JIWIRA PTY LTD and ANOR v FERRIER and ORS SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL GLEESON CJ, MASON P and MEAGHER JA 21 August 1997, 21 August 1997 [1997] NSWCA 168 LEGAL PRACTITIONERS — SOLICITOR AND CLIENT — APPELLANTS SUED RESPONDENT SOLICITORS FOR BREACH OF CONTRACT ALLEGING CONSEQUENTIAL DAMAGES — Appeal against trial judge's findings of no successful challenge made out — Appeal dismissed. LEGAL PRACTITIONERS — BREACH OF CONTRACT — APPEAL — appellants sued the respondents, their solicitors, alleging breach of contract and consequential damages — trial judge made factual findings in favour of respondents, concluding no breach of contract and, further, no damage — HELD — No successful challenge had been made to the trial judge's findings of fact. Gleeson CJ This is an appeal against a decision of Cooper DCJ given in the District Court on 25 October 1996. The appellants were the plaintiffs in the proceedings in the District Court. The respondents, a firm of solicitors, were the defendants. Cooper DCJ found in favour of the defendants and entered judgment for the defendants, ordering the plaintiffs to pay the defendants' costs. The unsuccessful plaintiffs have now appealed. They claim that, in the event that the appeal is successful this Court should enter judgment in favour of the appellants against the respondents in the sum of $23,728.26. It is unnecessary to distinguish between the two appellants for the purpose of stating that position. The issues in this appeal are somewhat narrower than the issues which were litigated before Cooper DCJ. Furthermore, the facts of the case are somewhat complex and in these reasons for judgment I will not attempt to go over them in the detail in which they appear in the reasons for judgment of Cooper DCJ. Rather I will assume that his Honour's reasons for judgment are available to be read with these reasons and will confine my references to the facts of the case to those which appear to me to be of central importance to the resolution of the issue that has been litigated in this appeal. It is not to be taken from that that I regard the detail of the fact - and in particular the details set out in the judgment of Cooper DCJ, as irrelevant or unimportant. On pl and p2 of his reasons for judgment, Cooper DCJ identified four matters which were the subject of the litigation. Counsel for the appellant has agreed that it is the matter referred to in paral which is the subject of the present appeal. Shortly stated, and at the risk of some oversimplification, that matter is as follows. The first appellant Jiwira Pty Ltd is a company controlled by the second appellant, Mr Baker. On 17 December 1992 Jiwira Pty Ltd was wound up on the petition of a creditor bank, to whom that company owed an amount in excess of $1 million. That amount was owing pursuant to a judgment that had been entered about eighteen months previously. The debt was not in dispute. The winding up proceedings had first come on for hearing on 3 December 1992. but had been adjourned until 17 December 1992. It is not without significance that 17 December 1992 was the second last day of the 1992 law 2 UNREPORTED JUDGMENTS term. If the case had been adjourned on that day it would not have been able to have been heard until a date in late January or early February 1993. It is common ground that, up until 16 December 1992, the respondent solicitors had been retained to act on behalf of the appellants in relation to a number of matters of which the question of the winding up of Jiwira Pty Ltd was one. The matters were complex and involved, amongst other things, questions of title to real estate in which Jiwira Pty Ltd claimed an interest, and questions of insurance over a substantial building on the real estate which had been damaged and virtually destroyed, as I understand it, by fire. These matters were closely interrelated. As well as the winding up proceedings that were being taken by the creditor against Jiwira Pty Ltd, there were questions as to rights under policies of insurance, and there was a mortgagee's sale of the subject land, which was due to take place in the week following 17 December 1992. In relation to all of those matters the respondent solicitors had been introduced to Mr Baker and his company by Mr LC Gruzman QC, who had been acquainted with Mr Baker and who appears, from some of the evidence in the case, to have had some business dealings with him relating to aviation interests. The fact that it was Mr Gruzman who introduced the solicitors to the client rather than the solicitors who introduced the client to counsel forms a significant part of the context in which certain advice was given and received, and certain decisions about the conduct of the various matters made. It is also common ground that on 16 December 1992 the retainer of the respondent solicitors by the appellants came to an end, although there is a dispute as to the circumstances in which that occurred and as to who terminated the retainer. That is a