Blazai Pty Limited v Maley & Ors

Before exchange on 3 August 2001 10Mr Loiero, the plaintiff's principal, consulted Mr Maley on 3 July 2001 and retained him to act on the plaintiff's behalf with respect to the sale by the plaintiff of a commercial site located on the Great Western Highway at St Marys (the St Marys Property) and an adjoining property which the plaintiff was in the process of purchasing (the Adjoining Property) (together the Property), which would form part of the sale. Mr Loiero had previously retained a solicitor from Maclarens with respect to a separate transaction, but had not previously retained Mr Maley. 11In the course of the conference on 3 July 2001, Mr Loiero instructed Mr Maley that the purchaser would be a company associated with John Palasty, for whom Mr Harley, solicitor, was acting but that the identity of the company had not yet been determined. Mr Loiero told Mr Maley that the sale price was to be $5.3m; there would be a deposit of 10% and that monthly payments would be made by the purchaser between exchange and completion. 12Mr Maley instructed Marlene Sweeney, a paralegal employed by Maclarens, to carry out title searches. When these title searches were received, they were stamped by Maclarens, in accordance with their usual practice to record the date of receipt of every piece of correspondence received by post or DX. The stamp generally used was distinguished by a row of 24 points at the base of the imprint. 13The following day, 4 July 2001, Mr Maley started drafting the special conditions of contract. On 5 July 2001, Mr Loiero sent a facsimile concerning the Adjoining Property to Maclarens for Ms Sweeney's attention. 14On 5 July 2001, Mr Maley prepared an engrossed version of the front page of the standard contract for sale. At that time, the purchaser's identity was not filled in because Mr Maley's instructions at that time were that it was to be a company associated with Mr Palasty. Mr Maley understood that there was to be no vendor's agent which is why there was no reference to such a person on the draft front page. 15On 9 July 2001, Joseph D'Agostino, solicitor for the vendors of the Adjoining Property, caused letters to be hand delivered to Maclarens, which contained contracts for the various pieces of land which comprised the Adjoining Property. These letters were not stamped as having been received. I accept that it was not the usual practice of Maclarens to stamp hand-delivered documents, as distinct from documents that had been received in the DX or by post, which were stamped. 16On 10 July 2001 Mr Maley sent a draft contract for sale of the Property to Mr Harley. 17In a conversation with Mr Maley on 13 July 2001, Mr Harley proposed terms which he understood the clients to have negotiated between themselves: (1)the purchase price was to comprise the following amounts: (a)$10,000, which was to be released to the plaintiff; (b)$360,000, to be released to Philip Leslie Bangel, the vendor of one of the properties that comprised the Adjoining Property; (c)$1.1m, to be paid to the plaintiff; (d)a further, $100,000 30 days from exchange; (e)a further, $250,000 9 weeks from exchange; and (f)the balance on settlement. (2)the purchaser would pay a monthly amount of $15,000 until settlement; (3)to secure the return of the deposit, the plaintiff will grant a mortgage over one of the properties comprising the Adjoining Property in favour of the purchaser but that the purchaser can only exercise the power of sale if the purchaser validly terminates the contract as a result of the plaintiff's default. 18At the conclusion of this conversation, Mr Maley told Mr Harley that he would obtained the plaintiff's instructions on those terms. On 13 July 2001, Mr Maley sent a facsimile of the Special Conditions to Mr Loiero. On 16 July 2001, Mr Maley sent a facsimile to Mr Harley confirming certain terms of the contract "subject to our client's agreement". Mr Loiero was copied into this facsimile. 19On 20 July 2001, Mr Loiero sent a facsimile to Mr Maley in which he reported that he had met with the purchasers that day. He instructed Mr Maley to make changes to the draft conditions in accordance with handwritten changes he had made to the facsimile which Mr Maley had sent to Mr Harley. The changes included that the balance of the deposit, $1.1m, would be held in trust and an amendment recording that the purchaser would pay its own agent. The facsimile said, in part: "Please make all final changes as attached as they will be exchanging by 12 am Monday 23 July 2001. I should point out that if this does not occur then I will withdraw the sale from them." 20When Mr Maley received the facsimile, he appreciated that there might be significant work in drafting and settling the Special Conditions. Accordingly, he wrote to the plaintiff on 23 July 2001, setting out the hourly rates that Maclarens proposed to charge for acting on the conveyance. 21Further versions of the draft front page of the contract at about this time show that there was to be a vendor's agent, who was to be Nexus Realty, and that the purchaser was to be Cerza Pty Limited. They also show an increase in the amount of the deposit to $1.025m. 22By letter dated 24 July 2001, Mr Maley wrote to Mr Harley enclosing an amended front page of the contract, amended special conditions and a drainage diagram. The front page recorded Nexus Realty as the vendor's agent; the purchaser as Cerza Pty Limited and the deposit as $1.025m. As in previous drafts of the front page it was provided that the deposit was not to be invested. 23By facsimile sent on 25 July 2001, Mr Loiero wrote by hand on the facsimile sent by Mr Maley to Mr Harley to provide his further instructions on behalf of the plaintiff to Mr Maley. A few minutes later he sent a further handwritten special condition to Mr Maley. Both facsimiles were sent from a business known as Jet Global Travel. 