Consolidated Lawyers Ltd v Abu-Mahmoud; Abu-Mahmoud v Consolidated Lawyers Ltd

Judgment

1. BATHURST CJ: I agree with Macfarlan JA.
2. MACFARLAN JA: In these proceedings Mr Mohamed Abu-Mahmoud, the respondent, claims damages from a number of lawyers, the appellants, arising out of their allegedly negligent advice. The appellants are persons or entities for whom, or with whom, Mr Abdul Salem Kassem, the second appellant, worked at different times. The proceedings have been conducted upon the basis that the other appellants have the same liability, if any, as Mr Kassem.
3. Mr Abu-Mahmoud is a property developer who from time to time invested jointly with Mr Mohammad Trad and Mr Mohamed Skaf. In May 2004 Messrs Abu-Mahmoud, Trad and Skaf, through their company Fairchild Development Pty Ltd ("Fairchild"), of which they were directors, purchased for redevelopment a property in Fairfield, Sydney, upon which a shopping centre complex was situated. The $7.55 million purchase price was funded in part by a secured loan made by St George Bank and guaranteed by the three individuals.
4. In December 2005 Mr Abdul Antar approached Mr Abu-Mahmoud about leasing a fruit and vegetable shop in the Fairfield shopping centre. Subsequently, a facsimile of 17 February 2006 from Mr Antar setting out the terms of a proposed lease was signed by Mr Abu-Mahmoud and Mr Trad. Communications concerning the execution of a formal lease continued into 2007, culminating in Mr Antar lodging a caveat in relation to dealing with the property on 4 May 2007. This claimed a leasehold interest arising out of the signed facsimile of 17 February 2006.
5. In the meantime, NorthAxis Pty Ltd ("NorthAxis"), a new company controlled by Messrs Abu-Mahmoud and Trad, entered into an agreement with Fairchild to purchase the Fairfield property for $4.8 million, subject to existing tenancies. This was a step in the implementation of advice, referred to below, that Mr Kassem allegedly gave to Mr Abu-Mahmoud about a means by which Mr Abu-Mahmoud (and his partners) could avoid responsibility for an approximately $400,000 Goods and Services Tax ("GST") debt that Fairchild owed to the Australian Taxation Office ("ATO"). Also pursuant to Mr Kassem's advice, Fairchild's members also placed it in voluntary administration on 16 November 2007. Upon becoming aware of the voluntary administration, St George Bank, on 28 November 2007, appointed Receivers and Managers of Fairchild on the basis that the voluntary administration constituted an event of default under the bank's charge. On 13 December 2007 Fairchild's creditors resolved to wind it up.
6. On 29 February 2008 NorthAxis received an offer from Challenger Ltd to provide a loan of $3.75 million to assist it in completing the Fairfield property purchase. Thereafter, Mr Abu-Mahmoud negotiated with the Receivers, acting on behalf of the bank, about the settlement of the purchase contract, with a view to Fairchild paying out the bank and the bank releasing the guarantors. On 27 March 2008, the bank indicated that it would be prepared to accept $4.87 million, rather than the then outstanding $5.1 million, in full settlement of its debt. Negotiations continued and on 8 July 2008 Mr Abu-Mahmoud offered the bank $4.5 million inclusive of GST as full settlement, on the basis that Mr Antar remained as a tenant.
7. The contract for sale between Fairchild and NorthAxis was ultimately abandoned and on 23 March 2009 Fairchild's receivers sold the Fairfield property to Mr Antar for $4.3 million.
8. The bank subsequently obtained judgment against Mr Abu-Mahmoud on his guarantee in the amount of $2,476,788.68, representing in large measure the difference between the bank debt and the proceeds of sale of the Fairchild property to Mr Antar. Taking into account other lesser sums, the details of which were not disclosed to the Court, Mr Abu-Mahmoud's loss was assessed at $2,335,593.18 and judgment was entered in the present proceedings in his favour against the appellants for that amount.
9. In his judgment of 18 May 2015 Garling J, sitting in the Common Law Division of the Court, found that Mr Kassem gave Mr Abu-Mahmoud negligent advice (the "restructure advice") that led to Mr Abu-Mahmoud having NorthAxis agree to purchase the Fairfield property from Fairchild and ultimately led to Mr Abu-Mahmoud suffering the losses reflected in the judgment entered in his favour against the appellants ([2015] NSWSC 547). His Honour rejected Mr Abu-Mahmoud's case that after Mr Kassem gave the restructure advice, he gave further advice that was causative of Mr Abu-Mahmoud's loss. On appeal, the appellants challenge his Honour's findings that the restructure advice was negligent and that Mr Abu-Mahmoud's loss was caused by that negligence. In addition, Mr Abu-Mahmoud seeks leave to appeal on a question of costs decided by the primary judgment in his subsequent judgment of 26 June 2015 ([2015] NSWSC 833).
10. For the reasons that appear below, I consider that both the appellants' appeal and Mr Abu-Mahmoud's application for leave to appeal should be dismissed with costs.

