|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
Supreme Court of New South Wales - Court of Appeal |
Last Updated: 13 July 2009
NEW SOUTH WALES COURT OF APPEAL
CITATION:
Symonds v Vass [2009]
NSWCA 139
FILE NUMBER(S):
40860/07
HEARING DATE(S):
16
March 2009, 17 March 2009
JUDGMENT DATE:
10 July 2009
PARTIES:
Monica Frances Symonds (First Appellant)
Gerald Henry Symonds (Second
Appellant)
Cedric Bohrsmann Vass and the other 24 persons named in Schedule
"A" to the Notice of Appeal (Respondents)
JUDGMENT OF:
Beazley JA Giles JA Ipp JA
LOWER COURT JURISDICTION:
Supreme
Court
LOWER COURT FILE NUMBER(S):
SC 20994/01
LOWER COURT
JUDICIAL OFFICER:
Patten AJ
LOWER COURT DATE OF DECISION:
14
November 2007
LOWER COURT MEDIUM NEUTRAL CITATION:
Monica Frances
Symonds and Gerald Symonds v Cedric Borsmann Vass and 24 ors [2007] NSWSC
1274
COUNSEL:
D M J Bennett QC; V R W Gray (Appellants/Cross
Respondents)
R J Weber SC; T M Faulkner (Respondents/Cross
Appellants)
SOLICITORS:
George Mallos Lawyer (Appellants/First &
Second Cross Respondents)
Mallesons Stephen Jaques (Respondents/Cross
Appellants)
Kemp Strang Lawyers (Third Cross
Respondent)
CATCHWORDS:
CAUSATION - whether respondent’s
breaches of duties caused the appellants to suffer damage by losing the
opportunity of a better
outcome - where appellant clients entered into
compromise of their claim following breaches of duties by the respondent
solicitor.
PROCEDURE - courts and judges generally - judges - adequacy of
reasons for judgment - whether trial judge made express findings of
primary fact
that exposed a specific chain of reasoning - where trial judge recounted in
detail large extracts from the evidence
and the transcript.
PROFESSIONS AND
TRADES - lawyers - duties and liabilities - whether respondent solicitors
breached duties owed to the appellant clients
in contract and in tort in
preparing the appellants' case for trial.
PROFESSIONS AND TRADES - lawyers -
other matters - advocate's immunity - application of the test in
D’Orta-Ekenaike v Victoria
Legal Aid - where appellant clients entered
into compromise of their claim following breaches of duties by the respondent
solicitor
- finality of litigation principle.
LEGISLATION CITED:
Fair
Trading Act 1987
Trade Practices Act 1974 (Cth)
CATEGORY:
Principal judgment
CASES CITED:
Alpine Holdings Pty Ltd v
Feinauer [2008] WASCA 85
Batard v Hawes [1853] EngR 2; (1853) 2 E & B 287
Beale v
Government Insurance Office of NSW (1997) 48 NSWLR 430
Boland v Yates
Property Corporation Pty Ltd [1999] HCA 64; (1999) 74 ALJR 209
Brittain v
Lloyd [1845] EngR 1283; (1845) 14 M & W 762
Calin v Greater Union Organisation Pty Ltd
[1991] HCA 23; (1991) 173 CLR 33
Chamberlain v Ormsby [2005] NSWCA
454
Chapman v Hearse [1961] HCA 46; (1961) 106 CLR 112
Coshott v Barry
[2009] NSWCA 34
Customs and Excise Commissioners v A [2002] EWCA Civ 1039;
[2003] 2 All ER 736
Dansar Pty Ltd v Pagotto [2008] NSWSC
112
D’Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR
1
Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58; (2004) 62 IPR
184
Donellan v Watson (1990) 21 NSWLR 335
Francis v Bunnett [2007] VSC
527; (2007) 18 VR 98
General Steel Industries Inc v Commissioner for Railways
(NSW) [1964] HCA 69; (1964) 112 CLR 125
Giannarelli v Wraith (1989) 156 CLR
543
Gould v Vaggelas [1985] HCA 85; (1985) 157 CLR 215
In re A Debtor
[1937] 1 Ch 156
Keefe v Marks (1989)16 NSWLR 713
Kelley v Carston [1998]
QB 686
Kuru v State of New South Wales [2008] HCA 26; (2008) 236
CLR
Lampleigh v Brathwait (1688) 1 S & M LC 13
MacRae v Stevens
(1996) Aust Torts Rep 81-405
Mallik v McGeown [2008] NSWCA 230
March v E
& MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506
Mastronardi v
State of New South Wales [2007] NSWCA 54
Mifsud v Campbell (1991) 21 NSWLR
725
Mt Isa Mines Ltd v Pusey [1970] HCA 60; (1970) 125 CLR 383
Munnings v
Australian Government Solicitor [1994] HCA 65; (1994) 68 ALJR 169
National
Insurance Company of New Zealand Ltd v Espagne [1961] HCA 15; (1961) 105 CLR
569
Philip Walton trading as Pitcher Walton & Co v Efato Pty Ltd [2008]
NSWCA 86
Rees v Sinclair [1974] 1 NZLR 180
Saif Ali v Sydney Mitchell
& Co [1980] AC 198
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR
247
Sourlos v Luv A Coffee Lismore Pty Ltd [2007] NSWCA 203
Stead v State
Government Insurance Commission [1986] HCA 54 (1986) 161 CLR 141
Walton v
Efato Pty Ltd [2008] NSWCA 86
Wardley Australia Ltd v Western Australia
[1992] HCA 55; (1992) 175 CLR 514
Waterways Authority v Fitzgibbon [2005]
HCA 57; (2005) 221 ALR 402
Yates Property Corporation Pty Ltd v Boland (1997)
145 ALR 169
Zhang v Andrew Pine Furniture Pty Ltd [2004] NSWCA 250
TEXTS CITED:
P Cane, "The new face of advocate's immunity" (2005) 13
Torts Law Journal 93.
DECISION:
1. Appeal and cross-appeal
allowed.
2. Set aside orders 1 to 8 made by Patten AJ on 13 December
2007.
3. Remit the proceedings to the Common Law Division for a new trial on
all issues.
4. Costs of the trial before patten AJ to be in the disposal of
the judge conducting the new trial.
5. Respondent pay 70 per cent of the
appellants' costs on appeal.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF
APPEAL
CA 40860/07
SC 20994/01
BEAZLEY JA
GILES JA
IPP JA
10 JULY 2009
Monica Frances Symonds & Anor v Cedric Bohrsmann Vass & Ors
Headnote
FACTS
In March 1994 the appellants commenced proceedings in the Supreme Court of NSW against Mr Frank Egan and his company, Egan National Valuers (NSW) Pty Ltd, claiming damages for the losses they had suffered in relation the development of a property, Paradis Sur Mer. The appellants had retained Egan and his company as valuer and professional advisor in connection with the development.
The appellants were represented in their case against Egan and his company by the respondent, a firm of solicitors. The hearing commenced before Dowd J on 29 January 1996, and lasted nearly five weeks, after which time the appellants entered into a compromise of their claim. By that compromise the appellants received nothing in respect of their claim and agreed to pay their own costs.
The appellants then sued the respondent, alleging that, in the preparation of the case against Egan and his company, the respondent breached contractual and tortious duties it owed the appellants. These breaches, according to the appellants, resulted in them entering into the compromise and suffering damage falling under two heads: the loss of an opportunity to recover a large sum of damages from Egan and his company, and the loss resulting from delay and disruption in the proceedings.
The trial judge, Patten AJ, found that the respondent had committed breaches of duties as the appellants alleged. He dismissed the claim for loss of an opportunity, however, on two bases. First, his Honour held that the appellants had not proved that the breaches caused the appellants to lose the chance of succeeding in their proceedings against Egan and his company. Secondly, his Honour held that, in any event, the respondent was protected by advocate’s immunity because it prevented the appellants from relying on the compromise of the Egan proceedings as a component of their damages.
His Honour upheld the claim for damages for delay and disruption and awarded the appellants $140,000. His Honour held that the defence of advocate’s immunity did not apply to those breaches, as they were not intimately connected with the conduct of a case in court.
On appeal, the appellants challenged the dismissal of their claim for damages for loss of the chance of succeeding in the proceedings against Egan and his company. They contended that his Honour erred in holding that advocate’s immunity applied to their claim for loss of a chance damages, and erred in holding that they had failed to prove that the breaches of duty caused such damage. On cross appeal, the respondents challenged the finding that it committed breaches of duty and the finding that it was liable to the appellants for damages of $140,000.
HELD (Ipp JA dissenting) allowing the appeal and the cross appeal, and ordering a retrial
Breach of duty and causation
Per Ipp JA (Beazley and Giles JJA agreeing)
(i) The trial judge’s reasons as to the findings of breaches of duty were inadequate. Those reasons did not enable the parties to see the extent to which their arguments were understood and accepted, and to understand the basis of his Honour’s decision.
Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58; (2004) 62 IPR 184 referred to
Mastronardi v State of New South Wales [2007] NSWCA 54 applied
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 applied Sourlos v Luv A Coffee Lismore Pty Ltd [2007] NSWCA 203 applied Waterways Authority v Fitzgibbon [2005] HCA 57; (2005) 221 ALR 402 applied
(ii) There was ample evidence before the trial judge capable of proving that the respondent had committed breaches of the duties it owed the appellants. The cross appeal should be upheld, however, to the extent that it seeks a retrial of the breaches of duty issues on the ground of inadequate reasons.
(iii) Whether it was foreseeable that the breaches of duty might contribute materially to a compromise of the kind that was in fact effected depends, to a material extent, on the precise breaches found to have occurred, the facts that gave rise to the breaches and the facts that gave rise to the compromise. Those issues can only be determined, reliably, at a retrial.
Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 referred to
Mifsud v Campbell (1991) 21 NSWLR 725 referred to
Mastronardi v State of New South Wales [2007] NSWCA 54 referred to
Mallik v McGeown [2008] NSWCA 230 referred to
Stead v State Government Insurance Commission [1986] HCA 54 (1986) 161 CLR 141 applied
Advocate’s immunity
Per Beazley and Giles JJA
The finality principle, upon which advocate’s immunity is based, has not always been given full effect in the case law. The question whether advocate’s immunity applies cannot be determined without proper findings of negligence. Whether advocate’s immunity applies depends on a clear understanding of what occurred and of the respect or respects in which there was negligence and cannot be determined on a hypothetical basis. Accordingly, a new trial should be ordered.
Alpine Holdings Pty Ltd v Feinauer [2007] WASCA 85 referred to
Chamberlain v Ormsby [2005] NSWCA 454 referred to
Coshott v Barry [2009] NSWCA 34 referred to
Dansar Pty Ltd v Pagotto [2008] NSWSC 112 referred to
D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 referred to
Francis v Bunnett [2007] VSC 527 referred to
Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543 referred to
Keefe v Marks (1989) 16 NSWLR 713 referred to
Walton v Efato Pty Ltd [2008] NSWCA 86 referred to
Per Ipp JA
(i) The appeal fails by reason of advocate’s immunity.
(ii) The principal rationale for advocate’s immunity is the finality of litigation principle. A paradigm case to which advocate’s immunity applies is where the client asserts that if the case had been prepared and presented properly, a different result would have been reached.
D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 applied
Rees v Sinclair [1974] 1 NZLR 180 referred to
Saif Ali v Sydney Mitchell & Co [1980] AC 198 referred to
Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543 referred to
(iii) The appellants’ case against the respondent is known and was defined by senior counsel in submissions. That case falls squarely within the test for advocate’s immunity laid down in D'Orta-Ekenaike v Victoria Legal Aid. The final order made by Dowd J cannot be repaired or expunged on appeal. Nor can the compromise be set aside. The appellants wish to assert that, if the case had been prepared and presented properly, no compromise would have been made and orders other than those made by Dowd J on 28 February 1996 would have been reached. These consequences are, however, consequences flowing from what is a lawful result. The compromise was a lawful contract and the judgment granted by Dowd J was a lawful judgment.
D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 applied
Keefe v Marks (1989) 16 NSWLR 713 referred to
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT
OF APPEAL
CA 40860/07
SC 20994/01
BEAZLEY JA
GILES JA
IPP JA
10 JULY 2009
Monica Frances SYMONDS and Anor v Cedric Bohrsmann VASS and 24 Ors
Judgment
1 BEAZLEY JA: I have had the opportunity to read in draft the reasons of Giles JA and Ipp JA. I agree with the reasons of Giles JA and wish only to add the following short remarks.
2 As the reasons of each of Giles JA and Ipp JA demonstrate, the content and extent of the principle of advocate’s immunity and its application in a particular case is both problematic and troubling. This is particularly so if the immunity extends to the case of an omission, such as a failure to prepare the evidence necessary for trial, or the failure to give consideration to the correct parties to a claim.
3 In determining the outer limits of the immunity, the language of Mason CJ in Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543 may be significant. His Honour said at [21], 559-560:
“... where does one draw the dividing line? Is the immunity to end at the courtroom door so that the protection does not extend to preparatory activities such as the drawing and settling of pleadings and the giving of advice on evidence? To limit the immunity in this way would be to confine it to conduct and management of the case in the courtroom, thereby protecting the advocate in respect of his tactical handling of the proceedings. However, it would be artificial in the extreme to draw the line at the courtroom door. Preparation of a case out of court cannot be divorced from presentation in court. The two are inextricably interwoven so that the immunity must extend to work done out of court which leads to a decision affecting the conduct of the case in court.”
4 Mason CJ then accepted as correct the statement of McCarthy P in Rees v Sinclair [1974] 1 NZLR 180 at 187:
“... the protection exists only where the particular work is so intimately connected with the conduct of the cause in Court that it can fairly be said to be a preliminary decision affecting the way that cause is to be conducted when it comes to a hearing.”
5 Those statements bear the notion of some active decision making being involved. If that is correct, it may be that the immunity does not extend to an omission that occurs because the legal practitioner failed to turn her or his mind to the matter that is alleged to be negligent. An omission can arise as much from an active decision not to do something, as it can from a failure to turn one’s mind to a particular matter.
6 However, there are statements, in both Giannarelli and D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 that might tend against that view. There is certainly extensive reference in both cases to the immunity extending to omission. The principle has also been applied in cases that might be seen as involving a failure by the practitioner to turn her or his mind to a particular matter: see, in particular Keefe v Marks (1989) 16 NSWLR 713 at 718.
7 In D'Orta-Ekenaike, Gleeson CJ, Gummow, Hayne and Heydon JJ made the following comments in the plurality judgment at [87], 31:
“As Mason CJ demonstrated in Giannarelli, ‘it would be artificial in the extreme to draw the line at the courtroom door’. And no other geographical line can be drawn that would not encounter the same difficulties. The criterion adopted in Giannarelli accords with the purpose of the immunity. It describes the acts or omissions to which immunity attaches by reference to the conduct of the case. And it is the conduct of the case that generates the result which should not be impugned.”
8 These comments do not necessarily capture the distinction I have made above, nor do they necessarily extend the immunity as far as Ipp JA considers has been done. If that is so, it is apparent that the question whether advocate’s immunity applies in this case cannot be determined without proper findings of negligence.
9 Accordingly, I agree with Giles JA that the appeal should be allowed and
the matter remitted for a new trial.
10 GILES JA: I gratefully draw upon the reasons of Ipp JA, which I have had the advantage of reading in draft, and assume familiarity with them in what follows. I respectfully differ from his Honour only to the extent that, not being persuaded that the appeal fails by reasons of advocate’s immunity, I consider that there should be a new trial.
11 As explained by Ipp JA, the trial judge’s findings of negligent conduct suffered from inadequacy in his Honour’s reasons. The trial judge’s basis for holding that the breaches of duty did not cause loss of the opportunity to recover damages from Egan was also erroneous. It was, however, open on the evidence to find negligence and causation of loss in that respect. I do not think that this Court could make findings on those matters, not having experienced first hand the evidence of Mr Klotz and the appellants. It would also not be appropriate to do so when the trial judge did not meaningfully assess the value of the lost opportunity. If the respondent be held liable, there will have to be a further hearing in which evidence of the appellants will come into the determination of that value. Accordingly, subject to the question of advocate’s immunity there should be a new trial in which negligence, causation and loss can be properly decided.
12 I go then to the question of advocate’s immunity.
13 The trial judge’s application of advocate’s immunity is difficult to understand. His Honour said at [153] that it applied to “everything which occurred after the commencement of the proceedings before Dowd J”, it seems meaning the commencement of the hearing, and prevented “any attack upon anything done by counsel or Mr Klotz in that period including the advice which led to the compromise of the action”. He said at [171] that, because advocate’s immunity prevented the appellants from relying on the compromise of the earlier proceedings as a component of their damages, he would “exclude from their damages an assessment of the value of their lost chance of success in the proceedings against Egan”. But he also said at [162], under the heading “causation”, that the appellants were not precluded by advocate’s immunity from recovery of damages representing the loss flowing from delay and disruption in the conduct of the trial, because the respondent’s breaches were not intimately connected with the conduct of the case in court, and referred at [167]-[168] to Mr Klotz’s “failure to apply his mind to the many difficulties inherent in the case” and failure to provide proper particulars, acceptance of a trial date for a case unready for trial and failure to seek a hearing date. As also explained by Ipp JA, the application of advocate’s immunity in relation to loss of the opportunity to recover damages from Egan was flawed.
14 Ipp JA has considered in detail the extent and application of the immunity, and I do not unnecessarily repeat the valuable discussion in his Honour’s reasons. On the law as expounded in the High Court the immunity extends to the work of a solicitor, not acting as an advocate, done out of court which is intimately connected with work in court, or on another statement of the test the work which leads to a decision affecting the conduct of the case in court. Its central justification is the finality principle, that a controversy once quelled should not be re-litigated in demonstrating that the lawyer’s negligence in the conduct of litigation caused damage to the client. Re-litigation in which it is asserted that, had the case been prepared and presented properly, a different result would have been reached is regarded as offending the finality principle.
15 Ordinarily the correct application of advocate’s immunity would be left for the new trial, to be determined upon the findings of negligence. The question in the new trial would be whether, having regard to the rationale for the immunity, the negligence of the respondent, if found, fell within the statement(s) of the test.
