MAXWELL v CHITTICK and ORS [1994] NSWCA 196

MAXWELL v CHITTICK

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

MAHONEY, PRIESTLEY and POWELL JJA 10-11 May 1994, 23 August 1994

[1994] NSWCA 196

Was appellant retained as respondent's solicitor — deceit and fraud — breach of fiduciary and trust obligations — breach of duty.

RESPONDENTS INDUCED TO BUILD HOME ON APPELLANT'S LAND — whether appellant retained as respondent's solicitor — appellant's actions amounted to deceit and fraud — breach of fiduciary and trust obligations — breach of duty in negligence — Bankruptcy Act 153(2)(b) applies — Limitations Act does not run.

The respondents were induced by the appellant to build a home upon land owned by the appellant and his wife. Without the consent of the respondents, the appellant caused a series of mortgages to be given over the land and ultimately defaulted in payment. The mortgagee took possession of the land and sold it. The appellant later became bankrupt and entered into a scheme of arrangement with his creditors.

Held: (1) The evidence did not disclose a formal retainer of the appellant as solicitor for his parents-in-law and in the circumstances of this case such a retainer should not be inferred. (2) The appellant's actions involved a deceit upon the respondents and, in the extended or equitable sense, a fraud upon them. False representations concealing the existence of the mortgages amounted to conscious fraud. (3) The appellant owed both fiduciary and trust obligations to the respondents and through his actions in creating and discharging successive mortgages over the land he acted in breach of these duties. (4) A breach of duty by the appellant in negligence was established. (5) The composition with creditors did not release the appellant from the respondent's claim since the appellant's actions amounted to fraud within s153(2)(b) of the Bankruptcy Act 1966. (6) The Limitations Act does not run against the breach of equitable obligations of this kind. (7) The appellant's claim against his insurer was defeated.