Cupidity overwhelmed common sense

 Vella & Anor v Gustafson & Ors [2009] QSC 424

 

Martin J entered judgment against the first Defendant Stephen Gustafson as solicitor for the plaintiffs in respect of failed loan agreement.

 

The facts centred on Mr Vincent who was described by his Honour as a rogue devising a scheme whereby he facilitated the plaintiffs to pay the second and third Defendants $300,000.00 to clear a debt in his name in disguise of an option agreement for a property purchase.

 

Mr Gustafson’s interest in the agreement was to secure $200,000.00 previously lent to Mr Vincent and not repaid. Mr Gustafson’s disputed his was the plaintiffs’ lawyer, but rather said they were engaged in a joint venture. This argument did not produce any traction from the outset:

 

[25] I interpolate here that it is curious that Mr Vella, who had already been party to a failed high interest transaction, and Mr Gustafson, who had been party to a similar transaction with Mr Vincent, should engage in the same type of enterprise again. Mr Gustafson said he saw it as his only hope of recovering his losses from the first, failed loan agreement. It is, I think, most likely that cupidity overwhelmed common sense with both of them; but that plays no part in the assessment of their legal rights.  

 

[26] Mr Gustafson maintained that he was not acting as a solicitor when he took part in the meeting and that he had not since then acted for either of the plaintiffs.

[27] Another unusual aspect of the history of this transaction is that Mr Gustafson, who has been a solicitor for about 30 years, took no notes of the conversations had during the 15 August meeting or at any time after it. Mr Gustafson explained that this was because he was not acting for anybody but himself. The absence of such notes, while it might be thought to be unusual, does not necessarily place Mr Gustafson at any elevated position of risk of being disbelieved. As Chesterman J said in Dew v Richardson [1999] QSC 192:

“[10] I was referred to the judgment of Denning LJ in Griffiths v Evans [1953] 1 WLR 1424 at 1428 at which the judge said:

‘… I would observe that where there is a difference between a solicitor and his client … the courts have said, for the last 100 years or more, that the word of the client is to be preferred to the word of the solicitor, or, at any rate, more weight is to be given to it … The reason is plain. It is because the client is ignorant and the solicitor is, or should be, learned. If the solicitor does not take the precaution of getting a written retainer he has only himself to thank for being at variance with his client over it and must take the consequences.’

The judgment was a dissenting one. The other Lord Justices merely noted that the solicitor’s evidence had been accepted by the trial judge and, conventionally, decided the case in accordance with the finding on credit. I cannot accept it is a principle of law that wherever a solicitor and his client disagree about the terms of a retainer (or advice) and the solicitor has not made a written note of the communication the client’s evidence must be accepted. Findings of fact, especially those based upon an opinion as to the creditworthiness of witnesses, are to be made from a careful and objective examination of the evidence adduced with respect to those facts. To introduce the notion that in a given circumstance facts must be found a certain way is to replace justice in the individual case determined by the application of legal principle to idiosyncratic facts with the arbitrariness of a determination made by reference to a mindless ritual.

I approach the critical question on the basis that both client and solicitor, plaintiff and defendant, have an equal right to be believed. Which of their respective versions is to be accepted will depend upon the persuasiveness of their evidence as judged by surrounding, objective circumstances.” (emphasis added)

 

[33] The documentary evidence is consistent with a relationship of solicitor and client. It was argued for Mr Gustafson that his actions were those of a desperate man seeking to recover his own losses. But that does not explain the references in correspondence to “act for”, “my client”, “I am now instructed”, “I am strongly advising my client”. In particular, the letter to Mr Vella of 15 March 2006 containing the words “We have not billed you” and “note of initial instructions” lead me to the view that Mr Gustafson was acting for Mr Vella and Nicalex at all relevant times as their solicitor.

 

His Honour concluded:

 

[36] Mr Gustafson did not, but should have, warned Mr Vella that not having a signed contract for the Molendinar property could lead to difficulty. I accept that Mr Vella would not have gone ahead with the transaction had he known of that.

[37] In the circumstances of this proposed transaction an ordinary and reasonably prudent solicitor would have, at least, ensured that further security was obtained for Mr Vella and would have advised him that the proposed option agreement was likely to be ineffective unless the contract for the sale of the Molendinar property was signed and enforceable. Mr Vella said that Mr Gustafson had told him that if there was default then it would be a simple matter of selling up the property or otherwise realising upon the security. This could not have occurred in the absence of a binding contract for sale of the Molendinar property.

[38] I accept that Mr Gustafson failed in his duty to Mr Vella by not:

(a) Ascertaining whether the Geoff Wolter Unit Trust had assets available in the event of default.

(b) Advising the plaintiffs to obtain appropriate security whether by way of a security over real property or personal guarantees from people of substance associated with Vinmatt and by conducting appropriate searches.

[39] Had Mr Gustafson considered the matters in the preceding paragraph he would have known that the Geoff Wolter Unit Trust had no assets, that Mr Vincent was not a director of Vinmatt, and that Mr Vincent was a bankrupt.

[40] As a result of the breach of duty or negligence of Mr Gustafson, Mr Vella and Nicalex have lost the sum of $300,000.

 

In respect of the second and third Defendants his Honour found:

 

[48] The burden in this part of the case necessarily lies on the plaintiffs and they have not discharged that burden by establishing beyond the balance of probabilities that there was, in fact, such a relationship that would engage the principle in Black v Freedman & Co [1910] HCA 58; (1910) 12 CLR 105. That case dealt with money which had been stolen and which became trust money which could then be followed into another person’s hands. The plaintiffs rely on the money going into the hands of the second and third defendants as volunteers and without consideration. The plaintiffs argued that there was a scheme of sorts, engaged in at least by Mr Vincent and Mr Matthews, which led to them being duped into handing over $300,000 to Mr Matthews. All aspects of that allegation have been denied by Mr Matthews. There is no other persuasive evidence which would lead me to the conclusion that the plaintiffs have discharged the onus which would allow a finding to be made that there was an agreement or arrangement between the second and third defendants and Mr Vincent, or that they received it as volunteers alone.

[49] The claim against the second and third defendants is dismissed.

 

Mr Vincent was not called any of the parties and the rule in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298) was not applied because:

 

[45] The inference which can be drawn in a circumstance such as this is no more than that the evidence which was not called would not have helped the party who failed to call the witness: Brandi v Mingot (1976) 51 ALJR 207. The making of a Jones v Dunkel inference depends upon the closeness of the relationship of the absent witness with the party who did not call him. See Hospitality Group Pty Ltd v Australian Rugby Union Ltd [2001] FCA 1040; (2001) 110 FCR 157. In this case, one might not expect Mr Matthews (who was unrepresented) to call Mr Vincent, given that Mr Vincent had misled him on numerous occasions about his capacity to repay the loan and, although they had once been close business acquaintances, they no longer were. I do not think that it is appropriate to draw the Jones v Dunkel inference in this case.

 

 

Brisbane Barrister – David Cormack

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