16 Can it be said that, assuming negligence in the respects alleged by the appellants, advocate’s immunity would necessarily apply? If it can, the appeal should be dismissed. It is not clear whether the cross-appeal should also be dismissed. While the respondent does not seek a new trial as to the wasted costs unless the appeal is upheld, that could leave reliance on advocate’s immunity as an answer to liability in damages for the wasted costs. If there is immunity from suit or no actionable duty of care, can any loss at all be recovered? It is not necessary to decide, since for the reasons which follow I do not think it can be said that advocate’s immunity would necessarily apply.
17 I go first to the respects in which negligence is alleged by the appellants. While recognising the inadequacy of the trial judge’s reasons, the appellants relied on findings of Patten AJ. They also provided a “summary of what [they submitted] Mr Klotz should have done in relation to the damages claim”.
18 Patten AJ found that the appellants proved the breaches alleged in sub-paras (a) to (i) and (k) of para 27 of the statement of claim. The appellants did not rely on sub-paras (c) or (g). The other sub-paragraphs were -
“(a) Failed to obtain a written opinion from counsel as to the Plaintiff’s prospects of success in the proposed proceedings against Egan prior to proceedings being commenced or at all.
(b) Failed to include in the Summons and Statement of Claim causes of action based on Mr F K Egan’s letter addressed to Mr G Symonds dated 30 August, 1990, letter dated 5 April 1991 addressed to Barclay’s Bank, the letters addressed to Mr G Symonds dated 6 February, 1992 and 28 February, 1992 and the Certificate of Valuation dated 18 December, 1991.
...
(d) Failed to advise with respect to the proper parties to be named in the Summons and the Statement of Claim; and either failed to advise that Senneh Pty Limited and/or Tisete Pty Limited and/or Tabard (Jersey) Limited should have been Plaintiffs in the action or wrongly applied for their joinder as Plaintiffs after the hearing had commenced.
(e) Failed to identify and plead to particularise the nature of the losses suffered by the Plaintiffs.
(f) Failed to respond to Egans Solicitors’ request for particulars (letter dated 19 December 1995) in relation to the Barclays Bank deed until ordered by the Court to do so. When they did respond, they failed to contend that the Barclays Bank Deeds were irrelevant.
...
(h) Taking a date for a five week hearing without having sought or obtained an advice on evidence when the Plaintiffs’ case was not ready for hearing.
(i) Failed to advise the Plaintiffs that the case was not property prepared ready for hearing and that an application could be made to vacate the hearing date, or once the hearing had commenced to apply for an adjournment of the hearing;
...
(k) Failed to reconsider the merits of the case prior to the hearing and advise the Plaintiffs with respect thereto.”
19 His Honour added more generally -
“157 Obviously some of the breaches were more significant than others. I am satisfied, in particular, on the probabilities that Mr Klotz failed to apply his mind to the significance to the case of the companies Senneh Pty Ltd, Tisete Pty Ltd, Tabard (Jersey) Limited and Gowrise Pty Ltd, and as to how the involvement of those companies could impact upon the pleading of the Plaintiffs causes of action. He also failed to give adequate or any consideration to the proper quantification of the Plaintiffs damages, including as to the impact upon those damages of the deeds of release. As a consequence, Dunhill Madden also failed to provide proper particulars to Egan’s solicitors.
158 In my opinion, the case against Egan was not ready for hearing and Dunhill Madden were negligent and in breach of their contractual obligations when they accepted a date for hearing and thereafter failed to apply for vacation of the hearing date.
20 It may be that not all the breaches found by Patten AJ would have causal significance. Some may go beyond work during and as part of the conduct of the case in court.
21 The appellants’ summary of what Mr Klotz should have done was -
“a. Either delivered a brief to counsel to advise on what should be relied upon as the correct method of calculating damages or properly and carefully considered this issue himself in relation to the possible alternative methods. Note that the contractual obligation was to obtain, prior to the commencement of proceedings, advice on ‘prospects of success’ (Red 39F). The respondent has submitted that this would merely have involved saying ‘if you are believed on reliance and your valuation evidence is preferred to that of the defendants, you will win’. This was insufficient. In the context, as Mr Hammerschlag recognised ‘prospects’ clearly included damages which involved determining methodology. (See Black vol 3 95-D-Q). The contractual obligation should have been complied with prior to the commandment of proceedings. The general duty required it to be done early enough to avoid the trial being prejudiced by uncertainty and unpreparedness.
b. Acted on the resulting advice or conclusion by particularising the damages and preparing what ever evidence was consequentially required.
c. Either delivered a brief to counsel to advise whether (and, if so, how) that advice or conclusion was affected by the Barclays deed and what arguments should be put and evidence tendered in relation to it or properly and carefully considered that issue himself. (See Black Vol 3 1101K-O). this should have been done early enough after the date of the deed to avoid the trial being prejudiced by the necessity to deal with this issue ‘on the run’ and unprepared when the defendants (as was inevitable) raised it.
d. Acted on the resulting advice or conclusion by providing the explanation and preparing whatever evidence was consequentially required.”
22 Some of this also may go beyond work during and as part of the conduct of the case in court.
23 I then say something more of the statement(s) of the test.
24 In D’Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 at [86] the plurality said that they did not consider that the two statements of the test differed “in any significant way”. Intimate connection suggests a closer relationship than leading to a decision affecting the conduct of the case, but it seems that affecting the conduct of the case is to be regarded as intimate connection. On the other hand, intimate connection does not call for a decision, if by that is meant an overt decision like the pleading guilty in that case. If the negligence lies in omission, the intimate connection test may be more meaningful. If a decision is made to prove certain facts, but the lawyer negligently fails to obtain evidence to prove the facts, perhaps there is a decision in the sense of a decision to proceed with the case without evidence to prove the fact, but in Gianarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543 at 586 Brennan J left aside “liability for failure to carry out preliminary decisions ... when that failure impairs the conduct of the case in court in the way intended”.
25 Advice to the client may fall within the statement(s) of the test. In D’Orta-Ekenaike v Victoria Legal Aid McHugh J said of a “failure to warn” basis of negligence -
“157 ... The issue is whether the relevant connection with the conduct of the litigation exists, not the form of the negligence. An integral part of the advocate's role is the giving of advice on the basis of which the client will give instructions that direct the course of proceedings. The advice is critical to and often determinative of the client's decision. There is no relevant distinction between instructions given on negligent advice and the negligent carrying out of instructions if both are intimately connected with the conduct of litigation.”
26 The rationale enunciated in D’Orta-Ekenaike v Victoria Legal Aid could bring a wide application of the immunity. Whether the work is negligently performed through act or through omission, and whether or not it leads to an overt decision, there cannot be re-litigation in which it is asserted that, but for the negligence, a different result would have been reached. According to the rationale, it does not matter that the client does not seek to overturn the prior result, but uses it as the basis for complaint. The re-litigation is regarded as challenging a lawful result and so as offending the finality principle, distinguished from challenge by appeal because it would be re-litigation “of a skewed and limited kind” (D’Orta-Ekenaike v Victoria Legal Aid at [45]).
27 The wide reach of the finality principle is evident from the outcome in D’Orta-Ekenaike v Victoria Legal Aid. The client was ultimately acquitted, and the impugned result was his initial conviction, overturned on appeal. The initial conviction was itself not a conviction on his guilty plea, but after the guilty plea was led in evidence at the trial.
28 The courts are of course bound to apply advocate’s immunity as the common law has been laid down by the High Court. But when the test(s) “describe the acts or omissions to which immunity attaches by reference to the conduct of the case” (D’Orta-Ekenaike v Victoria Legal Aid at [87]), the application depends on the acts or omissions and their part in the conduct of the case, and is likely to be fact-specific. How has it been applied?
29 In D’Orta-Ekenaike v Victoria Legal Aid at [154] – [156] McHugh J said -
“[154] Work that courts have held was intimately connected with the conduct of a cause includes: failing to raise a matter pertinent to the opposition of a maintenance application [Rees v Sinclair [1974] 1 NZLR 180 at 187]; failing to plead or claim interest in an action for damages [Keefe v Marks (1989) 16 NSWLR 713 at 718]; issuing a notice to admit and making admissions [Munnings v Australian Government Solicitor [1994] HCA 65; (1994) 68 ALJR 169 at 172; [1994] HCA 65; 118 ALR 385 at 390 per Dawson J] ; failing to plead a statutory prohibition on the admissibility of crucial evidence [Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543]; negligently advising a settlement [Biggar v McLeod [1978] 2 NZLR 9].
[155] In Keefe v Marks, Gleeson CJ referred to other examples of out-of-court work that would be intimately connected with the conduct of the cause [(1989) 16 NSWLR 713 at 718]: interviewing the plaintiff and any other potential witnesses, giving advice and making decisions about what witnesses to call and not to call, working up any necessary legal arguments, giving consideration to the adequacy of the pleadings and, if appropriate, causing any necessary steps to be undertaken to have the pleadings amended.
[156] By contrast, a failure to advise the availability of possible actions against third parties [Saif Ali v Sydney Mitchell & Co [1980] AC 198 at 216, 224, 232], failure to advise commencing proceedings in a particular jurisdiction [MacRae v Stevens [1996] Aust Torts Reports ¶81-405 (63,679)] and the negligent compromise of appeal proceedings leading to the loss of benefits gained at first instance [Donellan v Watson (1990) 21 NSWLR 335] have been held not to fall within the immunity. Of course many other categories of conduct are well recognised as falling outside the immunity, especially the giving of advice not for the purpose of litigation [eg, Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1].” (footnotes inserted)
30 The plurality did not collect examples in the same way. McHugh J accepted a like test of work which “would require the impugning of a final decision of a court or the re-litigation of matters already finally determined by a court” (at [168]), and did not cast doubt on the examples he gave. Nor did the plurality suggest that cases which had been decided according to the “boundary for the operation of the immunity” (at [85]) laid down in Gianarelli v Wraith had been incorrectly decided.
31 McHugh J did not refer to Yates Property Corporation Pty Ltd v Boland (1997) 145 ALR 169 (Branson J) as approved for its “practical application of the immunity” in Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 74 ALJR 209 at [97] (Gleeson CJ); see also at [363] (Callinan J), perhaps because the various observations were obiter. Her Honour at 220 would have found that the immunity extended to a barrister’s failure to consider a matter or issue with consequential failure to advise with respect to it. As to the solicitors, her observations at 222 included that if the solicitors acted without due care skill and diligence it had not been shown that their failure affected the conduct of the case, it seems because the conduct of the case was in the hands of the barristers. This suggests a real causal question in the application of the test(s).
32 In MacRae v Stevens (1996) Aust Torts Rep 81-405 advising that proceedings had to be commenced in Queensland was regarded as not concerned with the management of the case. Beazley JA said at 63,690 that “it would be an artificial construct to say such advice ‘leads to a decision affecting the conduct of the case in court’, merely because it can be said to have a connection with the litigation”.
33 In Donellan v Watson (1990) 21 NSWLR 335 the parties compromised on the basis that an appeal should be withdrawn, but the solicitor mistakenly consented to an order that the appeal be upheld. Mahoney JA, with whose reasons Waddell AJA agreed, noted that there was no contested hearing and that the order as made was not collaterally attacked, and considered that the case did not fall within the rationale of advocate’s immunity. The rationale to which his Honour referred included (at 337) “the adverse consequences of the re-litigation of issues determined in a court proceeding”.
34 Non-exhaustive reference may be made to cases since D’Orta-Ekenaike v Victoria Legal Aid.
35 In Chamberlain v Ormsby [2005] NSWCA 454 it was held that negligence in advising in relation to a compromise of proceedings was within the immunity. But it has also been held, on strike-out applications, that it is arguable that advice in relation to compromise falls outside the immunity because there is no quelling of the controversy by the exercise of judicial power in the determination of the issues in the case: Francis v Bunnett [2007] VSC 527; (2007) 18 VR 98 (Lasry J); Alpine Holdings Pty Ltd v Feinauer [2008] WASCA 85 (Steytler P and Newnes AJA); see also Kelley v Carston [1998] QB 686. Whether for the finality principle it is sufficient that there be a result, although not a result through judicial determination, may not be definitively established, although Biggar v McLeod (1978) 2 NZLR 9 involved a negligently advised settlement.
36 In Walton v Efato Pty Ltd [2008] NSWCA 86 counsel advised that evidence of solvency should be obtained, but the solicitor failed to obtain it. On the basis that it was difficult to identify the decision to which that led affecting the conduct of the case in court, it was doubted whether advocate’s immunity applied. It was not necessary to come to a conclusion.
37 In Coshott v Barry [2009] NSWCA 34 failure to advise as to the extent of relief to be claimed in the proceedings was regarded as “too far removed from the actual conduct of the trial to be covered by the doctrine of advocate’s immunity” because not leading to a decision affecting the conduct of the case in court (at [62]). This may be compared with Keefe v Marks (1989) 16 NSWLR 713, where failure to plead or claim interest was held to be within the immunity.
38 In Dansar Pty Ltd v Pagotto [2008] NSWSC 112 Harrison J held that advocate’s immunity did not apply because, amongst other reasons -
“90. ... the advice that it is alleged ought to have been given by the defendants was not connected with the conduct of the first proceedings but rather related to the question of whether or not they should have been brought to an end. That did not involve a forensic decision about how the case was to be conducted. In D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 the High Court confirmed that the immunity (if it operates) extends to the instructing solicitor as well as to counsel: see [90] and [168]. However, the work must still be ‘work done out of Court which leads to a decision affecting the conduct of the case in Court’ or ‘work intimately connected with’ work in Court: D'Orta at [86].
91 With respect to the first proceedings it cannot be said that the advice that the plaintiffs complain the defendants failed to give them was work done out of court leading to a decision affecting the conduct of the case in court or intimately connected with it. Even though the defendants did not advise the plaintiffs to commence the proceedings in the first place, it was an implied term of their retainer to advise the plaintiffs if the first proceedings were hopeless. Such advice is wholly anterior to, and separate from, work done leading to a decision affecting the conduct of the first proceedings. "Conduct" in that sense is clearly a reference to how, or the manner in which, litigation should be conducted, not a reference to whether or not it should be commenced at all or continued. See, for example, McHugh J in D'Orta at par [151] as follows:
‘In Giannarelli, the majority adopted the extent of the immunity described by McCarthy P in the New Zealand Court of Appeal [171]. In Rees v Sinclair his Honour said [172]:
“... the protection exists only where the particular work is so intimately connected with the conduct of the cause in Court that it can fairly be said to be a preliminary decision affecting the way that cause is to be conducted when it comes to a hearing”.’ (Emphasis added).”
His Honour went on to say, as to the second and third proceedings, to the effect that the immunity did not apply where the duty to advise whether or not to commence proceedings arose prior to their commencement.
39 I do not refer to these examples in approval or disapproval, but to make the point that the finality principle has not always been given full effect. There may be questions of pre-commencement work, of failure to carry out decisions, of advice as to prospects and of need for judicial determination. On ascertained facts, questions of that kind arising in the present case could be decided. But there should be ascertained facts.
40 It may not be easy to see a clear line between work done prior to the commencement of proceedings, such as advice on the prospects of success or on appropriate defendants and causes of action, and the conduct of the proceedings. It may not be easy, more particularly, to see a clear line between work done in the course of the proceedings and advice given in relation to compromise. Work done prior to commencement of proceedings can lead to decisions as to their conduct, and work done leading to decisions as to their conduct is likely to underpin advice in relation to compromise. More widely, work done leading to decisions as to the conduct of the proceedings is likely to govern whether the client is advised about preparedness for a hearing or about prospects as the hearing looms, and what advice is given. But there can not be excluded negligent failure in these respects which does not satisfy the statement(s) of the test. Deciding the application of the immunity requires a clear understanding of what occurred and clear findings of the respect or respects in which there was negligence on the part of the lawyer.
41 The negligence alleged by the appellants includes failure to obtain advice as to prospects of success prior to the commencement of the proceedings, and more particularly failure as part of obtaining that advice to consider the correct basis for damages. It includes failure to advise that the case was not properly prepared for a hearing and failure to reconsider and advise as to the merits prior to the hearing. No doubt the focus of the allegations is on failure to consider the proper basis for claiming damages having regard to the contingent, and later the actual, effect of the Barclay’s deed, and to prepare with evidence accordingly. It may be that any negligence in that central respect would attract advocate’s immunity. But I do not think that it can safely be concluded, on what amounts to an hypothetical basis, that negligence in all the respects alleged by the appellants falls within advocate’s immunity.
42 Courts are ordinarily, and properly, astute to come to decisions upon facts as found, and not upon assumed facts. The old procedure of demurrer operated, not always satisfactorily, on precisely pleaded allegations, but a notional demurrer cannot resolve the appeal. On a notional strike-out the high standard of unarguability for which General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 is conventionally cited is not achieved. As Ipp JA has pointed out, with reference to Keefe v Marks, fine distinctions should not be drawn and the immunity cannot be circumvented by the construction of allegations of damage. Fully appreciating that, in my opinion it cannot properly be determined on appeal that advocate’s immunity applies so as to provide a complete defence to the appellants’ claim against the respondent.
43 As I have said, it may be that not all the breaches on which the appellants rely would have causal significance. The respondents sought to categorise them in such a way that, in their submission, the breaches would not have caused loss of the opportunity to recover damages from Egan. That too depends, in my view, on a clear understanding of what occurred and of the respect or respects in which there was negligence, and causation also cannot properly be determined on appeal on what amounts to an hypothetical basis.
44 It may be that in the end it will be held that the appellants’ claim is defeated by advocate’s immunity. They no doubt will take advice. However, for the reasons above a new trial should be ordered.
45 The costs of the trial before Patten AJ should be left for disposal by the judge conducting the new trial in the light, amongst other things, of its conduct and result. The costs on appeal are difficult. The appellants and the respondents each had valid complaints. A result come to on appeal can aid in the disposition of costs, but not in the present case. A complex assessment of costs of the appeal and costs of the cross-appeal should be avoided if possible. On a necessarily broad-brush approach, the appellants have had greater success on the substantive matters debated than the respondents, and the respondents should pay 70 per cent of the appellants’ costs on appeal.
