THE PLAINTIFF'S ACTION AGAINST THE FIRST DEFENDANTS
371 The plaintiff's claims against the first defendants were common law claims in the tort of negligence and in contract, alleging breaches of an obligation to exercise reasonable care in acting as solicitors for the plaintiff.
372 At the hearing there was no dispute that the first defendants had been retained by the plaintiff to act as her solicitors on the application for probate of Mr Baker's will and in relation to the arrangement which was ultimately effected by the deed of transfer and the deed of residence and that in so acting for the plaintiff the first defendants were obliged to exercise reasonable care. What was disputed was the scope of the first defendants' duty and in particular whether the duty extended to matters outside the terms of the retainer; whether there had been breaches of the first defendants' obligations; and, if so, whether those breaches had caused damage to the plaintiff.
373 In counsel for the plaintiff's final submissions (which were lengthy submissions, both written and oral) many of the allegations which had been made in the statement of claim were not the subject of any submission and were not pressed in any way.
374 In pars 30 to 33 of the written submissions counsel did refer to pars 9, 10 and 11 of the amended statement of claim ("the firm's duty of care regarding the estate generally") but this part of the written submissions was quite brief and was not strongly pressed. I am not satisfied that I should find that any of the breaches alleged in pars 10 and 11 of the amended statement of claim have been established.
375 The allegations in the amended statement of claim which were strongly pressed in counsel for the plaintiff's final submissions were the allegations in pars 18 to 20 ("duty of care in relation to the deed").
376 There is some overlap or duplication in the respects in which it is alleged in par 18 of the amended statement of claim that the first defendants were obliged to advise the plaintiff. Having regard to the submissions which were made, it seems to me to be useful to classify the obligations which it was submitted the first defendants had, as follows:-
377 Sub-pars 18(g) and 18(a) - A duty to advise the plaintiff that by entering into the deed of transfer she would be transferring away most of the assets to which she was entitled as the sole beneficiary under her husband's will.
378 Sub-pars 18(d) and 18(g) - A duty to advise the plaintiff as to the practical legal effect of the deed of transfer and, in particular, of the risk that Mr Rigg as the transferee under the deed of transfer could mortgage the homestead and might default under the mortgage, with the consequence that the mortgagee might exercise its rights under the mortgage against the homestead, thus depriving Mrs Baker of her home.
379 Sub-pars 18(f), 18(h) and 18(e) - A duty to advise the plaintiff that it was not necessary for her to sign the deed of transfer (sub-par 18(f)); that she was free to decline to sign the deed of transfer (sub-par 18(h)); that there were alternatives to entering into the deed of transfer (sub-par 18(e)).
380 Sub-par 18(i) - A duty to advise the plaintiff that there was a conflict of interest between the plaintiff on the one hand and Trevor Baker and Stephen Rigg on the other hand and a conflict of interest (or a conflict of duty and duty) in the first defendant's acting for both her and for Trevor Baker and Stephen Rigg.
381 It would not appear to me that any separate submissions were made by counsel for the plaintiff in relation to sub-pars (b) and (c) of par 18 of the amended statement of claim.
382 It was accepted by counsel for the plaintiff that some of the advice which it was alleged the first defendants should have given to Mrs Baker was outside the terms of the first defendants' retainer and was financial advice or akin to financial advice. However, counsel referred to Waimond Pty Limited v Byrne (1989) 18 NSWLR 642 especially at 652 where Kirby P said:-
"Although the contract of retainer will be an important indicium of the nature of the relationship which gives rise to the common law duty of care … it will not chart exclusively the perimeters of that duty".
383 Kirby P then referred to what Deane J had said in Hawkins v Clayton (1988) 164 CLR 539 at 579 that, depending upon the circumstances of the particular case, a solicitor's duty may require the taking of positive steps "beyond the specifically agreed professional task or function, where these are necessary to avoid a real and foreseeable risk of economic loss being sustained by the client". See also the judgment of Hope AJA in Waimond especially at p 665.
