Howarth v Miotti[2009] QSC 96

SUPREME COURT OF QUEENSLAND

 A Lyons J

 The background and the issues

1. In February 2000, Lyn Gary Howarth and Christine Joy Howarth (“the Howarths”) entered into an arrangement to “purchase off the plan,” a unit in a Gold Coast development called Kirra Beach Apartments. They paid large sums of money directly to Michael Murgia, (“Murgia”) who was the sole director of Magnamain Investments Pty Ltd, which was developing the apartment complex. The Howarths say that the monies were paid on the basis of Murgia’s statement that they would receive a significant discount if they paid the purchase moneys “up front”. Despite the fact that the Howarths paid large sums of money to Murgia and entered into possession of the Unit in October 2002, the settlement of the Contract scheduled for December 2002, never proceeded. The Howarths were ultimately evicted in 2006, by the mortgagee in possession. The Howarths are now divorced.

2. Murgia’s whereabouts are not known. The Howarths however, now bring an action against Steve Miotti, (“Miotti’) a solicitor and Redchip Lawyers (“Redchip”). Miotti has been a solicitor since 1987, practising predominantly in the areas of property transactions and at the relevant time was employed by Redchip. The basis of the action is that the Howarths say they retained Miotti and Redchip in July 2000, to act for them in the purchase and “to protect their interest in the unit and in particular the monies that they were paying in advance of the settlement.” They allege that the solicitors failed to protect their interests, give them appropriate advice particularly in relation to the monies paid and with respect to a proposed contract with a third party. They also allege the solicitors terminated the proposed settlement without their instructions. The Howarths seek damages, alleging breach of contract and negligence.

3. The issues in this case, therefore, involve determining whether there was a breach of a contract between Miotti, his firm and the Howarths and whether the conduct involved, amounts to negligence. The determination of those issues, necessarily involves the resolution of a series of factual matters, including the following:

1. what was the nature of the arrangement between Murgia and the Howarths? 

2. what were the precise terms of the arrangement between the Howarths and Murgia?

3. what was the date of the agreement, the listed purchase price and the discounted purchase price. 

4. when was Miotti retained?

5. what was the scope of the retainer?

6. what was the knowledge of the defendants in relation to the payments made to Murgia and Magnamain.

7. what events led to the cancellation of the settlement in December 2002?

8. what advice was given when there was an offer to purchase the Unit through the agent Leanne Shea from a third party for $650,000?

4. The determination of those issues of fact is difficult in this case for a number of reasons. First, Michael Murgia is not a party to the current proceedings and there is no evidence from him as to what transpired in relation to the formation of the agreement with the Howarths. Second, the solicitor’s file in relation to the Contract for the Unit is sparse, as Mr Miotti has not kept detailed file notes of what transpired and on some occasions kept no file notes at all. Furthermore, the plaintiffs have amended the pleadings on three occasions and within those pleadings, there are irreconcilable allegations of fact. Accordingly an assessment of credit will be vital to the ultimate determination of the issues.

The arrangement with Murgia in relation to the Unit

5. Lyn Howarth states that in January 2000, he met Michael Murgia. They became friends and they frequented the Harold Park races and other sporting events together. The Howarths allege that Murgia told them in February 2000 that, if they bought a Unit off the plan and paid the money early, they would receive a discount of $30,000. Lyn Howarth states that the representation was initially that, “If you can come up with just on $100,000, I’ll give you $30,000 discount off the unit.”^[1]  Lyn Howarth also states that as no agent was involved, a further $13,000 was also taken off the price.  The Howarths essentially claim that they orally agreed with Murgia that Magnamain would reduce the price of the property to $280,000, if they paid money ‘up front’ at an early stage.   In examination in chief, Lyn Howarth’s evidence^[2] about the purchase price was as follows;

“So what did you believe the price would be?---Well, the original price was 323.

Yes?---When he took the $13,000 off it, it went down to $310,00.

Okay?---And then the other 30,000 off it, it went down to $280,000.”

The early payments to Murgia

6. The Howarths say that, an initial amount of $50,000 was given directly to Murgia in February 2000, with a further sum of $30,000, paid directly to Murgia on 5 April 2000.  A further payment of $31,000 in cash was then made in May 2000.  There are no receipts for these payments and these amounts were paid without written documentation.

7. There is a record of a withdrawal of an amount of $50,000, from the plaintiff’s bank account^[3] on 17 February 2000 and a record of the payment of that amount, by bank cheque, into an account in the name Magnatrust Pty Ltd (rather than an account in the name of the developer Magnamain Investments Pty Ltd).  The Suncorp Metway bank statements,^[4] also record the withdrawal of an amount of $16,775.70 on 5 April 2000, from the Howarths’ account.  Lyn Howarth states that, he provided the balance of the $30,000 paid on that date and the further $31,000 paid in May, in cash to Murgia.  He says he had these cash amounts on hand at his home.

8. A Letter of Commitment,^[5] signed by the Howarths dated 15 June 2000, is in evidence.  This letter sets out their wish to purchase a Unit in the development for a purchase price of $340,000.  The letter also stated that a holding deposit of $34,000 had been paid and that it would be held in Redchip Lawyers’ Trust Account.  There is no evidence or any record however, of such an amount ever being paid into Redchip Lawyers’ Trust Account.

9. Lyn Howarth’s evidence is that, despite the amounts set out in the Letter of Commitment of June 2000, a written Contract was entered into in early May 2000. He states that the purchase price for the Unit in that agreement was $323,000. His evidence is that he was not given a copy of that Contract. He also states that, he was subsequently required to sign a further Contract on 14 July 2000,^[6] because the bank was not happy with the initial figures.  This 14 July Contract is in evidence and it indicates that the Howarths were purchasing Unit 601 for a purchase price of $340,000 and a deposit of $34,000.  It was signed by the seller and by the plaintiffs, as buyers and also as guarantors.^[7]

10. Lyn Howarth’s evidence is that he did not seek legal advice prior to signing the contracts.^[8]

“…it didn’t occur to you that you ought to seek advice as to the meaning of the contract from somebody who can read well and has legal training?---Well, I trust him.  I thought he was a very genuine person.

I see.  All right.  And if you signed other documents for Mr Murgia, you didn’t have a lawyer look at those, either?---No, no.

So, you trusted Mr Murgia emphatically?---Yes.”

11. On the final page of that July Contract was an undated and unwitnessed acknowledgment by the “stakeholder-trustee” of receipt of the deposit moneys and a statement that, the stakeholder agreed to hold the amount and any balance received. Miotti’s signature appears on that final page as the stakeholder and that document indicates that Redchip Lawyers are the buyers’ solicitors. This acknowledgment is undated. The Howarths claim that this document was signed by Miotti in July 2000.

12. Integral to the Howarths claim, is their assertion that when the Contract was signed in July 2000, which acknowledged a deposit of $34,000, an amount of $111,000 had, in fact, already been paid to Murgia. It is also an integral part of the Howarths’ claim that, they allege they engaged Miotti in July 2000 and they told him that they had paid this amount of $111,000. They also contend that they paid a further $169,000 to Murgia with Miotti’s knowledge. They claim that in total, payments of $280,000 were made. Lyn Howarth stated:^[9]

“Well, I told him about the agreement about paying the money up front, he was going to give me a discount and all that, and, as I said Mr Miotti said, “Well, that’s between you and Mike” He said he was -you know, like “I’m acting for you”, and everything like that and, yeah, that was it.

Okay. Did Mr Miotti say anything else during that discussion?---Well, he-yeah, well, he never said I was doing anything wrong.  He just said, you know, go along, you know, everything’s fine the way it’s going, yeah.”

The further payments by the Howarths

13. At the time the Contract was signed in July 2000, the Howarths owned a property at Browns Plains where they resided. The Howarths state that in October 2000 Murgia encouraged them to sell their home as he told them the unit development was nearing completion. They placed their home on the market and it sold in December 2000. Settlement occurred on 12 January 2001. The settlement figures^[10] indicate that, an amount of $95,131.02 was paid to Suncorp Metway, in satisfaction of the amounts owing to the bank.  Two cheques were also paid into Redchip Lawyers’ Trust Account at settlement, one in the amount of $66,643.96 and the other in the amount of $10,506.51. 

14. It is clear that these cheques were the proceeds from the sale of the Howarths’ property at Browns Plains. It is unclear however, who actually paid these amounts into the Trust Account at Redchip. Lyn Howarth states,^[11] he spoke to Miotti in January and told him;

“Well, I said to Miotti, I said.  “Murgia wants me to put the money into your Redchip Lawyers- send it to Redchip Lawyers,” right.

Yes?--- And he said to me, “Send it to Redchip Lawyers Trust Account.”

….Well, all I done was I rang up Hefferans, the ones who were selling me property, and I told them to send a letter and send the money to Redchip Lawyers Trust Account.” 

15. The Trust Account ledger at Redchip Lawyers,^[12] records these amounts as being held on account for Magnamain Investments rather than the Howarths, from 12 January 2001.  They are noted simply as “Settlement Proceeds” and there is no correspondence or even a file note to otherwise indicate how those funds came to be held on account for Magnamain.  It is clear however, that there is no reference to the Howarths being the source of the funds.  The Redchip Lawyers’ Trust Account receipt,^[13] issued on that date in fact indicates that, the drawer of the cheques was “Magnamain Investment-bank cheque”.