46 I propose the orders -
1. Appeal and cross-appeal allowed.
2. Set aside orders 1 to 8 made by Patten AJ on 13 December 2007.
3. Remit the proceedings to the Common Law Division for a new trial on all issues.
4. Costs of the trial before Patten AJ to be in the disposal of the judge conducting the new trial.
5. Respondent pay 70 per cent of the appellants’ costs on appeal.
47 IPP JA:
The appeal and cross-appeal
48 This appeal and cross-appeal arise out of a claim for damages for professional negligence brought by the appellants against the respondent, a firm of solicitors. The appellants’ claim against the respondent concerns the respondent’s conduct, on the appellants’ behalf, of an action brought by the appellants for damages against Mr Frank Egan and his company, Egan National Valuers (NSW) Pty Ltd. I shall refer to Mr Egan and his company as “Egan”.
49 Dowd J presided over the trial of the appellants’ claim against Egan. After a hearing lasting nearly five weeks, the appellants entered into a compromise of their claim. By that compromise the appellants received nothing in respect of their claim and agreed to pay their own costs. The sole benefit they received from the compromise was that they escaped any liability to pay Egan’s costs (for which they would probably have been held liable if, at the end of the trial, judgment had been given in favour of Egan).
50 The appellants then sued the respondent. In broad terms they alleged that, in the preparation of the case against Egan, the respondent breached contractual and tortious duties it owed the appellants. These breaches, according to the appellants, resulted in them entering into the compromise and suffering damage. The appellants alleged that the damage so caused fell under two heads. The first was the loss of an opportunity to recover a large sum of damages from Egan. The second was loss resulting from delay and disruption in the proceedings.
51 Patten AJ found that the respondent had committed breaches of duties as the appellants alleged. He dismissed the claim for loss of an opportunity in the Egan proceedings, but upheld the claim for damages for delay and disruption. He awarded the appellants $140,000 under the latter head.
52 The appeal concerns the claim for loss of the opportunity of a better outcome in the Egan proceedings. The cross-appeal, as originally framed, challenges the award of $140,000 for delay and disruption and also asserts grounds on which it was contended this Court should uphold his Honour’s dismissal of the claim for loss of opportunity. The latter arguments should more properly have been the subject of a notice of contention but the appellants accepted that matters raised in the cross-appeal could be relied on to resist the appeal, and nothing turns on the way in which the issues were brought before this Court.
53 The cross-appeal challenges the findings Patten AJ made to the effect that the respondent had breached the duty it owed the appellants. Determination of the appeal raises issues concerning advocate’s immunity and causation. These issues would ordinarily require precise findings of how the respondent breached its duty. The respects, if any, in which the respondent breached its duty, was an issue raised by both the cross appeal and the appeal. Nevertheless, the appeal was argued before the cross-appeal.
The appellants’ claim against Egan
54 The appellants’ claim against Egan concerned the development of a property known as Paradis Sur Mer, 7 Wolseley Crescent, Point Piper. The appellants were the developers of Paradis Sur Mer and retained Egan as a valuer and professional advisor in connection with the development.
55 The development was a failure and, in consequence, the appellants sustained a loss of several millions of dollars. The appellants asserted that, in proceeding with the unsuccessful development, they relied on incorrect valuations by Egan. They brought proceedings against Egan, claiming damages for the loss they had suffered.
56 The appellants based their case against Egan on four alternative causes of action, namely, breach of contract, negligence, and misleading or deceptive conduct under the Trade Practices Act 1974 (Cth) or the Fair Trading Act 1987.
57 On 29 January 1996 the Egan trial commenced. Mr Hammerschlag, then of counsel, appeared (at first, alone) for the appellants, instructed by the respondent. Mr Stephen Klotz, a solicitor then in the employ of the respondent, had carriage of the appellants’ case on behalf of the respondent. On 1 February 1996, Mr Klotz retained Mr Spender QC to lead Mr Hammerschlag. Mr Stitt QC with Mr J Simkins represented Egan.
58 The trial continued until 28 February 1996, on which date the appellants and Egan entered into the compromise agreement. In consequence of the compromise, Dowd J made orders by consent. These orders included judgment for Egan against the appellants. As I have mentioned, the effect of the compromise (and the orders) was that the appellants failed to recover any part of the damages that they had claimed.
59 Opening the appellants’ case proved to be a difficult task. Counsel for the appellants was frequently interrupted by objections from Mr Stitt, most of which Dowd J upheld. As the opening proceeded, his Honour began to display a degree of acerbity and hostility towards the appellants’ case.
60 Mr Stitt’s objections led to attempts by the appellants to amend their statement of claim. Eventually the statement of claim was amended and additional parties, two companies controlled by the appellants, were joined as plaintiffs. These new plaintiffs were pleaded as having claims only in the event of the appellants failing in their claim (the joinder of these new plaintiffs was described by Mr Weber SC, who together with Mr Faulkner appeared in the appeal for the respondent, as a “fall-back position”).
61 The joinder led to further interlocutory applications, including an application by Egan for security for costs. The atmosphere in the court deteriorated to the extent that the appellants made two applications for Dowd J to disqualify himself. One of these applications was withdrawn and the other was unsuccessful. The opening was adjourned to enable the appellants to apply to this Court for leave to appeal against certain interlocutory orders made by Dowd J. That application for leave was unsuccessful.
62 The appellants’ counsel spent the entire period from 29 January 1996 (when the trial commenced) until 28 February 1996 (when the compromise was arrived at and Dowd J ordered judgment for Egan) opening the appellants’ case. No oral evidence was adduced.
The appellants bring proceedings against the respondent
63 Nearly six years later, on 13 December 2001, the appellants commenced proceedings against the respondent. Their claim was based on allegations that the respondent had breached its retainer agreement and, alternatively, a duty of care it owed at common law to the appellants “with respect to the bringing of the proceedings [against Egan] and the conduct and preparation of [that] case for hearing”. Patten AJ presided over this trial.
64 His Honour found, principally, as follows:
(a) The appellants had proved ten breaches of duty (in contract and in negligence) by the respondent. In these reasons, I use “breaches of duty” as a compendious term to describe the breaches both in contract and in negligence that his Honour found.
(b) The appellants had proved that the breaches caused “delay and disruption in the conduct of the trial”.
(c) The defence of advocate’s immunity did not apply to the breaches that caused delay and disruption as those breaches were not “intimately connected with the conduct of a case in court”.
(d) The damages caused by disruption and delay amounted to $140,000 (in which sum the appellants were entitled to judgment); this sum represented part of the fees that the appellants had paid the respondent and which, according to his Honour, were wasted by reason of the respondent’s breaches.
(e) The appellants had not proved that the breaches caused the appellants to lose the chance of succeeding in their proceedings against Egan.
(f) In any event, advocate’s immunity prevented the appellants “from relying on the compromise of the earlier proceedings as a component of their damages”.
(g) Therefore, the appellants failed in proving that they were entitled to damages for the loss of the chance of succeeding in their proceedings against Egan.
The relief sought and the issues raised in the appeal and cross-appeal
65 In their appeal to this Court, the appellants challenged his Honour’s dismissal of their claim for damages for loss of the chance of succeeding in the Egan proceedings. Essentially, the appellants contended that his Honour erred in holding that advocate’s immunity applied to their claim for loss of a chance damages, and erred in holding that they had failed to prove that the breaches of duty caused such damage.
66 As I have mentioned, the respondent’s cross-appeal challenged the finding that it committed breaches of duty and the finding that it was liable to the appellants for damages of $140,000.
67 During the course of the hearing of the appeal, Mr Bennett QC, who together with Mr Gray appeared for the appellants, limited the relief the appellants sought to a retrial of their claim for damages for loss of the chance of succeeding in the Egan proceedings.
68 On the second day of the appeal, Mr Weber also limited the relief sought by the respondent in the cross-appeal. What Mr Weber intended to convey in this regard is not entirely clear. There are two factors that complicate the question. Firstly, the appeal transcript on this issue may not be entirely accurate. Secondly, the parties’ submissions did not always take account of the way in which the issues on the appeal and the cross-appeal were interdependent. While the relief that Mr Weber was seeking in the cross-appeal (in the event of the appeal succeeding) is plain enough, it is not entirely clear to what extent, should the appeal fail, he limited the relief sought in relation to the order for damages of $140,000. I shall explain how this uncertainty arises.
69 Shortly before the luncheon adjournment on the second day of the appeal, the presiding judge, Beazley JA, asked Mr Weber (at Appeal Transcript 39) whether the respondent sought a retrial of the $140,000 claim should the court consider that the cross-appeal succeeds to the extent that the breaches of duty issues should be retried, but not be prepared to find, affirmatively, that there were no breaches of duty on the part of the respondent. Mr Weber replied, “Only if the appeal was successful”. In other words, Mr Weber was saying that he only sought a retrial of the $140,000 claim in the event of the appeal succeeding. He clarified this as follows:
“In other words we would live with the court not feeling like it was in a position to overturn the trial judge on the findings of negligence and not go back for a retrial, but in the event that the appeal was successful then we think there should be a complete retrial ... .”
70 I understood this statement to mean that, should the court dismiss the appeal and also hold that the findings as to breaches of duty by the respondent should stand, the respondent did not want a retrial on the claim for damages of $140,000. On the other hand, should the appeal be upheld, the respondent sought a retrial on all issues, including the damages claim of $140,000. I intend to proceed on this basis.
71 I accept, however, that I may have misunderstood Mr Weber. I would therefore give liberty to the respondent to apply if it wishes to argue that my understanding is incorrect.
72 In his opening argument in the appeal, Mr Bennett made two main submissions. The first was that his Honour erred in finding that advocate’s immunity was a defence to the appellants’ claim. Mr Bennett submitted that his Honour had incorrectly applied the doctrine of advocate’s immunity to the issue of causation, whereas it was only capable of applying to the issue of breach. The second was that his Honour erred in finding that the appellants had not proved causation. He submitted that his Honour should have held that the respondent’s breaches of duty caused the appellants to lose the chance of succeeding in their proceedings against Egan. Mr Bennett further submitted that his Honour failed to give adequate reasons for all his decisions adverse to the appellants. He sought a retrial of the causation issue.
73 Mr Weber supported his Honour’s ultimate findings as to causation (although he did not argue, in opposition to Mr Bennett, that his Honour had given adequate reasons for those findings). He submitted, further, that advocate’s immunity protected the respondent from liability, including liability for the loss of a chance.
74 Mr Weber also submitted, in the cross-appeal, that Patten AJ had erred in finding breaches of duty on the part of the respondent. He submitted that the judge had failed to make findings of primary facts from which breaches of duty could be inferred and had given inadequate reasons for his conclusions in this regard. Mr Weber submitted that it was open to this Court to make the necessary findings of fact itself and that, should it do so, those findings would lead to the conclusion that the respondent had not breached any duty. Mr Weber submitted, in the alternative, that there should be a retrial of the breaches of duty issue. Mr Bennett did not argue that his Honour’s reasons for his findings on the breaches of duty issue were adequate. Mr Gray, who argued this part of the case on the appellants’ behalf, submitted that there was ample evidence capable of supporting findings of breaches of duty.
The resolution of the appeal and the approach to the remaining issues
75 In my opinion, the appeal fails by reason of advocate’s immunity. In accordance with my understanding of the relief sought by the respondents (as set out above), in these circumstances they do not seek a re-trial of the claim for damages for delay and disruption.
76 I shall proceed to deal with the issues raised by the cross-appeal and the causation issue raised by the appeal. I shall do so, not only because of what is stated in Kuru v State of New South Wales [2008] HCA 26; (2008) 236 CLR 1 about the duty of intermediate courts of appeal to deal with all grounds of appeal, but also because I think that the appellants, in light of the unfortunate history of the proceedings so far, are entitled to have their arguments fully addressed.
77 As appears from what follows, I would uphold the appellants’ arguments on the issues other than advocate’s immunity and consider that the cross-appeal should succeed to the extent that the breaches of duty issues should be re-tried. These views, however, are predicated on my conclusion that advocate’s immunity applies and the appeal fails.
Advocate’s immunity
78 Patten AJ held that, by reason of advocate’s immunity, the respondent was not liable to the appellants for the loss of the chance of succeeding in the Egan action. His Honour’s reasoning was based on the proposition that advocate’s immunity applied to everything done by the respondent (and Mr Klotz on its behalf) after the commencement of the trial and, in particular, in connection with the compromise of the action. His Honour said (at [153]-[154]):
“In my opinion, advocate (sic) immunity clearly applied to everything which occurred after the commencement of the proceedings before Dowd J. The immunity ... prevents any attack upon anything done by counsel or by Mr Klotz in that period including the advice which led to a compromise of the action.
That decision [to terminate the proceedings by the compromise], its implementation and the discussions and advice which preceded it were, in my opinion, protected by advocate (sic) immunity.”
79 The appellants, however, did not contend that Mr Klotz (and through him, the respondent) negligently caused the compromise to be entered into. The compromise, on the appellants’ case, was merely a link in the causal chain connecting alleged earlier breaches of duty by Mr Klotz to the damages they claimed. On this basis, advocate’s immunity had no application to the compromise. Furthermore, the appellants’ case alleged breaches of duty on an ongoing basis for more than a year before the trial commenced. The appellants’ case did not allege breaches of duty after the trial commenced. Accordingly, his Honour’s reasoning in regard to the application of advocate’s immunity, as set out in [153] of his reasons, cannot be sustained.
80 Mr Weber did not seek to support his Honour’s reasoning. Rather he submitted that advocate’s immunity applied to those breaches of duty actually relied on by the appellants (that is, acts and omissions by the respondent that occurred prior to the commencement of the trial and the entry of the compromise). This submission focuses attention upon the true issue of advocate’s immunity in this appeal.
81 In dealing with that issue, it is first necessary to define the breaches of duty said to have caused the damage. This exercise involves issues raised by the cross appeal. For the purposes of this part of my reasons I shall, however, assume that the breaches of duty submitted by Mr Bennett and found by Patten AJ are correct.
82 Mr Bennett submitted that “the main negligence” on the part of the respondent was a “failure to analyse and prepare the case properly”. He said, “It was simply going to court totally unprepared as to what was being claimed [and] how it was being claimed.” Later, he expanded on this submission, saying, “It was a failure to have organised, to have worked out the precise basis [of the damages claimed], worked out the problems and worked out the way they were going to be dealt with.” In subsequent, written submissions filed by Mr Bennett and Mr Gray on behalf of the appellants, it was contended, in effect, that the respondent was negligent in failing, in good time (and prior to the trial):
(a) to brief counsel to advise on the most appropriate method of calculating and proving damages (having regard to the different possible factual scenarios that might obtain), and properly and carefully to examine and consider these issues itself;
(b) to brief counsel to advise as to how the appellants’ damages could be affected by two documents referred to at the trial as the “Barclay Deeds” (and, in particular, how those damages would be affected by the first Barclay Deed becoming unconditional) and properly and carefully to consider these issues itself; and
(c) to plead and prepare the case on damages (including obtaining whatever evidence was consequentially required for the trial) in accordance with decisions arrived at in consequence of the steps set out in (a) and (b) above.
83 The particulars of negligence as formulated in the previous paragraph are not in precisely the same terms as those pleaded in paras 27 (a), (b), (c), (d), (e), (f), (g) (h), (i), and (k) (being the breaches of duty found by Patten AJ to have been established). Nevertheless, having regard to the width of the pleaded particulars and the way in which the case was run at trial, including the evidence that was led, I am satisfied that it is open to the appellants, on appeal, to put their case in the way set out in the previous paragraph.
84 Patten AJ made findings as to particular negligent conduct on the part of the respondent (through Mr Klotz) that fall squarely within the formulation of the breaches of duty articulated by the appellants. These findings (to which I refer below) reinforce the conclusion that the breaches of duty as so formulated are in accord with the way in which the appellants presented their case at trial.
85 The first set of the findings concerned three companies (the “Corporate Guarantors”) who - to facilitate the financing of the development of Paradis Sur Mer - guaranteed the appellants’ liabilities to the Bank and mortgaged properties owned by them as security for those liabilities. The first finding was that Mr Klotz, in preparing the case for trial, failed to apply his mind to the significance of the involvement of the Corporate Guarantors in the development of Paradis Sur Mer and “to how the involvement of those companies could impact upon the pleading of the [appellants’] causes of action” (at [157]).
86 The second finding (at [157]) was that Mr Klotz “failed to give adequate or any consideration to the proper quantification of the [appellants’] damages, including as to the impact upon those damages [of the Barclay Deeds]”.
87 Other relevant findings that fall within the formulation articulated on appeal are:
(a) “[The respondent] ... failed to provide proper particulars to Egan’s solicitors” (at [157]);
(b) “The case against Egan was not ready for hearing and [the respondent] was negligent and in breach of [its] contractual obligations when [it] accepted a date for hearing and thereafter failed to apply for vacation of the hearing date” (at [158]);
(c) “[Mr Klotz failed] to apply his mind to the many difficulties inherent in the case” (at [167]), and;
(d) The respondent failed to “provide proper particulars, [accepted] a trial date for a case, in truth, unready for trial and [failed] to seek vacation of the hearing date” (at [168]).
88 The respondent, by its cross-appeal, challenges these findings. I mention the findings at this point, however, as they support the conclusion that the breaches of duty as formulated by the appellants on appeal are within the way the case was presented at trial.
89 The question that arises is whether advocate’s immunity applies to the breaches of duty so formulated. In considering this question it is necessary to bear in mind that the breaches of duty on which the appellants rely are not breaches by the respondent acting as an advocate, either in the court or outside it. They are breaches that are alleged to have been committed before the trial commenced (and not in court) by the respondent acting purely as a solicitor. It is not alleged that the barristers who represented the appellants were negligent in any respect.
90 There is a linguistic anomaly in applying the doctrine of advocate’s immunity to a person who did not purport to act as an advocate. This anomaly focuses the mind on the problem, namely, what is the boundary of the immunity; that is, to adopt the language now in fashion concerning duty of care, what is the “scope” of the immunity? In particular, does it apply to solicitors doing work in connection with court proceedings but other than as an advocate?
91 The current position in Australia relating to advocate’s immunity stems from what was said by McCarthy P in Rees v Sinclair [1974] 1 NZLR 180 at 187:
“I cannot narrow the protection to what is done in Court: it must be wider than that and include some pre-trial work. Each piece of before-trial work should, however, be tested against the one rule; that the protection exists only where the particular work is so intimately connected with the conduct of the cause in Court that it can fairly be said to be a preliminary decision affecting the way that cause is to be conducted when it comes to a hearing. The protection should not be given any wider application than is absolutely necessary in the interests of the administration of justice, and that is why I would not be prepared to include anything which does not come within the test I have stated.” (My underlining.)