24Mr Maley's file contains a photocopy of a bank cheque in favour of the plaintiff dated 27 July 2001 in the sum of $50,000. Although Mr Maley has some recollection of the plaintiff receiving some monies from the purchaser prior to exchange I am not satisfied that this cheque came from the purchaser or was in any way associated with this transaction. Nor do I accept, for reasons set out in more detail below, Mr Loiero's evidence that it was on the file before he collected it from Maclarens on 17 December 2001. 25On 30 July 2001, Mr Maley sent a facsimile to Mr Harley, which was also copied to Mr Loiero, setting out final amendments to the front page and the special conditions. The new draft front page nominated "Gateway Developments Pty Limited" as the purchaser. Later that day, Mr Loiero sent a facsimile with handwritten endorsements of what he described in the coversheet as being "final changes". Mr Maley made changes to the contract in accordance with these instructions and despatched a further draft to Mr Harley, which was copied to Mr Loiero. Mr Maley's facsimile was sent at 12.48 pm. 26On Friday 3 August 2001, Mr Loiero and his wife went to the offices of Maclarens. Mr Loiero executed the contract for sale of the Property on behalf of the plaintiff. 27Later that day, but before exchange, Mr Loiero asked Mr Palasty to meet him downstairs at Mr Harley's office. Mr Palasty handed Mr Loiero a cheque drawn on Gateway's account with the St George Bank in the sum of $1.1m, which Mr Palasty assumed would be handed over to Nexus Realty. The basis on which the cheque was handed over by Mr Palasty to Mr Loiero was that it would not be presented. It would have been inevitable that the cheque would have bounced had it been presented because neither Gateway, nor Mr Palasty, had access to funds of that magnitude. At this time, Mr Palasty's assets had been frozen by the ANZ Bank. 28It was put by the plaintiff's counsel to Mr Palasty in cross-examination that it would be "extremely uncommon" for such an arrangement to be made. Mr Palasty disagreed. He said: "There are many transactions in that way. We, as property developers, rely on in a transaction like this where it was a very complicated site we rely on, there were certain works that needed to occur, improvements. Mr Loiero was aware of that and it is not an unusual transaction to do that in these circumstances in this deal. ... the site was what we call a sterile site. It had very, very serious issues associated with it. I was always concerned that if Mr Loiero did not do certain works and did not complete certain things then we would never get the money back from him and that we needed to improve the value of that site to be able to settle at that time. ... it was always the intent to settle the transaction by basically getting the, uplifting the valuation and then getting the 70 per cent or 80 per cent on it. That is why the cheque was done that way, Mr Loiero and myself agreed on that, that it wouldn't be banked. Because we had to do certain works to liven the DA up that was to lapse in October ... In this situation... the position was this, that the site had major, major earthworks associated with trying to, to make the site live for October otherwise the DA was going to lapse. There was a major creek running through the site and the only thing that we could do was carry out work to ensure that the DA wouldn't lapse. If the DA lapsed then your client's land would have been worth nothing. There was no DA on it and wouldn't have got another application through, through DLAWC, the Department of Land and Water Conservation. We were the ones that were prejudiced because we were putting money into the project to get that done and in the end we lost some money on that as well." 29The side-deal between the plaintiff and the purchaser which had been negotiated by Mr Loiero and Mr Palasty, the reasons for which are apparent from the passages quoted above from Mr Palasty's cross-examination, was concealed from Mr Maley. 30I am satisfied that Mr Loiero's intention, throughout the period of his dealings with Mr Maley, was that, irrespective of what the contract provided on its face, the payment of deposit and other monies would be sorted out directly between the parties and no substantial cheque which could be drawn on cleared funds would be available on exchange. The contract was, in respect at least of the provision for the deposit, effectively a ruse to be provided to Mr Loiero's bank in order to give it false "comfort".

Exchange on 3 August 2001 31Later that day, Mr Maley went to Mr Harley's office to exchange contracts. When Mr Maley arrived, Mr Harley told him that the purchaser was not paying any money on exchange "because it is being sorted out between the parties direct with the agent". 32Mr Maley was very concerned about this turn of events since he had expected to receive three cheques on exchange: $150,000 which was to be released to the plaintiff; $1.1m, being the balance of the deposit, payable to the agent and $18,000 being the first monthly payment. It was, in his experience, unheard of for an exchange to occur without a deposit being received. Mr Harley then explained other, unrelated amendments to the contract. 33Mr Maley rang Mr Loiero to obtain instructions on the proposed amendments and, most importantly, on the fact that no cheques were to be provided on exchange. In the course of the conversation, Mr Loiero instructed Mr Maley that all amendments were acceptable. In relation to the issue of the deposit the following exchange occurred: "Mr Maley: They don't have the cheques for the exchange. There is no money being paid on this exchange. They say it is being sorted out between you, the purchaser and the agent. Mr Loiero: That's ok. That's under control. Just exchange it. Mr Maley: Are you sure? Mr Loiero: Yes, yes." 34The amendments to the contract were made by hand. The contracts were then exchanged. No amendments were made to the written contract in relation to the deposit. 35That evening, Mr Maley rang Mr Loiero to tell him that exchange had occurred and no money had been received. Mr Loiero responded by saying: "That's OK."

