You are the lawyer … Sydney property drama … Solicitor who didn’t realise party to the sale of a property was also his client … Duty of care was owed … Retainer … NSW Court of Appeal lays down the law on requirement for lawyers to “step outside” a matrimonial dispute … Gabrielle Hunter reports
Ian Simpson and his firm have been ordered by the NSW CA to pay $814,445.25 to the plaintiff, Suzana Trajkovski, for allowing proceeds of a sale of property she owned jointly with her ex-husband and his parents, to be disbursed without her authority and contrary to her interests.
Mrs Trajkovski had separated from her husband after being physically abused and intimidated by him throughout their marriage.
Ian Simpson had acted for both of them in several matters throughout their marriage, but Mr Trajkovski retained Simpson to act for him in relation to the matrimonial dispute.
In their matrimonial proceedings, the Family Court made orders that Mrs Trajkovski would transfer to Mr Trajkovski various assets, including her interest in the family home in Dural, upon payment of $800,000.
As the Dural house was being prepared to be sold, Mrs Trajkovski had still not received payment of the $800,000 from her ex-husband. She was advised by her solicitor, a Mr Chesters, to lodge a caveat over her interest in the property.
This prompted a highly charged exchange in which Mr Trajkovski showed up uninvited at the home of his former wife, where she lived with their two sons. He threatened to kill the children and himself if the caveat was lodged.
Mrs Trajkovski was distressed by this encounter and decided to withdraw her instructions for Chesters to act for her.
Chesters contacted Simpson and …
“… made it clear in the starkest terms that the appellant had been traumatised by Mr Trajkovski’s conduct and that Mr Simpson would thenceforth have to take instructions [regarding the sale of the Dural property] from the appellant directly.”
However, after “having a yarn” with the ex-husband alone about these changed circumstances, Simpson allowed the proceeds from the sale to be disbursed in accordance with Mr Trajkovski’s instructions alone, with none of the proceeds to be paid to Mrs Trajkovski.
The trial judge, Des Fagan, initially found there was no retainer between Mrs Trajkovski and Simpson and, if there was, Mr Trajkovski had her ostensible authority to direct payment of the proceeds.
The Court of Appeal didn’t think much of that – finding that there was a solicitor-client relationship and Simpsons owed Mrs Trajkovski a duty of care.
“It is commonplace in matrimonial property proceedings, when matrimonial property is to be sold pursuant to court order or by agreement, for the conduct of the sale to be given to the solicitors for one of the parties (say the husband), while the solicitor for the other (say the wife) maintains a watching brief to ensure that the interests of that party are protected. It was this ‘watching brief’ role that Chesters were fulfilling, at least until their retainer was terminated. In such a case, the solicitors with the conduct of the sale step outside the role of acting exclusively for one party in the matrimonial dispute, and incur responsibilities to both.”
Accordingly, the court held that by allowing Mrs Trajkovski’s share of the proceeds of sales to be used without her authority, Simpsons breached its duty of care.
Further, Simpson Solicitors was aware that Mrs Trajkovski was acting under duress and that the husband did not have actual or ostensible authority to solely instruct payment of the proceeds.
Simpson argued that Mrs Trajkovski was guilty of contributory negligence for not taking steps to protect her interest in the Dural property.
The CA had none of it – finding that a caveat was unnecessary to retain her entitlement to her share of the property.
John Basten JA and Ron Sackville AJA said:
“Failure to lodge a caveat does not cloak Mr Trajkovski with any authority, nor convey any representation that he has such authority.”
They added that if Simpson had fulfilled the duty owed to Mrs Trajkovski she would have received her full entitlement, and nothing she did or failed to do contributed to her losses.