92 Kirby J, in D’Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 (at [291], 92), pointed out that McCarthy P’s dictum expanded the immunity to out-of-court advice. Not until Rees v Sinclair was the notion propounded that advocate’s immunity extended to pre-trial work.
93 McCarthy P’s dictum was adopted in Saif Ali v Sydney Mitchell & Co [1980] AC 198 by Lord Wilberforce (at 215), Lord Diplock (at 224), and Lord Salmon (at 232). Lord Wilberforce (at 215) said that the immunity attached to “a solicitor acting as an advocate in court” but “only in the area in which it extends” (presumably, his Lordship had in mind the limitations contained in the words of McCarthy P underlined above). Lord Diplock (at 224) regarded Rees v Sinclair as a “limited extension” of the immunity. These views coincided with the opinion of McCarthy P that “[t]he protection should not be given any wider application than is absolutely necessary in the interests of the administration of justice”.
94 In Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543 Mason CJ (at 559) agreed with the views expressed by Lord Wilberforce, Lord Diplock and Lord Salmon in Saif Ali that: “[T]he same immunity attaches to a solicitor acting as an advocate in court as attaches to a barrister”. This statement suggests that a solicitor would only be able to rely on the immunity if he or she was “acting as an advocate” (albeit that his Honour agreed with McCarthy P that the protection existed if the work out of court was “intimately connected with the conduct of a cause in court”).
95 In Giannarelli Mason CJ (at 560) said that “the immunity must extend to work done out of court which leads to a decision affecting the conduct of the case in court”. His Honour did not in this sentence mention the qualification that the work involved must be “intimately connected with the conduct of the cause in court”. Nevertheless, Mason CJ expressly approved McCarthy P’s dictum in Rees v Sinclair and warned, “to take the immunity any further would entail a risk of taking the protection beyond the boundaries of the public policy considerations which sustain the immunity”. Wilson J was of similar mind when saying (at 577) that: “It is the function of advocacy that attracts the immunity”. See also Dawson J at 596.
96 D’Orta-Ekenaike involved a claim by the appellant (Mr D’Orta-Ekenaike) against the Victorian Legal Aid Commission (VLA). VLA, acting as instructing solicitor, had advised the appellant to plead guilty to a criminal charge against him. In later proceedings the appellant alleged that that advice had been negligently given and he had, in consequence, suffered damage. VLA relied on advocate’s immunity.
97 Gleeson CJ, Gummow, Hayne and Heydon JJ (the “plurality”) dealt (at [90], 32) with the position of VLA as a solicitor as follows:
“No relevant distinction could be drawn between the junior of two counsel retained to appear for an accused tendering advice of the kind of which the applicant complains and the instructing solicitor tendering that advice ... The duties which each owes the client are identical. The content of the advice is identical. It cannot be said that the advice of one is more closely related to the court proceedings than the other, let alone one being intrinsically superior to or more effective than the other (if such a distinction were possible or relevant).”
98 The appellant in D’Orta-Ekenaike was represented in the criminal proceedings by a barrister instructed by a solicitor (on behalf of VLA). The plurality said (at [90], 32) that considerations of finality that underpinned the maintenance of advocate’s immunity required that the immunity extend to advice given by the solicitor as well as that given by the barrister.
99 Their Honours expressly dispelled any notion that the immunity does not extend to a solicitor not acting as an advocate (see at [91], 32). The majority (Gleeson CJ, McHugh, Gummow, Hayne, Callinan and Heydon JJ) held that the instructing solicitor, who was not acting as an advocate, was entitled to the immunity.
100 In dealing with the test for advocate’s immunity, the plurality stated (at [86], 31):
“[T]here is no reason to depart from the test described in Giannarelli as work done in court or ‘work done out of court which leads to a decision affecting the conduct of the case in court’ or, as the latter class of case was described in the Explanatory Memorandum for the Bill that became the Practice Act, ‘work intimately connected with’ work in a court. (We do not consider the two statements of the test differ in any significant way).”
101 Their Honours went on (at [87], 31) to say:
“The criterion adopted in Gianarelli accords with the purpose of the immunity. It describes the acts or omissions to which immunity attaches by reference to the conduct of the case. And it is the conduct of the case that generates the result which should not be impugned.”
102 Their Honours concluded (at [91], 32):
“Because the immunity ... is rooted in the considerations described earlier [including considerations of finality], where a legal practitioner (whether acting as advocate, or solicitor instructing an advocate) gives advice which leads to a decision (here the client’s decision to enter a guilty plea at committal) which affects the conduct of a case in court, the practitioner cannot be sued for negligence on that account.”
The reasons of McHugh J and Callinan J are to the same effect.
103 As a matter of language, there is a difference between “work done out of court which is intimately connected with the conduct of a case in court” and “work done out of court which leads to a decision affecting the conduct of the case in court”. The omission of the qualification that the work be “intimately connected with the conduct of a case in court” is capable of extending the scope of the immunity. In light of D’Orta-Ekenaike, what weight, if any, must now be attributed to that qualification?
104 In my opinion, a significant pointer to this question is to be found in the rationale for the immunity as expressed in D’Orta-Ekenaike. As Professor Cane has said, “one would expect the scope of advocate’s immunity to reflect its rationale” (See P Cane, “The new face of advocate’s immunity” (2005) 13 Torts Law Journal 93).
105 Put shortly, the principal rationale of the majority in D’Orta-Ekenaike is the finality of litigation principle. It is thus difficult to resist the proposition that advocate’s immunity applies to any claim that requires the re-litigation of a decided case on the alleged ground that any work done out of court (leading to a decision affecting the conduct of the decided case in court) was negligently done by a solicitor or barrister. On this basis, “work done out of court which leads to a decision affecting the conduct of the case in court” is work that is “intimately connected with the conduct of a case in court”. This explains the statement by the plurality in D’Orta-Ekenaike that the two expressions of the test do not differ in any significant way.
106 The plurality (at [31], 16 and [35], 17-18) stressed that the administration of justice would suffer adverse consequences from the re-litigation, in collateral proceedings for negligence, of issues determined in the principal proceedings. They said (at [45], 20-21):
“[T]he central justification for the advocate’s immunity is the principle that controversies, once resolved, are not to be reopened except in a few narrowly defined circumstances. This is a fundamental and pervading tenet of the judicial system, reflecting the role played by the judicial process in the government of society. If an exception to that tenet were to be created by abolishing that immunity, a peculiar type of re-litigation would arise. There would be re-litigation of a controversy (already determined) as a result of what had happened during, or in preparation for, the hearing that had been designed to quell that controversy. Moreover, it would be re-litigation of a skewed and limited kind.”
107 Their Honours went on (at [66], 26) to state:
“In every case the complaint must be that a consequence has befallen the client which has not been, and cannot be, sufficiently corrected within the litigation in which the client was engaged. That consequence may take a number of forms. For the moment, it will suffice to identify what may appear to be the three chief consequences: (a) a wrong final result; (b) a wrong intermediate result; and (c) wasted costs.”
108 Their Honours proceeded to give examples of complaints of the kind referred to at [66] and then said (at [70], 27):
“What unites these different kinds of consequence is that none of them has been, or could be wholly remedied within the original litigation. The final order has not been, and cannot be, overturned on appeal. The intermediate consequence cannot be repaired or expunged on appeal. The costs order cannot be set aside; the costs incurred cannot be recovered from an opposite party. And in every one of these cases, the client would say that, but for the advocate’s conduct, there would have been a different result. In particular, leaving cases of wasted costs aside, the client wishes to assert that, if the case had been prepared and presented properly, a different final, or intermediate, result would have been reached. And yet the judicial system has arrived at the result it did. The consequences that have befallen the client are consequences flowing from what, by hypothesis, is a lawful result. So, to take the present case, the imprisonment of which the applicant seeks to complain is lawful imprisonment. In a case where the client would say the wrong final result is reached, the result in fact reached is, by hypothesis, one that was lawfully reached.” (My underlining.)
109 McHugh J’s reasoning is similar to that of Gleeson CJ, Gummow, Hayne and Heydon JJ. It is encapsulated by the following paragraph ([168], 56):
“Accordingly, the immunity should extend to any work, which, if the subject of a claim of negligence, would require the impugning of a final decision of a court or the re-litigation of matters already finally determined by a court. On that basis, no distinction should be drawn between the role of a solicitor and a barrister in the context of advising a client regarding the entering of a plea in criminal proceedings. If the immunity were applicable to the barrister and not the solicitor in the present case, it would not serve the public policy of preventing the rehearing of the applicant’s charge.” (My underlining.)
110 I draw attention to the statement of the plurality at [70] that I have underlined at [108] above, namely:
“In particular, leaving cases of wasted costs aside, the client wishes to assert that, if the case had been prepared and presented properly, a different final, or intermediate, result would have been reached.”
111 The assertion that their Honours so identified constitutes the basis of arguments by clients that:
(a) prior to trial, their solicitors made negligent decisions and negligently failed to prepare the case properly;
(b) the negligence in question led to decisions affecting the presentation of the case in court by a barrister;
(c) as a result of that negligent conduct, the trial judge granted judgment in favour of the opposing side;
(d) but for that negligent conduct, the trial judge would have granted judgment in the clients’ favour, and;
(e) hence, the clients suffered the loss of an opportunity of obtaining a successful outcome in the litigation.
112 As the plurality noted, the failure to obtain a different and more favourable result (by reason of the solicitors’ failure to prepare and present the case properly) is a “consequence” that may befall clients but which cannot be corrected within the litigation in which they were engaged (see at [69] and [70]). Their Honours observed (at [71], 27) that the premise for the proposition that a client should have an action against a person who negligently caused such a consequence is that “there should be no wrong without remedy”. Their Honours, in effect, rejected this proposition. They stated (at [84], 30-31):
“To remove the advocate’s immunity would make a significant inroad upon what we have earlier described as a fundamental and pervading tenet of the judicial system. That inroad should not be created. ... But the legal principle which underpins the Court’s conclusion is fundamental. Of course, there is always a risk that the determination of a legal controversy is imperfect. And it may be imperfect because of what a party’s advocate does or does not do. The law aims at providing the best and safest system of determination that is compatible with human fallibility. But underpinning the system is the need for certainty and finality of decision. The immunity of advocates is a necessary consequence of that need.” (Citation omitted.)
113 I would observe that their Honours referred to a “party’s advocate”. But, the application of the broad test for advocate’s immunity, and the powerful focus given to the rationale for the immunity (the finality principle), protects conduct by persons not acting as advocates at all (as occurred, in fact, in D’Orta-Ekenaike).
114 Take for example the situation where a solicitor briefs a barrister to advise on the preparation of a case for trial. Assume that the barrister gives negligent advice, goes on to act as advocate at the trial and the trial is lost because of the negligent advice. There can be no doubt, according to D’Orta-Ekenaike, that the barrister would be entitled to rely on advocate’s immunity. As a second scenario, assume that the solicitor does not retain a barrister, but does all the preparation and advocacy work at the trial on his or her own and with the same result. According to the principles laid down in D’Orta-Ekenaike, advocate’s immunity would apply to the solicitor. Assume, as a third scenario, that the solicitor prepares for trial without retaining a barrister, thereafter retains a barrister on trial, and the trial is lost without negligence on the barrister’s part but rather by reason of negligence in the preparation by the solicitor. As I later explain, on the evidence this case is equivalent to this last scenario. In my view, it is self-evident according to the principles laid down in D’Orta-Ekenaike that advocate’s immunity would apply to the solicitor.
115 The appellants’ case against the respondent falls within the “kinds of consequence” referred to at [70] of D’Orta-Ekenaike (see [108] above). The final order made by Dowd J cannot be repaired or expunged on appeal. Nor can the compromise be set aside. Patten AJ held that it was entered into without duress and that finding is not challenged. The appellants say that, but for the respondent’s conduct, there would have been a different result. They wish to assert that, if the case had been prepared and presented properly, a different intermediate result (that is, no compromise) and final result (orders other than those made by Dowd J on 28 February 1996) would have been reached. The consequences that have befallen the appellants are, however, consequences flowing from what is a lawful result. The compromise was a lawful contract and the judgment granted by Dowd J was a lawful judgment.
116 I reiterate (because it is so important in the context of this case) that a paradigm case to which advocate’s immunity applies is where the client asserts that, “if the case had been prepared and presented properly, a different ... result would have been reached” (D’Orta-Ekenaike at [70]). The case put by Mr Bennett on behalf of the appellants is that very case. Thus, the appellants’ case falls squarely within the test for advocate’s immunity laid down in D’Orta-Ekenaike. In my opinion, D’Orta-Ekenaike compels the conclusion that the respondent is immune from the appellants’ suit.
117 I would add that this conclusion is reinforced by Keefe v Marks (1989) 16 NSWLR 713 (which post-dates Giannarelli). In Keefe v Marks Gleeson CJ (with whom Meagher JA agreed) gave the following examples of out of court work that would be intimately connected with the conduct of the case so as to attract the advocate’s immunity (at 718):
“[I]nterviewing the plaintiff and any other potential witnesses, giving advice and making decisions about what witnesses to call and not to call, working up any necessary legal arguments, giving consideration to the adequacy of the pleadings and, if appropriate, causing any necessary steps to be undertaken to have the pleadings amended.”
The appellants’ description of the respondent’s “main negligence” falls largely within this description.
118 In Keefe v Marks Gleeson CJ set out (at 718-719) the substance of the complaint made against the barrister concerned in that case, namely:
“It is that, having been briefed to act as counsel for [the plaintiff] in his action for damages for personal injuries, he did not at any relevant time, either prior to the commencement of the hearing, or during the hearing, direct his mind to the desirability of making on his client’s behalf a claim for interest or take the steps necessary to propound such a claim and that his neglect in that regard produced the result that [the Master] failed to award interest and the Court of Appeal declined to intervene. As a consequence, it is alleged [the plaintiff] did not recover his full entitlement. That, it is claimed, gave rise to a liability on the part of [the barrister] to [the plaintiff] and [the solicitor] seeks contribution or indemnity based on the existence of that liability.”
119 This description of the complaint is not entirely dissimilar to the complaint that the appellants make against the respondent. The appellants say that, prior to the commencement of the hearing, the respondent, having been instructed to act as their solicitors, did not analyse and prepare the case properly, did not analyse and consider the damages that the appellants were claiming, did not properly plead and particularise the elements of their damages claim, did not properly consider what evidence was necessary to prove their damages, did not have that evidence ready to adduce at trial, and proceeded to trial with the case as to damages inadequately prepared.
120 Gleeson CJ proceeded in Keefe v Marks to say (at [719]):
“It is impossible to characterise that aspect of [the barrister’s] conduct which occurred prior to the commencement of the hearing before [the Master] as ‘work done out of court which is unconnected with work done in court’. On the contrary, in so far as complaint is made of action or inaction prior to the commencement of the hearing it concerns a matter which was intimately connected with the work ultimately done in Court, that is to say, the presentation of [the plaintiff’s] claim for damages and any consequential relief to which he was also entitled.”
121 Paraphrasing these comments so that they apply to the present case (which requires only the alteration of a few unimportant words), it may be said that it is impossible to characterise that aspect of the respondent’s conduct which occurred prior to the commencement of the hearing before Dowd J as work done out of court that was unconnected with work done in court. On the contrary, insofar as complaint is made of action or inaction prior to the commencement of the hearing, it concerns matters that were intimately connected with the work ultimately done in court, that is to say, the presentation of the appellants’ claim for damages and any consequential relief to which they were also entitled.
122 In Keefe v Marks, when discussing the question whether the claim fell within the immunity, the Gleeson CJ said (at 719):
“Whatever may be the answer to that question, it does not appear to me that it could depend upon the detail of the evidence adduced at a hearing of the District Court action. Indeed, the relevant principle of immunity would be capricious in its operation if its application in a case such as the present were made to depend upon the precise history or circumstances of the communications and dealings between the barrister and his solicitor and their client. A rule of law which is said to be based upon considerations of public policy should not depend for its practical operation upon chance. Furthermore, it does not seem to me that a plaintiff can circumvent the immunity, simply by constructing allegations of damage in a manner which attempts to relate the harm suffered as a consequence of a barrister’s alleged negligence to that aspect of his conduct furthest removed from physically standing up and speaking in court. The statement of claim is to be read as a whole, and there is no doubt about what it is the barrister is said to have done that was wrong, or what form of harm befell his client. The barrister’s alleged negligence involved a continuing course of conduct, or inaction, which extended up until the conclusion of the hearing before [the Master] and manifested itself in a failure to make a claim for interest, and to apply for any necessary amendment to the pleadings in order to enable that claim to be pursued.”
123 His Honour concluded on this theme by saying (at 720):
“The substance of the allegation against [the barrister] is that he was negligent in the way in which he conducted [the plaintiff’s] action, and the principle of immunity which applies in such a case cannot be circumvented by drawing fine distinctions between the preparation and the conduct of the case, or between the [barrister’s] failure to advert to the matter of interest while he was in his chambers and his failure to do so while he was in Court.”
124 In Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 74 ALJR 209, Gleeson CJ in effect endorsed what he had earlier said in Keefe v Marks (at [97], 228-229). Callinan J (at [361], 280) was of the same view.
125 The respondent’s conduct said to constitute negligence giving rise to the appellants’ claim involved a continuing course of conduct, or inactivity, which extended up until the conclusion of the hearing before Dowd J. The appellants’ argument, in my view, depends upon the precise history or circumstances of the communications and dealings between the appellants and their solicitors. I do not think that I am doing their argument an injustice if I, too, describe it as an attempt to relate the harm suffered as a consequence of the solicitors’ alleged negligence to that aspect of their conduct furthest removed from physically standing up and speaking in court, and to drawing fine distinctions between the preparation and the conduct of the case. According to Keefe v Marks, these are precisely the kind of arguments that are not capable of refuting the application of advocate’s immunity. The test is in essence simple, namely, did the work, although done out of court, lead to a decision affecting the conduct of the case in court.
126 It follows that, in the present case, the doctrine of advocate’s immunity affords the respondent a complete defence to the appellants’ claim for loss of the chance of succeeding in their claim against Egan. For that reason, the appellants’ appeal must be dismissed.
