The complex settlement scenario faced by his developer client demanded the highest order of skill and experience. But a Supreme Court has held a solicitor negligent for failing to distill from the comprehensive advice already given, the most favourable client option and clearly recommending that such a course be followed.
More than 12 years ago, Dean and Paulette Lucantonio paid a 10% deposit when they signed up for the buy of a council approved redevelopment site in a Sydney waterfront suburb for $2.2 million.
A special condition in the November 2001 contract specified that the buyer must not raise any objection to the terms of the annexed development approval and site plans that incorporated architecturally innovative elements.
Shortly after signing, the buyer obtained a design opinion that the number of car spaces required by council could only be provided if a basement car park was added, raising doubts as to the feasibility of the project and availability of finance.
The buyer’s solicitor, Otto Stichter, advised Dean of his various options: seeking an agreed reduction in the purchase price; settling and claiming damages later; or promptly going off to court for specific performance and/or damages for misleading and deceptive conduct.
The course chosen was the third of the foregoing: proceedings were filed in December for specific performance and damages for misleading and deceptive conduct.
When settlement did not occur as specified in the contract on 16 January, the seller’s solicitors gave a Notice to Complete, calling for settlement on 6 February.
Recognising that the issue of the Notice put a different complexion on the buyers’ position, Otto canvassed the issues with them but that they were in two minds, made it difficult for him to receive instructions. They wanted the property but were intent on a price reduction to accommodate the “unbuildable” DA.
Otto organised a telephone conference on 4 February with Dean and also Darryl Warren, a barrister recruited to the task – about the buyers’ options in response to the Notice to Complete.
Late the following day – with completion due under the Notice, the next – Stichter faxed his buyers setting out a chronology of the to-ing and fro-ing. The advice concluded: “the safest course for you now is to settle and argue the damages issue later” because in the context of a dispute “that is not clear-cut …. the worst you can stand to lose is a costs order but you stand to gain damages, interest and costs”.
The buyer did not tender and on 7 February. The seller, Lucia Ciofuli, terminated, forfeited the deposit and later re-sold at the same price. The Lucantonios’ action against Ciofuli for misleading and deceptive conduct failed – after an 11 day trial in 2011 – because the seller’s view of the efficacy of the (early) iteration of the plans annexed to the 2001 contract was “genuinely held” and “not without grounds”.
They then turned their sights on Stichter.
In the courts view, solicitor Stichter had breached his duty by not providing straight-forward counsel. The “safest option” advice in the context of the Notice to Complete was provided only on the eve of the demanded settlement date but by then, in the buyer’s mind, there was insufficient time to arrange finance for settlement the following day.
“It must have been plain to the solicitor from the moment he received the notice to complete a decision would have to be made as to what course the buyer should take in response. It must have been equally obvious that such a decision would have to be made sufficiently in advance to enable the requisite preconditions, such as finance, to be satisfied. February 5 was much too late for that to be done. Having been retained, the solicitor must position the client to deal with the looming crisis.”
This finding was appealed by Stichter but the point abandoned, leaving the appeal judges to be concerned only with the buyer’s challenge to the trial judge’s finding that notwithstanding the lack of due care, the solicitor’s tardiness was not the cause of their resulting loss.
The New South Wales Court of Appeal this month dismissed the Lucantonios’ contentions. Even if clear “safest option” advice was given earlier, the buyers – they ruled – would not have followed it. Dean had never seriously contemplated that course of action – requiring as it did, an immediate settlement – but rather, was insistent on completion at a reduced price.
Otto Stichter has escaped liability and the Lucantonios are at the unfortunate end to their years of torment.
Perhaps the ordeal could have been avoided had a due diligence clause allowed the buyers to make feasibility enquiries before becoming bound to the deal.
The most important lesson to be gained however, from any “misstep” among these events is that lawyers’ advice must not only be timely and legally sound but must also be commercially prudent. The practice, often preferred from a risk management perspective, of merely holding up a range of options and requiring a client to decide for himself, may well be near the end of its life-cycle.
Lucantonio v Stichter [2014] NSWCA 5 McColl JA, Basten JA, Barrett JA 6/02/2014
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