16. The plaintiffs also contend that, further cash amounts were paid to Murgia in 2001 and 2002. The Howarths state that, $22,850 was paid in January 2001, $25,000 in October 2001, $10,000 in January 2002, $14,000 in June 2002 and $20,000 on 10 July 2002. Lyn Howarths’ evidence is that these cash amounts came from his income protection insurance, gambling proceeds and from the sale of his possessions.

17. On 6 February 2001, a fax message was sent to Redchip Lawyers, to the attention of Miotti from Murgia which stated as follows:^[14]

“Steve,

Please post the letter to PO Box 940 Browns Plains Qld 4118.

Regards,

Michael Murgia.”

18. There is no doubt that the Howarths paid funds directly to Murgia and that, some amounts had been paid to one of his companies Magnatrust Pty Ltd. It is clear that the fax of 6 February 2001 was sent three weeks after the settlement of the Howarths property. It is also clear that an amount of $77,150.47 was paid into Redchip Lawyers’ trust account and credited to Magnamain. It is therefore unclear to me, whether the fax of 6 February 2001 from Murgia acknowledging the amounts which have been paid by the Howarths, in fact includes the amount which has been paid into the trust account apparently by Magnamain.

19. It is clear however, that there is a document from Murgia, which states that cash payments of $212,000, had been made as at February 2001, with a total acknowledged payment of $242,000, if one includes the rebate of $30,000. The Howarths ultimately claim that all the payments required were made. They state they had paid a total of $280,000 to Murgia by mid 2002. These payments, they contend, were made up of cash payments of $116,074.50 and cheques totalling $163,925.99.

20. Lyn Howarth states that he received a letter from Redchip Lawyers in June or July 2002, acknowledging that they had paid for the Unit and that, “it was about two weeks after I paid the 20-the final payment.”^[15]  Whilst he cannot recall the exact words, he states it confirmed they had paid “$280,000 for the Unit, Unit 601 such and such Douglas Street Kirra.”^[16]

The Agreement to Occupy

21. During the period after their house was sold, the plaintiffs resided in a caravan on a property they owned near Esk, for approximately 10 months. They then resided with Murgia at Robina, or in accommodation which was provided by Murgia on the Gold Coast. The Howarths moved into Unit 601 at Kirra Beach Apartments in October 2002.

22. When the plaintiffs moved into Unit 601, they signed an Agreement to Occupy,^[17] dated 15 October 2002, which indicated that they were occupying prior to the settlement of the Contract, dated 14 July 2000.  Lyn Howarth states that he rang up the solicitors and told them they were moving in.  He states that, the conversation was around the time he took over as manager of the Units. 

“I had the keys to the whole complex.  I had master keys to everything, yeah.  So, I used to lock it up of a night time, when you know.  There was me and one other person living there at the beginning.”^[18]

He stated that, it was Murgia who brought the document around to their Unit for them to sign and that Murgia “told me to sign it because everybody had to sign it because they were moving into the Units.”^[19]

The Offer to purchase

23. Lyn Howarth stated that not long after they moved in to their unit, Leanne Shea, the agent involved in the marketing of the Units, approached him and said that she had a number of people interested in their Unit. He had then indicated to her that, “…it would have to be above 600, right and within a few days she came back to me”. She said, “I think I’ve got somebody interested in that unit for 650”.^[20] A written offer in these terms was ultimately made. 

24. Howarth states that he then contacted Miotti, who told him he “couldn’t sell it” and that “the reason Steve gave me was he said it’s still mortgaged to the bank.”^[21] Lyn Howarth states that, when he said to Miotti, that he had paid for the Unit and that “I’ve even got a letter with your letterhead on it saying I’ve paid for the unit.” that Miotti said to him “Well look at it this way, at least you’re in the unit, so it can’t be sold from underneath you”.^[22]  Lyn Howarth also states that, Miotti told him that he “would have to wait until Mike Murgia got the money to sort it out, which he told me, but he had assets to be sold to cover the Unit.”^[23]

The Termination of the Contract

25. Lyn Howarth states that at no time did he give instructions to terminate the settlement of the Contract and that he was not party to a telephone conversation where Murgia gave those instructions. He does however, recall Murgia telling him that, settlement would now be in early 2003, “February or March, or something, I think.”^[24]   He states that, they were never asked for instructions in relation to an extension of time for the Contract and that at no stage did they get advice from Miotti or Redchip about securing their interest in the property.  He also states, there was no written communication at all from the lawyers, regarding termination of the settlement of the Unit.  As previously indicated, the Contract never settled and the plaintiff’s were ultimately evicted from the Unit, by the mortgagee in possession.

26. There is no doubt that the Howarths paid money to Murgia. The Howarths, however, are suing Miotti and his firm at the time, Redchip Lawyers, for breach of contract and negligence. Their case is that, they retained the defendants to generally advise them about the 14 July 2000 Contract and the Purchase Price Agreement they say they had with Murgia.

27. Before I turn to an analysis of the nature of the retainer between the Howarth’s, Redchip and Miotti, it is first necessary to examine the nature of the agreement between the Howarths and Murgia, which preceded the involvement of the lawyers.

What were the terms of the agreement between Murgia and the Howarths? 

28. What was the agreement the Howarths made with Murgia in February 2000? Murgia is not available to give evidence as to what was agreed to, but Lyn Howarth is. The difficulty is however, that having heard the evidence of both Christine and Lyn Howarth, there is no clear version of what was agreed to. I will address this issue in some detail, because I consider the evidence given in this regard, particularly by Lyn Howarth, raises fundamental issues in relation to the credibility of his evidence.

29. The fundamental difficulty is that, Lyn Howarth was unable to identify with any precision the details of the arrangement with Murgia, which he says he entered into in February 2000, when the amount of $50,000 was paid into the Magnatrust Pty Ltd bank account. Not only is he unable to give precise details of the arrangement, he was also unable to give consistent evidence about this agreement. I also note that this agreement is not referred to in the first statement of claim. Lyn Howarth made the arrangement with Murgia and he should be able to give clear evidence of what was agreed. The details of that agreement however, are still unclear and there is no certainty about the bargain the parties actually entered into. There is no clear evidence about the original listed purchase price of Unit 601, the total amount of the discount, or the agreed discounted purchase price. Furthermore, there is no clarity about how much of the original purchase price had to be paid in order to get the discount, or even when the amounts had to be paid.

30. The lack of clarity is highlighted in the following exchange between Lyn Howarth and Miotti’s Counsel Mr Davis SC:^[25]

Mr Davis:

“…prior to 17 February, it was 323,000?--  Right, yep.

You agree on 17 February to pay him 50,000?--  Yes.

And he knocks 60,000 off?--  Yes.

I see?--  I wasn’t the only one offered-----

No, no?--  -----to pay money upfront to get a unit, either.

Mmm.  Well, if you take 60,000 off 323, don’t you get to 263?--  If you take what?

60,000 off 323,000, don’t you get-----?--  But he wasn’t taking 60,000 off 323.

Sorry, I thought you just told me he was?--  I didn't say he was taking 60,000 off it.  I didn't say at all 60,000.

I thought you just did?--  No, I didn't.

Okay.  All right.  You say when you paid him the 50,000 on 17 February, there was some deal for a reduction of the purchase price?--  Right.

How much?--  Well, when I paid him the 50,000, it was 60,000 would – came off the bill, right, 60,000 off the 323.

I see.  So does that include the 50 that you’ve paid?--  That’s including the 50 I’ve paid, yeah.  He turned it – it was turned into 60.

I see.  So you start with 323?--  Take off 60.

You take off the 60, I see, and then the $13,000 comes off later?--  Yeah.

But by the July date when you signed the contract, your notional purchase price, the total amount you’ve got to pay, is 280,000?--  When I signed the one in July?

Yes.  I think you’ve already said that?--  Yeah.  Well, I – that’s how it worked out.  I had to pay 280,000 all up, yeah-----

All up?--  -----for the unit, yeah.  Yeah.

And you knew when you signed the contract on 14 July that that was the total amount that you had to pay, 280,000?--  That’s right, yeah.

Now, this deal in relation to paying the money before the plan issued, right, paying it all upfront-----?--  Yeah, what – go on.  What do you mean the plan?

You knew that you had to pay all the money upfront, didn't you, for the unit?--  No, not all the money, no, no.  He just said, ‘You’d have to give me roughly 100,000 and I’ll take 30 off it’.

I see.  Very well.  Well, when did he say that?--  He said that before I gave him the 50,000.  We had a talk about it.

Yes?--  And,. Yeah, that’s when he agreed, and me and me wife thought it was a good deal.

All right.  In the document that has been put before the Court, your lawyers say this: “Prior to signing the July Contract, there was an agreement between the plaintiffs and Magnamain as to how the purchase price was to be paid.  By the standard purchase price of between 320 and 340 for a unit in the Kirra Beach Apartments to a total of 280,000 if that sum was paid prior to the Community Title Scheme for the Kirra Beach Apartments being issued.”?--  I don’t know about that – all that.  There was nothing – that wasn’t suggested.  I had to pay it before anything was planning or anything like that.  There was nothing – nothing said about that.

