clause;

   3. (3)

      the appellants were told that the vendors refused to include a “subject to finance” clause in the contracts but failed to inform the Hanshaws of that matter; and

   4. (4)

      the Hanshaws would not have exchanged contracts had they been told that the vendors refused to include a “subject to finance” clause in the contracts.

8. [8]

   The contacts were exchanged without any “subject to finance” clause. Two valuations by the bank chosen by the Hanshaws to finance the purchase were obtained. Unhappily, each valuation was in an amount considerably less than expected by the Hanshaws. The Hanshaws were unable to complete the purchase. The Hanshaws were sued by the vendors and, by settlement agreed to pay damages. No complaint was made about the reasonableness of that settlement. The Hanshaws cross-claimed against the appellants for breach of retainer and breach of duty. It was agreed before the primary judge that upon proof of liability, the damages payable by the appellants to the respondents were $272,559.65.

9. [9]

   Helpfully, Mr Griscti, who appeared for the appellants accepted that:

10. [10]

    The only two issues litigated on this appeal were:

    1. (1)

       whether the primary judge erred in concluding that Mr Brischetto did not tell the Hanshaws at the meeting on 27 November 2014 that the vendors had refused to include a “subject to finance” clause in the sale contracts; and

    2. (2)

       whether the primary judge erred in concluding that the Hanshaws would not have exchanged contracts had they been told that the vendors had refused to include a “subject to finance” clause in the sale contracts.

11. [11]

    On the first issue (comprising grounds 1-4 of the notice of appeal), the appellants submitted that the relevant breach in respect of each of these causes of action was that the appellants failed to inform the respondents prior to exchange of contracts that the vendors refused to agree to a “subject to finance” clause. Curtis ADCJ, in his analysis, identified four possibilities, namely:

12. [12]

    His Honour was not persuaded on the evidence that any of the parties had lied and concluded that “the contemporaneous documents are more consistent with acceptance of the [respondents’] case.”

13. [13]

    The appellants’ principal complaint on the appeal was that the primary judge had overlooked or not dealt with the evidence about what was said at the 27 November meeting.

14. [14]

    It was submitted that Mr and Mrs Hanshaw each gave evidence that the key meeting on 27 November 2014 was a brief one in which they were rushed into signing the contractual documents. The appellants emphasised that in cross-examination Mr and Mrs Hanshaw denied that Mr Brischetto discussed the contracts with them in detail and denied or did not recall Mr Brischetto addressing a number of matters with them such as the absence of a development application, a community associations search and discussions regarding a managing agent.

15. [15]

    The primary judge’s principal findings concerning the Hanshaws’ evidence about the 27 November meeting were as follows:

16. [16]

    The appellants submitted that Mr Brischetto’s evidence about what was said at the conference on 27 November 2014 was corroborated by his detailed handwritten notes. It was submitted that those notes supported his evidence that he went through the contracts in detail on 27 November. It was submitted to be significant that Mr Brischetto gave evidence that he had an independent recollection of the conference, whereas the respondents essentially did not.

17. [17]

    The primary judge made detailed findings about that matter:

18. [18]

    The appellants accepted that Mr Brischetto’s file note does not record a reference to the “subject to finance” clause. It was submitted, however, that the note did refer to the loan to valuation ratio being applied by the lender of 70 per cent referred to by the primary judge at [41], which is quoted above.

19. [19]

    It was submitted that the recorded discussion to the effect that if the valuation was less than expected the Hanshaws were able to make up the shortfall showed that it was implicit that the Hanshaws knew that the contracts were not “subject to finance”.

20. [20]

    It was submitted that his Honour effectively rejected the evidence of the Hanshaws about the 27 November meeting. In the context of expressing concerns with the credibility of the second and third respondents his Honour stated, “Mr Hanshaw also said that the meeting of 27 November 2014 lasted only minutes. That is inconsistent with the contemporaneous notes of Mr Brischetto”. It was submitted that his Honour gave little or no consideration to the respondents’ unreliable evidence in respect of the meeting.