127 In Philip Walton trading as Pitcher Walton & Co v Efato Pty Ltd [2008] NSWCA 86, Tobias JA (with whom Beazley JA and Giles JA agreed) made observations concerning the possible application of advocate’s immunity to negligence involving a solicitor’s failure to obtain certain evidence for use in a winding up application. These observations were obiter as it was unnecessary for his Honour to come to any conclusion as to the application of the immunity (see at [90]). Also, in Coshott v Barry [2009] NSWCA 34 (with the concurrence of Beazley JA and Campbell JA) I made findings on the same issue. These findings were obiter as the case was decided on other issues and advocate’s immunity was dealt with only to satisfy the requirements stated in Kuru. The observations made by Tobias JA in Walton and the findings I made in Coshott should be understood as being confined to the specific facts in those cases and are not to be understood as laying down any principle of broader application.
128 Accordingly, I conclude that the appeal must be dismissed.
129 As I have explained, notwithstanding this conclusion I shall go on to
consider the other issues in the appeal. What follows is,
of course, predicated
on my conclusion that the appeal fails.
The cross-appeal: Inadequate reasons for finding breaches of duty
130 In the cross-appeal, in relation to the breaches of duty, the respondent submits that the trial judge’s reasons were inadequate, that his Honour’s reasoning process is not apparent and that there is a serious lack of critical findings of primary fact necessary to understand his Honour’s ultimate conclusions. I interpose that the appellants’ submissions as to causation are to the same effect.
131 Having held that, by reason of advocate’s immunity, the appellants failed in their claim for loss of a chance, Patten AJ, under the heading “Are the appellants otherwise entitled to succeed?” said (at [155]-156]):
“In my opinion the [appellants] established breach of contract and negligence by [the respondent] as alleged in the Statement of Claim.
In particular, I find that the appellants proved the breaches alleged in paragraph 27 (a), (b), (c), (d), (e), (f), (g), (h), (i), and (k) [of the statement of claim].”
132 Of the breaches found by Patten AJ, the appellants contend that those alleged in paragraph 27 (a), (b), (d), (e), (f), (h), (i), and (k) are relevant to causation (and, hence, relevant in the appeal). These paragraphs are in the following terms:
“The Solicitors breached their Retainer and their duties owed to each of the Plaintiffs with respect to the bringing of the proceedings and the conduct and preparation of the case for hearing.
Particulars
(a) Failed to obtain a written opinion from counsel as to the appellants’ prospects of success in the proposed proceedings against Egan prior to proceedings being commenced or at all.
(b) Failed to include in the Summons and Statement of Claim causes of action based on Mr F K Egan’s letter addressed to Mr G Symonds dated 30 August, 1990, letter dated 5 April, 1991 addressed to Barclays Bank, the letters addressed to Mr G Symonds dated 6 February, 1992 and 28 February, 1992 and the Certificate of Valuation dated 18 December, 1991.
...
(d) Failed to advise with respect to the proper parties to be named in the Summons and the Statement of Claim; and either failed to advise that Senneh Pty Limited and/or Tisete Pty Limited and/or Tabard (Jersey) Limited should have been Plaintiffs in the action or wrongly applied for their joinder as Plaintiffs after the hearing had commenced.
(e) Failed to identify and plead or particularise the nature of the losses suffered by the [appellants].
(f) Failed to respond to Egans Solicitors’ request for particulars (letter dated 19 December 1995) in relation to the Barclays Bank deed until ordered by the Court to do so. When they did respond, they failed to contend that the Barclays Bank Deeds were irrelevant.
...
(h) Taking a date for a five week hearing without having sought or obtained an advice on evidence when the [appellants’] case was not ready for hearing.
(i) Failed to advise the appellants that the case was not properly prepared ready for hearing and that an application could be made to vacate the hearing date, or once the hearing had commenced, to apply for an adjournment of the hearing.
(k) Failed to reconsider the merits of the case prior to the hearing and advise the [appellants] with respect thereto.”
133 Patten AJ expanded as follows on the breaches of duty he found (at [157]-158]):
“Obviously some of the breaches were more significant than others. I am satisfied, in particular, on the probabilities that Mr Klotz failed to apply his mind to the significance to the case of the companies Senneh Pty Ltd, Tisete Pty Ltd, Tabard (Jersey) Limited and Gowrise Pty Ltd, and as to how the involvement of those companies could impact upon the pleading of the [appellants] causes of action. He also failed to give adequate or any consideration to the proper quantification of the [appellants] damages, including as to the impact upon those damages of the deeds of release. As a consequence, [the respondent] also failed to provide proper particulars to Egan’s solicitors.
In my opinion, the case against Egan was not ready for hearing and the [respondent was] negligent and in breach of [its] contractual obligations when [it] accepted a date for hearing and thereafter failed to apply for vacation of the hearing date.”
134 I have mentioned that Patten AJ further found that “[Mr Klotz failed] to apply his mind to the many difficulties inherent in the case” (at [167]), failed “to provide proper particulars”, accepted a trial date for a case which, “in truth, [was] unready for trial” and failed “to seek vacation of the hearing date” (at [168]).
135 Patten AJ made these findings as to breaches of duty after recounting in detail transcripts of the evidence that described what had occurred prior to and during the trial before Dowd J. It is to be inferred that he based his findings on that material. The difficulty is, however, that his Honour did not make express findings of primary fact that exposed the specific chain of reasoning that led him to come to the conclusions that he did. His Honour’s reasons are 112 pages in length. Nearly eighty of these pages are extracts from the evidence and the transcript. The remainder is largely a recital of facts that are common ground. The reasoning is sparse as are the primary facts that his Honour found. The critical findings are, to a substantial extent, conclusory. It was common ground between the parties on appeal that his Honour’s reasons as to the findings of breaches of duty were inadequate.
136 In Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58; (2004) 62 IPR 184 this Court (Sheller, Ipp and McColl JJA) said (at [282]-[285]):
“There is a noticeable increase in extremely complex and sophisticated litigation. This is one such case. The increased complexity of litigation and the great number of issues that in some cases require determination have led to some very lengthy judgments. There are other cases where the issues are less complex but the judgments are nevertheless very long, and unnecessarily so. This should be discouraged. Prolixity is an enemy of comprehensibility and, indeed, cogency.
...
The judgment sets out in great detail the submissions advanced by the parties and the evidence of many of the witnesses. Some of this material relates to peripheral matters. The mass of these references tends to obscure the essential issues that have to be decided and makes the reasoning process difficult to follow. ...
In Customs and Excise Commissioners v A [2003] EWCA Civ 1039; [2003] 2 All ER 736 Schiemann LJ said (at 753-754, [82]-[83]):
‘... [J]udges should bear in mind that the primary function of a first instance judgment is to find facts and identify the crucial legal points and to advance reasons for deciding them in a particular way. The longer a judgment is and the more issues with which it deals the greater the likelihood that: (i) the losing party, the Court of Appeal and any future readers of the judgment will not be able to identify the crucial matters which swayed the judge; (ii) the judgment will contain something with which the unsuccessful party can legitimately take issue and attempt to launch an appeal; (iii) citation of the judgment in future cases will lengthen the hearing of those future cases because time will be taken sorting out the precise status of the judicial observation in question; and (iv) reading the judgment will occupy a considerable amount of the time of legal advisers to other parties in future cases who again will have to sort out the status of the judicial observation in question. All this adds to the cost of obtaining legal advice.’
We endorse these remarks and would add some general comments.
One of the major reasons for the inordinate length of some judgments is the mechanical recounting of large tracts of submissions and evidence. Ordinarily, the repetition of counsel's submissions has a twofold purpose. First, to assist in defining the issue. Secondly, to indicate that the arguments raised have been taken into account. There is good reason, however, not to repeat these arguments verbatim, but to summarise them succinctly. Similarly, the recording of large extracts of evidence has little utility unless the point the judge seeks to make from the evidence is clearly stated at an appropriate stage. Moreover, the quoted extract should be reduced to a minimum; the minimum being that particular portion on which the point is based - and no more.
Where a judgment contains excessively long recitations of the parties' submissions and the evidence of witnesses it often becomes difficult on appeal to detect precisely which of the submissions the trial judge has upheld, and on what specific grounds, why long extracts of particular testimony are repeated, and what inferences are to be drawn from it and from what particular passages. This method of writing judgments makes it difficult to detect specific findings in the mass of material. The problem is exacerbated when the findings are scattered amidst discursive discussions.”
137 These remarks are apposite in this case. His Honour’s reasons did not enable the parties to see the extent to which their arguments were understood and accepted, and to understand the basis of the judge’s decision: (see Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 279 per McHugh JA; Sourlos v Luv A Coffee Lismore Pty Ltd [2007] NSWCA 203). The inadequacy of the reasons should be regarded as an error in the process of fact finding: see Waterways Authority v Fitzgibbon [2005] HCA 57; (2005) 221 ALR 402 at [130] per Hayne J; and as a failure to provide a trial in which, in a significant respect, the assessment of the evidence was not flawed: (see Mastronardi v State of New South Wales [2007] NSWCA 54 at [82] per Basten JA).
138 A retrial will not be ordered merely because the reasons for judgment are inadequate. The inadequacies must be such that a miscarriage of justice occurred: Mifsud v Campbell (1991) 21 NSWLR 725; Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430; Mastronardi v State of NSW; Mallik v McGeown [2008] NSWCA 230. As McColl JA in Mallik v McGeown observed (at [64]):
“Even where the Court finds a substantial wrong or miscarriage of justice has been occasioned, it has a discretion as to whether a new trial should be ordered.”
And (at [65]):
“The Court’s jurisdiction to order a new trial ‘depends on the demands of justice’: Calin v Greater Union Organisation Pty Ltd [1991] HCA 23; (1991) 173 CLR 33 (at 39).”
139 The “demands of justice” in this context will often depend on whether the appeal court considers it to be appropriate to decide the matter itself. As stated by Meagher JA in Beale (at 444):
“Thus, if the only conclusion open on the evidence available at trial was the conclusion reached by the trial judge, then, notwithstanding an inadequate statement of reasons, the matter need not go to a new trial.”
See also Zhang v Andrew Pine Furniture Pty Ltd [2004] NSWCA 250 per Giles JA (McColl JA and Bergin J agreeing) at [30].
140 The general approach to be applied was stated by the High Court in Stead v State Government Insurance Commission [1986] HCA 54 (1986) 161 CLR 141 at 145:
“[A]n appellate court will not order a new trial if it would inevitably result in the making of the same order as that made by the primary judge at the first trial. An order for a new trial in such a case would be a futility.”
The cross-appeal: The parties’ arguments
141 The first question on the cross-appeal is: Should this Court overturn the judge’s findings that the respondent committed breaches of duty and instead find, affirmatively as the respondent primarily contends, that it did not breach any duty? As I have explained, the respondent’s alternative position on the cross-appeal was that the breaches of duty issues should be remitted for retrial.
142 The respondent’s argument that it did not commit any breaches of duty was based to some extent on the evidence of Mr Klotz, Mr Hammerschlag and Mr Spender.
143 As regards the evidence of Mr Klotz, Patten AJ remarked (at [172]):
“I have reached the conclusions earlier expressed as to liability and damages largely upon what I regard as incontrovertible facts based on contemporary documentation, including the transcript of proceedings before Dowd J. It has thus been unnecessary to evaluate the credibility of the witnesses whose evidence was significantly challenged, namely the [appellants] and Mr Klotz. In fairness to them, however, I think I should say that, in my opinion, they gave evidence honestly and did what they could to assist the court. However, it must be borne in mind that they were giving evidence as to events and conversations which occurred a long time ago, most or all of which would not, at the time, have appeared particularly significant. In those circumstances it would be surprising if there were not some degree of reconstruction.”
144 His Honour’s remarks do not give the impression that he accepted the accuracy of all Mr Klotz’s testimony (albeit that he thought that Mr Klotz “gave evidence honestly and did what [he] could to assist the court”). His Honour’s remarks suggest that he had some difficulties with the accuracy of Mr Klotz’s testimony (and that of the appellants). This suggestion appears from his Honour’s reference to the fact that “[the particular witnesses] were giving evidence as to events and conversations which occurred a long time ago, most or all of which would not, at the time, have appeared particularly significant” and his Honour’s view that there might well have been “some degree of reconstruction”. His Honour made no specific findings as to which parts of Mr Klotz’s testimony (and that of the appellants) were susceptible to these criticisms.
145 The credibility of Mr Spender and Mr Hammerschlag was not questioned.
The accuracy of their evidence was, however, put in issue.
Their evidence (and
that of Mr Klotz), to the extent that it bears significantly on the breaches of
duty issue, consists largely
of statements by each that he thought that the
appellants’ case had been properly prepared, and in the case of Mr
Spender,
that little further evidence would have been required. The remarks his
Honour made on credibility do not provide guidance as to
the appropriate weight
to be placed on their evidence. This Court is not in a position to make that
assessment. Thus, if the evidence
on which the appellants rely is capable of
establishing the breaches of duty, the question whether the respondent committed
such
breaches could only be finally resolved by a retrial.
146 Mr Gray, who argued aspects of the cross-appeal on behalf of the appellants, submitted that the “sequence of events in the first three days or so of the trial demonstrated unarguably that the plaintiffs’ case before Justice Dowd was hopelessly unready”. He submitted that, in the face of the facts as proved, the statements by Messrs Klotz, Hammerschlag and Spender to the effect that the appellants’ case was ready for hearing were simply “unwarranted”. He submitted that a statement by Mr Spender made in the middle of his opening (to which I refer in greater detail below), that there was little additional evidence that would be called by the appellants (in consequence of the amendments to the appellants’ case against Egan) falls into the same category.
147 In these circumstances, it is necessary to examine the evidence bearing on the relevant circumstances prior to the trial before Dowd J in determining whether there was evidence on which a court could reasonably find that, in preparing the case against Egan for trial, the respondent committed breaches of duty.
148 The first step in this exercise is to set out the facts relating to the financing and development of Paradis Sur Mer and the loss incurred by the appellants in that connection.
The acquisition, financing and development of Paradis Sur Mer and the appellants’ loss
149 On 19 December 1989, Barclays Bank Australia Ltd (the “Bank”) wrote to the appellants stating that it was willing to provide loan facilities of up to $22 million to them, or to a company that they might nominate, for the purchase and development of Paradis Sur Mer. The securities and guarantors for this loan facility included:
(a) A first mortgage over 1/56 Wolseley Road, Point Piper;
(b) A first mortgage over three properties in Elizabeth Bay, namely, 2/39, 4/39 and 13/39 Elizabeth Bay Road, Elizabeth Bay;
(c) A first mortgage over Paradis Sur Mer, and;
(d) A letter of credit from Barclays Bank plc, Jersey office, for $3 million to be supported by a mortgage over the freehold of a property known as Airways House, Jersey.
150 A company known as Senneh Pty Ltd owned 1/56 Wolseley Road. A company known as Tisete Pty Ltd owned 2/39, 4/39 and 13/39 Elizabeth Bay Road, Elizabeth Bay. A company known as Tabard (Jersey) Ltd owned Airways House. Patten AJ said that the evidence “suggested” that the appellants were the beneficial owners of each property. His Honour did not, however, identify that evidence.
151 The documentary evidence before this Court tending to establish the matters set out in the preceding paragraph is virtually non-existent. That which is available does not establish that the appellants were the beneficial owners of the properties owned by Tisete and Tabard, nor does it cast any significant light on the appellants’ relationship with these two companies. Whether the appellants were in any better position at the Egan trial to prove these matters is not apparent. According to Mr Klotz, the respondent’s file relating to the case against Egan had to be “reconstructed”. Apparently, all the relevant documents have not been found. Thus, it is not known what precisely the file contained.
152 Senneh, Tisete and Tabard (the “Corporate Guarantors”) guaranteed the appellants’ obligations to the Bank and each mortgaged to the Bank the property that each owned, as security for the appellants’ obligations to the Bank. In the trial before Dowd J, counsel for the appellants informed his Honour that the appellants were the beneficial shareholders of and, in effect, controlled the Corporate Guarantors.
153 There is again the difficulty that the documentary evidence before this Court tending to establish the matters set out in the preceding paragraph is virtually non-existent. No such documentary evidence establishes that the appellants were the beneficial shareholders of and controlled the Corporate Guarantors. I again comment that it is not apparent if the appellants were in any better position at the Egan trial to prove these matters.
154 On 15 March 1990, the appellants exchanged contracts with the vendors of Paradis Sur Mer. The finance for the purchase was obtained from the Bank pursuant to the facility it had offered on 19 December 1989. The property comprising Paradis Sur Mer was held in three parcels. These were known as Lot 1, Lot E and Lot 2. The aggregate purchase price of the three properties was $13 million.
155 By deed dated 15 March 1990, the appellants declared that they had purchased Paradis Sur Mer on trust for Gowrise Pty Ltd, which agreed to provide the purchase price and to indemnify the appellants in respect of the property, including liabilities under any mortgage secured over it. The involvement of Gowrise in the transaction became an issue in the trial against Egan and remains obscure. I deal below more fully with Gowrise, suffice to say at this stage that the documentary evidence before this Court relating to Gowrise does not elucidate its position or the relationship between it and the appellants.
156 The appellants experienced several problems in developing Paradis Sur Mer. The development led to the creation of three redeveloped properties known as 6, 7 and 8 Wolseley Crescent. Each of the three properties was separately sold.
157 In November 1993, 6 Wolseley Crescent was sold at the direction of the Bank for $6.87 million.
158 The first of the Barclays Bank Deeds was executed on 1 July 1994. The Bank, the appellants, Senneh, Tisete, Tabard and Gowrise were parties to the Deed. Amongst other things, the Deed provided that, on or before 31 October 1994, the appellants would complete the sale of 8 Wolseley Crescent, Tisete would complete the sale of 13/39 Elizabeth Bay Road and Tabard would complete the sale of Airways House. Should the sales not be completed on or before 31 October 1994, the owners of the properties undertook to surrender possession of them to the Bank.
159 The Deed further provided that on 1 November 1994, subject to the other parties to the Deed not being in breach of their obligations to the Bank, the Bank would discharge those other parties from all liability relating to the monies borrowed from the Bank for the financing of Paradis Sur Mer. The parties understood that, on completion of all obligations owed to the Bank, the Deed would “become unconditional” (to use their phraseology). When this occurred the appellants would be released from the debt they had incurred to the Bank when borrowing the funds to pay for the development. This, in effect, meant that, upon the Deed becoming unconditional, the Bank would forgive the appellants $10 million of the debt.