matter in respect of which Cooper DCJ made certain findings to which I will refer in due course. It follows from that, however, and it is common ground, that the solicitors had no authority to appear for either Jiwira or Mr Baker when the winding up proceedings came on for hearing in this Court on 17 December 1992. In fact, a representative of the firm of solicitors turned up at court, as a matter of courtesy to inform the Court that the solicitors were no longer instructed to act for Jiwira. Mr Baker did not turn up in court on that day or arrange for other legal representation. He gave evidence that he did not know the proceedings were to be heard on 17 December 1992 but Cooper DCJ did not believe that evidence. The nature of the claim that is being pursued in this appeal is as follows. The petitioning creditor obtained an order for the winding up of Jiwira on 17 December 1992, the application being unopposed. Over the succeeding months there was a sale of the subject real estate and, in a manner that is not relevant to this appeal, funds became available to Jiwira and, presumably, the petitioning creditor's debt was paid. At all events, in late 1993 there was an annulment of the winding up order of Jiwira Pty Ltd. The sum of $23,728.26, that is, the amount remaining in issue in this appeal, is said by the appellants in effect to be the amount of costs and expenses thrown away by Jiwira as a result of the fact that it was put into liquidation and subsequently had to go through the process of obtaining an annulment of the winding up. Although this figure is not accepted by the respondents, for the purpose of these reasons for judgment I am content to accept that that is the amount of money that was lost to Jiwira Pty Ltd as a result of the fact that it was put into liquidation on 17 December 1992. What is contended on behalf of the appellants is that the circumstances in which the retainer of the respondents was terminated involved a breach of contract on the part of the respondents, and that that breach of their contract was URJ JIWIRA PTY LTD and ANOR v FERRIER and ORS (Gleeson CJ) 3 causally related to the loss suffered by Jiwira Pty Ltd, the nature of which I have just explained. There is a substantial issue in the appeal as to whether, even if the appellant's are correct in saving that there was a breach of contract on the part of the solicitors, there was a causal connection between that breach and the loss to which I have just referred. The two principal issues in the appeal concern whether or not it has been shown that Cooper DCJ erred in the way in which he dealt with the question of whether there was a breach of contract on the part of the solicitors, and in the way in which he dealt with the question of whether there was a causal relationship between any suggested breach of contract on the part of the solicitors and the loss suffered by Jiwira Pty Ltd. Before coming to the manner in which his Honour dealt with those matters, and the criticisms that are advanced as to his process of reasoning, the following general observations about matters relevant to the litigation and the background of the dispute between the parties should be made. Over the period between 3 December 1992, when the winding up petition first came before the Court, and 17 December, when the winding up order was made. Jiwira Pty Ltd and Mr Baker received legal advice from Mr Gruzman QC, Mr Einstein of junior counsel and the solicitors as to the various legal matters to which I have referred. One aspect on which they sought and received advice was the question of the prospects of obtaining a further adjournment of the winding up proceedings when they came up for hearing on 17 December 1993. I digress at this stage to make reference to the issue of fact as to whether Mr Baker knew that the winding up proceedings had been adjourned to 17 December 1993. He said that he did not know that the proceedings had been adjourned to that date but Cooper DCJ rejected his evidence. It was well open to Cooper DCJ to make that finding of fact. His evidence in that respect was directly contradicted by the evidence of Mr Griffin, solicitor, and in any event it is inherently improbable. The solicitors had no reason to conceal from Jiwira or Mr Baker the date to which the proceedings had been adjourned. As a matter of objective probability, it would have been amazing if the solicitors had not told Mr Baker the date to which the proceedings had been adjourned. They had no reason not to tell him. The evidence shows that Mr Baker, the solicitors, Mr Gruzman and Mr Einstein had, over the period between 3 December and 17 December, intensive discussions about what was to be done on the adjourned hearing date of the winding up proceedings. Indeed, the evidence shows that over the two days before 17 December there was a lot of discussion about the question of what work would need to be done in order to resist the winding up proceedings and the expense that would be involved in having that