I see?--  And I don’t even know what the plan is.

I see.  So if you didn't know about that agreement, obviously you didn't-----?-- What agreement?”

31. I consider there are contradictory accounts by Mr Howarth, as to the amount of the agreed purchase price. Was it $340,000, $310,000 or $323,000? I also consider there are contradictory accounts as to the amount of the discount offered to the Howarths. Was the discount $30,000, $43,000 or $60,000? The Howarths claim that the agreed discounted purchase price was $280,000, which involved the discount of $30,000, referred to by Murgia, with a further $13,000 reduction, because there would be no agent’s commission. This would be a total reduction of $43,000, however during cross examination there were times when Mr Howarth seemed to agree that the discount was $60,000.

32. Overall however, it would seem that the Howarths most consistent claim is that, the original listed purchase price was $323,000 and that the May 2000 Contract, evidenced this amount. There is no evidence that this was, in fact, the original listed price, other than Mr Howarth’s evidence. This figure is contrary to the figure contained in the signed Letter of Commitment, dated 15 June 2000, and the Contract, dated 14 July 2000. Those documents, in fact, indicate a purchase price of $340,000 and a deposit of $34,000.

33. Lyn Howarth insists however, that there was an earlier Contract in May 2000, which he was not given a copy of, which indicated the correct purchase price of $323,000. He states that, after the payments of $50,000 in February 2000 and $30,000 in April 2000, he made a further cash payment of $31,000, directly to Murgia at his office at Robina in early May 2000. He states that, he gave the money to his secretary who counted it and it was then that they signed the Contract for $323,000.

34. Lyn Howarth’s evidence^[26] is that,

“…it was about the middle of July he rang up again and asked me to bring me wife down because we had to sign another contract.

Okay. And can you …..explain the reason why he told you, you had to sign another contract?---Yes.  When I got down there –me and my wife got down there, he told me either the bank or his partner wouldn’t accept the first contract at the 323 because by the time we done the-signed the deposit thing, they’d gone up to 343,000 from the 323.”

35. A finding that there was a written agreement in May 2000, for a purchase price of $323,000, would depend on a finding that Lyn Howarth was a credible witness. I do not consider however, that he was a witness of credit. There is evidence which contradicts his version of events and there is no evidence to substantiate his evidence. Lyn Howarth alleges that, the second Contract in July was entered into contemporaneously with being told by Murgia in July that the bank or a business partner would not accept the purchase price of $323,000 in the earlier May Contract. The Contract was therefore executed in July to satisfy the third party. That does not however, explain the figures in the June Letter of Commitment, which contained the same figures as the July Contract, rather than the May Contract. As Lyn Howarth says he first knew about the purchase price of $340,000 in July, the June letter which he signed acknowledging this a month earlier is inconsistent with his evidence. The documents themselves namely the Letter of Commitment and the July Contract, also contradict Lyn Howarth’s version of events.

36. Furthermore the fax from Murgia to Miotti, dated 6 February 2001, also gives a purchase price and breakdown of payments, which is different to that given by Lyn Howarth. That letter indicates a purchase price for Unit 601 of $340,000, with a rebate of $30,000 and a statement that, at that stage the total price paid was $242,000 (including the rebate) and that, $98,000 was still to be paid. That letter stated that, the amounts paid were amounts of $30,000, $18,000, $50,000 and $114,000. The Howarths however, state that the amounts paid were amounts of $50,000, $30,000, $31,000, $77,150.49 and $22,850. I note therefore, that the sequence and the value of the deposit amounts set out in that letter do not correspond with the amounts the Howarths state were paid.

37. As previously note, the amount of $110,000 allegedly paid to Murgia, between February 2000 and May 2000, was paid without any documentation. When the first written agreement was entered into in May 2000, some months after the first amounts were paid, Lyn Howarth was not given a copy of the Contract, nor it would appear, did he ask for a copy. I find this inherently improbable. Given that the Howarths’ evidence is that, they had paid large amounts of money and had been given significant discounts, I consider that, anyone in their position would have insisted that the agreed discounted price and the payments be recorded on the documentation and that they be given a copy of the document.

38. Accordingly, I do not accept Lyn Howarth’s evidence that there was an earlier written Contract in May 2000, which indicated a purchase price of $323,000.

39. I also consider that there is insufficient evidence to ascertain the total amount which has been paid by the Howarths. Once again, I do not consider the evidence Lyn Howarth gave, to be credible. On my analysis of the evidence, there is substantiation for the cash payment of $50,000, the withdrawal of $16,775.70, the proceeds of the sale of $77,156.47, being paid to Redchip Lawyers and evidence of a bank cheque for $20,000, paid to Murgia on 10 July 2002, which Lyn Howarth states was the final payment.

40. Accordingly, there is substantiation of payments of $163,932.17. Claims that a further amount of almost $116,067.83 has been paid in cash are not able to be objectively verified.

41. This amount of $116,067.83 was allegedly paid in cash to Murgia. I also note that, this cash amount was paid said to be paid to Murgia and not Magnamain Investments or even Magnatrust, but to Murgia personally.

42. I consider it is also inherently improbable that Lyn Howarth was able to pay large cash amounts to Murgia because he had large cash amounts at home, which were the result of his gambling wins, savings or the sale of items of furniture. Even if one accepts that some amounts, could have been received from the sale of items and from savings from his income protection insurance moneys, this would still leave a large figure to be the result of gambling wins. I do not accept that such a large figure would be the proceeds of gambling.

43. Furthermore, I have concerns about the fact that there is an obvious disparity in the various Statements of Claim, which have been filed in these proceedings. The difficulty is that, these various statements rely on different factual backgrounds, which have not been reconciled. The obvious inference is that, the Howarths have given different versions of the facts at various times.

44. Overall therefore, I can find no consistent evidence as to the amount of the purchase price, the discount paid, the discount offered or the total amount of the funds actually paid. I also consider that the version given by the Howarths, to be improbable and I do not accept their versions as to the purchase price, or the amount of the discount, unless those amounts are verified by other evidence. Accordingly, I do not accept Lyn and Christine Howarth’s version of events in relation to the formation of the agreement and the payments made, pursuant to that agreement.

45. Clearly however, a Contract of Sale dated 14 July 2000, was entered into between the Howarths and Murgia on behalf of Magnamain, to purchase Unit 601 for $340,000. I consider that they paid large sums of money directly to him or one of his entities prior to the completion of the units and that there was a promise of a discount probably in the order of $30,000.

Was there a retainer with Mr Miotti and if so, when did it commence?

46. The next issue relates to the Howarth’s claim that they retained Miotti and Redchip in July 2000, to act for them in the conveyance of the property, to advise generally in relation to the July 2000 Contract and to advise generally, in relation to the purchase price agreement. Accordingly, I need to ascertain whether there was a retainer with Miotti and Redchip and if so, when did that retainer commence and for what purpose were they engaged.

47. Lyn Howarth says he first met Miotti in February 2000, around the time he made the first payment to Murgia. He says, he had gone with Murgia into Miotti’s office in the city and Murgia indicated to Miotti that he (Howarth) was buying one of the Units off the plan. He states that this was the only occasion he met Miotti in person and that his other contacts were by telephone.

48. The Howarth’s claim that there was a retainer with Miotti from July 2000, when they entered into the written Contract dated 14 July 2000, which nominated Redchip Lawyers as their Solicitors. There is also an earlier document dated 15 June 2000, which is the Letter of Commitment, which states that $34,000 was held, on their behalf, in the Redchip Lawyers’ Trust Account. Accordingly, there is a reference to an intention in the documents that Redchip are to be retained.

49. Lyn Howarth’s evidence is that, approximately 10 days after he signed the Contract in July 2000, he rang Miotti and asked him if he had the Contract. Howarth also states that, at this point, he told Miotti that he had already paid $111,000 and that he was planning to pay further amounts in cash, to Murgia. Howarth indicates that Miotti said, “That’s between you and Mike.” Howarth states that, Miotti agreed to act for him during this conversation. Howarth also argues that the Contract, dated 14 July 2000, indicates that not only had he and his wife signed as purchasers, but that Miotti, as the stakeholder trustee, acknowledged the receipt of the deposit moneys. Furthermore, he states in that Contract, Miotti agreed to hold that amount and any balance, when received, in accordance with the agreement.

50. Miotti denies that the telephone call or the conversation occurred and he also states that, he has never in fact met Christine Howarth or spoken to her at all about the July 2000 Contract.