160 In March 1994, 7 Wolseley Crescent was sold at the direction of the Bank for $7.25 million. In December 1994, 8 Wolseley Crescent was similarly sold for $1.44 million.
161 The Second Barclays Deed was executed on 15 November 1994. It provided that, in consideration of payment of $465,000 (receipt of which was acknowledged), the Bank agreed to discharge the Elizabeth Bay mortgage (over all the secured Elizabeth Bay properties) and also discharged Tisete from liabilities thereunder.
162 By the time the Second Barclays Deed was executed, the Bank had sold two of the three Elizabeth Bay properties pursuant to its rights under the Elizabeth Bay mortgage. Tisete – according to the appellants – by then owned the third Elizabeth Bay property as a bare trustee for the appellants. The business of a restaurant was conducted on the third Elizabeth Bay property (which was at 13/39 Elizabeth Bay Road). Apparently the appellants had obtained a loan of $465,000 from third parties unrelated to the Bank. They used those monies to pay the Bank and discharge the mortgage over 13/39 Elizabeth Bay Road so that they could, through Tisete, retain the restaurant, operate it and earn a living.
163 There is no documentary evidence before this Court that establishes precisely what occurred in regard to 13/39 Elizabeth Bay Road, the capacity in which Tisete owned the property, the basis on which the appellants retained possession of the property, and the payment of $465,000.
164 By 25 October 1995, Tabard had failed to sell Airways House. Nevertheless, Tabard, apparently, complied with its obligations under the First Barclays Deed by surrendering possession of Airways House to the Bank. By the First Deed, the Bank was entitled to sell Airways House and apply the proceeds towards payment of the overall indebtedness of the appellants to the Bank in respect of the development of Paradis Sur Mer.
165 There is no documentary evidence before this Court that establishes, at the date of the trial, the ownership and possession of Airways House.
166 On 25 October 1995, the Bank wrote to the appellants and confirmed that,
“the situation is finalised”. This statement
was reinforced in a
subsequent letter on 30 October 1995 when the Bank wrote to Mr Symonds
confirming, “that the deed is finalised
as far as the Bank is
concerned.” On 30 October 1995, the appellants provided Mr Klotz with
copies of these two letters.
Four possible bases on which the appellants’ damages could have been assessed
167 The appellants submitted that there were several ways in which their damages case could have been advanced at the Egan trial. Some were more advantageous than others. They submitted that reasonable care on the part of the respondent required each basis to be considered and a decision made, after thorough research of the facts and the law, as to which should be adopted. The appellants contended that the respondent failed to do this.
168 The four ways postulated by the appellants were:
(a) The cost to the appellants of the development (that is, the expenses they incurred in developing Paradis Sur Mer) less sale prices (the “first approach”). The concept of “costs” or “expenses” included the cost of acquiring the properties together with any outgoings involved in the development. This is the orthodox approach to damages in a claim of the kind made.
(b) The loss to the appellants caused by the reduction in value of their shares in the Corporate Guarantors (the “second approach”); that reduction in value resulting from the Corporate Guarantors having to forfeit their properties to the Bank in discharge of the mortgages they had entered into to secure the Bank’s loan to the appellant).
(c) The amounts that the appellants became liable to pay the Corporate Guarantors once the Corporate Guarantors paid the Bank the amounts owed under the mortgages (the “third approach”).
(d) Joining the Corporate Guarantors as plaintiffs in the action against Egan on the basis that each would claim its losses directly (the “fourth approach”).
169 The first approach was the simplest and, in my view, it is correct in law. It had the added benefit that it would have allowed the appellants to argue that the reduction in liability to the Bank was a “benefaction” that did not reduce their loss (and in effect, was res inter alios acta or a collateral benefit in the sense referred to in National Insurance Company of New Zealand Ltd v Espagne [1961] HCA 15; (1961) 105 CLR 569). Mr Klotz, however, stated: “It was no part of [the appellants’] case, as I understood it, to contend that the Bank deeds were not effective and that their loss was not limited to loss of the secured properties.”
170 The second approach is problematic. Arguably, it could be met by the proposition that the losses in question were the losses of the individual companies and, in law, were not recoverable by the appellants as shareholders. The general rule is that shareholders “may recover damages for the loss which they personally have suffered and which is separate and distinct from the loss suffered by the company”: Gould v Vaggelas [1985] HCA 85; (1985) 157 CLR 215 at 220 per Gibbs CJ. As the Chief Justice observed, shareholders “cannot recover damages which are merely a reflection of a loss suffered by the company”. The second approach is the approach Mr Klotz thought that the appellants would adopt once the First Barclays deed became unconditional.
171 As regards the third approach, Mr Weber submitted that the appellants had no liability to the Corporate Guarantors as the latter had made no demand for payment of the monies they had disbursed to the Bank. The only authority he cited in support of this proposition was Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514. In my view, however, Wardley is distinguishable from the circumstances in this case. The indemnity in Wardley was in express terms (see at 524) and the undertaking was “to pay on demand such sum pursuant to this indemnity as shall be demanded by the [Bank] ... ” (my emphasis). Mason CJ, Dawson, Gaudron and McHugh JJ (at 524) distinguished that particular indemnity from an indemnity “of a kind which generates an immediate non-contingent liability to pay upon execution of the instrument”. Their Honours stated (at 524) that the indemnity before them created a liability only if and when the Bank’s relevant “net loss” was ascertained and quantified, “subject to the making of a demand for payment by the Bank”. That approach, however, was based on the particular wording of the indemnity in question.
172 Greene LJ in In re A Debtor [1937] 1 Ch 156 at 163-164 set out the relevant principles relating to the liability of a principal debtor for debts paid by a guarantor as follows:
“It is, in my opinion, settled beyond possibility of dispute that where ‘A’ at the request of ‘B’ guarantees payment of ‘B’s’ debt to ‘C’, the law implies an undertaking by ‘B’ to indemnify ‘A’ in respect of any sums which he properly pays to ‘C’ under the guarantee. This is merely a branch of a wider rule which is laid down in numerous authorities. I may quote as examples Brittain v Lloyd [1845] EngR 1283; (1845) 14 M & W 762, 773 where Pollock CB says, ‘It is clear, that, if one requests another to pay money for him to a stranger, with an express or implied undertaking to repay it, the amount, when paid, is a debt due to the party paying from him at his request it is paid, and may be recovered on account for money paid ... The request to pay, and the payment according to it, constitute the debt; and whether the request be direct, as where the party is expressly desired by the defendant to pay, or indirect, where he is placed by him under a liability to pay, and does pay, makes no difference; and Batard v Hawes [1853] EngR 2; 2 E & B 287 at 296, where Lord Campbell said, ‘To support the action for money paid, it is necessary that there should be a request from the defendant to pay, either express or implied by law. Where one party enters into a legal liability for and at the request of another, a request to pay the money is implied by law from the fact of entering into the engagement; and, if the debt or liability is incurred entirely for a principal, the surety, being liable for him at his request, and being obliged to pay, is held at law to pay on an implied request from the principal that he will do so’: see also notes to Lampleigh v Brathwait (1688) 1 S & M LC 13 ed, 155 et seq.
Now it is said in the present case, and said truly, that until the petitioning creditor had paid the Bank no debt became due to her from the debtor. But this is beside the point. The implied undertaking to indemnify is an undertaking to reimburse the guarantor upon the happening of a contingency, viz, the payment by the guarantor to the creditor, and until that contingency happens there is no debt ... . To quote again the words of Pollock CB in speaking of the general rule, ‘The request to pay and the payment according to it, constitute the debt’. In the case where the request is to enter into an obligation, the request to pay is implied from the fact of entering into the obligation.”
173 In my view, there was nothing to prevent the appellants from adopting the third approach. It was also relatively simple to apply. The only disadvantage from which it suffered was that it resulted in the appellants not having the opportunity to argue the Espagne (res inter alios acta) point.
174 The fourth approach, eventually, was adopted as a “fall-back position” by the appellants when, in the middle of his opening, Mr Spender applied to amend the appellants’ statement of claim by joining the Corporate Guarantors. This approach had the problem that it required the appellants to prove that Egan owed the Corporate Guarantors either contractual or tortious duties and also raised difficulties of proof involving the element of reliance on the part of the Corporate Guarantors on the conduct of Egan. In the result leave was only granted to join two of the three Corporate Guarantors. Tabard was not joined.
Mr Klotz’s approach, prior to the trial, to the assessment of damages
175 By the time that Mr Klotz first began to prepare the appellants’ case against Egan for trial, he knew that the development project had resulted in very considerable financial loss to the appellants.
176 On 30 March 1994, Mr Klotz (by filing a summons in the Commercial Division) commenced the appellants’ action against Egan. The summons did not particularise the damages claimed. Mr Klotz said that, at that stage, although he did not specifically recall thinking about it, he “must have” considered the issue “of what their loss was”.
177 By letter dated 20 May 1994, Mr Klotz informed Phillips Fox, the respondent’s solicitors, that “the appellants allege that the measure of the damage that they have suffered is the difference between the total cost of the development and the proceeds of the sale of those parts of the property that have been sold (6 and 7 Wolseley Crescent) plus the value of the remaining part of the property that they presently retain (8 Wolseley Crescent).” This was the orthodox approach, that is, the first approach set out above.
178 The First Barclays Bank Deed was executed on 1 July 1994. Mr Klotz knew of the terms of the Deed from about the time it was executed. I repeat that, according to the Deed - upon fulfilment of the obligations of the parties other than the Bank - the appellants’ debt to the Bank would be reduced by $10 million.
179 Mr Klotz testified that, prior to the Barclays Bank Deeds “taking effect in late 1995”, he believed that the appellants’ loss “was the debt they had incurred to Barclays Bank to fund the development, less the proceeds of sale of the development properties”. This basis of damages assessment, in effect, is equivalent to the costs of the development less the proceeds of sales of the developed properties.
180 On 15 November 1994, the mortgage in favour of the Bank over 13/39 Elizabeth Bay Road was discharged by the payment to the Bank of the amount of $465,000.
181 On 21 November 1994, Phillips Fox wrote to Mr Klotz asking for discovery of the documents relating to and including the Barclays Deeds. Mr Klotz said that at this stage he was of the opinion that the Barclays Deeds were irrelevant to the damages. This attitude was difficult to justify.
182 On 28 November 1994, Mr Klotz supplied to Phillips Fox the following
particulars of the appellants’ damages:
|
Development Costs
|
|
|
|
|
|
|
|
$28,963,081.13
|
|
|
|
|
|
|
Less:
|
Sale of No 6
|
$6,870,000.00
|
|
|
|
Sale of No 7
|
$7,250,000.00
|
|
|
|
Sale of No 8
|
$1,440,000.00
|
$15,560,000.00
|
|
|
|
|
$13,403,081.13
|
These particulars again reflected the first (and orthodox) approach. No regard had been paid to the effect of the First Barclays Deed.
183 On 28 November 1994, Mr Klotz wrote to Phillips Fox, stating, “We note that our clients have recently entered into two deeds with Barclays Bank PLC. Presently, however, neither deed affects our clients’ damage.” Mr Klotz stated that the appellants would produce the Barclays Deeds for inspection. That did not occur until shortly before the trial.
184 Mr Klotz testified that, “As at November 1994, it was my opinion that the two Bank deeds were irrelevant to the quantification of [the appellants’] claim against Mr Egan”. This was because he had not been instructed by that date that the First Barclays Deed had become unconditional.
185 Mr Klotz understood that, when the First Barclays Deed became unconditional, the appellants’ loss would be the diminution in the value of their interests in the Corporate Guarantors as a result of those companies losing their properties. This, in essence, represented damages according to the second approach.
186 On 4 October 1995 the proceedings were listed for call-over. At the call-over a hearing date of 29 January 1996 was allocated.
187 Mr Klotz was of the opinion in October 1995 that the proceedings were sufficiently prepared to take a hearing date commencing on 29 January 1996. He did not consider that there were any tasks outstanding for final preparation of the case for trial that could not be accomplished within the period between 4 October 1995 and 29 January 1996. After 4 October 1995, Mr Klotz did not consider that the case was not sufficiently prepared for hearing so as to warrant an application to vacate the hearing date.
188 Mr Klotz said that, in October 1995, the appellants informed him “that they had taken steps to ensure all their obligations under the Bank deeds had been fulfilled”. In other words, the First Barclays Deed had become unconditional.
189 Mr Klotz accepted in cross-examination that once the First Barclays Deed became unconditional it had a “dramatic consequence on the [appellants’] claim against Mr Egan”. He accepted that the Deed “was a very important matter” as regards the appellants’ claim for damages. He accepted that the existence of the Deed was sufficiently important to require obtaining considered legal advice as to its effect on damages, but he did not seek such advice.
190 Mr Klotz testified:
“As at December 1995, my understanding of the operation of the Bank deeds was that the Bank had accepted payments derived from the proceeds of sale of the secured properties in satisfaction of [the appellants’] debt to the Bank. Therefore I considered the loss claimed by the appellants was the amount of the payments made to the Bank from the proceeds of the sale of the secured properties.”
191 In effect this view was that the appellants could not claim as damages the $10 million reduction in debt owed to the Bank. No consideration was given to the Espagne (res inter alios acta) principle.
192 Mr Klotz did not regard Phillips Fox’s request contained in their letter of 19 December 1995 (for particulars as to whether the deeds affected the calculation of damages) as important. He did not respond to that letter until after the trial had commenced.
193 On 19 December 1995, Phillips Fox wrote to the respondent drawing attention to the First Barclays Deed and contending that it affected the appellants’ claim for damages. According to Mr Symonds, on several occasions thereafter he raised with Mr Klotz his failure to reply to Phillips Fox’s letter of 19 December 1995 and received the reply, “Don’t worry Gerald, it’s a simple matter, just some housekeeping to be sorted out on the first morning of the trial.”
194 Mr Klotz accepted that the first time Mr Hammerschlag knew about the First Barclays Deed was at the conference on 24 January 1996. On that date, Mr Hammerschlag’s view was that the case was ready for hearing.
195 Mr Klotz accepted in cross-examination that, as at 24 January 1996, his belief was that the appellants’ damages against Egan were to be assessed by reference to the value of the properties the Bank had taken in reduction of its debt. He was asked: “How were you going to prove that?” He replied: “I don’t recall now”. He agreed that he had never obtained a current valuation of any of the properties. He accepted that Airways House had not been sold. It was put to him: “If you were going to claim damages based on the value of the properties taken by the Bank, which included the property in Jersey, how were you going to do it?” He replied: “I don’t know”.
196 This evidence is ambiguous. It is, however, capable of being understood as meaning that Mr Klotz did not know how the appellants were going to prove their damages. It is also capable of being understood as meaning that Mr Klotz did not remember how damages were going to be proved. This, essentially, was a matter for the trial judge but his Honour did not resolve the issue and made no findings in this connection.
Counsel’s difficulties in opening the appellants’ case at trial
197 Early in Mr Hammerschlag’s opening on the first day of the trial, 29 January 1996, he submitted that the appellants “in effect lost all of [the secured] properties and that the quantification of their loss is what the properties lost were worth”. He referred to the Barclays Deeds and said: “The bank sold all the properties and released [the appellants] from the balance of the debt.” This, strictly speaking, was not correct as Airways House and 13/39 Elizabeth Bay Road had not been sold. Mr Hammerschlag reiterated, nevertheless, that the basis of the loss suffered by the appellants was “simply the value of the properties lost to them”. He stated: “The appellants have no assets left.” This, too, was not correct (for the reasons stated above).
198 Mr Stitt interrupted and submitted that this was the first time the appellants “had put their case this way”. He pointed out that Airways House and the Elizabeth Bay property had not been lost and “could not form part of the appellants’ claim”. He requested clarification of the appellants’ losses. The transcript records:
“Discussion ensued regarding properties listed in the schedules and corporate entities involved.
Mr Stitt submitted this was the first time counsel for the appellants had said the deed in fact was operative and incorporated a release. He objected to the continuation of the opening by Mr Hammerschlag until clarification of the claim had been given.”
199 Mr Hammerschlag reiterated that the calculation of the appellants’ losses was “simply based on the value of properties they had lost”. Mr Hammerschlag stated he would have the relevant calculations in writing “tomorrow”. He submitted: “the waiver of the Bank’s debt had nothing to do with the amount claimed”. This statement appears to be inconsistent with the view then held by Mr Klotz and the way damages were later argued. The transcript records:
“Further discussion ensued regarding properties involved, and the beneficial interests and corporate entities involved. ... Mr Hammerschlag submitted that if some of the relevant properties were held by corporate entities, they were entities whose shareholdings were held by the [appellants], and reflected solely the value of the properties.”
200 According to the transcript, Mr Hammerschlag submitted:
“[I]f the issue regarding beneficial interest was taken, the [appellants] would say the value of the shareholding equalled the value of the property, and that he would endeavour to persuade his Honour on the financial data that that was so.”
201 Mr Hammerschlag noted that if it became necessary he would make application “for the two or three corporations involved to be joined as parties”. Dowd J expressed concern “as to whether the issue of tax loss value of the corporations would arise, and that the trial should be starting without these matters being resolved”. Mr Stitt reiterated his position that he was confronted with a five week trial without having information regarding “these properties, particularly property in Jersey which apparently had not been sold”.
202 The next day, 30 January 1996, Mr Hammerschlag informed Dowd J that Mrs Symonds owned 1/56 Wolseley Road, Tisete owned the three Elizabeth Bay properties as a bare trustee for Mrs Symonds, and Tabard owned Airways House. He thereby corrected the inadvertent error he made on the first day of the trial when he made a statement implying that the appellants owned Airways House.
203 Mr Hammerschlag submitted that the loss of Airways House diminished the value of Mrs Symonds’ shares in Tabard. He said that she owned beneficially all the shares in Tabard.
204 Mr Hammerschlag observed that the appellants had discharged the mortgage on the restaurant property in Elizabeth Bay and still owned the restaurant. He thereby corrected the second error he had made on the first day. According to the transcript, “[h]is Honour noted that in that event the value of the property became irrelevant. Mr Hammerschlag agreed that the loss in respect of this property was limited to the amount the Bank accepted in discharge of the mortgage”.