Events post-exchange 36At 8.30 am on 6 August 2001, Mr Loiero rang Mr Maley and asked him to send a copy of the contract to a named person at Westpac. Mr Maley refused on the basis that the contract stipulated that a $1.25m deposit would be paid on exchange, which was contrary to the fact. Mr Loiero became agitated and insisted that it be done but Mr Maley again refused. Mr Loiero then instructed Mr Maley to send a copy of the contract to him, which Mr Maley agreed to do. 37Mr Maley gave evidence, which I accept, about the reasons for his refusal to comply with Mr Loiero's instructions, which included the following: "I was also concerned, having attended an exchange at which no deposit was paid over, and having received a telephone call from Mr Loiero at 8.30 am the next business day demanding that a copy of the Contract be sent to Westpac, that Mr Loiero had done a side deal with the Palastys that no deposit would be paid, either immediately or at all, but that Mr Loiero wanted to represent to Westpac that the deposit had been received." 38Mr Maley's suspicions, which were unconfirmed until Mr Palasty gave evidence of the side deal, were well-founded. 39Following this conversation Mr Maley sent a letter to Mr Loiero in which he enclosed a copy of the contract. The letter read in part: "I confirm my telephone advice to you on exchange that I did not receive any deposit and you confirmed that you were arranging the deposit direct with the Purchaser." 40As a result of these communications, Mr Maley had formed a dim view of Mr Loiero's conduct. His communications with Mr Loiero after 6 August 2001 were few and far between. Mr Maley diarised the need to follow up the transaction but before he did so Mr Harley visited him in his office and asked him what was happening with the settlement of the Adjoining Property and the primary application for consolidation of the lots. 41By letter dated 24 August 2001, Mr Maley wrote to Mr Loiero informing him of the purchaser's request for information and seeking instructions in order to respond. Mr Loiero did not respond. Mr Maley was not particularly troubled by his client's silence. He knew Mr Loiero to be an experienced property developer who did not require a solicitor to oversee matters such as a primary application, which principally involves surveyors. 42The matter next came up in October 2001 when Mr Harley visited Maclarens. Mr Maley asked him how the matter was going, to which Mr Harley responded that he understood their clients to be talking and working everything out, including the primary application, between themselves. 43In November 2001, when the two solicitors saw each other again, Mr Harley told Mr Maley that he believed that neither the primary application nor the plan of consolidation had been registered. Mr Maley assured him that he would find out what was happening. 44On 7 November 2001 Mr Maley wrote to Mr Loiero in the following terms: "We refer to the above matter which we note is due to settle on 15 December 2001. Please confirm that you have attended to the warranties undertaken in the special condition of the Contract for Sale regarding in particular obtaining registration of Primary Application and a Plan of Consolidation." 45Mr Maley received no reply. The next time he heard about the transaction was on 13 December 2001 when Greg Nash, solicitor of Nash O'Neill Tomko, rang him to tell him that he was acting for Mr Loiero in relation to the purchase of a tavern at Enfield and that Mr Loiero was blaming, amongst others, Mr Maley for the delay in the sale of the Property. 46Mr Nash then wrote to Mr Maley by letter dated 14 December 2001 I the following terms: "I refer to our conversation yesterday. My client does not agree that the delayed land settlement should have any bearing as to tavern completion, by our client's bank. I also cannot see any document that gives rise for the bank to behave in this manner and in my opinion, does constitute a contractual breach. Notwithstanding this, and bearing in mind my client's position, I have tentatively organised an urgent appointment to discuss this issue with counsel." 47Mr Maley then asked Ms Sweeney to arrange for Mr Loiero to come to Maclarens to discuss matters. Mr Loiero attended Maclarens on 17 December 2001. Although Mr Loiero insisted that Mr Maley was in some way to blame for the delay, he did not challenge Mr Maley's statements to the following effect: (1)Mr Loiero and Mr Palasty were dealing with the matter between themselves and Mr Maley was not involved; and (2)Mr Loiero had at no time instructed Mr Maley that the plaintiff was purchasing a tavern, much less that the settlement of the tavern was conditional on the completion of the Property. 48The conference concluded with Mr Maley suggesting that they part company, informing Mr Loiero he would not seek payment for his services and handing the file to Mr Loiero. Mr Maley did not arrange for his file to be copied before this conference. Accordingly when he handed his file over to Mr Loiero, the arrangement of documents, the contents of the file and its integrity were no longer within his control.