51. It is clear that the Contract is dated 14 July 2000 and that Miotti signed that document as stakeholder. There is no indication however, that Miotti signed in July as the signed acknowledgment is undated. I do not consider that there is any evidence that the retainer commenced on 14 July 2000. Whilst the documentation indicates that the Contract is dated 14 July 2000, there is no indication that it was in fact signed on this date, or that either Miotti or Redchip Lawyers became involved at this stage. I do not consider that there is any objective evidence of any actual involvement of Miotti or Redchip at this stage. Indeed, the evidence indicates that the Howarths had paid $110,000 to Murgia, signed a Letter of Commitment in June 2000 and a Contract dated 14 July 2000 all without any reference to a lawyer

52. I also consider that an examination of the correspondence between the lawyers in November 2000 and February 2001 indicates that the earliest date the Contract was sent to the lawyers, was after 3 November 2000. I consider that the letter dated 3 November 2000, from Hickey Lawyers, who were acting for Magnamain Investments to Redchip, implies that the contract was in fact backdated, as that letter states “We refer to the above matter and advise that the vendor has accepted the offer and the Contract has now been signed and dated 14 July 2000.  The original signed Contract will be forwarded to you shortly.” (my emphasis)  In relation to the deposit I do not consider there is any evidence that Miotti signed as stakeholder in July 2000, as his signature is undated and the evidence indicates that the vendor did not sign until November 2000.

53. A further letter was then sent to Redchip Lawyers dated 5 November 2000, which contained further information in relation to the sale of Lot 601 at Kirra Beach to the Howarths and indicated that, settlement was to take place on the 15^th day after the date on which notice is given that the plan is registered and that a separate title has been created.  The letter also stated that a full deposit of $34,000 had been paid and “is held in your trust account.  Please authorise us to amend Item 7 of the sale details to the Redchip Lawyers.”^[27]

54. Furthermore, I consider that an examination of the documentation from Redchip Lawyers’ which includes the “file opening book,”^[28] “file cover sheet,”^[29] “trust ledger”^[30] and ‘trust account receipts,”^[31] indicates that the file was first opened in November 2000.  The records clearly show that, “file number 00-577… was opened on 8 November 2000 and it’s in the name of Lyn and Christine Howarth, purchase of 601 Kirra Beach”.^[32] 

55. In my view, this documentation and the correspondence, does not support Lyn Howarth’s version of events, which is that he engaged Miotti in July and rang him about 10 days after the signing of the Contract to make sure he had the Contract. It is clear from Hickey Lawyers’ letter that the original signed Contract, was not signed by the vendor until shortly before the signed contract was forwarded, which was not until 3 November 2000. I do not consider there is any evidence of contact with the firm or Miotti until November 2000.

56. Accordingly, despite the date on the Contract, I consider that the objective evidence is that some time after 3 November 2000, documentation was forwarded by Hickey Lawyers indicating that a Contract had “now” been entered into between the parties and the original signed Contract would be forwarded shortly. I consider that, Hickey and Redchip became involved in this transaction at this time and not before. I also consider that in their letter Hickey Lawyers are advising Redchip Lawyers all the relevant information for the transaction. This indicates to me that Redchip and Miotti did not have a prior involvement.

57. I also note that, it was during this period that the bank cheques from the proceeds of the sale of the Howarth’s property at Regents Park were paid into the Redchip Lawyers Trust Account on 12 January 2001. At the time those cheques were paid into the trust account it is clear that the Howarth’s file and trust account ledger had been opened at the firm in November 2000. Accordingly if, as Lyn Howarth alleges, he gave instructions to Hefferans to have the cheques paid into Redchip Lawyers Trust Account in January 2001 and that he told Miotti this then the cheques would have been correctly credited to the Howarths and the trust account receipt would have issued to them.

58. I do not therefore accept Lyn Howarth’s version of events that Miotti knew these cheques were paid in by him and were to be held on his behalf. As the bank cheques were deposited for the credit of Magnamain Investments, the obvious inference is that Murgia obtained those bank cheques post settlement from the Howarths and gave instructions that they be placed in the trust account to his credit and not as Lyn Howarth alleges. I consider therefore, that the objective evidence casts Lyn Howarth’s evidence further into doubt.

59. I also consider that the 5 February 2001 letter from Hickey’s, is in fact a letter which queries whether Redchip are holding a deposit of $34,000 rather than indicating that they hold it given Redchip are asked to confirm the information. Furthermore, the 6 February 2001 fax message from Murgia to Redchip Lawyers to the attention of Miotti, advises the purchase price of $340,000, the rebate of $30,000, the amounts paid and the balance owing of $98,000.^[33]

60. Given the content of the letter I consider that it is clear that these amounts had not been paid to Redchip or Miotti. The letter to the Howarths on 28 February 2001, then confirms that Redchip had an acknowledgment from the ‘vendor’ that $242,000 had been paid. Clearly this was to the ‘vendor’. That letter is in the following terms:^[34]

“RE: KIRRA BEACH PLAZA – UNIT 601

We confirm that we are acting on your behalf in relation to the purchase of the above property from Magnamain Investments Pty Ltd.

We further confirm that we hold an acknowledgment from the Vendor that you have paid the sum of $242,000.00 towards the purchase price for the Unit.

We shall contact you once the Survey Plan has registered to discuss the finalisation of the transaction.

In the meantime please do not hesitate in contacting us should you have any other queries.”

61. I consider that this correspondence confirms the commencement of the solicitor client relationship, which I consider commenced with the opening of the file and the trust account ledger on 8 November 2000. In this letter, the solicitors state that the vendor has advised them that an amount of $242,000 has been paid to the vendor and not the solicitors. I do not consider that this is an acknowledgment that that amount has been paid to the solicitors or that a deposit of $34,000 is being held by them as stakeholder.

62. Lyn Howarth stated that he believed that all the moneys he paid to Murgia had been paid into the defendants trust account. I consider this to be an extraordinary statement which is in conflict with the evidence.

63. I consider that the earliest professional involvement of the firm was in early November 2000, when the documents were forwarded to Redchip by Hickey Lawyers. None of this correspondence, when viewed objectively, confirms earlier contact or involvement between the Howarths and Redchip or Miotti. Neither is there any correspondence to indicate that the Howarths gave instructions that, the settlement funds paid into Redchip Lawyers’ Trust Account on 12 January 2001, were to be held on their account.

The nature of the retainer

64. The next issue which needs to be determined is what was the nature of the retainer? What were Miotti and Redchip asked to do? I accept Miotti’s evidence that he knew Murgia and that he acted for Murgia in a number of matters. I also accept that it was Murgia who asked him to act for the Howarth’s and I note that the Contract was sent to Miotti directly by Hickey Lawyers. It would seem that there was never a face to face meeting with the Howarths and that all the contact with Miotti was conducted by Lyn Howarth over the over the phone in Murgia’s presence. Having observed Lyn Howarth in the witness box I consider that it must have become apparent to Miotti that Lyn Howarth was a fairly unsophisticated client. It must also have been apparent that he was very closely associated with Murgia.

65. Miotti gave evidence that, he had extensive commercial experience as a solicitor having been admitted since 1987. He also stated he had considerable experience with “off the plan” contracts. In relation to this Contract and the deposit his evidence was as follows;^[35]

“Is that your signature?--  Yes, I believe it is my signature.

Did Redchip Lawyers actually receive the deposit?--  No, they did not receive any deposit monies on this contract.

Can you tell her Honour, then, the circumstances which led to your signature being on the contract?--  I recall being down at the Gold Coast seeing clients on a date which I'm not certain of.  I had called into the offices of Magnamain.  They were down at Robina at the time.  I was speaking to them about other matters.  The contract - and I believe it to be this contract - was produced to me.

By whom?--  By Michael Murgia.

Yes?--  And there was a cheque attached to a front - to the front of a bundle of documents.  It had disclosure documents. It was quite a thick bundle of documents, most likely more than one copy as well.  I was to be the stakeholder.  I believe the cheque was made out to Redchip Lawyers Trust Account.  I signed it as - to be the stakeholder in the trust deed.  When I went to take the cheque with me, and I was going to take a copy of the contract, too, but, to be honest, I'm not too sure whether it had been fully executed or not, and I was advised - I was advised by Mr Murgia that the whole of the documents as they were going to go back to Hickeys to be effectively vetted, and then that would be forwarded to me in due course.

So, after having been told that, what did you see became of the contracts and the cheque?--  I eventually received the contract on a date that I'm certain that I received it.

Well, what about that day that you saw the cheque and you saw the contract, did you leave with the contract and the cheque or not?--  No, that was left there.

Okay?-- And my understanding was that it would be vetted by Hickeys, or Hickeys were sending all the contracts out, and I was going to receive the contract.

Now, when you had that meeting with Mr Murgia-----?--  Yes.

-----by that stage had you met the Howarths?--  I don't believe that I had met the - no, I had not met the Howarths at that stage.”

66. Miotti’s evidence is that, Murgia had previously asked him to act for the Howarths and that around the time the contract was sent to him in November, he had a telephone call with both Murgia and Lyn Howarth, whereby Murgia introduced him to Lyn Howarth. He stated that “The first conversation was a very general conversation where I had agreed, on introduction by Mr Murgia, to generally act for him in a –in the conveyance.”^[36] 

67. Miotti rejects Lyn Howarth’s evidence that, Howarth told him that he was paying money directly to Murgia in July. Counsel for the Howarths relies on a series of decisions^[37] to argue that where there is a difference between a solicitor and his client as to the issue of a retainer, then the word of the client is to be preferred.  In particular, reliance is placed on the 2001 decision of the Queensland Court of Appeal in Adamson v Williams[38]where it was held that;

“…Courts have taken a fairly hard attitude towards solicitors who come before them relying on oral retainers.  Cordery on Solicitors suggests that more weight is given to the client’s affidavit than to that of the solicitor.”