21. [21]

    It was submitted in writing that having made findings on credibility which were “tantamount to dishonesty”, his Honour marginalised this evidence as relating to “peripheral matters”. The appellants submitted that the primary judge erred in stating that such evidence was not central to what he described as the issue at hand and in expressing the central question as being whether the respondents would have entered into the contracts in the absence of a “subject to finance” clause.

22. [22]

    It was submitted that his Honour erred in reasoning from the absence of a specific reference to the “subject to finance” clause in the notes of the conference to a conclusion that, “[b]ecause the notes make no specific reference to the subject to finance clause I rather think that the probability is they confirm the account of the [respondents]”. It was submitted that this involved a failure to take into account the other part of the notes earlier referred to.

23. [23]

    It was submitted that his Honour failed to take into account or accord any weight to the evidence that Mr Brischetto was a careful and prudent solicitor. In his affidavit as well as in cross examination Mr Brischetto stated that he went through the contents of the contracts with Mr and Mrs Hanshaw. He gave evidence that he recalled specifically advising in respect of the “subject to finance” clause:

24. [24]

    It is to be noted, however, that the following finding was not challenged on appeal:

25. [25]

    It was submitted that his Honour erred in failing to find that Mr Brischetto’s evidence was corroborated by that of his secretary, Lidia Catalano. The evidence included a diary note of a conversation between Ms Catalano and Mrs Hanshaw in the following terms:

26. [26]

    The primary judge found about this evidence:

27. [27]

    Finally, concerning the reactions of the parties to the initial bank valuation, his Honour found:

28. [28]

    As to the second issue, causation, it was submitted that the proper determination of factual causation required his Honour to consider all of the relevant evidence, rather than rely on the general circumstances and “common prudence”.

29. [29]

    The appellants submitted that his Honour’s reasons do not disclose any consideration of the Hanshaws’ professed confidence in their assessment of property values in the Hunters Hill area. It was submitted that there was no apparent consideration of the Hanshaws’ apparent impulsiveness and lack of caution in negotiating with the vendors.

30. [30]

    It was submitted that if the totality of the evidence had been considered the likely conclusion was that the respondents had not established, on the balance of probabilities that they would not have proceeded with exchange of contracts in the absence of a “subject to finance” clause. It was submitted to be a plausible conclusion that the Hanshaws would have wished to proceed with the transaction on the basis that they expected a favourable valuation (and were prepared to take the risk) or that the Hanshaws considered they had the means to effect the purchase even if the valuation was less than expected.

Consideration

1. [31]

   The relevant principles binding on this Court in cases of this kind are set out in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22. Both parties drew attention to and relied upon Baira v RHG Mortgage Corporation Limited [2012] NSWCA 387 at [173]-[175] where Bathurst CJ explained those principles as follows:

2. [32]

   The appellants in the present case were required to demonstrate that the primary judge’s finding about the critical issue was “glaringly improbable” or “contrary to compelling inferences”. In Baira, the Chief Justice was not saying that where it was shown that a primary judge failed to deal with some evidence, he or she has thereby failed to deal in a satisfactory way with the substantial amount of evidence necessary to be dealt with before the relevant finding could be made. As Mr Griscti accepted in his submissions in reply, the evidence identified by the Chief Justice in Baira has to have a particular quality. His Honour was not referring simply to evidence which was relevant, but, rather to evidence having a quality which seriously calls into question the integrity of a finding of fact.

3. [33]

   The appellants’ case in this Court was essentially based upon what were asserted to be differences in accounts and differences in recollection about the matters discussed at the 27 November meeting. This was an inadequate foundation for a successful attack upon a finding of principal fact. It was not sufficient merely to point to some evidence which was relevant and not recorded in the judgment. It was necessary to point to evidence having a quality which seriously calls into question the integrity of the primary judge’s critical finding of fact. Successfully to attack the critical finding of fact here, the appellants needed to demonstrate the existence of evidence from which a compelling inference contrary to that finding of fact could be drawn.

