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Limitation periods for claims arising from defective Binding Financial Agreement

Defective Binding Financial Agreement: recent comments from the Court of Appeal in Victoria in relation to the limitation period to bring a professional negligence claim

A recent decision of the Court of Appeal in Victoria considered a professional negligence claim by Ms Orwin against her former solicitor Mr Rickards in relation to preparation of a pre-nuptial Financial Agreement.  The Court make some interesting comments in relation to the limitation period for a claim against a solicitor in negligence.

On 4 September 2020 the Court of Appeal of the Supreme Court of Victoria delivered judgment in the matter of Orwin v Rickards [2020] VSCA225. The judgment was an appeal from a 2019 decision of the Supreme Court of Victoria.

Facts

The claim brought in the Supreme Court of Victoria was in relation to the preparation of a Financial Agreement (commonly referred to as Binding Financial Agreements).

Ms Orwin entered into a Financial Agreement in March 2010 with Mr Sarah.  Mr Rickards was the solicitor who acted for her in drafting and advising on the agreement.

The parties separated in 2011. In 2015 Mr Sarah brought an application to the Federal Circuit Court seeking to set the Financial Agreement aside.  The Agreement was held not to be valid as it had been entered into under the incorrect legislation.  The property adjustment application was settled by Ms Orwin agreeing to pay Mr Sarah a sum of $550,000.00.

Ms Orwin then commenced proceedings in the Victorian Supreme Court against Mr Rickards claiming damages for breach of duty and care in relation to the preparation of the Financial Agreement.  Ms Orwin argued that if the Agreement had been properly prepared it would have protected her from the family law claim and she would not have had to pay the settlement sum of $550,000.00 to Mr Sarah or the costs of the family law proceedings.  Importantly, Ms Orwin also claimed as damages the legal fees paid to Mr Rickards in the preparation of the Financial Agreement in July 2010.

The Decision

The Supreme Court held that Ms Orwin’s claim was statue barred.  The Court considered the case was most akin to Winnote Pty Ltd v Page [2006] NSWCA 287, a case in which the solicitors had provided advice, in reliance upon which the plaintiff had obtained a lease, only to have the plaintiff’s purpose in entering into the lease thwarted when a third party had obtained a mining licence in relation to the land in question.  In Winnote the Court determined that the plaintiff suffered damage as a result of a solicitor’s advice at the time it obtained the lease, because the bundle of rights it obtained was inferior to that which it would have obtained if properly advised, and that the fact that the quantum of damage had increased materially thereafter was irrelevant.

Justice Osborn was satisfied that the solicitor did not properly draft a Financial Agreement to a standard consistent with his duty of care owed to his client.  The trial Judge had accepted Ms Orwin’s contention that the fees paid to Mr Rickards in July 2010 were damages for negligence and the consequence of that was that her negligence claim was issued out of time. 

As Ms Orwin had not filed her claim within the period of time required by the Limitation of Actions Act 1958 Victoria her claim against the solicitor was dismissed.

A further ground for dismissing the claim was that Ms Orwin’s evidence had failed to establish that at the time the parties entered into the Financial Agreement they had been in a de facto relationship.

The Appeal

On appeal Ms Orwin sought to challenge the Judge’s findings that the parties were not in a de facto relationship in March 2010.  Unfortunately Ms Orwin had given evidence in the family law proceedings that she and Mr Sarah were not in a de facto relationship at the relevant time.  The Court of Appeal determined that the trial Judge’s analysis of Ms Orwin’s evidence was unimpeachable and there was no basis for challenge of the factual finding that the parties were not in a de facto relationship. 

That finding was sufficient for the appeal to be dismissed however the Court considered the limitation issue raised by Ms Orwin. 

In the appeal, senior counsel for Ms Orwin sought to disavowing the position adopted at trial and instead adopted the position that there was no legal basis for Ms Orwin to recover the costs paid to Mr Rickards in July 2010 as damages for negligence.  The appeal submission for Ms Orwin relied on the analysis Wardley Australia Ltd v Western Australia (1992) 175 CLR514 and argued that no actual loss was suffered until the de facto relationship ended and Mr Sarah made a claim pursuant to the Family Law Act

The Court of Appeal reviewed the authorities and determined that the classification of loss in the case was “a question of real difficulty” and could see real force in the argument that the loss suffered by Ms Orwin other than the payment of fees to Mr Richards was a contingent loss at the time the Financial Agreement was entered into.  Ultimately the appeal was rejected as the Court held that the trial Judge’s conclusion had a secure foundation in existing authorities namely Winnote Pty Ltd v Page and a New Zealand decision.

The Court of Appeal took the opportunity to comment that the degree of uncertainty in relation to legal characterisations of loss is regrettable. 

The Court did not allow Ms Orwin to change her position she advanced at trial namely that the fees she paid to Mr Rickards were recoverable as damages in negligence. The appeal was unsuccessful.

Liability limited by a scheme approved under Professional Standards Legislation

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