205 At this stage Mr Stitt raised a number of objections. He said Mrs Symonds did not own 1/56 Wolseley Road. In relation to Tisete, no documents had been discovered to indicate that it was a bare trustee. In relation to Tabard, although Mrs Symonds was said to own the shares, there had been no discovery of relevant documents relating to this issue. He said that, in the appellants’ particularisation of their loss, they had made no claim for loss by Mr Symonds. He made application for Mr Symonds to be struck out of the proceedings.
206 Dowd J said that if no damage had been suffered he would need to consider the whole of the material in a new light.
207 The transcript records:
“Mr Hammerschlag indicated that there had been an error made in the hurried preparation of exhibit B, and that in fact certificates of title indicates that 1/56 Wolseley Road was owned jointly by [the appellants] at the date of the loss, but that at the date of the loan it was apparently owned by Senneh Pty Ltd.”
It appears that no relevant documents relating to Senneh’s ownership of 1/56 Wolseley Road had been discovered.
208 Mr Stitt submitted that it was “unfair to the defendant to be expected to meet the case whilst it was imprecise and unclear” and made a formal application that Mr Symonds be dismissed from the suit.
209 Mr Hammerschlag indicated that he wished to avoid the case “going off on some synthetic technical question as to the parties” and that the substance of the case was that the appellants had had properties which they had lost.
210 The transcript records:
“His Honour indicated that the changes that had occurred in the [appellants’] case in the last two days made it difficult to understand what the issues were which needed adjudication, and that he had not been told with any precision the facts within the case.”
211 On 30 January 1996, Mr Klotz attended a meeting with the appellants and Mr Hammerschlag at which he made a file note reading as follows:
“Instructed to pursue claim re Tabard as best we can, cognisant of the risk that the court might reject evidence and that claim might be lost. Instructed to do this rather than seek adjournment to put Tabard damages case on.”
212 On the third day of the trial, 1 February 1996, Mr Spender announced his appearance as leading Mr Hammerschlag. He referred to the proposed amendments to the statement of claim relating to the joinder of the Corporate Guarantors. This led to a discussion as to how any case could be brought in contract or tort involving the Corporate Guarantors. Mr Stitt continued to raise several objections concerning particularisation of the damages claimed. According to the transcript he submitted, “[N]o-one at this stage actually [seems] to know the amount of the claim and how it [has been] calculated”.
213 Discussions continued concerning several problems relating to the joinder of the parties. Dowd J identified several problems. Mr Spender attempted to answer his Honour’s queries both on the facts and on the law. According to the transcript, “His Honour expressed his concern that the pleadings should articulate the matters Mr Spender was asserting, as they could not be looked at in vacuo”.
214 Lengthy submissions then followed. Attempts were made to explain the factual basis of the appellants’ claim and the facts supporting the theory of damages the appellants then sought to advance. The transcript records that, at the end of the day’s proceedings, “His Honour noted that the issue of discovery was on hand. Mr Spender submitted he would take instructions, that he apprehended there would be almost nothing to discover, and that they would act very quickly to facilitate that. He undertook on return to his chambers to ensure that there was a schedule of damages prepared, and that he would address any issue of discovery”.
215 The fifth day of the hearing was Monday 5 February 1996. Mr Spender had faxed a draft amended statement of claim to Dowd J. Mr Stitt objected to the amendments sought. He continued to raise several objections to the pleadings and submitted that they did not contain adequate material facts. He submitted that the nature of the causes of action on which the Corporate Guarantors were relying was not properly pleaded. Mr Spender said that he “did not propose to put on any additional evidence save and except asking a few supplementary questions of Mr Symonds”.
216 It is plain from the transcript that, at this stage, his Honour still did not understand how the appellants intended to advance their case.
217 His Honour stated that the appellants had a serious problem in relation to what he described as “the capital gain issue” arising from the introduction of the Corporate Guarantors as appellants. Much time was taken up on this question. Dowd J said:
“[Y]ou are asking me to allow an amendment where I have indicated that I am not going to allow the amendment without particulars, and I and the defendant are entitled to know the particulars and claim for damages, and the heads of damages including capital gains, and I have not got that before me.”
Mr Stitt complained that Phillips Fox had asked in December 1994 for the particulars, and 18 months had since elapsed without a response.
218 In dealing with the issues that had so far arisen Dowd J said, amongst other things:
“It is not good enough for parties to expect a court to deal with the complex matter of capital gains tax, depending on the finding the court makes, where there are five potential appellants involved, without any indication that the court is going to hear any more evidence that has been filed ... .
It is further of concern that the prayer omitted from the draft statement of claim which I considered last Friday, has suddenly appeared in last Sunday’s version, and that there has been no attempt by the parties to qualify or particularise that claim or to bring it to the attention of the court, now well into the five week period allocated for the hearing of this matter.”
219 On 6 February 1996, Mr Symonds signed a statement for use in the proceedings against Egan. The statement recorded:
(a) The appellants were the sole directors of Senneh and Tisete;
(b) The directors of Tabard were three other persons and “[t]hose nominee directors and their predecessors have, since we emigrated from the United Kingdom, always acted in accordance with Monica’s and my directions”, and;
(c) The mortgage in favour of the Bank over 13/39 Elizabeth Bay Road was discharged by the payment to the Bank of $465,000; the appellants borrowed the latter sum from other parties not involved in the proceedings.
220 On 7 February 1996, Dowd J gave judgment on the application to file an amended statement of claim. His Honour allowed the amendments joining Senneh and Tisete. He refused the joinder of Tabard on the grounds that it could not be shown that Tabard had a cause of action against Egan. He allowed the amendment of the statement of claim to include reference to capital gains tax but said that the court would not determine that issue until all the other issues had been completed. His Honour proceeded to make general orders for discovery by the new parties (Senneh and Tisete). It is not clear how, after 7 February 1996, the appellants’ claim in respect of their loss relating to Airways House was to be advanced.
221 On 8 February Mr Spender told Dowd J that he had instructions to apply for leave to appeal to the Court of Appeal from the judgment of 7 February, and that a claim would be made for an order that Dowd J disqualify himself on the ground of a reasonable apprehension of bias. Later, that application for disqualification was withdrawn.
222 On 8 February 1996, Mr Stitt applied for security for costs. In the course of the application, Dowd J pointed out that Mr Hammerschlag had told him that the appellants’ case for damages was based on the loss of all the properties. He said that in these circumstances, he needed to be told the position of 13/39 Elizabeth Bay Road, which Mrs Symonds still owned. Mr Spender then attempted to explain to Dowd J that $465,000 had been lent to the appellants and they had used this to discharge the mortgage over the restaurant property (this explanation had previously been given to Dowd J). Mr Stitt, however, objected. He submitted that this explanation could not be given from the bar table and evidence should be led under oath in due course on this.
223 Dowd J responded to this exchange as follows:
“I have raised it now on four or five occasions, I think, and on a security for costs application you have chosen not to deal with the issue, and I am placed in the situation that I have been told at various stages, with no evil intent I know, things that are either true or not true.”
224 Eventually his Honour delivered an extempore judgment which contained, amongst other things, the following remarks:
“I have, during the course of this application, indicated my concern about the extraordinary state of these proceedings, in terms of the opening by junior counsel for the [appellants], Mr Hammerschlag, ... and the various statements that have been made by [Mr Spender] as to the actual state of the appellants’ position.
I have made it abundantly clear on a number of occasions during the course of this hearing that I consider it quite extraordinary for counsel for the appellants to open a case to indicate that certain assets have been lost and to then find, in discussion with counsel, that the assets are not lost at all; therefore the first statement is totally and completely false.
Secondly, to then be told that the [appellants] are impecunious, ... and then to be told that the [appellants], despite some suggestion that evidence might be put on to correct the erroneous opening, that the [appellants] are of ‘limited means’, an expression that is tantamount to insulting to the court in the light of the initial opening.
...
Notwithstanding that on the evidence before me there appears to be assets owned by the appellants and notwithstanding the lack of frankness of the appellants, who have sat in court listening to each of the various conflicting statements that have been made about their financial position, it would be unreasonable, in terms of law as to security, to deprive them of their right to bring an action, if in fact the joinder of two corporate entities did not increase the costs.
...
It is nonetheless a possibility that [appellants] may order their financial affairs so that, even if they recover from the defendants, it may well be that an order for costs against them, in respect of [the Corporate Guarantors], may place the defendants in the position where they are ranked after other creditors and where, indeed, the [appellants] may still not have any assets against which the first and second defendants could recover.
There has been no undertaking given not to place the defendants in a disadvantageous position by distribution of assets. The [appellants] are clearly sophisticated commercial investors and are quite capable of making arrangements that are financially suitable to them.”
225 Dowd J concluded:
“In order that [the Corporate Guarantors] and the [appellants] not be prevented from continuing proceedings, I propose that the order to which their counsel have indicated that they would consent in respect of costs that may be recovered by the defendants against [the Corporate Guarantors] appellants, be secured by a charge over the shares in Tabard, to the extent of the sum of $60,000.00 and that the sum be further secured by a registered mortgage, subject to any existing encumbrances, over the premises 13/39 Elizabeth Bay Road, Elizabeth Bay.”
226 His Honour also ordered that the proceedings by the Corporate Guarantors be stayed pending compliance of the terms of the order and that the appellants pay the costs of the application.
227 The trial was adjourned until the following day, 9 February 1996. On that date Mr Spender informed his Honour that the appellants would indemnify the Corporate Guarantors in respect of any order for costs made against them and submitted that it followed that Mr Stitt’s application for security for costs should be dismissed. Mr Stitt submitted, “Mr Spender and Mr Hammerschlag had both informed the court as recently as yesterday that the basis for the claim was that the appellants had lost the properties”. Mr Stitt contended that this submission was “false insofar as it related to the property 13/39 Elizabeth Bay Road”. Mr Stitt noted that apparently the restaurant property had not been lost by the appellants. He observed that there had been no evidence about the tenant of the restaurant and that presumably the appellants were receiving rent or some income from that tenant. Mr Stitt further submitted that the statement that Airways House was lost could not be true. He submitted that it was open to question whether Tabard acted at the direction of the appellants.
228 In the course of argument on 9 February 1996, Dowd J said:
“But I have been concerned that if I have been misled as to matters of pecuniosity, that matter should be corrected by counsel appearing for them, who unintentionally – and there is no reflection on Mr Hammerschlag at all; he has been as frank as his then current instructions permitted him to be – however, it is a discretionary remedy and if your clients want a discretion exercised either way, I need to be a little more impressed by their frankness to the court on a matter such as this.”
229 Mr Spender then handed to Dowd J an undertaking by the appellants, in effect, to stand behind the corporate appellants.
230 The transcript records that Dowd J noted that Mr Spender had indicated that there would be evidence that day and “the court would be told something about the pecuniosity of Mr Spender’s clients”. Mr Spender, however, stated that the appellants “would not be putting such evidence before the Court. He submitted that it was his view that such evidence would not be required”.
231 The transcript records:
“His Honour noted that the court had been told of two inconsistent matters and as an exercise of discretion it was very difficult where the court had been told that the [appellants] are impecunious and have lost their assets, and then had elicited from counsel for the [appellants] that they have retained an asset. He noted that the court was in the position of not knowing the basis on which they had retained that asset, and noted that as a matter of duty to the court before the proceedings started, that that matter should be resolved.”
232 Mr Spender observed that he was happy to tell the judge what the position was but there was an objection to this evidence coming from the bar table. The matter was not taken further.
233 The case was adjourned until Monday 12 February 1996. Mr Stitt again stressed the inconsistency between the statements made that the appellants had lost everything and were impecunious and the material that showed that they owned the restaurant property and that Airways House had not been sold.
234 Mr Spender announced that he proposed to renew his application that Dowd J disqualify himself. On 13 February 1996, Dowd J delivered a judgment in which he refused to disqualify himself. His judgment included the following paragraph:
“I also wish to make it abundantly clear that I have not formed a view unfavourable to the [appellants] in respect of the substantive issues that are to be tried in these proceedings, the issue of the credit of either the [appellants] has not yet arisen at any stage in any matters that I have considered ... .”
235 The matter was adjourned to enable the appellants to apply to the Court of Appeal for leave to appeal against his Honour’s decision not to disqualify himself.
236 On 21 February 1996, Mr Stitt raised questions of particulars and discovery. His Honour delivered an extempore judgment on the question of particulars which contained these paragraphs:
“... Mr Spender says we all know what the case is about. I want to say that if the court is included in the ‘we’, that is not a view to which I accede. ... It seems to me that the change in the appellants’ case has been a significant one, that the pleadings being in fairly general terms particulars are appropriate and the complexities of the proceedings because of the joinder of the third and fourth appellants and the matters going to damages in relation to the question of the two Barclay Bank deeds are very much matters before the court.”
And:
“I think the court and the defendants are entitled to know with particularity, ... the case that the defendants have to meet and I consider that particulars are appropriate. The statement made in correspondence by [the respondent] that the past three and a half weeks have been spent clarifying issues in the matter, is not a sufficient answer.”
237 His Honour observed that it was incorrect to say that the issues arising out of the Barclays Deeds were not relevant to the claim for damages. He said:
“The issue of the deeds and the losses sustained by the [appellants] ... are very much matters before the court, in terms of assessing the quantum of damages that the court may be obliged to determine.”
His Honour ordered the provision of the particulars concerned.
238 On 26 February 1996, the Court of Appeal dismissed the application by the appellants to appeal against his Honour’s refusal to disqualify himself.
239 As Patten AJ said, the atmosphere of the court and the attitude of Mr Stitt thereafter is illustrated by the following extract from the transcript:
“STITT: Yes but the sentiment is exactly the same and the point must come in this case where the [appellants] are forced to accept the fact that they are not going to be allowed to litigate this case bit by bit and piecemeal by piecemeal and that every time their obvious defects are pointed out, and some of them are still starting to come from my learned friend despite what has been said by the Bench and in the course of argument in the last few weeks.
We cannot go on week after week and week after week with Mr Spender turning up and your Honour saying to him ‘Mr Spender, what about this? And he says every day ‘I will take that on board. I will give it due consideration’.
Your Honour, how long can this go on for? The time has long since passed when these indulgences should not be granted to my learned friend, particularly when he does not give any reason and particularly when he does not come forward and say ‘I made a mistake’ or ‘my solicitor misunderstood’ or whatever. Why are we in this position? The short answer is the [appellants’] case is defective, it is defectively prepared, the evidence is defective and why should your Honour give any further indulgence?
Can I just say that my instructions are that there was a directions hearing in 1994 when there was a timetable laid down. There was a further hearing in chambers when the timetable was amended by consent. There was a further direction hearing with the court and there was a proposed timetable laid down which was opposed where an extension under the timetable was sought by my clients and that was opposed by the appellants. There was a final conference held in December 1994 at which time the court was assured that the appellants’ case was then ready and that all the evidence was available. It was expedited. The court granted expedition on the [appellants’] application.
Now your Honour, at the start of this case following that regime, that was the position. The first [appellant], Mr Symonds had two statements, one dated 14 June 1994 and the second one dated 30 November 1994. Since this case has started Mr Spender has filed a further statement of 30 January 1996 and 6 February 1996 whilst this case has been running. Now the appellants want to come along and say ‘We want further statements’ and I say in response to that, ‘Why should they?’ Why should they be allowed to go on, coupling their case together as they go? Questions of fairness ultimately give way to the fact that fairness applies to both parties and this case should proceed on the basis that my learned friend has been given by your Honour, and I say this with no disrespect, indulgences that many other judges would not have given him up to this point. We are in the fifth week. Now I do not say that critically ---
HIS HONOUR: I think the law is not only to both parties but fairness to other litigants as well.”
240 By now, Messrs Spender, Hammerschlag and Klotz had begun to express misgivings as to the eventual prospects of success. After the proceedings in the Court of Appeal, Mr Symonds said that Mr Spender told him: “Justice Dowd will find against you on credit”.
241 In the course of Mr Spender’s evidence in the trial before Patten AJ, he was asked whether, once things had begun to go wrong in the hearing before Dowd J, there would have been any advantage in adducing additional evidence. He replied: “I don’t know what additional evidence could have been advanced”. He did not think that an adjournment “would have changed anything”.
242 Eventually, on 28 February 1996, the compromise was arrived at and judgment by consent handed down.
Gowrise
243 I have noted (at [155]) the deed by which the appellants recorded that they had purchased Paradis Sur Mer on trust for Gowrise Pty Ltd. Gowrise had agreed to provide the purchase price and to indemnify the appellants in respect of the property, including liabilities under any mortgage secured over it.
244 On 30 January 1996, the second day of the trial before Dowd J, Mr Hammerschlag informed his Honour that Gowrise had never traded, the trust deed was never implemented, its tax returns and balance sheets were always nil, and the company had been deregistered. According to Mr Hammerschlag, the appellants had intended Gowrise to be their nominee purchaser of the properties that comprised Paradis Sur Mer. The appellants were advised, however, that double stamp duty might be payable were Gowrise to be their nominee. For that reason, they did not allow a trust deed relating to Gowrise to come into existence.
245 At one point, Dowd J noted that the deed was “signed, sealed and delivered”. Mr Hammerschlag maintained that the deed “by a consensus” had been terminated (that is, in an attempt to show that any involvement by Gowrise was irrelevant). It was never made clear precisely how this consensus manifested itself.
246 The difficulty that faced the appellants at this stage of the opening was that no discovery had been made of the documents relating to Gowrise’s participation in the transaction, and there was vagueness and uncertainty about its involvement.
247 The basic lack of detail and uncertainty in regard to the involvement of Gowrise enabled Mr Stitt to submit in the middle of the opening of the appellants’ case that the appellants had purchased Lot 1 and Lot E as trustees for Gowrise “and that they held no beneficial interest in the relevant contract for sale” and to argue that Gowrise was relevant “not only to whether or not there was a breach giving rise to an action but also on the question of damages”. Mr Stitt submitted that the statement by Mr Hammerschlag that Gowrise played no role in the matter was incorrect as Gowrise had borrowed money from the Bank. He said that it was incorrect to say that the borrowers were the appellants personally.
248 Mr Stitt was able to stress that, although the appellants made the loan application to the Bank, Gowrise drew down the funds that were utilised by the appellants. Thus, on some basis that was not fully explained, the funds that were borrowed by Gowrise were utilised by the appellants. It was not clear whether Gowrise then became a creditor of the appellants. Mr Stitt, quite properly, used this material to create uncertainty in the mind of the judge as to the appellants’ damages claim. He submitted that, contrary to the statement by Mr Hammerschlag that Gowrise had played no role in the purchase, Gowrise had borrowed funds from the Bank and that it was incorrect to say that the borrowers of the funds to finance the development were the appellants personally. He pointed out that an account had been established at the Bank in the name of Gowrise and monies were deposited to that account, but that subsequently the appellants had asked the Bank to reverse the transaction.
