Michael Peter Johnston v Roderick Alexander Smith & Ors [2005] NSWSC 433

New South Wales Supreme Court

CITATION : Michael Peter Johnston v Roderick Alexander Smith & Ors [2005] NSWSC 433

HEARING DATE(S) : 7 March 2005 - 11 March 2005, 16 March 2005

JUDGMENT DATE : 25 May 2005

JUDGMENT OF : Barr J at 1

DECISION : Direct the entry of a verdict and judgment for the first defendant - order the plaintiff to pay the costs of the first defendant - dismiss the claim against the third and fourth defendants.

Michael Peter Johnston, Roderick Alexander Smith, Growthcorp (Aust) Pty Limited, Charles Platcher, Andrew Craig Ashton, Mortgage Partners Pty Limited PARTIES :

FILE NUMBER(S) : SC 20743/01

RG Forster SC/ RM Lovas (Plaintiff) COUNSEL : LV Gyles/K Oliver (1st Defendant)

Chegwidden Solicitors (Plaintiff) SOLICITORS : Turtons Lawyers (1st Defendant)

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

GRAHAM BARR J

25 MAY 2005

20743/01 MICHAEL PETER JOHNSTON v RODERICK ALEXANDER SMITH & ORS

JUDGMENT 1 HIS HONOUR: The plaintiff, Michael Peter Johnston, sues the first defendant, Roderick Alexander Smith, and others for damages arising out of events in which Mr Johnston invested and lost a large sum of money. Mr Smith is a solicitor, the principal of the firm Penrhyn Parker, who acted for Mr Johnston. Some time ago Mr Johnston discontinued his claim against the second defendant, Growthcorp (Aust) Pty Limited, ("Growthcorp"). The third defendant, Charles Platcher, was bankrupt at the time of the events giving rise to the claim and Mr Johnston is content for his claim against Mr Platcher to be dismissed. The fourth defendant, Andrew Craig Ashton, has become bankrupt since the commencement of the proceedings and the Court has been invited to dismiss the claim against him as well. Terms of settlement have been filed in the action between Mr Johnston and the fifth defendant, Mortgage Partners Pty Limited ("Mortgage Partners"). The only dispute for determination is therefore the one between Mr Johnston and Mr Smith. 2 Mr Johnston was born in 1970. He attended primary school and high school, which he left after completing the school certificate at the age of fifteen years. He undertook an apprenticeship and studied at TAFE and became an auto electrician. He lived in a house in Curl Curl, originally purchased in the 1950s by his grandmother. His parents eventually became the owners and he purchased it from them in 1996. His father, who was an officer at Australia and New Zealand Banking Corporation ("ANZ Bank') arranged a mortgage from that bank. 3 Mr Johnston had known a man called Nathan Morgan since they had attended school together. They remained friends and saw one another from time to time. In 1999 Mr Morgan was working for either or both of Growthcorp and Mr Platcher. The distinction does not matter, because he took his directions from Mr Platcher, who was a Director of Growthcorp. Growthcorp used to borrow money and sink it into land or property development. It was on the lookout for lenders of money. One of Mr Morgan's functions was to introduce to Mr Platcher persons who might be prepared to invest money in Growthcorp. During October 1999, taking advantage of their friendship, Mr Morgan told Mr Johnston that he was working for a company called Growthcorp which needed investors to enable it to complete certain projects it was undertaking. Mr Johnston said that he was not interested, but Mr Morgan persisted, asking him several more times over the next few weeks. Eventually Mr Johnston agreed to meet Mr Morgan one evening at an hotel. He kept the appointment. Mr Morgan and Mr Platcher attended. Mr Platcher told Mr Johnston that Growthcorp needed investors for a project to buy land and build a backpackers hostel at Noosa and to buy, subdivide and develop an abattoir at Yallah. He handed Mr Johnston a number of documents. Mr Johnston said that he would like to think about it. After the meeting Mr Platcher twice telephoned Mr Johnston and Mr Johnston told him that he wanted to speak to his solicitor about the matter. 4 Mr Johnston was then a certified auto electrician working in steady employment. He was a director of the company that employed him, though not the manager. His net annual income was about $30,000.00. Apart from his house he owned no substantial assets. By that time his indebtedness to the ANZ Bank had been reduced to about $130,000.00. Mr Platcher was telling him that if he invested the sum of $360,000.00 Growthcorp would pay the interest on the loan and repay it in full after the six months. It would also pay out his housing loan at the end of the six months. He must have doubted whether he could raise such a large sum. He must also have wondered how the venture could pay off his mortgage, which then stood at four times his net annual salary, within six months. I think that it must have been doubts about such matters that made him want to obtain the advice of a solicitor before deciding whether to invest.