JAMES v GAIN [1998] NSWCA 115

JAMES v GAIN SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

GLEESON CJ, POWELL and BEAZLEY JJA 19 February 1998, 26 February 1998 [1998] NSWCA 115

Negligence — Solicitor — Conveyancing transaction — Mental capacity to enter into contract for sale — Differing valuations — Property sold at lowest valuation — Proof of damage.

Gleeson CJ, Powell and Beazley JJA The appellant, as executor of the estate of Keith Arkinstall, deceased, brought proceedings in negligence against the respondent, a solicitor, in respect of a conveyancing transaction in which the deceased sold his property at Gundagai, at a time when the deceased did not have the mental capacity to enter into the contract for sale.

The conveyancing transaction was entered into on 4 February 1986. On 7 May 1986, an order was made in the Protective Division of the Court declaring that the deceased was a person incapable of managing his affairs. Earlier, on 24 April 1986, Dr Spragg, psychiatrist had diagnosed the deceased as suffering from an advanced state of dementia. In evidence in the proceedings subject of the appeal, Dr Spragg said that any difference in his mental condition between 4 February 1986 and when he saw him in April 1986 "would have been imperceptible".

The trial judge appears to have accepted that the deceased did not have the mental capacity to enter into the conveyancing transaction. However, his Honour held that it had not been established on the balance of probabilities, that the respondent "knew or ought to have known that [the deceased's] mental condition was such that he was not capable of properly understanding this transaction". It followed on this finding that there was no breach of the solicitor's duty.

We have some sympathy with the appellant's challenge to this part of his Honour's judgment. There was evidence which pointed strongly to a finding that, at the least, the respondent ought to have known of his condition. See for example letter dated 24 October 1985 from Mr Webb solicitor to the appellant; and the respondent's evidence at AB 70, 75. Any successful challenge would of course have to overcome the application of the principles in Abalos v Australian Postal Commission (1990) 171 CLR 1 67.