Dual Homes v Moores Legal Pty Ltd & Pilley McKeller Pty Ltd [2016] VSC 86

The facts

In this Supreme Court of Victoria case, a solicitor failed to advise a company appropriately in relation to the consequences of not complying with two statutory demands relating to the same judgment debt.

As a result of the solicitor’s negligence, the company faced a disastrous situation when it was wound up in insolvency over a debt that it was, at all times, able to pay.

The company later incurred significant costs in terminating the liquidation as a result of the solicitor’s negligence.

The relevance of proportionate liability

In this case, the issue of proportionate liability was relevant because the solicitor’s negligent conduct took place during periods of time when he was employed by two different law firms:

  • Up until 30 April 2011, the solicitor was a principal at Pilley McKellar Pty Ltd (Pilley McKellar).
  • After 1 May 2011, the solicitor was employed by Moores Legal Pty Ltd (Moores Legal).

Both firms were defendants in the proceedings.

The key issue

The Court had to apportion liability for the damage to the company between the two defendant law firms (Pilley McKellar and Moores Legal), because Moores Legal argued that the claim against it was apportionable and that Pilley McKellar was a concurrent wrongdoer within the meaning of the term under Part IVAA of the Wrongs Act 1958 (Vic).

What the court decided

After reviewing the long series of events that led to the company being wound up, Dixon J found that the solicitor was negligent for failing to:

  • properly advise the company regarding the legal consequences of non-compliance with a statutory demand within the 21-day time limit;
  • properly prepare an application to set aside a statutory demand, including failing to bring the application within the 21-day time period; and
  • appear at the winding-up application brought as a result of the non-compliance with the statutory demand, which resulted in the winding up of the company.

Dixon J also held that, in response to the statutory demands, the solicitor failed to:

  • advise of the time frames for compliance with the two statutory demands;
  • take proper instructions; and
  • inform the client that the failure to comply with the statutory demands would result in a presumption of insolvency, and that defending a winding-up application could be a difficult, expensive and time-consuming process involving significant risk.

In relation to the question of proportionate liability, Dixon J held that both Pilley McKellar and Moores Legal owed the plaintiff a duty of care and were concurrent wrongdoers.

In addition, Dixon J held that the time period during which the solicitor breached his duty to the plaintiff spanned the period from shortly after 13 April until 19 May 2011. During that period, the solicitor was a partner of Pilley McKellar until 30 April and an employee of Moores Legal from 1 May 2011. In short, the solicitor’s acts and omissions spanned his employment from Pilley McKellar to Moores Legal.

After reviewing the relevant legislation and cases, Dixon J stated: ‘What is required of the court is broad consideration of both the culpability of the departure from the standard of reasonable care and relative importance of the acts of the parties which caused the damage.’

Dixon J examined the conduct of the solicitor closely, both before and after 30 April 2011. After reviewing the facts, he determined that the solicitor’s breach of duty during the period 1–4 May 2011, and then during the period 15–19 May 2011 (when he failed to act as instructed to protect his client’s interests), was both ‘more culpable’ and ‘of greater causal’ potency than the breach of duty that occurred before 30 April 2011

This view led Dixon J to determine that Pilley McKellar should pay one-third, and Moores Legal two-thirds, of the damages to the company.