Taking advantage of another person's obvious error
By Michael Dolan.
You are acting for a vendor in a commercial property conveyancing transaction. When you receive the settlement adjustment statement from the purchaser’s solicitors you notice that an arithmetical error of $986 has been made in your client’s favour in one of the adjustments. Do you simply allow the matter to settle on that basis and reduce your fees by $986 thereby earning yourself goodwill with your client.
If you go into a shop to buy new sunglasses and the person serving you mistakenly gives you too much change, would you simply be pleased at your good fortune and pocket it waving a cheery thank you to the shop assistant as you leave, or would you point out the error and return the obvious overpayment in your change? I hope that most of us would always return the money to the shop as it is clearly the right and honest thing to do as a matter of personal conscience.
The conduct rules
Honesty is a fundamental ethical duty required of a solicitor:
“4.1.2 A solicitor must also be honest and courteous in all dealings in the course of legal practice.” (1)
In addition, the conduct rules provide that:
“30.1 A solicitor must not take unfair advantage of the obvious error of another solicitor or other person, if to do so would obtain for a client a benefit which has no supportable foundation in law or fact.” (2)
Judicial views in reported decisions
A good example of what the court requires in the case of obvious mistake by a solicitor involved a statement of claim where a party to a proceeding the Federal Court of Australian pleaded a statute which had been repealed and the other side did not draw their attention to the mistake. The trial judge was the Honourable Susan Keifel AC (now Chief Justice of the High Court of Australia).
Her Honour wrote:
“3 The original statement of claim pleaded the wrong legislation. So much is conceded. It has not however been suggested that the first respondent's legal advisors brought this to the attention of the applicant's advisers, as professional courtesy and the interest of both parties requires. If they had done so, and the applicant nevertheless determined to pursue the claim the first respondent might have had some claim to indemnity costs. It does not suggest that this was done. I do not think the circumstances are such that an order for indemnity costs is appropriate.” (3)
In the following year the Supreme Court of New South Wales also had occasion to deal with the issue:
“32 I accept that it is not the function of the defendant’s legal representatives to draw the attention of the plaintiff’s legal
representatives to an obstacle in their path in pursuit of an application. However, where legal representatives keep to themselves an
obvious and deadly point, they run the risk that costs will not be awarded in their favour. Counsel for the defendant said that the point
seemed to him so plain that he could only assume that counsel for the plaintiff had come up with an answer to such an obvious point and he
therefore did not raise the matter with him.
33 I have found this issue rather difficult. As I have said, it is not for the defendant’s counsel, or legal representatives, to advise the plaintiff. On the other hand, as I have also said, failure to raise such a matter puts the party doing so at risk.” (4)
The question answered
In answer to the question asked at the commencement of this article, you should advise the purchaser’s solicitors that there appears to you to be an arithmetical error in the Statement of Adjustments and suggest that the document be reviewed by them and corrected prior to settlement being effected.
- Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 under the Legal Profession Uniform Law, Rule 4.1
- Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 under the Legal Profession Uniform Law, Rule 30.1
- Emirates Park Pty Ltd v Magic Millions Sales Pty Ltd (includes corrigendum dated 18 September 2002)  FCA 1039
- Green v Schneller  NSWSC 202 (3 April 2003) Simpson J.