Events post-termination of Mr Maley's retainer: the tampering with the file 49Mr Loiero instructed R J Thomas to act for the plaintiff in connection with the transaction. 50Mr Maley noticed, as he read through, for the purposes of these proceedings, the documents that were exhibited to Mr Loiero's affidavit and which Mr Loiero had deposed had been sent to Mr Maley, that several letters were not only inconsistent with his recollection of what had occurred, but each of them bore a "received" stamp which did not correspond with the "received" stamp which had been applied to other documents in the file. The suspicious stamp (the Blazai stamp) had 16 dashes at the bottom, whereas the stamp on undisputed documents (the Maclarens stamp) had 24. 51Mr Maley, alerted by the appearance of the Blazai stamp on the disputed documents and the Maclarens stamp on documents which were indisputably part of the file, caused his son to do a random search of files in the offices of Maclarens to see if the Blazai stamp appeared on any other document. His son selected, at random, 38 files that were open at the relevant period and inspected them. None of those files contained the Blazai stamp. 52Subsequently, Maclarens, through their solicitors retained Michelle Novotny, a document examiner, to conduct a random sample of 25% open files at Maclarens to investigate whether the Blazai stamp appeared on any documents other than the documents thought to have been added to the Maclarens file after it was delivered up by Mr Maley to Mr Loiero. 53Ms Novotny was provided with a list of open files by Maclarens. She selected files by name at random from the list. There was no indication on the list as to the nature of the matter. She requested a total of 782 files, of which 681 were provided, the balance being either not available, because the file had gone with a solicitor to another firm or had been destroyed, or not relevant because there were no documents within the file from the relevant period (mid to late 2001). 54Within these 681 files, 3,258 date stamp impressions were found and compared with the Blazai stamp and the Maclarens stamp. No stamps that corresponded with the Blazai stamp was found but 2,974 impressions that corresponded with the Maclarens stamp were found. Of the remaining 284 date stamp impressions, some were impressions on copy documents of files from other entities; others indicated that Maclarens used stamps other than the Maclarens stamp during that period. 55The evidence that every one of the suspected documents bore the Blazai stamp and that not a single document other than these documents was found in the random search described above is sufficient to establish that the documents bearing the Blazai stamp were not on the file when it left the custody of Maclarens and must have been added subsequently. 56There are other matters which indicate that the suspicious documents were not sent on the dates they bear. As the narrative set out above indicates, Mr Loiero tended to communicate with Mr Maley by endorsing correspondence from others with his own handwriting and faxing the endorsed letter back to Mr Maley. It is contrary to his usual practice that he would send a typewritten letter of any length to Mr Maley. 57Furthermore, each of the letters from the plaintiff to which the Blazai stamp had been applied supported, in an entirely self-serving way, the case that the plaintiff now brings in these proceedings. 58As far as the suspicious correspondence dated prior to 3 August 2001 is concerned, it is wholly at odds with the undisputed correspondence. For example, in one of the disputed letters, dated 17 July 2001, Mr Loiero seeks confirmation that the guarantees given by the Palastys were satisfactory. There was no discussion about guarantees and no reference to them in undisputed documents. Further, I do not accept that if Mr Maley had actually received such a letter, he would have done nothing. 59As appears from the narrative set out above, Mr Maley's utility as far as Mr Loiero was concerned, was to prepare a contract for sale of the Property in a form which could be exchanged and a copy despatched to Westpac, presumably with a view to obtaining further finance for the tavern purchase or to incline the bank to grant an extension on monies already due. This, together with Mr Maley's refusal to send the contract to Westpac, explain the almost total cessation of communication between Mr Loiero and Mr Maley after 6 August 2001 and up to and mid-December 2001 when Mr Maley convened the conference with Mr Loiero which resulted in the termination of his retainer. 60However, many of the suspicious documents bear dates in August, September, October and November 2001. Another noteworthy matter is that there are no responses by Mr Maley to these suspicious documents. I am satisfied that Mr Maley would not have disregarded correspondence from Mr Loiero had it been sent. His non-response is a further indication that the suspicious documents were not sent at all. 61It is also inconceivable that Mr Loiero would have been content to keep writing detailed correspondence into the ether, without any response from Mr Maley. Mr Loiero impressed me as the type of person who would not hesitate to complain or terminate a retainer if he thought that he was not getting timely service. There are references to the monthly payments of $18,000 and the purchase of the tavern in the suspicious correspondence, which, I am satisfied, had they been sent, would have elicited a timely response from Mr Maley. 62There is another odd feature of the file in that it contains a letter from R J Thomas, solicitor, dated 19 December 2001 which has apparently been signed by Mr Thomas. It bears the Blazai stamp and represents that the letter was received on 20 December 2001. However it contains a typographical error which appears to have been corrected on a subsequent version. It was put to Mr Thomas that he may have given Mr Loiero a signed version of what he proposed to send to Mr Maley but not in fact sent it. Subsequently he might have realised that there were errors in the letter which needed to be corrected and sent a corrected version to Mr Maley. That the uncorrected version is on the Maclarens file, with the Blazai stamp, leads to the inference that this document, too, was placed on the file after Mr Loiero had collected it from Mr Maley. 