384 As regards sub-pars 18(a) and 18(g), it was submitted that there was a real and foreseeable risk of economic loss to Mrs Baker, that Mr Sheridan should at least have asked Mrs Baker why she wanted to transfer away all the assets and that, if he had done so, Mrs Baker would have given an answer which would have revealed to Mr Sheridan that Mrs Baker was acting out of a sense of crisis induced in her by Mr Rigg.
385 As regards sub-par 18(d) of the amended statement of claim, it was pointed out by counsel that Mr Sheridan had admitted in cross-examination that he had not advised Mrs Baker that a practical implication of the proposed transaction was that, if Mr Rigg defaulted under an existing or a future mortgage over the homestead, Mrs Baker could lose her home.
386 As regards sub-par 18(h) of the amended statement of claim, it was pointed out by counsel that Mr Sheridan had admitted that he had not advised Mrs Baker that she had freedom of choice whether to enter into the proposed transaction. It was submitted that there were alternatives to entering into the deed of transfer, which would have been open to Mrs Baker and about which Mr Sheridan should have advised Mrs Baker.
387 As regards sub-par 18(i) of the amended statement of claim, it was submitted that there was a clear conflict between the interests of Mrs Baker on the one hand and of Stephen Rigg and Trevor Baker on the other hand and that, consequently, Mr Sheridan should not have acted for Mrs Baker, without obtaining her informed consent, and Mr Sheridan had failed to obtain Mrs Baker's informed consent.
388 On the issue of causation it was submitted that it was not essential for Mrs Baker to have given direct evidence, for example about what she would have done, if advice which had not in fact been given had been given. Counsel referred to Gould v Vaggelas (1985) 157 CLR 215 at 235 per Wilson J; Dominelli Ford (Hurstville) Pty Limited v Karmot Auto Spares Pty Limited (1992) 38 FCR 471. It was submitted that Mrs Baker had, in fact, given some evidence relevant to causation and, in particular, some evidence which would support a finding that she would have adopted an alternative course, if she had been advised about the alternative course, and that, if she had been advised to see another solicitor, she would have done do. It was submitted that the causation issue should be resolved in favour of the plaintiff, on the basis that no reasonable person, if properly advised, would have assented to divesting herself of the whole of her property in the circumstances of the present case.
389 It was submitted by counsel for the first defendants that the first defendants had been retained by Mrs Baker, to act for her in relation to the family arrangement, at the conference with Mr Sheridan on 18 July 1996. It was submitted that I should accept Mr Sheridan's evidence of what had happened and of what had been said at that conference. Accordingly, I should find that the terms of the retainer were that Mr Sheridan was instructed by Mrs Baker to draw documents and to take steps to give effect to what Mrs Baker said she wanted to happen and, in particular, that the properties previously owned by Mr Baker should be transferred to Stephen Rigg and Trevor Baker, that Stephen Rigg and Trevor Baker should assume responsibility for the debts Mr Baker owed to the Commonwealth Bank and the State Bank, that the livestock and the plant and equipment should be transferred and that Mrs Baker should be able to live in her home on the homestead rent free. I should find that on 18 July 1996 Mrs Baker gave instructions in person to Mr Sheridan; that she said to Mr Sheridan "I want" the properties to be transferred and not that anybody else had suggested to her or told her that the properties should be transferred; that neither Stephen Rigg nor Trevor Baker was present at the conference; and that, although Mrs Rigg had been present, I could not, on the evidence, make any finding that Mrs Rigg was exerting any influence on Mrs Baker.
390 It was submitted that Mr Sheridan had not been under any obligation to provide financial advice to Mrs Baker. It was submitted that I should find that Mr Sheridan was not retained by Mrs Baker to provide financial advice, that Mrs Baker did not rely on Mr Sheridan to provide any financial advice and that Mr Sheridan did not assume any responsibility to provide financial advice.
391 As to whether a solicitor is obliged to provide financial advice, I was referred by counsel for the first defendants, not merely to Waimond, but also to Clark Boyce v Mouat [1994] 1 AC 428, Citicorp Australia Limited v O'Brien (1996) 40 NSWLR 398 especially at 418 per Sheller JA and Nikolic v Nikolic [2002] NSWCA 248.