68. However, it is well settled that there is no principle of law that the client’s evidence must be accepted and it is clear that “Findings of fact, especially those based upon as to creditworthiness of witnesses, are to be made from a careful and objective examination of the evidence adduced with respect to those facts.”^[39]  I consider that the objective evidence, in many respects, confirms Miotti’s version of events.  As I have indicated it is Murgia who sent the 6 February 2001 fax to Miotti, setting out the contact details for the Howarths and he is clearly introducing the Howarths to Miotti.  He is also the one advising that an amount of $242,000 had been paid towards the purchase price and that there was still another $98,000 to pay.  In my view, this letter does not support Howarth’s allegation that he engaged Miotti and told him he was making payments to Murgia in July 2000. I prefer Miotti’s evidence to that given by Lyn Howarth.  Miotti openly accepted his failure to write contemporaneous file notes and I consider that he gave an honest account of what had transpired.

69. In my view, this confirms that Murgia was the one who introduced the Howarths to Miotti and indeed organised for Miotti to act for them. It is also clear that, the Howarths and Murgia had a pre-existing arrangement in relation to the unit. I do not consider there is any evidence that Miotti or Redchip knew of the payments by the Howarths to Murgia and Magnamain prior to a telephone call from Murgia to Miotti, just prior to the fax of 6 February 2001. It is clear however, that on 6 February 2001, Miotti is informed in writing by Murgia that he has been paid $212,000 or $242,000 including the rebate. I consider that the objective evidence supports a finding that this is the first occasion Miotti is told of the detail of these payments.

70. In relation to his knowledge in respect of these payments Miotti stated as follows;^[40]

MR FAULKNER

So you believed a deposit had been paid?-- I believe they were part payments towards the purchase price.

So you believed it was an instalment contract?--  I can't say that I thought a receipt - a receipt of that letter, I cannot say to you that I thought it was an instalment contract.

But you believed that moneys were being paid towards the purchase price, didn't you?--  It would constitute an instalment contract, yes.

But you didn't put your mind to it?--  I can't say that I specifically put my mind to it.

Okay.  So you didn't think to advise your clients in respect of the nuances of instalment contracts?--  It was an off-the-plan stage.  Their rights would have been limited.

71. I consider that, it is abundantly clear that prior to Miotti’s involvement, there were extensive arrangements made between the Howarths and Murgia, without any reference to Miotti or Redchip. The nature of this relationship is revealed in the following exchange.^[41]

“That was all done between you and Mr Murgia, wasn’t it?  Mr Miotti had nothing to do with any of that?--  No, well, as I said, Mr Miotti was never there when I signed anything, right.

No, that’s right, isn’t it?  And your contact with Mr Miotti was very, very scant, wasn’t it?  You hardly had anything to do with Mr Miotti over this entire episode?--  No, I made – I think there should be notes in his thing how many phone calls I made.”

72. Given this background, what then was the nature of the retainer when the firm and Miotti were actually engaged in late 2000? I consider that the evidence indicates that, Miotti and the firm were retained to attend to the conveyance of the Unit. I do not consider that there is any evidence of a broader retainer. Clearly, Murgia and the Howarths had entered into an oral agreement and subsequently a written agreement, long before Miotti or Redchip were retained as confirmed by the following;^[42]

“And with Mr Murgia, you signed a whole stack of documents, didn't you, the contract, the deed?--  Yeah.  He just kept on putting them in front of me, so I signed them.

You signed them without any reference at all to Mr Miotti?--  Well, I didn't think I needed any reference ‘cause he never ever said anything about anything else I received from Mr Miotti.  They never said I was doing anything wrong.”

73. It would also seem clear that the Agreement to Occupy, signed in October 2002, was entered into without any reference to Miotti or Redchip.

74. Miotti indicated that as soon as the Contract came in, it was actually delegated to one of the paralegals, because generally there was little initial work to do with an ‘off the plan’ Contract and they wouldn’t expect much to occur at the early stage. He stated;^[43]

“…we don’t expect too much to happen.  We put it into the compactus, and we really ready ourselves to start the conveyancing process really upon registration of the plan where we can get accurate searches of what the property is all about.”

75. There is in fact no evidence of any meetings between Miotti and the Howarths during 2001 and Lyn Howarth agreed that, any contact was in fact by phone rather than in person. “….between November 2000 and February 2001?-- I never had contact with him personally, but over the phone I did.”^[44] I do not accept Christine Howarth’s evidence that, she was in constant contact with Miotti throughout this period, as it is not supported by the evidence and is simply contrary to the Howarth’s pleaded case.  I accept Miotti’s evidence that, he had never met Mrs Howarth and that his first contact with her was in mid 2004. 

76. Lyn Howarth alleges that, he received a letter from Miotti in July or August 2002, confirming that they had paid the full purchase price of $280,000 for the unit. Such a letter would have had to have been prepared on information provided by either Murgia or Hickey Lawyers, as it would have had to have been substantiated as Miotti would have had no independent evidence to this effect. There is however, simply no evidence of any such advice from either Hickey lawyers or Murgia. Furthermore, the alleged letter to the Howarths is not in evidence. Such a letter does no comprise part of the Redchip file, there is no reference to advice in this regard on the Hickey Lawyers file and Mr Howarth does not have a copy of the letter. I do not therefore accept the existence of such a letter.

The third party offer to purchase the unit for $650,000

77. The plaintiffs claim that due to the advice they received from Miotti, that they could not enter into a contract to sell the unit prior to the settlement of the July 2000 Contract, they failed to sell their unit for a profit. Lyn Howarth stated that a third party who had been introduced by the agent Leanne Shea was willing to pay a purchase price of $650,000. I accept Ms Sheas evidence that, there was a buyer interested in the property at the price of $650,000.

78. I do not however accept Lyn Howarth’s evidence as to the advice he was given by Miotti that, a settlement in conjunction was not possible. There is no evidence in support of Howarth’s version of events and I do not accept that such advice would have been given by a solicitor with Miotti’s experience.

79. Ms Sheas evidence in fact was that, she was told to hand all such contacts directly to the developer and I consider that it is more likely that Murgia told the Howarths the matter could not settle and not Miotti.

80. I accept Miotti’s evidence that he knew nothing about this offer to purchase.

What events led to the cancellation of the settlement in December 2002?

81. The survey plan for the property was registered on 29 November 2002. On 5 December 2002, Hickey Lawyers, for Magnamain, wrote to Redchip Lawyers indicating that the plan had registered and that settlement was to take place on 20 December 2002.

82. Miotti indicated that after this letter, he was telephoned by Murgia in December 2002, who indicated that he would need to get an extension of time to settle the Contract and that he (Murgia) would speak to Hickeys about it. Miotti said that during this conversation Murgia told him

“..he was awaiting settlement of a number of prior contracts before he would be able to transfer clear title to the Howarths in relation to Lot 601, because he needed to, in effect, discharge the registered first mortgagee.”^[45]

83. Miotti states that at the time of this conversation, he was not aware of how much money the Howarths had paid to Murgia but he understood ““they had paid all that they were having to pay”, or whatever their arrangements were.”^[46]  Miotti says that, Howarth was present with Murgia during this conversation because at one point Howarth got on the phone and complained about the state of repair of the unit.  It was also during this conversation that he first became aware that the Howarths were in occupation of the unit.

84. File notes at Hickey Lawyers^[47] dated 16 and 17 December 2002 and a letter dated 17 December 2002,^[48] indicate a confirmation from Murgia, that settlement was to be delayed and was now to occur 45 days after the notice of the registration of the plan and would be on 20 January 2003. The letter in fact, confirms direct contact between Murgia and Howarth, as Hickey Lawyers letter states “our client has instructed us to advise that it had separately agreed with your client”.

85. Miotti’s evidence is that, he was party to a further telephone conversation in early January 2003. He states that, Murgia and Howarth were together on one end of the phone and Murgia indicated he and the Howarths had agreed to terminate the Contract. Miotti states that Howarth said:^[49]

“This unit is a F-ing piece of shit.”  He had had enough of the unit.  He said that there was problems with the plumbing.  There was a number of problems that he’d indicated to me.  He had had a gutful of the unit.  He wasn't going to complete the contract, at all, and that he would - he and Murgia would sit down and sort out what was going to happen from this point forward, but he was not going to buy that “F-ing piece of shit.”

Okay.  Now, you knew at this stage that Murgia had at least some of Mr Howarth and Mrs Howarth's money?--  I did.

Did you give any advice to Mr Howarth on this particular conversation?--  Yes, I did.

What was that advice?--  I suggested to Lindsay that I prepare an agreement between them in relation to the - well, the termination of the contract, and also for whatever the arrangement was going to be between himself and Michael in relation to going forward.  I also suggested to him by way of example that he should take security over Murgia's house.