63It was put on behalf of the plaintiff that it was glaringly improbable that the suspicious documents could have been prepared in the four days between 17 December 2001, when Mr Loiero collected the file from Maclarens, and 21 December 2001, which was the latest date on which he could have delivered it to his new solicitors, R J Thomas, since that was the day their offices closed for Christmas. 64First, I do not consider it to be particularly unlikely that this correspondence, voluminous as it was, could be prepared in four days. Even if the file was delivered and reviewed by Mr Thomas on 19 December 2001, as he asserted in a letter of that date to Mr Harley, this would have been sufficient time to prepare the correspondence. 65Secondly, I do not accept that the file was necessarily delivered to R J Thomas on 21 December 2001, or that if it was, it was not uplifted by Mr Loiero subsequently. Mr Thomas had no documentary record of when the file had been received or what had been done with it on receipt. He was particularly vague in his oral evidence about when the file had come into his possession. 66Thirdly, I do not accept that preparation of these false documents did not commence prior to 17 December 2001. Mr Loiero impressed me as someone who would prefer to find a financial remedy for his own misadventures and is unconcerned, as these proceedings amply demonstrate, about the means he employs to further his ends. Once it appeared that the sale of the Property would not proceed as envisaged, he may well have begun preparing his case against Mr Maley and this may have occurred prior to the meeting of 17 December 2001. After all, he had been telling others, including Mr Nash, that Mr Maley was at fault prior to that day, although there was no justification for such an allegation. 67Whether the documents were added and the Blazai stamp applied by Mr Loiero or by someone else on his behalf does not emerge from the evidence. However, Mr Loiero is the only person with any apparent interest in the matter. I am satisfied either that he tampered with the file by adding the suspected documents or that he directed someone else to do it. 68He also removed salient documents, including Mr Maley's letter of 6 August 2001, and added pink documents, which were not on the file when it was in Mr Maley's possession. 69The plaintiff sought to fortify its case that certain documents had been sent by reference to facsimile records which showed, in some instances, that letters had been sent by facsimile on the dates which corresponded with the dates on suspicious documents. In the normal course, such records could reasonably be regarded as corroboration that certain documents were sent by facsimile at certain times. However, I have no confidence that the letters that correspond with the facsimile records were the letters identified by Mr Loiero. 70I find that after Mr Loiero obtained the file from Mr Maley he set about fabricating documents with a view to constructing a case against Mr Maley. He realised that the transaction had gone sour, and that he would not make the money he hoped to make from it. He therefore, in a dishonest and opportunistic way, sought to take advantage of Mr Maley's precipitate return of the file without making a photocopy. 71Not only did Mr Loiero fabricate correspondence from the plaintiff to Mr Maley but, in an attempt to give verisimilitude to his version, he also applied a "received" stamp to the correspondence before inserting it in apparent chronological sequence on the file. To this end he procured a stamp which resembled, at least to an eye not particularly attuned to deceit, the Maclarens stamp that appeared on actual correspondence within the file. 72But he did not stop there. He also added documents in pink paper to the file. He may have seen such copy documents on other solicitors' files and thought that they, too, would fortify his assertion that the file that he had tampered with was authentic. I accept Mr Maley's evidence that Maclarens did not use pink paper. 73However, in both these endeavours, he showed a lack of appreciation of the investigation that would be conducted on behalf of Maclarens to resist what Mr Maley knew to be a false claim. 74It was for the plaintiff to establish on the balance of probabilities that the suspicious documents were in fact sent to Maclarens on or about the dates they bear: s 140 of the Evidence Act 1995. The plaintiff has not discharged that onus. Had I considered the probabilities to be equal, or less than equal, the defendants would have been entitled to succeed, even if I had not been persuaded that Mr Loiero had tampered with the file: Hammoud Bros Pty Limited v Insurance Australia Limited [2004] NSWCA 366 at [31]-[33]. In establishing the findings of fact that I have made above, Maclarens has discharged an onus which is greater than the one it bears. Nonetheless, since Maclarens has discharged that onus it is appropriate that I record the findings I have set out above.

The termination of the contract for sale of the Property 75Gateway purported to terminate the contract for sale of the Property on 23 January 2002. The plaintiff was unable to complete the purchase of the Enfield Tavern and incurred expenses arising from interest charges on facilities which it had obtained on the basis that the sale would go through. It attempted to sell the Property unsuccessfully. The plaintiff went into administration. Its administrator eventually sold the Property to an entity controlled by Mr and Mrs Palasty for $2.5m pursuant to a contract entered into on 8 July 2003 and which settled on 14 October 2003. 76Colliers valued the Property for the eventual purchaser as at 8 August 2003 for $5m on an "as is with Development Approval" basis. 77Laing & Simmons valued the Property as at 18 February 2004 on an "as is with Development Approval" to be $6.6m.