392 In Nikolic the New South Wales Court of Appeal at par 17 approved the following statement by Lord Jauncey in Clark Boyce:-
"When a client in full command of his faculties and apparently aware of what he is doing seeks the assistance of a solicitor in carrying out a particular transaction, that solicitor is under no duty, whether before or after accepting instructions, to go beyond those instructions by proffering unsought advice on the wisdom of the transaction. To hold otherwise could impose intolerable burdens on the solicitors".
393 It was submitted that I should find that on 18 July 1996 Mrs Baker was not incapacitated by emotional distress as a result of her husband's death and was in full command of her faculties and apparently aware of what she was doing, with the consequence that Mr Sheridan was under no duty to proffer unsought advice on the wisdom of the proposed transaction.
394 Counsel for the first defendants disputed that, if a client is inexperienced in business matters, the scope of the solicitor's duty to give advice is extended. It was submitted that the true position is that, if a client is inexperienced in business matters, a solicitor may have to advise more fully on matters on which it is within his retainer to give advice.
395 As regards sub-par 18(g) of the amended statement of claim, it was submitted by counsel for the first defendants that I should find that Mrs Baker knew, to the knowledge of Mr Sheridan, that she had received the assets of the estate under her husband's will and that she was transferring away those assets. Evidence on which such findings could be based would include the evidence that Mrs Baker had been present at the reading of the will on 7 May 1996, evidence that on 18 October 1996 she had made the affidavit of executor in which the assets and liabilities of the estate were listed, evidence of what happened in the conference on 18 July 1996, evidence of Mrs Baker's visit to Centrelink on 19 July 1996 and of the contents of the Centrelink documents signed by her, evidence of what happened at the conference on 25 November 1996 and evidence of admissions made by Mrs Baker in cross-examination.
396 It was submitted that there was no need for Mr Sheridan to tell Mrs Baker of matters of which, to Mr Sheridan's knowledge, Mrs Baker was already fully aware.
397 As regards sub-par 18(d) of the amended statement of claim, Mrs Baker had admitted in cross-examination that she had realised that, if the properties were transferred, Mr Rigg as the owner of some of the properties could borrow money on the security of a mortgage over those properties and that, if Mr Rigg did not repay the lender, the lender could sell the properties. She realised that this was "a possibility" but she "didn't think it would happen".
398 As to sub-pars 18(f), 18(h) and 18(e) of the amended statement of claim, it was submitted that I should find that the course Mrs Baker wanted to adopt had a number of advantages for her, which she communicated to Mr Sheridan, including that the properties would be kept together, the properties would continue to be used for cattle grazing, the business of Kempsey Kar Kare would continue to be carried on, Mrs Baker would be relieved of having to take any part in the cattle grazing business or the business of Kempsey Kar Kare, Mrs Baker would be relieved of having to worry about the debts of the estate, Mrs Baker would be able to occupy her home rent free and free of any other charges and Mrs Baker would derive income from a pension.
399 Mrs Baker had admitted in cross-examination that she knew that she had a choice whether or not to transfer the properties to Stephen Rigg and Trevor Baker.
400 It was also submitted by counsel for the first defendants that there was no viable alternative course of action, a submission which was more fully developed later in counsel's submissions.
401 As to sub-par 18(i) of the amended statement of claim, it was submitted that, notwithstanding any concession made by Mr Sheridan in cross-examination, there had in fact been no conflict of interest between Mrs Baker on the one hand and Stephen Rigg and Trevor Baker on the other hand, because of the limited nature of Mrs Baker's retainer of Mr Sheridan and the absence of any viable alternative course of action. Even if there had been a conflict of interest between the clients and Mr Sheridan had been acting for clients whose interests conflicted, it would still be necessary for Mrs Baker to prove that, by reason of the conflict, Mr Sheridan had omitted to give some advice or information to Mrs Baker which should have been given, and that this had not been proved.