4. [34]

   In relation to whether, at the meeting on 27 November, Mr Brischetto told the Hanshaws that the vendors had refused to agree to include a “subject to finance” clause in the contracts, the primary judge based his conclusions upon the contemporaneous documentary record, the reactions of the parties to subsequent bank valuations which were lower than expected and upon his Honour’s observations of the oral evidence of the principal witnesses.

5. [35]

   The primary judge did not fail to deal in a satisfactory way with a substantial amount of evidence. On the one hand, Mr Brischetto gave evidence and was cross-examined. He maintained that he told the Hanshaws at the meeting that the vendors had not agreed to include a “subject to finance” clause in the contracts for sale. The Hanshaws each gave equally clear evidence that they had not been told of that matter until some days later and after they had signed the contracts for sale.

6. [36]

   Given that conflict, the primary judge approached the fact finding task in the conventional way and examined the contemporaneous documents and evidence from the parties and others about events both before and after the critical meeting to determine whether it was likely, on the balance of probabilities, that the Hanshaws had not been told at the meeting that the vendors had rejected the “subject to finance” clause in the contracts for sale. Having examined the contemporaneous documents, the primary judge held that they were more consistent with the respondents’ case. Such an approach is consistent with the approach to fact finding outlined by McLelland CJ in Eq in the oft-cited Watson v Foxman (1995) 49 NSWLR 315.

7. [37]

   The primary judge was entitled to proceed on the assumption that the “subject to finance” clause sought in the letter of 19 November was a matter which was important to the Hanshaws. The clause sought was detailed and not merely a request for a general “subject to finance” clause. The only subject matter of the letter Mr Brischetto sent to the solicitors for the vendors was the request for a detailed “subject to finance” clause (see [4] above). The solicitors for the vendors responded the following day (see [5] above).

8. [38]

   The primary judge was entitled to conclude that a competent solicitor would formally communicate such a rejection promptly to his or her clients. Sometimes powerful proof or evidentiary support for a proposition is provided by the absence of something that would reasonably be expected to be present. The absence of a letter or email communicating the rejection of the clause by the vendors is consistent with it having been overlooked by Mr Brischetto. A solicitor, in circumstances where there had been an explicit request for the inclusion of a detailed clause, which had been immediately rejected the following day, would be expected to communicate that rejection to his or her clients in writing. Were the rejection to be communicated orally, a careful file note of that conversation would be expected to be made. There was neither here.

9. [39]

   It is significant that no document records that Mr Brischetto ever told the Hanshaws, either before or after they signed the contracts for sale, that the vendors had rejected inclusion of a “subject to finance” clause in those contracts. The primary judge was correct so to conclude at [20] of his judgment, quoted at [24] above. Mr Griscti accepted that his Honour’s statement at [20] was accurate.

10. [40]

    Mr Brischetto’s evidence that he had told the Hanshaws in the meeting on 27 November that the vendors had rejected a “subject to finance” clause must also be evaluated against the background of the following matters:

    1. (1)

       on any view, Mr Brischetto did not tell the Hanshaws at any time between 20 November (when he was told that the vendors had rejected a “subject to finance” clause in the contracts for sale) and 27 November about that matter. There was no satisfactory explanation for that failure, and Mr Brischetto accepted in cross-examination that it would have been appropriate to have told the Hanshaws about that matter on 21 November (when Ms Catalano said he would report to the Hanshaws) and on 22 November (when he reviewed the relevant correspondence);

    2. (2)

       the omission by Mr Brischetto to tell the Hanshaws between 20 and 27 November supports a conclusion that he did not tell them on 27 November. The primary judge was entitled to conclude that it was something that Mr Brischetto overlooked, both originally (that is to say, on 22 November when he reviewed the file and correspondence) and at the 27 November meeting;

    3. (3)

       on any view, the topic of a “subject to finance” clause was not contained in Mr Brischetto’s list of matters to be discussed at the meeting on 27 November;

