New South Wales Supreme Court CITATION : Goldsmith v Gillis [2002] NSWSC 334 CURRENT JURISDICTION: Common Law Division FILE NUMBER(S) : SC 12923 of 2001 HEARING DATE(S) : 11 April 2002 JUDGMENT DATE : 23 April 2002 Barrie Goldsmith (Plaintiff) PARTIES : v Sarah Louise Gillis (Defendant) JUDGMENT OF : Master Malpass LOWER COURT Local Court JURISDICTION : LOWER COURT 4348/98 Level 5 Downing Centre Sydney FILE NUMBER(S) : LOWER COURT Ian Barnett LCM JUDICIAL OFFICER : COUNSEL : Mr G Segal (Plaintiff) Mr Peter Jeffriess (Defendant) SOLICITORS : Goldsmiths Lawyers (Plaintiff) Duncan Scott (Defendant) CATCHWORDS : Appeal from Local Court - assessment of damages - expression of reasoning process - misdirection and lack of fact finding. LEGISLATION CITED : Contracts Review Act 1980. Legal Profession Act 1987. CASES CITED : N/A DECISION : See paragraph 30. IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Master Malpass TUESDAY 23 APRIL 2002 12923 of 2001 Barrie Goldsmith v Sarah Louise Gillis JUDGMENT 1 Master Malpass: These proceedings were commenced by Summons filed on 17 September 2001. The plaintiff seeks inter alia that the judgment and orders made by Mr Barnett LCM on 31 August 2001 be set aside. 2 The plaintiff is a solicitor. The defendant is also a solicitor, who worked for the plaintiff as an employed solicitor for some time (there was a written contract). Mr Christopher Villanueva was a client and the defendant had the conduct of his matter for a period. Her services were terminated and she joined a firm of solicitors who later acted for her. Following the termination of the services of the defendant, questions arose as to the payment of fees by Mr Villanueva. 3 A compromise arrangement was reached between the plaintiff and Mr Villanueva. It involved payment of fees in the sum of $4,000. Payments were made in the total sum of $1,500. 4 Subsequently, the plaintiff brought proceedings in the Local Court to recover the unpaid balance ($2,500). 5 Defences were filed on behalf of Mr Villanueva. There were statutory defences (agitating matters arising under the Legal Profession Act 1987 and the Contracts Review Act 1980). There was also a defence that there had been an agreement that no fees would be charged. This was an agreement alleged to have been made with the defendant. Prior to that time, the plaintiff had been unaware of any such agreement. 6 In these circumstances, the defendant was joined as a second defendant in the Local Court proceedings and a claim for damages for breach of contract was pleaded against her. Mr Villanueva filed an amended defence and brought a cross-claim to recover the moneys he had paid to the plaintiff. The proceedings came on for hearing before the learned Magistrate. The plaintiff was unsuccessful as against both defendants. The cross-claim was successful. The plaintiff was ordered to pay costs. 7 An appeal was brought to this Court. It was heard by Adams J and judgment was delivered on 6 December 2000. Adams J then made a number of orders. 8 One of the successful defences relied on by the first defendant in those proceedings was that propounded pursuant to the Contracts Review Act 1980. His Honour ordered that judgment be given for the first defendant against the plaintiff. He ordered that judgment be given for the plaintiff against the second defendant. The plaintiff was ordered to pay the first defendant's costs of the Local Court proceedings. An order was made concerning payment by the second defendant of costs of the plaintiff. 9 His Honour upheld the findings made as to the defence propounded under the Contracts Review Act 1980. His Honour also ordered that the question of damages be remitted to the Local Court. This order also contained words which were expressed as being for the purpose of better clarity. This expression was to the effect that the facts permitted but one conclusion in law, namely, that the second defendant was in breach of her contract with the plaintiff by agreeing to undertake work without fee on behalf of the first defendant and by failing to inform the plaintiff that she had done so. 10 The assessment of damages was heard by the learned Magistrate. He found that the plaintiff was entitled to nominal damages in the sum of $100 only. He entered verdict and judgment in that sum and ordered the plaintiff to pay the second defendant's costs of the proceedings. 11 The Summons brings an appeal against the judgment and order made by the learned Magistrate. The appeal was heard on 11 April 2002. The court had before it the material adduced in both hearings before the learned Magistrate (an "Appeal Book" and Exhibits "A" and "B"). It was common ground that the plaintiff was not entitled to relief unless error of law could be demonstrated. 12 Both parties have prepared detailed written submissions. Counsel have orally addressed to these submissions. For the purposes of dealing with this appeal, it is unnecessary to recite and deal individually with the many arguments that were advanced by counsel. The errors were glaringly obvious and need little elaboration. 13 I now turn to the judgment of the learned Magistrate. He was required to deal with an assessment of damages in respect of a claim comprising what has been described as four items. Item 1 was in the sum of $4,000. It concerned a component of the claim for damages measured by the fees which were not recovered from Mr Villanueva (the plaintiff had been ordered to repay the sum of $1,500). Item 2 was a claim for interest in relation to item 1. Item 3 was another component representing the costs incurred by the plaintiff in seeking recovery of the fees from Mr Villanueva (there was a sum of $21,560.40 being the plaintiff's own costs and a sum of $14,500 being the costs that the plaintiff had been ordered to pay to Mr Villanueva). Item 4 was a claim for interest on certain disbursements. There was a waiver of any amount that exceeded the jurisdiction of the court. 