249 Eventually, Mr Stitt submitted that the appellants did not borrow the money from or incur debts to the Bank. He submitted that the debts were incurred by Gowrise and that at a subsequent time, the circumstances of which needed to be explored, the appellants of their own volition assumed the liabilities of Gowrise.
250 According to Mr Stitt, a bundle of documents disclosed by the appellants revealed that in November 1990, long after the indebtedness to the Bank had been incurred, Mr Symonds wrote to the Bank and said that he wished the indebtedness of Gowrise to be transferred to him. According to Mr Stitt, that raised “very real questions” as to whether the appellants “had any entitlement at all” against Egan.
251 On my reading of the transcript, prior to trial there was a serious failure on the part of the respondent, as the appellants’ solicitors, to investigate and clarify the position of Gowrise. That Gowrise’s involvement in the transaction potentially could affect the appellants’ entitlement should have been obvious and, had the respondent acted prudently, by investigating the situation carefully, the position advanced by Mr Hammerschlag would have been pleaded and supported by disclosed documents and statements of witnesses.
Inadequacies in the preparation for trial of the appellants’ damages case and breaches of duties
252 On the evidence that I have recounted, the following matters arguably constitute negligence on the part of Mr Klotz (representing the respondent).
253 In 1994, Mr Klotz should have investigated the best possible way of putting the appellants’ case on damages in the event of the First Barclays Deed becoming unconditional. He knew from July 1994 that the First Barclays Deed was capable of having a significant, indeed, “dramatic” effect on the assessment of appellants’ damages. He accepted that the Deed had complicated the position to the extent that it would have been reasonable for him to seek an opinion as to the best course to follow. He omitted to do this.
254 It was virtually inevitable that, at some time after July 1994, the First Barclays Deed would become unconditional. For Mr Klotz to take the view that it was irrelevant to damages was arguably unrealistic and dangerous to his clients, the appellants.
255 Mr Klotz omitted, in good time, to inform Mr Hammerschlag of the Deed. He did so only on 24 January 1996, five days before the trial. This was far too late.
256 Mr Klotz accepted the trial date:
(a) Without having taken reasonable steps to ensure, particularly in the light of the fact that the First Barclays Deed had become unconditional, that the appellants’ damages claim had been pleaded in the most advantageous way;
(b) Without having taken reasonable steps to ensure, in light of the fact that the First Barclays Deed had become unconditional, that all the evidence, including the documentary evidence, necessary to prove the appellants’ damages claim as assessed in the most advantageous way, was available and briefed to counsel;
(c) Without having taken statements from all necessary witnesses, including the appellants, so as to be in a position to prove the appellants’ damages claim in the most advantageous way;
(d) Without having taken taking statements from all necessary witnesses so as to be in a position to prove reliance on the part of the Corporate Guarantors (the witnesses concerned would be one or more of the directors of each of the Corporate Guarantors);
(e) Without having taken taking statements from all necessary witnesses and without having obtained the necessary documents so as to be in a position to prove the diminution of the value of the appellants’ shareholding in each of the Corporate Guarantors and any claim for damages that might have to be advanced on behalf of the Corporate Guarantors;
(f) Without having amended the appellants’ pleadings to clarify the fact that Gowrise had no interest in the proceedings;
(g) Without having evidence available by way of statements of witnesses or otherwise to prove that Gowrise had no interest in the proceedings;
(h) Without having taken reasonable steps to ensure that full discovery had been or could quickly be made of all documents that had or might become discoverable by reason of any change in the way the appellants might put their damages claim, and by reason of any potential involvement of the Corporate Guarantors, and;
(i) Without having taken reasonable steps to ensure that appropriate particulars of the way in which the appellants were advancing their damages claim were provided to Egan’s solicitors.
257 Mr Klotz did not in good time, after accepting the trial date, attend to all the matters referred to in the preceding paragraph and did not brief counsel with the information and material that would have become available to him had he in fact attended to those matters.
258 The evidence is capable of establishing that the respondent committed other breaches of its duty to the appellants in regard to the way in which the appellants’ case was prepared for trial. I shall briefly mention these.
259 The particulars as to damages were provided only on the third day of the trial. The valuations for the lost properties were as at 1989 and 1990, six years before the trial. It would have been desirable to have current valuations for the lost properties. Mr Weber drew attention to the fact that, save for Airways House, there was evidence of the price the properties had fetched when sold by the Bank. But those sales were mortgagee sales and might well not have represented market value on the basis of sales that were not forced. As regards Airways House, it is true that the appellants acknowledged that they should proceed with the trial without evidence of value, but that acknowledgement was made after the trial had commenced when the appellants had little choice other than to proceed with what evidence they had.
260 Mr Klotz stated that the appellants had instructed him that the Corporate Guarantors held no assets other than the secured properties. This is a matter that had to be proved and prudence required that that proof should include production of the latest financial statements of the companies concerned. The material before this Court does not indicate that documentary evidence of that kind was available.
261 On the material before this Court, there does not appear to have been any documentary evidence to prove that Senneh owned 1/56 Wolseley Road, that Tisete owned the Elizabeth Bay properties, that Tabard owned Airways House, that the appellants were the beneficial owner of each of these properties and that the appellants controlled these companies.
262 There is no documentary material before this Court that establishes how the appellants were able to pay the Bank $465,000 to discharge the Bank’s mortgage over the 13/39 Elizabeth Bay property owned by Tisete.
263 The matters I have listed above demonstrate, amply, that the evidence before Patten AJ was capable of proving that the respondent committed breaches of the duties it owed the appellants. Had I not dismissed the appeal on the grounds that advocate’s immunity applies to the appellants’ claim (and had this Court been required to deal with the cross-appeal), I would have dismissed the cross-appeal to the extent that the respondent thereby sought a finding that it did not commit breaches of its duties as his Honour found. I would, however, have upheld the cross-appeal to the extent that it seeks a retrial of the breaches of duty issues on the ground of inadequate reasons.
Causation
264 In dealing with causation Patten AJ first found that the respondent’s breaches of duty were capable of causing delay and disruption in the conduct of the trial, and this, his Honour said, was “the very situation which came about” (at [161]). For this reason his Honour held that the appellants were entitled to damages representing the loss flowing from the delay and disruption. These damages, as I have said, he assessed at $140,000.
265 In dealing with the damages relating to the loss of a chance of succeeding in the case against Egan, Patten AJ said (at [169]-[171]):
“[T]he settlement of the proceedings on 28 February 1996 so far as it terminated the [appellants’] right of action against Egan, was, as I have found, an act of the [appellants’] free will and must, I think, in relation to the negligence and breach of retainer of [the respondent], be regarded as a novus actus interveniens connected to the non-actionable conduct of the [appellants’] counsel and solicitors in the trial before Dowd J.
...
Consistently with the quoted observations of Mason CJ [in March v E & MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506 at 517 et seq], in my opinion, the compromise of the action in the way it occurred was not a reasonably foreseeable consequence of [the respondent’s] breaches, nor was it, in the ordinary course of things, something likely to happen.”
266 Thus, his Honour held that the respondent’s breaches of duties he had found did not cause the appellants to suffer damage by losing the opportunity of a better outcome in their case against Egan.
267 As regards the value of that loss of opportunity, his Honour firstly, held (at [30]) that “[t]he project resulted, on any basis, in very considerable financial loss [to the appellants]”. His Honour, however, later observed that he would have assessed the appellants’ prospects of success in the litigation against Egan “at very much less [than] 50%” (at [173]).
268 In their appeal, the appellants challenged Patten AJ’s decision that they had not proved causation.
269 The appellants submitted, firstly, that his Honour erred in holding that, because entering into the compromise was an act of the appellants’ free will, it must be regarded as a novus actus interveniens.
270 In March v E & MH Stramare Pty Ltd Mason CJ explained (at 517-518):
“The fact that the intervening action is deliberate or voluntary does not necessarily mean that the plaintiff’s injuries are not a consequence of the defendant’s negligent conduct. In some situations a defendant may come under a duty of care not to expose the plaintiff to a risk of injury arising from deliberate or voluntary conduct or even to guard against that risk ... . To deny recovery in these situations because the intervening action is deliberate or voluntary would be to deprive the duty of any content.” (Citations omitted.)
271 The respondent, as the appellants’ solicitor, owed the appellants a duty to take reasonable care in the preparation of the case against Egan. The content of that duty involved taking reasonable care not to expose the appellants, by reason of inadequate preparation of the case, to the risk of having to compromise their claim on adverse terms (that is, on terms less favourable to those that might reasonably have been agreed upon had the case not been inadequately prepared, or to the terms of a judgment that the court might otherwise have handed down in the appellants’ favour). In these circumstances, to paraphrase Mason CJ, to deny recovery because the appellants entered into the compromise of their own free will deprived the duty of any content. It was an erroneous approach.
272 The appellants then submitted that his Honour had erred in holding that “the compromise of the action in the way it occurred was not a reasonably foreseeable consequence of the respondent’s breaches, nor was it, in the ordinary course of things, something likely to happen.”
273 His Honour’s phrase, “the compromise of the action in the way it occurred,” is enigmatic. What was the “way it occurred”? His Honour made no express findings in this regard.
274 Mr Weber submitted that his Honour was intending to imply that hostile conduct by Dowd J, including the various statements reflecting on the appellants’ credibility, made during the course of the appellants’ opening and in extempore judgments, caused the appellants to decide (in the light of advice they had received from their counsel) to compromise as they did. Mr Weber submitted that Patten AJ used “a deliberately opaque expression to avoid being critical of the role that Dowd J played in the decision to settle”. Mr Weber submitted that the respondent did not cause Dowd J “to say what his Honour said”. He submitted that no one could possibly have foreseen that “a judge of this court would say the things [about the appellants] that he did without having even seen [them] in the witness box. That was rather extraordinary in anybody’s experience of this Court”.
275 In my opinion, Mr Weber was justified in submitting that Dowd J’s comments were unforeseeable and extraordinary. In view of the seriousness of the issue I think it desirable to recapitulate what occurred.
276 On the first day of his opening, Mr Hammerschlag submitted that the appellants had lost all their properties and that the Bank had sold all the properties. Both these statements were factually incorrect. The appellants were in court when Mr Hammerschlag made these statements. On the second day of the opening, Mr Hammerschlag corrected these errors. He explained that the appellants had discharged the mortgage over the restaurant property in Elizabeth Bay and still owned that property. He explained further that Tabard still owned Airways House.
277 The incorrect statements were obviously made through inadvertence and were very quickly corrected. They were, in any event, innocuous. As Mr Spender attempted to explain to Dowd J, the appellants had borrowed $465,000 to pay the mortgage debt owed to the Bank in respect of the restaurant property. This meant that, although they still technically owned the property, other lenders had replaced the Bank. Furthermore, although Tabard still owned Airways House, the Bank had taken possession of the property, it had been surrendered to the Bank pursuant to the First Barclays Deed, and the Bank was in the process of selling the property.
278 Mr Hammerschlag’s errors were trivial, made without any sinister motive whatever, and were rapidly corrected. In context, they carried no malignant imputation of any kind. They should have been ignored.
279 Dowd J, however, took a different view. As appears from his quoted remarks he appeared to have decided that the appellants were directly responsible for the misstatements of fact that had been made, that this demonstrated that the appellants had not been frank with the court, and that the conduct in question was tantamount to insulting to the court. Dowd J said that if he had been misled “as to matters of pecuniosity” that should have been corrected by counsel who had been as frank with the court “as his then instructions permitted him to be”. He said that he needed “to be a little more impressed by the appellants’ frankness to the court in a matter such as this”. He also made remarks suggesting that the appellants might order their affairs so as to thwart costs orders the court might make. These were very serious reflections on the integrity of the appellants, who were yet to give evidence in the case. They were quite unjustified and should not have been made.
280 It is true that on 13 February 1996, Dowd J, in giving judgment on the application that he disqualify himself, said:
“I also wish to make it abundantly clear that I have not formed a view unfavourable to the [appellants] in respect of the substantive issues that are to be tried in these proceedings, the issue of the credit of either the first or second appellants has not yet arisen at any stage in any matters that I have considered ... .”
281 Despite these remarks, however, both counsel for the appellants - who were eminent and highly experienced barristers - advised the appellants that, by reason of the attitude the judge had manifested, he would find against them on credit and the appellants would lose.
282 I accept Mr Weber’s submission that, in the circumstances I have outlined, the attitude taken by Dowd J to the integrity of the appellants (manifested before they had given evidence) was extraordinary and unforeseeable. It is uncontroversial that that attitude materially contributed to the compromise. It does not, however, follow that it was the sole cause of the settlement. Nor does it follow that the fact that the judge’s attitude was unforeseeable means that the appellants failed to prove causation.
283 The appellants’ case was that there were other causes for their decision to compromise. These other causes included the argument that they entered into the compromise because of duress, the fact that by 28 February 1996 their funds were exhausted and they were unable to continue financing the action, and the fact that because of inadequate preparation Dowd J had taken an unfavourable view of their case (apart from their credibility) and, by reason of the lack of adequate preparation, the various amendments that had been made and the unavailability of necessary evidence, their case was in shambles.
284 Patten AJ rejected the appellants’ argument as to duress. His Honour did not, however, address the other factors that the appellants contended materially contributed to the entering into of the compromise.
285 There was evidence that the appellants’ lack of funds contributed to their decision to compromise. Many of Dowd J’s remarks to which I have referred demonstrate that he was of the view that the appellants’ case had not been properly presented and that there was confusion on their part in several areas. This attitude on the part of his Honour was plainly justifiable. There were problems with Gowrise, with the basis on which damages were being sought, with the proof of damages, with the precise roles the Corporate Guarantors were playing as plaintiffs, with the claims in respect of losses in connection with the restaurant property and Airways House, with reliance on the part of the Corporate Guarantors, and with discovery.
286 It is against this background that I return to the phrase used by Patten AJ, namely, “the compromise of the action in the way it occurred” (my emphasis). His Honour gave no explanation of what he meant by “the way it occurred”. It is not possible to resolve, satisfactorily, what his Honour meant by this phrase. It is reasonably arguable that he had in mind not only Dowd J’s attitude to the appellants’ credit but also the appellants’ lack of funds and the breaches of duty that he had found in relation to the respondent’s preparation of the appellants’ case. It is also reasonably arguable that he meant only the remarks that Dowd J made about the appellants.
287 In my view, it was reasonably foreseeable that the case might come nowhere near finishing in the five weeks allocated to it if the respondent breached its duties in preparing the case for trial. It was also reasonably foreseeable that, in that event, the appellants might run out of funds and be forced to settle. It was also reasonable foreseeable that, should the respondent breach its duties in preparing the case for trial, the appellants would face incalculable problems in presenting their case and the judge might take a strongly adverse view as to its merits.
288 The evidence is capable of establishing that the appellants’ lack of funds and the respondent’s breaches of duty that his Honour found in relation to the respondent’s preparation of the appellants’ case materially contributed to the appellants’ loss of the opportunity of obtaining a better outcome in their case against Egan. Accordingly, had I not dismissed the appeal on the advocate’s immunity ground, I would have upheld it in regard to causation and ordered a retrial of that and all other issues.
289 I should also say that I accept Mr Bennett’s argument that it was reasonably foreseeable that the breaches of duty such as those found by Patten AJ might lead a judge, at an early stage in the trial, to form an adverse view of the appellants’ case. I accept further his submission that, for the appellants’ to succeed on causation, it was only necessary for them to prove that Dowd J’s expressed attitude to the credibility of the appellants (while not itself specifically foreseeable) was a consequence of the same general character as forming an adverse view of the appellants’ case: Chapman v Hearse [1961] HCA 46; (1961) 106 CLR 112 at 120 and 121. The test of foreseeability does not require precise events that caused the harm to be foreseeable. Rather, as Barwick CJ stated in Mt Isa Mines Ltd v Pusey [1970] HCA 60; (1970) 125 CLR 383 (at 390):
“The rarity of such an injury in the circumstances does not in my opinion deny the foreseeability of an injury of the class of which it forms one. That it is sufficient that the class of injury as distinct from the particular injury ought to be foreseen as a possible consequence of particular conduct in order to establish liability for damages for the particular injury is well established (see eg Chapman v Hearse [1961] HCA 46; (1961) 106 CLR 112 at 115).”
290 As the High Court said in Chapman v Hearse (at 121):
“[I]t would be quite artificial to make responsibility depend upon, or deny liability by reference to, the capacity of a reasonable man to foresee damage of a precise and particular character or upon his capacity to foresee the precise events leading to the damage complained of.”
291 Thus, in my opinion, Patten AJ erred in rejecting the appellants’ case on causation on the grounds that Dowd J’s reaction in relation to their credibility was not foreseeable. It was sufficient for the appellants to show, as they did, that the judge’s reaction fell within the general risk of harm to which they would be exposed should their case be inadequately prepared.
292 Whether it was foreseeable that breaches of duty on the respondent’s part might contribute materially (in the Chapman v Hearse sense) to a compromise of the kind that was in fact effected depends, to a material extent, on the precise breaches found to have occurred, the facts that gave rise to the breaches and the facts that gave rise to the compromise. The precise breaches could only be determined, reliably, at a retrial.
293 Likewise, a decision could only be made on causation once the precise breaches of duty, if any, were identified.
294 Thus, had I not considered that the appeal should be dismissed on the grounds of advocate’s immunity, I would have proposed that the appeal be upheld and the issue of causation, and all other issues, be remitted for retrial.
Conclusion
295 I would dismiss the appeal with costs. The cross-appeal, as I have said, is, in effect, conditional on the appeal succeeding. As I would dismiss the appeal, there is no need to make any orders on the cross-appeal. As the appellants’ arguments were largely successful on the cross-appeal, I would make no orders as to the costs of the cross-appeal. I would grant liberty to apply in regard to argument that the respondent may wish to raise in regard to the way in which the cross-appeal concerning the award of damages of $140,000 has been dealt with.
*********
LAST UPDATED:
10 July 2009
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/nsw/NSWCA/2009/139.html