work done. In my view no successful challenge has been made to the judge's finding that Mr Baker knew that the winding up proceedings had been adjourned to 17 December 1992. I return to an account of some aspects of the background of the case. The evidence shows on 14 December 1992 Mr Gruzman QC advised Mr Baker that there was no hope of either resisting the winding up proceedings or of obtaining an adjournment of the winding up proceedings on 17 December and that resistance to the winding up proceedings on that day, or an attempt to seek an adjournment, would be futile. So far as the evidence shows, it appears that such advice was correct. The petitioning creditor had been owed a debt of more than $1 million for about eighteen months. There was no good reason why the petitioning creditor should 4 UNREPORTED JUDGMENTS be kept waiting for its money. Mr Baker himself was the subject of a bankruptcy notice. According to the evidence of the solicitors Mr Baker had made it clear that he was not willing to provide the petitioning creditor with all the financial information about himself and Jiwira that the petitioning creditor wanted in order to consider consenting to an adjournment or waiting a longer time for its money. There were issues as to the valuation of the land on which Jiwira was relying to be put in funds to pay the debt to the petitioning creditor. There was an existing valuation of the land which was at least one year out of date. There were complicated questions as to the title to the subject land and as to the rights of various parties under policies of insurance. The barristers and solicitors involved in the case repeatedly told Mr Baker that resisting the winding up proceedings of 17 December was not simply a matter of turning up and throwing themselves on the mercy of the Court. They rightly advised Mr Baker that, to offer any credible resistance to the winding up proceedings, it would be necessary to obtain evidence about the various matters to which I have adverted, and that obtaining that evidence would involve a good deal of professional work, and would be expensive. Counsel for the appellants has accepted in argument that it would have cost several thousand dollars to obtain the necessary evidence even to mount a serious application for adjournment. Reference has earlier been made to the fact that 17 December 1992 was the second last day of the law term for that year, so there was no question of adjourning the matter for a day or two or a week or two. Any adjournment would have involved a delay until late January or early February 1993 at the earliest. That is a discretionary matter that would have been of significance to the Court. On 15 and 16 December the respondents' solicitors demanded payment from Mr Baker or his company of a further $7,000 in respect of legal costs owing up to 16 December. It is not disputed in this appeal that an amount somewhat in excess of $7,000 was owing to the solicitors on 16 December. As I have said, it is also accepted that several thousand dollars in addition to that sum of $7,000 would have needed to be spent in order to mount any kind of credible resistance to the winding up proceedings on 17 December. Cooper DCJ found as a fact that resistance on 17 December to the winding up proceedings - and by the term "resistance" I include an application for an adjournment - would have been both expensive and futile. His Honour's reasons for that conclusion are set out in his judgment on p22 and p23. I shall not repeat those reasons in detail but shall simply state that I am in substantial agreement with them. All of the advice which Mr Baker was receiving in the days leading up to 17 December was to the effect that it was both useless and expensive to resist the winding up proceedings of 17 December. It is not suggested in this appeal that that advice was incorrect or negligent. That constitutes the background against which Cooper DCJ came to resolve the first of the disputed issues agitated in this appeal. That issue relates to the circumstances in which the retainer by the solicitors came to an end on 16 December 1992. The matter is complicated by the fact that there was an admission on the pleadings which was contradicted by sworn evidence which was accepted by Cooper DCJ. The case was conducted on the basis that the issue was an open issue, notwithstanding the form of the pleadings. There was no objection to the evidence which Cooper DCJ accepted, and there had been an URJ JIWIRA PTY LTD and ANOR v FERRIER and ORS (Gleeson CJ) 5 agreement between the parties as to the issues that required to be resolved which appeared to leave this as an open issue. Cooper DCJ accepted that the solicitors, on 15 and 16 December, demanded payment of $7,000 on account of costs from Mr Baker. As I have already said there is no dispute that that amount was owing on 16 December. The area of dispute was whether or not the solicitors accompanied that demand with a threat that if the $7,000 were not paid they would not