What did - how did Mr Howarth respond to that advice?  What did he say?--  The effect of it was, “This is all F-ing B. I’m going to deal with this with Murgia.  You don't need to concern yourself - you don't need to worry about this.  I'm going to sort this stuff out with Murgia,” and that's effectively the gist of the conversation.  He was sorting out with Murgia.  He didn't want me to do any agreement.  He didn't want any security.  He was just going to sort it out with Murgia.  He was getting quite aggressive.  I did feel somewhat intimidated, and I thought, “Well, I'll leave it up to their own devices.”

Once he said those things to you-----?--  Yes.

-----what did you consider was your ongoing involvement in the matter?--  I thought I was done.”

86. Lyn Howarth denies this version of events. The great difficulty with these two telephone calls is that, Miotti did not make file notes or document these instructions in any way. Furthermore he did not write to the Howarths confirming what had occurred and he did not confirm in writing what the Howarths instructions to him had been. Neither did he set out in writing the advice he had given them. Miotti is obviously open to criticism for these failures. These instructions and his advice should have been carefully noted given the consequences which could flow from the postponement or termination of a contract for the purchase of property.

87. Counsel for the Howarths again argues that, because of Miotti’s lack of file notes, the evidence of the Howarths should be preferred, particularly in relation to the termination of the contract and relies on the decisions of Lord Denning in Griffiths v Evans[50] and Chesterman J in Dew v Richardson[51] in this regard. 

88. Even accepting these obvious failings I prefer the evidence of Miotti to that of the Howarths because I consider that the evidence supports Miotti’s version of events. It is clear from the evidence that transfer documents were not prepared by Miotti or Redchip, in preparation for settlement and no real arrangements were made with Hickey Lawyers in relation to a proposed settlement of unit 601. Mr Thams, a solicitor with Hickey lawyers, confirmed that there “was really no great preparation for settlement.”^[52]  

89. In addition, the proposed settlement date of 20 January 2003 passed and there is no evidence of any complaint by the Howarth’s to Miotti or of any contact with Miotti in the period after January 2003. Neither is there any evidence of the Howarths ringing Redchip or Hickeys to enquire as to what is happening about the settlement. I consider that the file note and letter of 20 January 2003, confirm that there was indeed an arrangement entered into between Murgia and Howarth, about the termination of the contract and indeed the return of the deposit without any reference to Miotti. I do not consider there is any evidence that Miotti or Redchip purported to terminate the July 2000contract on behalf of Howarth as he alleges.

90. The documentation in evidence also indicates the following information:

1. On 23 January 2003, an urgent letter was sent by Hickey Lawyers to Redchip stating that the Contract was due to be effected on 20 January 2003, but that no one had attended to effect settlement. They reserved their client’s rights under the Contract and at common law.[53]
2. On 17 December 2003, Hickey Lawyers file note indicates that there has been a phone call to Mike Murgia by Kylie in relation to unit 601 and that he “confirmed matter not proceeding, deposit has already been refunded, Mike will request Redchip Lawyers to send a fax confirming same.”[54]
3. On 17 December 2003, Hickey Lawyers sent a letter stating “Our client has now advised us that this matter is at an end and that the deposit has now been returned to your client.”[55]
4. On 23 January 2004, an email from Miotti to Kylie Shea at Hickey Lawyers confirmed that the purchase of the unit will not be proceeding “as the parties have agreed for them to be mutually terminated.”

91. I consider that the evidence indicates that, Lyn Howarth, who was at the relevant time employed by Murgia as the manager of the units, was making the decisions in relation to the contract directly with Murgia. He was clearly acting quite independently of his solicitors and indeed did not even advise them of his decisions until after they were made.

 Subsequent events

92. It would also seem clear that the Howarths continued to deal with Murgia during the period January 2003 to June 2005 and this is apparently without reference to Miotti or Redchip. Some twelve months after the failure to settle in January 2003, that is on 16 January 2004, Hickey Lawyers sent a facsimile to Mike Murgia at Magnamain, asking if the settlement with the Howarths is proceeding and on 23 January 2004, Miotti replied by email to Kylie Shea, advising that the contract had been mutually terminated.

93. Transfer documents dated 29 March 2004 however, were subsequently executed by Magnamain Investments Pty Ltd and the Howarths.^[56]  There is no reference to Miotti or Redchip in that document.  Clause 3 refers to an unwritten Agreement, dated 20 March 2001 and the details of the sale price listed on the Transfer indicate “Cash-$340,000”.  At clause 4, the actual date of possession was given as “20/12/02”.  Lyn Howarth stated^[57] that he and his wife were given these transfers by Murgia and that

“He came into the courthouse with us and got me and me wife to sign it…..he took the paperwork back and went off and said ‘That will be transferred in your name in a couple of weeks’, or something.” 

Howarth agreed that this transfer was signed by him without any reference to Miotti.^[58]

“Well, whatever those documents, you signed those documents and Mr Miotti had nothing to do with them; you agree with that?---He never-no, I can certainly say he never said anything about this transfer, no.”

94. Mr Thams also agreed that a new contract had been provided to Magnamain;^[59]

“..the original contract for sale of Lot 601 has been terminated and then some how or other re-enlivened, as evidence by your letter of 16 January 2004---Yes

Right.  And then a new contract has been executed; is that right?”

95. Mr Thams also stated that “it would appear they’ve given it to the buyers, who’ve signed, and it was returned back to us at Hickey Lawyers.” In my view, this confirms that the defendants have not been involved in this transaction.

96. On 2 April 2004, Hickey lawyers sent a facsimile to Murgia noting his instructions that the sale to the Howarths is proceeding and that a fresh blank contract and disclosure statement have been prepared.^[60] This new contract was signed in April 2004.

97. In early to mid 2004 Miotti says that he was contacted by Christine Howarth in the following terms:^[61]

MR DAVIS: 

“Now, going back to the conversation with Mrs Howarth, when was the first time you spoke to her?-- Early to mid 2004.

Did she contact you or did you contact her?--  She contacted me.

And what was the conversation?--  She telephoned, introduced herself as Tina Howarth.  She thought that I wasn't going to recognise her name, and she explained to me that she was the husband of Lindsay.

The husband of Lindsay?--  The wife of Lindsay.  I had said to her “I know exactly who you are, Tina,” and she said to me that the reason that she'd called is that she wanted some honest answers, and I said, “Okay, no problem at all.”  She said to me that she had a mortgage document that had “Redchip Lawyers” on the document and what was it about.

Can I just stop you there.  Did she say anything about trusting Lindsay and Mike?--  In relation to - she did.

How did that come up?--  Because she had seen the document - the mortgage document.  I had indicated to her that it wasn't prepared by me, that I had never seen it, and she had indicated - she had said to me that “Mike and Lindsay were up to no good again.”

I see?--  And that's the reason why she wanted to speak with me.

Okay.  So you, by this stage, then, have told her that the mortgage document wasn't prepared by you?--  I did say that to her.

Did you then give her some advice?--  I did.

And what was the that advice?--  I said to her that she had really two options.  She had indicated to me - she told me that she had seen - she had got these documents from Lindsay's paperwork.  I said to her that she two options:  she could confront Lindsay and Michael in relation to what the document was all about or, alternatively, she should take the document to a lawyer and get to the bottom of it.”

98. The obvious inference is that Christine Howarth took Miotti’s advice to see a lawyer because on 21 June 2004, a Caveat in relation to the unit was lodged on behalf of Christine Howarth by Peter Atkinson and Company. Clause 4 of the Caveat provides that, the basis of the Caveat is “pursuant to contract in writing dated on or about February/March 2004 between Magnamain Investments Pty Ltd as vendor and Lyn Howarth and Christine Joy Howarth.”

99. Miotti indicated in evidence that his next contact with Christine Howarth was in 2005. On 24 February 2005, a Contract for the Sale^[62] of lot 601 for a purchase price of $550,000 is entered into between Magnamain Investments Pty Ltd as vendor and Christine Howarth as purchaser.  Redchip Lawyers and Miotti are listed as the solicitors for both the vendor and the purchaser. Miotti states that came about because the mortgagee had issued notices exercising power of sale and Christine Howarth was trying to purchase unit 601 as follows:^[63]

“I now take to you to 2005 and at this point in time, Mrs Howarth enters into a contract to purchase the unit; is that right?-- Yes.

And how did you become involved in that?--  I had been speaking to Mrs Howarth and Mrs - and Mr Murgia in relation to negotiating, you know, a contract with - at that stage, there were some problems with the mortgagee and I was negotiating as best I could a contract that would be acceptable to Mrs Howarth.

When you say you had problems with the mortgagee, the problem was in paying him enough money - sorry, in paying it enough money to have it release the title?--  At that stage, I believe that there notices exercising power of sale that had issued from the mortgagee and that the mortgagee obviously wanted to sell those - I think there were three units left. They wanted them sold.  There was some negotiation on price. I can't really recall how the negotiation process went up down or what offers may have been.  My best recollection of the price was around 550,000.

But ultimately, that transaction didn't proceed because the mortgagee couldn't be placated; is that right?--  The exact position at the end was that a deposit had been paid under that contract.  There was some finance that had been organised by Mrs Howarth and there was a difference still remaining to have sufficient funds to settle that contract and that difference, from my recollection, was about $60,000 could not be paid to the mortgagee.  So, the contract never-----

It collapsed?--  It was terminated, yes.”