402 Counsel for the first defendants submitted that, even if the plaintiff established that some breach of duty had occurred, it would still be necessary for the plaintiff to prove that the breach had caused damage to the plaintiff; that, if no breach had occurred, the plaintiff would have acted differently from the way in which she had acted and in a way which would have involved no damage or less damage for her. It would be necessary for the plaintiff to prove that, if Mr Sheridan had given advice which he had omitted to give, Mrs Baker would have acted on that advice. Counsel referred to Citicorp at p418G per Sheller JA.
403 It was submitted by counsel for the first defendants that, although direct evidence from the plaintiff on an issue of causation was not essential, the absence of evidence or at least of clear evidence from the plaintiff about what she would have done, if certain advice had been given to her, made it more difficult to make a finding in her favour on the issue of causation.
404 It was submitted that, if a breach consisted of Mr Sheridan failing to give information on some matter but the plaintiff was already aware of the matter without having to be told by Mr Sheridan, then the omission to give information on that matter could not have been causative of damage to Mrs Baker.
405 As to whether, if Mrs Baker had been advised before 25 November 1996 that she should seek independent legal advice, she would have sought independent legal advice, it was submitted that the vague and conflicting evidence given by Mrs Baker did not establish that, if such advice had been given by Mr Sheridan, Mrs Baker would have sought independent legal advice. It was submitted that I should accept Mr Sheridan's evidence that on 25 November 1996 he did ask Mrs Baker whether she wanted to see another solicitor.
406 Likewise, it was submitted that Mrs Baker's evidence did not establish that, if Mr Sheridan had advised her to seek financial advice from an accountant, she would have taken his advice and seen an accountant. Nor did the evidence establish what financial advice an accountant might have given Mrs Baker.
407 A number of submissions were made by counsel for the first defendants on whether Mrs Baker could have acted differently, consistently with what her objectives were, if she had been given different advice by Mr Sheridan; that is, whether there was any viable alternative course of action to the course of action in fact adopted by Mrs Baker.
408 It was submitted that the present case was not a "no transaction case" in which a viable alternative would have been for Mrs Baker simply to have done nothing. Because of the death of her husband, who had been carrying on two businesses, who had left assets and debts secured by mortgages and who had left a will under which Mrs Baker was the executrix and the beneficiary, Mrs Baker had to do something. She could not simply do nothing.
409 The present case, it was submitted, was different from the case of parents who are asked to give a guarantee of the debts of their child, the guarantee to be supported by a mortgage over their home. Such a case is, indeed, a "no transaction case". A viable alternative for the parents is simply to decline to enter into any transaction.
410 The plaintiff's case had been opened by counsel for the plaintiff on the basis that, if Mrs Baker had been properly advised by Mr Sheridan, she could have acted differently by using the personal property in the estate to pay the debts of the estate and by letting the real property in the estate on agistment so as to provide an income for herself. This case had collapsed, when it became apparent during the course of the hearing that the personal property in the estate would not have been sufficient to pay the debts of the estate and that the evidence of the plaintiff's expert witness, the accountant Mr Otto that a modest, but sufficient, income for Mrs Baker could be derived from letting the real property on agistment, had been based on false assumptions, including an assumption that the cattle owned by Mr Baker at his death had been grazing solely on his land and not also on Syd's property. In addition, the evidence of the first defendants' expert Mr Naunton, that the nett income from agistment would be insufficient to support the plaintiff, should be accepted.
411 During the hearing it was suggested on behalf of the plaintiff that another alternative course which would have been viable, would have been for Mrs Baker to sell some of the real property so as to pay the balance of the debts of the estate and to let the rest of the real property on agistment so as to provide some income from agistment for her, and for her to receive a pension.
412 In relation to this suggested alternative, it was submitted by counsel for the first defendants that the realty which might have been sold had not been identified, that this course of action would have been contrary to Mrs Baker's wish to keep all of her husband's properties together, that there was no evidence that, if she had retained some of the real property, she would still have been eligible to receive a pension and that there was no evidence from the plaintiff that, if she had been advised to adopt this alternative course, she would have taken it.
413 It was submitted by counsel for the first defendants that I should find that the plaintiff would not have acted any differently, if any different advice had been given by Mr Sheridan. The course the plaintiff had adopted and had told Mr Sheridan that she wanted to adopt fulfilled the objectives she had.