Mr Maley 78It is apparent from the findings of fact set out above that I accept the evidence of Mr Maley. He did not overstate his recollection. He was careful in giving evidence about a transaction that occurred more than eleven years ago. Most importantly, his evidence is consistent with the objective facts and the logic of events.

Mr Palasty 79I accept Mr Palasty's evidence generally. I accept his evidence about the side deal which had been reached between him and Mr Loiero prior to exchange of contracts and the commercial logic which underpinned the arrangement itself and the need to conceal it from persons such as Mr Maley. 80The plaintiff endeavoured to make a substantial attack on Mr Palasty's credit and insinuated, in the course of cross-examination, that he was an unscrupulous and reprehensible character who could not be believed. Furthermore it was put that his evidence about the side deal did not appear in the affidavit which was filed on Mr Palasty's behalf when he was a party to the proceedings, as fifth defendant, and that it ought be inferred accordingly that it was a recent invention. I do not accept this submission. 81In my view, Mr Palasty was understandably circumspect about deposing to the side deal in his affidavit of 4 November 2009. It was an arrangement which, although apposite to the commercial interests of the plaintiff and Gateway and their principals, Mr Loiero and Mr Palasty, at the time, tended to place both participants in a poor light. Furthermore, at the time he swore the affidavit, Mr Palasty was a party to the proceedings and therefore exposed to the risk of a judgment against him. 82Since swearing the affidavit, Mr Palasty has lost any financial or other interest he might have had in the outcome of these proceedings because he was made bankrupt. The plaintiff indicated on the first day of the hearing that he no longer proceeded against Mr Palasty. Since he is now relevantly disinterested in the proceedings, Mr Palasty's evidence is no longer affected by motive and is, in my view, credible.

Mr Loiero 83It is apparent from the findings I have already made that I found Mr Loiero's evidence to be untruthful. He was evasive about his dealings with Mr Palasty and denied that he spoke to Mr Palasty on an earlier occasion about the sale of the Property. He said, unconvincingly, "I'm a very private guy." He blamed his solicitors for what was, and was not, in his affidavit. He sought to minimise the role he played in the transaction and the extent to which the contract was negotiated by him with Mr Palasty. 84The following passage provides an illustration of this: "Q. I thought you agreed with me a moment ago that you were dealing directly with Mr Palasty about these matters? A. No, sir. I said to you that when he put the proposal to me and I was considering his proposals, and but again, I needed to be at all times - no matter who I discussed things with, I needed to go to a lawyer, the lawyer has to prepare a contract. The lawyer has to be comfortable that whatever the person is putting to me, that I'm protected, and then I leave it in the lawyer's hands from that point." 85Mr Loiero denied that he knew anything about the financial difficulties that Mr Palasty was experiencing and also that he was keen to have the contracts exchanged so that he could provide the contract to his bank. His hyperbole in the following passage was inherently incredible, in the circumstances of the transaction as I have found it to be: "Q. And what I am suggesting is that you told him on being told of that issue that he had, that is, that he couldn't provide a straight forward exchange at ten per cent, that your bank was only interested in exchange? A. No, sir. If Mr Palasty would have told me about the, anything to do with ANZ bank drama or seizing of funds and stuff, I would have heard those words. I would have run for the hills." 86When he was cross-examined about the suspicious documents and the inconsistencies between them and the objective probabilities, he sought to excuse the discrepancies with such excuses as: "I am not the greatest letter writer." And: "Yeah, there is a lot to hold in my head. Yes, I am not real sure." 87His evidence that he did not know that the deposit had not been paid was false to his knowledge. He admitted that he had received Mr Maley's letter of 6 August 2001. 88I do not accept Mr Loiero's evidence except where it is corroborated or amounts to a statement against interest.

Conclusions 89I am satisfied that Mr Maley's version of events and his recollection as to which documents were on his file when he terminated the plaintiff's retainer is correct. It is corroborated by the objective circumstances and also by indications on the "added" documents that they were not received by him. I consider that there was no want of reasonable care on his part in the course of his retainer, having regard to his instructions and to the surrounding circumstances. 90Further, any loss suffered by the plaintiff through the circumstance that the sale of the relevant property was not ultimately settled at the agreed price was not as a result of anything Maclarens did, or failed to do. I am not satisfied that the contract for sale of the property was a bona fide transaction; rather, it was a document prepared and executed for the purposes of misleading others, including financial institutions, into believing that the plaintiff's property had a certain value and that certain funds would be realised from its imminent sale. 91Accordingly, for the reasons given in more detail below, there will be judgment for the defendant.