100. ASIC records^[64] indicate that Magnatrust Pty Ltd was dissolved on 12 June 2005.

101. ASIC records^[65] indicate that Magnamain Funds Management Pty Ltd was dissolved on 26 June 2005.

102. The evidence then indicates that on 19 July 2005, Christine Howarth made an application^[66] for a home loan of $465,000 with Wizard Home Loans.  The application document, which she states she did not read, was organised by Murgia. It indicated that she had been employed by Magnatrust Pty Ltd for four and half years as a sales and marketing manager with a monthly salary of $6833.  The form also stated that she had $135,000 invested with Magnamain Funds Management Pty Ltd and that the market value of the subject property was $550,000.

103. Christine Howarth gave evidence at the hearing. She confirmed her former husband’s evidence that, he had given large cash amounts to Murgia including $30,000, on the date they signed the first contract. She also stated that she did not speak to Miotti until after they moved into the unit in October 2002. She also confirmed that, a Contract had been entered into in 2004, without reference to Redchip or Miotti and that she had engaged different solicitors to prepare and lodge the caveat in 2004.

104. Christine Howarth stated that in early 2005, Murgia told her that in order to get the unit in her name, she needed to go to Wizards Home Loans “to a place that he told me to go and sign a document.” She advised that, at the time she signed the application form she was not employed and had very little money. When asked what her understanding was as to why she was going to Wizards she replied^[67]

“Well, Mr Murgia said if I could get-he would- if I could get a loan, he would pay it off, so I just did what he asked.

Did you read- you had to fill out some form?---No, I didn’t fill out anything.  All I did was sign something.

But you didn’t read it?---No.”

105. She later said in evidence,^[68] “Michael Murgia explained to me that he was borrowing the money and he would be paying it back and the unit was going into my name……he told me everything would be fixed up and I was desperate at the time.” Christine Howarth stated^[69] that, at the time she applied for the loan she and her husband had paid for the unit already but didn’t have title.

“You’ve actually- you’ve actually paid for this unit, you say---?—Mmm.

----by the time you’re doing this application with Wizard Home Loan, right?  Who had you paid?---Well, Michael Murgia and---

Right.  You paid Michael Murgia?---Yes.

But notwithstanding that you’d paid Michael Murgia, you didn’t get the title to the unit?---yeah.

Right?  Did it dawn on you that perhaps you ought not to be trusting towards Mr Murgia?---Not at the time.”

106. Miotti stated in evidence that he did not have anything to do with the application for finance and I accept this evidence.

107. I consider that, the evidence indicates that the Howarths continued to deal with Murgia and entered into arrangements with him in relation to Unit 601 after January 2003, without any reference to Miotti or Redchip who considered the contract had been “mutually terminated”. I consider that as the Howarths entered into a further contract with Magnamain for the purchase of Unit 601 in 2004 they were also clearly of the view that the 2000 had been terminated.

108. Having considered the evidence, I am satisfied that the relevant findings of fact about which I am satisfied are as follows.

Findings

109. The Howarths signed a Contract of Sale dated 14 July 2000, with Michael Murgia who was representing Magnamain to purchase Unit 601 for $340,000.

110. There had been an earlier oral agreement, whereby a discount was promised by Murgia and large sums of money were paid directly to him. The date of the oral agreement, the original purchase price of the unit and the discount offered are uncertain.

111. The Howarths paid significant funds directly to Murgia or Magnatrust, signed a Contract dated July 2000, a Letter of Commitment in June 2000 and an Agreement to Occupy in October 2002, without any reference to Miotti or Redchip.

112. I accept that the amount of $163,932.17 has been paid. I do not accept the claim that a further amount of almost $117,000 in cash has been paid.

113. I am not satisfied that Miotti signed the Contract as stakeholder in July 2000.

114. I am not satisfied that Miotti or Redchip held the deposit of $34,000.

115. The firm Redchip and Miotti were retained on or about 8 November 2000.

116. Redchip and Miotti were retained to conduct the conveyance of unit 601.

117. I am not satisfied that the evidence establishes that Miotti and Redchip were told of the existence of a purchase price agreement by the Howarths.

118. I am satisfied that Miotti and Redchip were unaware of the payments by the Howarths to Murgia and Magnamain prior to a phone call to Miotti, just prior to the fax of 6 February 2001.

119. The fax of 6 February 2001, advised that $242,000 had been received by Murgia and that the balance owing was $98,000.

120. I am not satisfied that Miotti or Redchip sent a letter in July or August 2002, confirming that the Howarths had paid the full purchase price of $280,000 for the unit.

121. I am satisfied that Miotti was not advised by Lyn Howarth of an offer to purchase unit 601 for $650.000 in late 2002.

122. I am satisfied that an arrangement was entered into between Murgia and Howarth about the postponement of the Contract in December 2002.

123. I am satisfied that Murgia and Howarth mutually agreed to the termination of the Contract prior to Miotti being advised in January 2003.

124. Neither Miotti or Redchip made the decision to terminate the July 2000 contract with Magnamain.

125. I am satisfied that Miotti gave advice as to how Howarth could protect his interest after the contract was terminated but this was not file noted or confirmed in writing.

126. I am satisfied that Howarth rejected Miotti’s advice as to how to protect his interest and made his own arrangements with Murgia.

127. The Howarths continued to deal with Murgia and entered into arrangements with him in relation to Unit 601 after January 2003, without any reference to Miotti or Redchip who considered the contract had been “mutually terminated”.

128. Transfer documents dated 29 March 2004, were executed by Magnamain Investments Pty Ltd and the Howarths, without reference to Miotti or Redchip.

129. A new Contract of Sale between the Howarths and Magnamain was signed in April 2004, for a purchase price of $340,000 without any reference to the defendants.

130. On 24 February 2005, a Contract for the Sale^[70] of lot 601 for a purchase price of $550,000 was entered into between Magnamain Investments Pty Ltd as vendor and Christine Howarth as purchaser.  Redchip and Miotti are stated to be the solicitors for both vendor and purchaser and Miotti knew this.

The plaintiffs claim. The duties owed by the defendants.

131. The Howarths allege that the defendants breached their contractual and common law duties by;

1. failing to advise when retained in July 2000, that the Contract required an amendment to reflect the Purchase Price Agreement;

2. failing to advise them not to make further payments under the Purchase Price Agreement;

3. failing to undertake various enquiries to protect their interests;

4. failing to advise the contract could only settle if they were able to pay $340,000 at settlement;

5. failing to advise that they could enter into a contract with the third party to purchase their unit and settle both contracts simultaneously;

6. failing to ensure the July 2000 contract was not terminated;

7. agreeing to terminate the July 2000 contract without instructions.

132. The plaintiffs claim that due to the defendant’s failure, they paid $169,000 after the defendants were retained.

133. The plaintiffs also claim they lost the opportunity to settle the July 2000 Contract, in conjunction with the contract to purchase by the third party for $650,000. In total, the plaintiffs claim $459,000 together with interest.

134. Further and in the alternative, the plaintiffs claim damages for breach of contract and/or negligence, in the sum of $169,000.

The duties owed by the defendants.

135. It is clear that, the defendants owed to the plaintiffs a contractual obligation to perform the retainer to the standard of a reasonable competent legal practitioner and that there was a co-extensive duty in tort. As Dal Pont in his text on Lawyers Professional Responsibility[71] states;

“Various terms are implied as a matter of law into the retainer, giving effect to the very nature of the relationship.  The basic implied term is that the lawyer will use her or his best endeavours to protect the client’s interest and exercise reasonable care and skill in carrying out by all proper means the client’s instructions in the matters to which the retainer relates.  In essence, this implied term largely replicates the lawyer’s duty of care in tort; a lawyer who discharges his or her duties negligently is therefore concurrently liable in tort and contract.

136. The plaintiffs submit that in Berrivale Orchards Limited v Blakes,[72] White J defined the duty of a solicitor to his or her client in terms quoted from Cordery on Solicitors, which, in summary, are to:^[73]

1. Carry out his instructions in the matters to which the retainer relates, with diligence and proper means;
2. Consult with the client on all questions of doubt which do not fall within the express or  implied discretion left to him; and
3. Keep his client informed to such an extent as may be reasonably necessary, and comply with reasonable requests from the client for information about his affairs.

137. The plaintiffs also rely on the decision of Hill v Van Erp[74] where Brennan CJ held that “…the solicitor’s duty is to exercise professional knowledge and skill in the lawful protection and advancement of the client’s interests in the transaction in which the solicitor is retained”. I note however that there is no evidence before me however as to what a reasonably competent legal practitioner would have done in the circumstances of this case. 