    4. (4)

       on any view, Mr Brischetto did not make a note of any discussion specifically about the “subject to finance” clause in the notes that he made immediately following the meeting on 27 November, even though he knew the importance of keeping accurate and complete file notes. It was reasonable and appropriate for the primary judge to conclude that there would be a written record of that information, given it was a clause which his clients had specifically requested and had been expressly refused by the solicitors on the other side;

    5. (5)

       Mr Brischetto’s affidavit does not, at least in terms, support his assertion that he told the respondents that the vendors had refused to agree to the “subject to finance” clause. Rather, his recounting of that conversation rather assumes that the Hanshaws already knew that the “subject to finance” clause had been rejected by the vendors. In any event, Mr Brischetto’s account of that conversation appears to be based on his file note rather than any independent recollection. That file note is consistent with Mr Brischetto assuming that the purchasers would obtain finance. This may provide a further reason why Mr Brischetto did not tell the Hanshaws that the “subject to finance” clause had been rejected by the vendors;

    6. (6)

       the correct factual finding about what was said at the meeting on 27 November is also informed by the Hanshaws’ reactions to valuations received after exchange and before settlement. Upon being informed on early January 2015 of the valuation of $1.2 million, the Hanshaws immediately suggested that they might need to withdraw from the contracts relying upon the “subject to finance” clause. On 9 January 2015, Ms Catalano recorded the following conversation with Mr Hanshaw:

    7. (7)

       after being told that the clause had not been included in the contracts for sale, the Hanshaws immediately complained that they had not been told. Mr Brischetto’s note of the conference on 22 January 2015 states that “John and Anita [Hanshaw] believe [1] that [contracts] were subject to finance”. Those reactions are consistent with their not having been told on 27 November that the vendors had rejected a “subject to finance” clause.

11. [41]

    The appellants’ complaint about the way the primary judge addressed the evidence of the Hanshaws about the content of the meeting on 27 November is without merit. The Hanshaws’ evidence about the length of the meeting was rejected by the primary judge. The primary judge proceeded on the basis that the Hanshaws were wrong about that matter. His Honour accepted that Mr Brischetto had a number of important matters to address at the 27 November meeting. It does not follow that the rejection of one part of a witness’ evidence necessarily leads to the rejection of it all, as the primary judge correctly concluded. As Basten JA explained in Sangha v Baxter [2009] NSWCA 78 at [155], because a witness has not told the truth with respect to a particular matter does not mean that other parts of his or her evidence are untruthful. Where possible, an assessment should be made of the reasons for the untruthfulness in order to see if other aspects of the evidence are likely to be infected by the same concern. See also Hutchison Construction Services Pty Ltd v Fogg; Fogg v Les Quatre Musketeers Pty Ltd (t/as Plastamasta South Coast) [2016] NSWCA 135 per Leeming JA at [68]. In the present case, the difficulties with parts of the evidence given by the Hanshaws were squarely faced by the primary judge. His Honour took them into account in reaching his ultimate conclusion.

12. [42]

    In relation to the meeting on 22 January 2015:

    1. (1)

       Mr Brischetto’s notes recorded that the Hanshaws “believe” that the contracts for sale were subject to finance, without comment and without recording the assertion that Mr Brischetto had in fact told them that they were not. As the primary judge accepted, this was more consistent with the Hanshaws’ account;

    2. (2)

       Mr Brischetto’s notes also recorded him telling the Hanshaws that they should seek advice from another lawyer if they believed that he had acted negligently. The primary judge was entitled to conclude that this was a relevant matter to take into account; and

    3. (3)

       Mrs Hanshaw’s notes recorded an account, which the primary judge accepted, that Mr Brischetto had apologised for the problem and for the lack of communication.

13. [43]

    The objective evidence, which was reviewed and set out by the primary judge, was supportive of the Hanshaws’ account rather than that of Mr Brischetto.