14 The court has been told that there was no dispute in respect of the quantum of each of these claims. However, the defendant raised issue as to whether any of them were recoverable as a consequence of the breaches found by Adams J. 15 In dealing with item 1, the expression of reasoning process of the learned Magistrate appears to extend over some four pages. Generally speaking, the reasoning process appears to be somewhat obscure or at least difficult to follow. It appears to canvass a number of matters, at least some of which are sought to be explained away on the basis of digression and as being not relevant to the ultimate decision. 16 There are a number of statements which are expressed as being what the defence argued or what was the defence submission. The substance of one of them seems to be that had Mr Villanueva been told that he would have to pay money for the services, he would not have given the instructions to perform the services. Another was that it was never contemplated when this contract of employment was entered into that damages would be a consequence of a breach. 17 It was observed as follows:- "Certainly no employed solicitor (as the 2nd defendant was) would work for another solicitor, on the basis that they would be held personally liable for the legal fees that might be charged to a client of the employing solicitor." 18 The expression of the reasoning process devotes some time to various other matters including the poor financial circumstances of Mr Villanueva and the defendant's knowledge of his circumstances, the termination of her employment, her view as to her performance of her duties, the contractual provisions as to termination and the quotation of a passage from Cheshire and Fifoot - 7th Australian Edition (concerning remoteness of damage) 19 The expression of this part of the reasoning process concludes with the following two paragraphs:- "In the present case it has been argued that to make the 2nd defendant personally liable for legal fees would not have been within the reasonable contemplation of the 2nd defendant at the time that the contract was entered into. My view is that this is a sound argument in the present case, and accordingly no damages are awardable under Item 1." 20 This material throws up a number of problems. Firstly, there is the insufficiency of the disclosure of the actual reasoning process to enable an understanding to be had as to how it was that the decision on this item was reached. Secondly, whatever that reasoning process may have been, there is clear misdirection and failure to address relevant questions. Thirdly, there is the lack of findings to support the decision that was made. For present purposes, I have put aside consideration of those findings that were said to have been made without any evidence. 21 Similar problems are apparent from the material concerning item 3 and it is unnecessary to repeat what has been said in the preceding paragraph hereof. 22 The consideration of this item commences with the following observation:- "I accept the argument relating to remoteness is equally applicable in relation to this item and accordingly no damages are payable under this head. In addition, there are other issues argued by the 2nd defendant." 23 The expression of reasoning process proceeds with reference to matters of history and arguments advanced. There is also reference to what happened during the first hearing and evidence that was given. 24 The consideration of these items concludes with the following two paragraphs:- "In my view, it is very clear from the evidence that the plaintiff embarked on a course of action that was directed to obtaining his fees as quickly as possible, but in effect denying the 1st defendant his rights under various legislation. This issue has been previously decided, but it is also relevant here in that the costs incurred by the plaintiff in pursuing the 1st defendant, and set out at Item 3, were, in my view, of the plaintiff's own making, and cannot be attributed to the 2nd defendant. Having regard to the evidence I accept the defence submissions that no damages should be awarded under Item 3." 25 In relation to items 2 and 4, these were dealt with as follows:- "in view of my finding in relation to Items 1 and 3, it follows damages would not be awarded in relation to the interest items." 26 The viability of these heads of damage was dependent upon what was done in relation to items 1 and 3. 27 It is unfortunate for the present parties that what commenced as a small claim has escalated to a significantly larger dispute due to the expenses of litigation. There have now been two hearings and two appeals. In the circumstances, it is with the greatest reluctance that this Court moves once again to remit the proceedings back to the Local Court. Unfortunately, there is no other option. 28 During the hearing, the parties were repeatedly invited to contemplate a commercial resolution of the matter. Despite this encouragement, it seems that this may not now be possible. 29 I am satisfied that the plaintiff has demonstrated an entitlement to the relief sought. Clearly, there is error of law which justifies the disturbing of the decision. 30 I order that the judgment given on 31 August 2001 and the order for costs made on that day be set aside. The matter is to be remitted to the Local Court to be determined according to law. I observe that it may be in the interests of justice that any further hearing take place before another Magistrate. The Exhibits are to be returned. ********** Last Modified: 04/26/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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