Buyer Beware – Solicitor Not Negligent Giving Conveyancing Advice

Insurance

minutes reading time

DATE PUBLISHED: September 8, 2023

key takeaways

  • Lawyers have a duty of care to examine all documents (including building reports) for issues that might impact the suitability of a property being purchased by the client, e.g. if the client expressed interest in performing renovations in the future.
  • The due care and skill owed by a lawyer to a client will depend on the sophistication and understanding of that client. A first-time home buyer may require more direct and emphatic advice.
  • If a client does specify a future intention to use the property, the reasonable foreseeability of harm may increase.
  • It is good practice for a lawyer to emphasise the risks associated with purchasing a property and that advice may be better sought from other experts, e.g. asbestos experts.

The ACT Civil & Administrative Tribunal (ACAT) handed down the decision of Shields v Natlaw Pty Ltd & Anor (Civil Dispute) [2023] ACAT 44 on 17 August 2023, which found that a solicitor was not negligent when giving advice on the purchase of a property. 

The applicant, Ms Louise Shields (Ms Shields), lodged a claim against the respondent, NatLaw Pty Ltd (NatLaw), asserting that NatLaw’s solicitor had been negligent when giving advice concerning the risk of asbestos being present when purchasing a property. The property was purchased in Uriarra Village, Canberra, on 26 September 2017. Ms Shields alleged that the external cladding of the house contained asbestos. On 22 June 2022, Ms Shields applied to ACAT, claiming $25,000 in damages (the maximum amount in ACAT), plus filing fees. The damages initially claimed were for the installation of a deck on the property. The claim was subsequently amended to claim the cost of replacing the external cladding. 

Ms Shields had also joined the ACT Government, which previously owned the property. ACT Property Inspections Pty Ltd was also joined, being the company that performed a building inspection of the home at the time of purchase. These applications were discontinued before the matter proceeded to assessment, leaving NatLaw as the sole respondent. 

Prior to the application being heard, we discovered that the property had been listed for sale by Ms Shields. It subsequently sold for $670,000, which was $150,000 more than what Ms. Shields paid for it. We referred the ACAT Member to PPK Willoughby v Baird [2021] NSWCA 312, in which a property developer sold a property for a profit, precluding them from a successful claim of negligence against the solicitors. That claim was unsuccessful on the basis that it was a ‘no transaction’ claim, in that they claimed they would not have purchased the property but for the solicitor’s negligence. However, as they had made a profit on the sale of the land, there had been no compensable loss.

In the current matter, Ms Shields contended that the prospective cost of removing the asbestos and/or the ability to undertake renovations would incur a considerable cost. In the alternative, it was argued that she had either paid too high a price for the house or sold at too low a price. It was noted that:

  • No renovations had been performed, resulting in any loss; and
  • There was no evidence that the purchase or sale price differed from the best available prices (indeed, evidence confirmed that Ms Shields had negotiated when purchasing the house).


The Member had to determine the following questions:

(a) Whether NatLaw owed a duty of care to Ms Shields with regards to the potential presence of asbestos in the property.

(b) Whether NatLaw breached that duty.

(c) If so, whether Ms Shields suffered a loss.

(d) Whether any loss was caused by the breach.

(e) Whether NatLaw’s scope of liability extended to direct advice to test for asbestos.

(f) Whether Ms. Shield’s contributed to any of her losses.

(g) What damages should be awarded, if any?

During the purchase of the property, a building report confirmed that there had been no assessment concerning the presence of asbestos in the property. The report also contained an ACT Government fact sheet about the risks of asbestos, particularly in houses built prior to 1985. Other disclaimers were also contained within the contract of sale, referring to the risks of asbestos.

A file note provided by NatLaw recorded a meeting with Ms Shields prior to the purchase of the property. The file note, along with evidence from NatLaw’s solicitor, confirmed that the building report had been discussed. The solicitor also stated, as was their usual practice, that they were not a structural engineer and that any further inspections or reports were the responsibility of the purchaser.

Ms Shields argued that as a first home buyer, she expected her solicitor to provide suitable professional advice concerning the risks of purchasing a property. It was alleged that had she been alerted to the presence of asbestos, she may not have purchased the property. In cross-examination, Ms Shields confirmed that she did have prior property experience, having been a property manager for a Commonwealth agency and had also approached the strata title managers of Uriarra Village prior to purchasing the property, asking specific questions.

In response, NatLaw argued the following:

  • There was no breach of duty as Ms. Shields was alerted to the asbestos risk; and
  • There was no compensable loss as the property had sold for a profit, with no expenses having been incurred in the removal of the asbestos.


Conclusion

The Member found that whilst NatLaw owed a duty of care to Ms Shields, that duty was not breached as the scope of liability did not extend to ensuring that an asbestos report be obtained.

Furthermore, even if the duty had been breached, Ms Shields provided no evidence of loss as she had not incurred any expenses removing the asbestos and sold her property for a profit. There was no evidence that the initial purchase price or subsequent sale price, was above or below market value.

Ultimately, it was held that Ms. Shields was best placed to know the age and condition of the house and had multiple notations in the contract of sale about the possible existence of asbestos in the property. It was the purchaser’s obligation to ensure that any additional reports were obtained if deemed necessary.

How we can assist, what clients can do, what referrers can do

If you require any assistance with a similar situation or have any questions, our Insurance team is happy to assist. Please fill out the enquiry form below and mention this article for an obligation-free appointment.

GET IN TOUCH WITH US!

Don't Miss a Beat

Subscribe to MCW Insights

Still Have Questions?

Make an Enquiry

Exploring the Boundaries of Vicarious Liability: A Case Study in Historical Abuse Cases Beyond Employment
Buyer Beware – Solicitor Not Negligent Giving Conveyancing Advice
Home Ground Advantage: Stadium beats fan in Court of Appeal
Legal Professional Privilege: Expert Opinions & Solicitors File Note
Notification of Circumstances Under s40(3) ICA. MS Amlin Corporate Member Limited v LU Simons Builders Pty Ltd
Church Faces Vicarious Liability for Priest’s Criminal Acts
Intoxicated Plaintiff Liability: Legal Impact on People & Businesses
How to Navigate Non-Economic Loss Assessments in South Australia