Alleged negligence or breach of contract of retainer 92Although the acts giving rise to the alleged breach of contract of retainer and negligence occurred before the commencement of Part 1A of the Civil Liability Act 2002 (on 6 December 2002), those provisions have application to civil liability arising before their commencement: Sch 1, cl 6(1). Part 1A applies to any claim for damages for harm resulting from negligence, regardless of whether the claim is brought in tort or in contract: s 5A. 93The contract of retainer is sufficient to provide completely and exclusively for the legal rights and obligations of the parties in relation to their contractual dealings: Astley v Austrust Limited [1999] HCA 6; 197 CLR 1 at [47], per Gleeson CJ, McHugh, Gummow and Hayne JJ. Mr Maley had no duty to advise on matters going beyond the limits of his retainer: Heydon v NRMA Limited [2000] NSWCA 374; 51 NSWLR 1 at [364]. Accordingly the scope of the retainer is the principal matter that delineates the scope of the duty of care. 94The retainer is to be viewed in the light of the surrounding circumstances, including that the plaintiff, through Mr Loiero, not only reserved the right to conduct negotiations in the absence of Mr Maley but also negotiated a side deal which was at odds with the documents which he had instructed Mr Maley to draft and exchange. 95Mr Maley's retainer, for reasons given above, was limited to documenting the contractual relationship between the plaintiff and the purchaser of the Property in accordance with his instructions and arranging for and effecting exchange of contracts if and when conditions for exchange had either been fulfilled or he had been instructed to exchange notwithstanding their non-fulfilment. He was obliged to exercise reasonable care and skill and to act in accordance with his instructions as long as he was reasonably satisfied that the client understood the implications of giving such instructions. 96The commercial experience of the client is of significance in determining whether the solicitor's conduct in assessing whether the client understands the implications of particular instructions. Mr Loeiro was an experienced property developer who well knew the value of a contract that had apparently been exchanged and which recorded that a deposit had been paid. He was also attuned to the need to conceal from a solicitor matters which were at odds with a written agreement, lest the solicitor's professional obligations lead him or her to disclose that which the client wishes to keep secret. 97Mr Moses gave expert evidence in the plaintiff's case. The authorities establish that while expert evidence as to the duties of solicitors is admissible, it is not necessary either to establish negligence or refute it: Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 at 654, per Kirby P. 98Mr Moses gave opinion evidence that even if the facts were as Mr Maley deposed them to be, as I have found, Mr Maley was nonetheless negligent in some respects. 99In the course of Mr Moses' evidence, it was apparent that he was confounded by the transaction and could not understand why any client could sensibly instruct his solicitor to exchange in the absence of a deposit and in the absence of guarantees. The commercial logic of the transaction, as I have set out above, escaped him, in part because the basis of his evidence did not include the side deal which was established by Mr Palasty's evidence. 100I formed the view that because Mr Moses found the transaction so unusual as to be inexplicable, he was unable to accept that any solicitor advising the plaintiff could reasonably be satisfied that his client understood the implications of giving the instructions to exchange although no deposit was paid. Nonetheless Mr Moses accepted that had Mr Maley refused to exchange in the face of Mr Loiero's unambiguous instructions he might have exposed himself to a claim on that basis alone. 101Mr Moses gave evidence as to what he considered to be standard practice. However in circumstances where the transaction was, in his experience, unique, recourse to standard practice was unhelpful. Nonetheless Mr Moses accepted that a deposit of the size provided for under the contract would, if paid, have been sufficient to protect the plaintiff's interests in the event of default by the purchaser. In these circumstances, it was not necessary for Mr Maley to concern himself with the value of the purchaser, or whether there were personal guarantees of performance. 102I accept Mr Maley's evidence that it is not unusual in a transaction like the subject transaction for the company entity intended to purchase the property to change prior to exchange. I also accept Mr Maley's evidence that he placed significant weight on the size of the deposit which he understood, until specifically instructed to the contrary, was to be paid. 103I do not consider that Mr Moses' evidence adequately took into account the experience of the plaintiff as a property developer and the degree to which the plaintiff and Mr Palasty chose to negotiate important terms of the contract directly between themselves, without recourse to Mr Maley. It was not necessary, in my view, for Mr Maley to point out matters to Mr Loeiro which would have been perfectly obvious to Mr Loeiro. Duties are imposed on solicitors to protect clients, not to protect solicitors against clients who neither want, nor require, such protection. 104I do not consider that Mr Maley had any duty to advise the plaintiff that Cerza and Gateway had been recently incorporated or that they were companies of which John and Judith Palasty were not office holders. Mr Loiero was apparently untroubled by the identity of the corporate vehicle nominated by Mr Palasty to be the purchaser. Since Mr Loiero was aware of Mr Palasty's financial difficulties he would have known that there was little, or no, point in obtaining personal guarantees, even in the unlikely event that they had been forthcoming. Both the plaintiff and Mr Palasty were engaged in a speculative venture; for a time they shared an interest in executing transaction documents which said one thing, while at the same time, having an antecedent agreement between them which they regarded as binding. Guarantees formed no part of this. 105Nor do I accept that it showed any want of reasonable care on the part of Mr Maley that he did not ensure that Nexus Realty received $1.1m in accordance with the contract. He had been specifically instructed to exchange although he did not receive any money on exchange. In all the circumstances he was bound by his instructions since they came from Mr Loiero whose commercial sophistication entitled him to subject the plaintiff to such risks as he considered worth taking for the chance of financial gain. 106I reject the proposition that Mr Maley owed a duty to advise the plaintiff concerning the alleged failure of Gateway to pay the extra consideration of $18,000 per month due under special condition 41 of the contract. Mr Loiero had washed his hands of Mr Maley after 6 August 2001. He did not need Mr Maley to tell him what the contract said, since he had instructed him as to its terms. 107The plaintiff has not established that Mr Maley was negligent or in breach of the contract of retainer. In my view, Mr Maley took all reasonable precautions to protect the plaintiff from the foreseeable risk of harm that a reasonable solicitor in his position would have taken. 108Although it is not necessary that I determine causation or damage, I shall proceed to make findings in respect of these matters: Wolfenden v International Theme Park Pty Ltd (Trading As Wonderland) and Anor [2008] NSWCA 78 at [6], per Giles JA.

