PURKISS v HANNIGAN; PURKISS v HANNIGAN; PURKISS vKEEGAN [1997] NSWCA 357

PURKISS v HANNIGAN; PURKISS v HANNIGAN; PURKISS v KEEGAN SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

GLEESON CJ, HANDLEY JA and GILES AJA 2 and 3 December 1996, 13 February 1997

Solicitor conducted mortgage practice — conduct handed over to accountants — administered by same person — funds lent unsecured and lost — claims against solicitor and accountants.

1. As to funds of a particular client, was the administrator authorised to instruct the accountants to lend unsecured? On facts held not.

2. As to funds of other clients provided to the accountants after the handover, was the solicitor liable as well as the accountants? Held yes, because owed a duty of care to put in place a structure protective of the clients' funds on the handover or inform the clients of the changed position which might imperil their funds. Hawkins v Clayton (1988) 164 CLR 539 referred to.

3. As to all the funds, was the solicitor liable to indemnify the accountants? Held no, because owed no duty of care or fiduciary duty to advise them as to their responsibilities flowing from the handover. Allison v Clayhills (1907) 97 LT 709 and McMaster v Byrne (1952) 1 All ER 1362 distinguished.

Gleeson CJ I have had the benefit of reading, in draft form, the reasons for judgment of Giles AJA.

I agree with his Honour's conclusion as to the resolution of the issues in this appeal, and with his reasons for that conclusion.

Handley JA I agree with Giles AJA.

Giles AJA Mr Denis Hannigan practised as a solicitor at Long Jetty and Wyong, from 1975 in partnership, and from 1983 as a sole practitioner under the firm name Hannigans. From a time well before 1983 the practice at the Wyong office included what was referred to as a mortgage practice. Funds were received from investors, usually clients of the firm, and lent out on mortgage security, usually contributory mortgages. The mortgage practice was administered by Mr David Burke, who was not a solicitor but did legal work connected with the mortgage practice. Investors' funds were deposited to the credit of Hannigans' trust account, but the lending out was on mortgages taken in the name of Tungrove Pty Ltd (Tungrove), a company controlled by Mr Hannigan.