appear in court on 17 December. Mr Baker asserted that the demand was accompanied by that threat. The solicitors denied it. Cooper DCJ preferred the evidence of the solicitors to the evidence of Mr Baker on that point. As I have already indicated, the matter is further complicated by the circumstance that there would have been no point in the solicitors appearing in court on 17 December 1992 unless they had prepared evidence in respect of an adjournment application of the kind to which I have already referred, and it had been made clear to Mr Baker that obtaining evidence of that kind was an expensive undertaking. Cooper DCJ made the following finding of fact: "T accept that part of Mr Baker's evidence that he had the $7,000 available to pay Mr Ferrier. However; it is clear that notwithstanding its availability he chose not to pay it. 1am comfortably satisfied that the reason for this choice had nothing to do with any sense of outrage at being asked to pay this sum nor was it because he believed that no money was then owing by him to the defendants. I am satisfied that it was due to a conscious decision on his part to cut his losses. The evidence clearly establishes that Mr Baker had been repeatedly advised by Mr Gruzman QC, by Mr Einstein, by Mr Griffin and by Mr Ferrier that the chances of successfully resisting the application for winding up Jiwira Pty Ltd or of having the application adjourned were extremely remote. As at the time of this conversation with Mr Ferrier the realisation of this advice had come home to him. He had the choice of paying up $7,000 to fight an impossible fight or of holding onto his $7,000 and letting the inevitable happen. I am satisfied that he chose the second course and informed Mr Ferrier that his instructions were withdrawn." In my view those findings of fact were reasonable and were well open to the trial judge. The circumstances in which an appellate court will interfere with findings of fact of that nature made by a trial judge are well established by authority and it is unnecessary to canvass the authorities. It suffices for present purposes to say that no successful challenge has been made in this appeal to those findings of fact. In those circumstances it is unnecessary to determine whether, as a matter of law and professional practice, the solicitors, in all the circumstances of the case, would have been entitled to threaten Mr Baker that if he did nor come up with the $7,000 they would refuse to attend court. On the findings of fact made by the trial judge, which have not been successfully challenged, that issue does not arise. Even if there had been a successful challenge to the findings made by the trial judge as to the circumstances in which the solicitors' retainer was terminated. the appellants would still have faced a major difficulty on the question of causation, which I have earlier described as the second principal issue litigated in this appeal. 6 UNREPORTED JUDGMENTS It is common ground that on 16 December 1992 the solicitors' retainer came to an end and that they were neither bound, nor even entitled, to appear at Jiwira on 17 December 1992. Mr Baker did not seek alternative legal representation on that day; nor did he appear himself. Cooper DCJ inferred that Mr Baker did not seek alternative legal representation on 17 December because he had been told it was futile to seek to resist the winding up proceedings on that day and, of course, because he would have had to pay for it. Cooper DCJ found that Mr Baker, on that day, was in the frame of mind that, in relation to those particular proceedings, there was no point in sending good money after bad. In those circumstances I find it impossible to see that, assuming the demand at $7,000 accompanied by a threat of the kind alleged by the appellants had been made and had been in breach of the solicitors' contract, there was any causal connection between the breach and the damages said to have been suffered by the appellants. There is a further problem confronting the appellants. Unless the appellants can successfully challenge Cooper DCJ's conclusion that resistance to the proceedings on 17 December 1992 would have been futile, then there is an additional reason for saying there is no causal connection between any breach of contract on the part of the solicitors and the loss suffered by Jiwira. I have already expressed agreement with Cooper DCJ's conclusions in that regard; conclusions, be it noted, which were substantially to the same effect as the opinion repeatedly and emphatically expressed to Mr Baker by Mr Gruzman QC and his other lawyers. For a number of reasons, therefore, I am of the view that this appeal must fail. I propose that the Court should order that the appeal be dismissed with costs. Mason P IJ agree. Meagher JA I also agree. Appeal dismissed with costs. Counsel for the Appellant: Mr J Dungan Solicitors for the Appellant: James Solicitors Counsel for the Respondent: Ms Mary Walker Solicitors for the Respondent: Ferrier & Co