138. The 2004 Queensland Court of Appeal decision in Littler & Anor v Price & Ors[75] also discusses some of the relevant principles.  In that decision the solicitor agreed to act for reward as solicitor to Mr and Mrs Littler and to provide them with legal advice with respect to the conveyance of a unit. Jerrard JA said;

“[7] The terms of the admitted retainer appear indistinguishable from that described in Henderson v Amadio (No 1) (1995) 62 FCR 1 at 137 – 138 “to act in the conveyance of the property and the mortgage.” The Full Federal Court held, and I respectfully agree, that the solicitor’s obligations included those of perusing and advising on documents executed before the solicitor was retained, and to advise of any unusual benefits the documents conferred or any unusual burdens or detriments which it imposed. The retainer is also similar in terms to that found in Fox v Everingham & Howard (1983) 50 ALR 337 at 338, namely to “represent his wife and himself in the purchase of ‘this house’”. The Full Federal Court held, and again I agree, that that retainer included an obligation to explain the salient points of the contract to the purchasers, any provisions of it which were in an unusual form and which might affect their interests as they were known by the solicitors, and to give attention to the question of whether the contract contained adequate provisions from the point of view of the purchasers to protect them against a variety of contingencies which might have reasonably been foreseen as likely to arise “if things did not go as expected”. The Court summarised the solicitor’s obligations as being that the purchasers were entitled to rely on the solicitors to see to it that the contract was adequate to protect their interests.”

139. I agree with the plaintiff’s submission that there was a primary obligation to go through and explain the terms and conditions of the contract with the plaintiffs.^[76]  I consider that this duty arose after the contract was received by the defendants around 8 November 2000 and that this duty included advising the Howarths on the contract which had been executed before they were retained. 

140. I consider that Miotti need to explain the salient points of the contract to the Howarths. I agree with the plaintiff’s counsel’s submission that the Howarths needed some careful advice in relation to the contract to purchase the unit from Magnamain. In particular the risks of an ‘off the plan’ contract needed to be clearly pointed out. I also consider that as the Howarths were commercially unsophisticated and therefore needed greater explanation from Miotti. As Bell J said in Davies v Camilleri,[77]

“The solicitor acknowledged that clients who are uneducated or commercially unsophisticated need more explanation of transactions than do commercially sophisticated clients.  Equally he accepted that where the consequences of a transaction have the potential to be serious for a client a greater level of explanation and assistance is required.”

141. Furthermore, once the information was received by the defendants on 6 February 2001, that the vendor had been paid $242,000, I consider that the Howarths should have been advised in relation to securing or protecting those payments which Miotti was now clearly aware of. They should also have been advised that, no further payments should be made unless they were adequately protected. I consider that a reasonably competent solicitor would have provided advice in respect to the payments which had been made and would have advised of the risk of continuing to make further payments. I agree after 6 February 2001, Miotti’s knowledge of these payments gave rise to important issues including:

1. What protection by way of security or other form of assurance was being offered;

2. Were the amounts being paid held in trust or otherwise secured;

3. How these amounts would be recognised by the financier at settlement, given Miotti knew of Magnamain’s finance obligations as he had acted on their behalf in other transactions.

4. Had there been compliance with the Land Sales Act 1884.

142. As previously stated, I consider that the defendants were retained to conduct the conveyance. This retainer however was clearly against a background whereby the Howarths and Murgia had a series of arrangements in place which they did not advise Miotti about and which I consider probably changed over time. This clearly included an arrangement whereby the Howarths lived with the Murgias at their home at Robina in early 2002, lived in accommodation provided by the Murgias at other times in 2002, Lyn Howarth was employed as manager of the development and the Howarths were allowed to enter into occupation of unit 601. I do not consider that the true nature of these arrangements was explained in the evidence before me.

The payment of $169,000 after the defendants were retained

143. The Howarths claim that because the defendants failed to provide the advice and take the steps that a reasonably competent solicitor would have taken, they breached their retainer or duty in tort to them. It is clear that Miotti became aware on or about 6 February 2001 that large sums of money had been paid to Murgia. I consider this information should have been of some concern to Miotti and he should have made further inquiries in relation to the payments and clarified the position as to what was actually occurring. He should have had concerns as to whether the provisions of the Land Sales Act had been complied with.  It would appear that, Miotti delegated the file as it was an ‘off the plan’ purchase and thought nothing further about it.   This must clearly be a breach of his duty to his client.

144. The plaintiffs claim that because they were not advised of the risk of making further payments they paid a further $169,000 after the defendants were retained in July 2000. In short they paid a further $169,000 after Miotti was told in July 2000 of the payment of $110,000 towards the $280,000 purchase price.

145. As I have indicated in my findings, I am not satisfied that a retainer commenced until around 8 November 2000. Neither am I satisfied that it has been established before me that the full amount of $280,000 was in fact paid to Magnamain towards the purchase of unit 601. The plaintiffs have not established that $169,000 was paid after the solicitors were retained. I consider that after 6 February 2001, the evidence indicates that Murgia stated that $98,000 was still owing to Magnamain. Was this amount paid by the Howarths as a result of the breach of the defendant’s duty to advise them not to make any further payments until there was some security in place?

146. Even though I consider that Miotti failed in his duty to the Howarths, I do not consider that it has been established that, even if the plaintiffs were given their advice, they would have followed that advice.

147. Dal Pont^[78] states that;

“[4.130] The test of causation is not only a “but for’ test; the lawyers breach of duty must be a legally effective cause of the client’s loss.  The concern in this regard relates to attempt by clients to cast upon lawyers the complete liability for loss generated largely by factors independent of the lawyers breach

.….

[4.140] Whether at general law, or under civil liability legislation, courts continue to be challenged by issues of causation in the lawyer –client arena.  One such challenge is to assess how the client would have behaved independently of the breach of duty.  If the evidence shows that the client would have acted in the same fashion independent of the breach, it cannot be said that the breach has caused the loss the client seeks to recover from the lawyer.”

148. The plaintiffs state that they would have accepted any advice given by the defendants; however, I consider that this is against the weight of the evidence. In my view, it is clear from the evidence, that in the period from 2000 to mid 2005, the Howarths were completely under the influence of Murgia. It is also apparent from the evidence, that the Howarth’s signed everything that Murgia put in front of them. As has been previously documented in these reasons, the Howarths acted in several major transactions during this period, without any reference to a solicitor. The evidence also indicates that, the plaintiffs did not even respond to four letters from Miotti and Redchip in relation to the completion of disclosure documents. The evidence also indicates that even after the contract terminated the Howarths did everything Murgia asked.

149. Accordingly, I am not satisfied that the plaintiffs would have accepted the advice given by the defendants, if it was contrary to the arrangements they had independently made with Murgia and information they received from him.

150. Accordingly whilst I am satisfied that Miotti failed to come up to the standard of a reasonably competent solicitor in relation to the conveyance of the unit, particularly in advising the Howarths in relation to the contract and the payments they had made under the contract, I am not satisfied that the breach of duty alleged was in fact the legally effective cause of the Howarth’s loss.

The failure to advise in relation to the postponed settlement in December 2002 and the settlement of January 2003

151. The plaintiffs also submit that the defendants were obliged to advise fully in respect to settlement, particularly when it looked like it would not proceed. In the very least they submit, that advice should have been given and instructions taken in respect to this very important issue. I agree that extensive file notes should have been taken and that Miotti should have confirmed the instructions he was given in writing.

152. However as I have indicated in my findings, I consider that the decision in relation to the postponement of settlement scheduled for December 2002 was made between Howarth and Murgia, without reference to Miotti or Redchip. I also consider that the decision to terminate in January 2003 was made between Howarth and Murgia and that Howarth rejected Miotti’s advice as to how to protect his interest and made his own arrangements with Murgia.

153. I do not consider therefore, that there has been any breach by the defendants in this regard.

The lost opportunity case

154. The plaintiffs’ more substantive damages case, relates to the loss of the opportunity to on sell the unit. Further, they submit there was a fundamental requirement for the defendants to advise them that they could enter into a contract with the purchaser through Leanne Shea and if necessary that they would seek an extension of time to facilitate that settlement. This was so, regardless of what mortgages were over the property.

155. It would appear that, had a settlement in conjunction been arranged and had $340,000 been provided to Macquarie Bank at settlement, the matter would have settled. The plaintiffs submit that, had they been properly advised they would not have lost the opportunity to on sell their unit. In particular, they state there was a written offer that had been signed with no unusual terms and there was a further verbal offer at the time. Furthermore, they say that Ms Shea had sold numerous units in the complex and as a conjunct settlement is an ordinary day to day feature of conveyancing, then there would not have been any reasonable opposition to such a contract proceeding.

156. The plaintiff submits that, due to the lack of proper advice in breach of contract, the plaintiffs lost the opportunity to organise and complete a conjunct settlement. The value of this opportunity is ascertained as follows:

1. The plaintiffs would have been left with the $169,000 either in trust or otherwise available at settlement.

2. They would have then received the balance of the settlement funds less the costs of settlement.

3. The costs of settlement have been agreed at $29,745.00.

157. The plaintiffs submit that, properly advised, they would have received, in early to mid 2003, the sum of $449,255 on the settlement of the unit. They also submit that, the settlement of this unit was open until January 2004, because that is when the contract was finally terminated.

158. As previously stated, I do not consider that Miotti was advised of this offer to purchase and there is no breach by the defendants in this regard.

159. I consider therefore that the plaintiffs’ case fails.

160. The proceedings must be dismissed.

161. I will hear from the parties in relation to costs.