14. [44]

    The submission that his Honour erred in failing to find that Mr Brischetto’s evidence was corroborated by that of his secretary, Ms Catalano, should also be rejected. Ms Catalano was not present at the meeting on 27 November 2014 and her evidence, if anything, assisted the Hanshaws. She understood when she spoke to Mrs Hanshaw on 21 November that Mrs Hanshaw did not know that the vendors had rejected the “subject to finance” clause. She said nothing about that matter but promised a written report the next day, which was never sent. It is clear that when Ms Catalano spoke to Mr Hanshaw shortly after the meeting on 27 November the Hanshaws were labouring under a misapprehension that the contracts were each “subject to finance”. Again, she did not correct this view.

15. [45]

    Returning then to the critical question, the primary judge gave close consideration to the conflicting accounts and saw all three participants at the meeting cross-examined. His Honour had the advantage of seeing each witness respond to cross-examination about the critical conversation here in issue. His Honour took into account the contemporaneous documents. This is not a case where the conclusion of the primary judge is shown by uncontroversial facts or uncontested testimony to be erroneous. The contemporaneous and apparently reliable documentary evidence supports the Hanshaws’ account. The primary judge did not fail to deal in a satisfactory way with a substantial amount of evidence.

16. [46]

    I would reject the challenge to his Honour’s finding that at the 27 November meeting the Hanshaws were not told of that the vendors had rejected a “subject to finance” clause. It follows that ground 1-4 of the notice of appeal must be dismissed.

17. [47]

    As to causation, the matter was to be determined subjectively in the light of all the relevant circumstances. The primary judge had to determine whether the case as presented by the Hanshaws was to be accepted, which required an assessment of them as witnesses generally and by reference to the surrounding circumstances.

18. [48]

    The “subject to finance” clause was obviously important to the Hanshaws. It is perverse to suggest that it was not. It was the subject of an explicit and detailed written request for its inclusion in the contracts.

19. [49]

    The primary judge noted that although the Hanshaws told Mr Brischetto that they could make up a modest shortfall in the purchase price if the valuation was in an amount less than 70 per cent of what they had agreed to pay, they could not fund a substantial part of the purchase price from their own assets. That finding was not challenged in this Court. The fact that the Hanshaws agreed to a price without a valuation, even if it suggests a confidence in property values, does not lead to a conclusion that they would have proceeded to exchange contracts if they had known that there was no “subject to finance” clause. Indeed, it rather tends to the opposite conclusion.

20. [50]

    The appellants’ submission that the Hanshaws were unconcerned about the value of the property which would be used by their lender in making its lending decision is inconsistent with their having raised the issue of a “subject to finance” clause in the first place and to their reaction when they were told in January 2015 that the valuation was for a much smaller amount than hoped.

21. [51]

    This is another factual finding made by his Honour after seeing the relevant witnesses cross-examined and considering the relevant documentary record. The contemporaneous documents were more consistent with the Hanshaws’ case that they would not have exchanged contracts had they known that those contracts were not “subject to finance”. The primary judge did not fail to deal in a satisfactory way with a substantial amount of evidence. His Honour’s finding of fact, that the Hanshaws would not have exchanged if they had been told that the vendors had rejected the “subject to finance” clause, was not glaringly improbable or contrary to compelling inferences. Ground 5 of the notice of appeal should be rejected.

22. [52]

    Finally, it is to be noted that two separate Blue Books were produced for the purposes of the appeal. With few exceptions, the only documents to which the Court was referred were contained in what was styled the “Supplementary Blue Book”. Whilst no special costs order was sought by either party about the preparation of the Blue Books, what occurred in this case is to be deprecated.

23. [53]

    The Court expects the legal representatives of parties to an appeal to cooperate to produce appeal books that contain only those documents necessary for determination of the appeal. Given the events in this case, it perhaps should be re-iterated that the legal representatives of a party responsible for wasteful reproduction of unnecessary appeal books should expect that the Court may consider making a special costs order against them personally.

Conclusion and proposed order

1. [54]

   For the foregoing reasons, I propose the following orders:

   1. (1)

      Appeal dismissed;

   2. (2)

      Appellants to pay the respondents’ costs.

2. [55]

   SIMPSON AJA: I agree with Payne JA.