Causation of loss 109The plaintiff bears the onus of proving causation on the balance of probabilities; in other words, that had the "correct" advice been given he would have done something different: s 5D and s 5E of the Civil Liability Act and Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 at 355, per Mason CJ, Dawson, Toohey and Gaudron JJ. 110The plaintiff's case is, in substance, that Maclarens' negligence caused him to lose the chance of selling the Property for $5.3m. In order to determine whether the plaintiff has suffered any loss as a result of Maclarens' (assumed) default it is necessary to determine, on the balance of probabilities, first: what the plaintiff would have done but for Maclarens' default: Heenan v Di Sisto [2008] NSWCA 25, at [30]-[31] (Heenan). 111The second step is to determine what the third party, in this case, Gateway/Mr Palasty would have done in the event that, for instance guarantees were insisted upon or steps were taken to ensure payment of the deposit monies, including the $1.1m component due to held by Nexus Realty. 112I am satisfied that, if Mr Loeiro had been advised to obtain guarantees before exchanging without a deposit, he would have rejected that advice. If he had been advised not to exchange without a deposit, he would have rejected that advice. He would not have provided instructions to do anything in respect of the deposit monies, including the $1.1m to be paid to Nexus Realty, since he knew that there were no cleared funds available and that the matters were to be worked out directly between the parties). 113Mr Loiero would not have avoided entering into the contract or terminated it had he known of the true state of affairs since he did know the true state of affairs: namely that Mr Palasty had no access to funds to provide a deposit and was only prepared to have Gateway execute a contract which stipulated the purchase price of $5.3m because Gateway was not at risk of losing a deposit and no guarantees had been given. It was only when Mr Palasty indicated his intention not to settle and threatened to sue in December 2001, at a time Mr Loiero was not providing instructions to Mr Maley, that Mr Loiero's position changed. 114There is no evidence that establishes that even if Mr Loiero had caused the plaintiff to terminate the contract and pursued its rights and remedies under the Gateway contract, he would have been in a position to recover anything against Gateway. It is common ground that Gateway was a $2 company. 115Furthermore, I do not accept that the Property was, as at August 2001 when contracts for its transfer were exchanged, worth $5.3m. The contract did not represent the true agreement between the parties, at least as to the deposit. I am not satisfied that the consideration of $5.3m was not subject to a side deal as well as the deposit. It suited Mr Loiero's purposes for the contract to stipulate $5.3m as consideration, so that he could mislead Westpac as to the value of the Property. 116The valuations that were tendered by the plaintiff in support of the value of the Property are dated at around the time or subsequent to its eventual sale for $2.5m. The price which the plaintiff's administrator was able to obtain for the Property on the open market is a more reliable indication of its value than the valuations obtained for the purposes of applications for finance. 117For these reasons I am not satisfied that the plaintiff ever had a real chance of selling the Property for $5.3m. 118In any event, the plaintiff is not entitled to damages with respect to monies paid to Westpac in respect of the facility entered into for the purposes of the Enfield Tavern purchase. Mr Maley was not made aware of the tavern purchase and there is no reason why he should have realised that such a loss might result from the failure of the St Marys transaction to settle. The damages are, accordingly, too remote to be recoverable even if the plaintiff were otherwise entitled to damages.

Orders 119For the foregoing reasons, I make the following orders: (1)Judgment for the first to fourth defendants. (2)Subject to order (3) below, order the plaintiff to pay the first to fourth defendants' costs of these proceedings. (3)Direct that any party who, or which, seeks a costs order different from that set out in (2) make such application in writing to my chambers within seven days of these reasons. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 November 2012