The restructure advice

1. The primary judge accepted that in mid-November 2006 Mr Kassem gave Mr Abu-Mahmoud advice to the following effect and that this led to NorthAxis being incorporated and it entering into a contract dated 15 October 2007 to purchase the Fairfield property from Fairchild. The advice was given in the context of discussions between Mr Kassem and Mr Abu-Mahmoud about the $400,000 tax debt. "(a) Trad and you should incorporate a new company [NorthAxis Ltd]. (b) Northaxis Ltd should purchase Fairchild Development Ltd's only significant asset, namely the Fairfield Property. The sale price should be as low as possible, provided that it is still commercial, otherwise, one way or another, the sale might be undone. (c) After the sale, Trad and you should resign as directors of Fairchild Development Ltd, and instead appoint someone as sole director who has nothing to lose. (d) After the sale, the incoming director places Fairchild Development Ltd into liquidation so that it is then wound-up. (e) The effect of winding-up Fairchild Development Ltd is that Trad and you do not have, and could not have in future, any personal liability for the $400,000 tax liability" (Mr Abu-Mahmoud's Affidavit, 30 July 2012, pp 15-16).
2. His Honour found that Mr Kassem owed Mr Abu-Mahmoud a conventional solicitor and client duty of care which, by giving this advice, he breached in two respects.
3. First, "Mr Kassem made no reference to the fact that the ATO was likely to issue notices making the directors personally liable" for the $400,000 worth of tax owed in respect of GST (see s 57, now s 444 - 10, 444 - 15, of the Taxation Administration Act 1953 (Cth) (Judgment [327]). None of the parties suggested in argument on appeal that Mr Kassem's advice that the directors resign affected his Honour's conclusion.
4. The appellants did not challenge the finding that Mr Kassem was negligent in this respect but instead contended that the negligence did not cause any loss because, as it transpired, no such notices were issued by the ATO.
5. I reject this contention. As the terms of the advice made clear, the purpose of the scheme that Mr Kassem proposed was to enable Mr Abu-Mahmoud to avoid responsibility for paying the outstanding GST, or at least his share of it. The inference that the advice led to NorthAxis' entry into the scheme is readily drawn. The question is then whether entry into the scheme led to any recoverable loss. It is irrelevant that the ATO did not subsequently issue notices.
6. The appellants complained that the primary judge did not give any reasons for finding, and indeed did not expressly find, that if Mr Kassem's restructure advice had not been given, Mr Abu-Mahmoud would not have implemented the scheme. However, at least so far as the first aspect of negligence is concerned, neither reasons nor an express finding was required, the conclusion being obvious. Because the scheme's purpose was to avoid the GST liability, the absence of advice by its proponent that it would achieve that purpose would have rendered the scheme pointless.
7. Entry into the scheme led to a number of foreseeable consequences, including the bank treating the company's administration as an event of default under its charge and consequently appointing receivers. Subject to the particular causation arguments that the appellants raised on appeal, dealt with below, the losses flowed foreseeably from the implementation of the scheme. They were or should have been within Mr Kassem's reasonable contemplation (see Kenny & Good Pty Ltd v MGICA (1992) Ltd [1999] HCA 25; 199 CLR 413 at [57] per McHugh J).
8. Certainly, the scheme was intended to result in the discharge of Fairchild's (and therefore the guarantors') liability to the bank but there was also a reasonably foreseeable possibility that, given the tight financial circumstances of Mr Abu-Mahmoud and his associates referred to below, the bringing about of an event of default (and thus the conferring of immediate rights of action on the bank) might thwart the achievement of that goal.
9. Secondly, the primary judge held that Mr Kassem's advice was negligent because of the absence of a reference "to the likely actions of the secured creditor, St George Bank, when the borrower, Fairchild, was put into voluntary administration and then liquidation" (Judgment [327]).
10. On appeal, the appellants argued that this advice was commercial advice which Mr Kassem had no obligation to give. Whether that is so in relation to assessing the probabilities of the bank acting as it did need not be addressed. This is because embodied in his Honour's finding is the proposition that Mr Kassem failed to advise Mr Abu-Mahmoud that the proposed scheme would, by reason of Fairchild's entry into administration, give rise to an event of default under the bank's charge which would entitle it to require immediate payment of its debt and to appoint receivers. This was plainly a legal matter that Mr Kassem should have brought to Mr Abu-Mahmoud's attention.
11. The appellants submitted that Mr Kassem had no obligation to give the advice because Mr Abu-Mahmoud already knew that which Mr Kassem was required to advise. To support this submission they referred to Mr Abu-Mahmoud's concessions in cross-examination that he knew that if there was a default in payment of monies under the charge, the bank could take action under it (Transcript pp 146-7). However, neither that evidence, nor any other evidence to which this Court was taken during the hearing of the appeal, indicated that Mr Abu-Mahmoud knew prior to the scheme being implemented that it would, irrespective of whether payments were kept up, give rise to an event of default under the charge entitling the bank to call for immediate payment of its debt and to appoint receivers.
12. For these reasons, the appeal fails so far as it challenges the primary judge's findings in relation to Mr Kassem's negligence.

Post caveat advice

1. Although neither party puts the primary judge's rejection of the other allegations of negligence against Mr Kassem in issue on appeal, it is necessary to refer to them as his Honour's findings concerning them are of some relevance to the causation issues addressed below.
2. The second alleged breach of duty (the first being the restructure advice) was, effectively, that after Mr Antar's caveat was lodged and before Fairchild agreed to sell the Fairfield property to NorthAxis, Mr Kassem orally advised Mr Abu-Mahmoud that Mr Antar's caveat would have to be removed if the sale were to settle. The third alleged breach was to the effect that when the contracts for sale were exchanged on 15 October 2007, Mr Kassem failed to correct his earlier advice concerning Mr Antar's caveat. The fourth alleged breach was that Mr Kassem, on 27 April 2008, gave advice to the effect that whilst Mr Antar did not have to vacate the Fairfield property to enable the sale contract to complete, it was necessary for Mr Antar's caveat to be removed if that were to occur. The fifth alleged breach was that Mr Kassem gave similar advice on 2 May 2008. The sixth alleged breach is not of present relevance.
3. The primary judge rejected the second and third allegations of breach on the basis that between 27 May and 4 June 2007 Mr Kassem advised Mr Abu-Mahmoud that "Mr Antar was entitled to a lease, and one should be entered into with him, and further that Antar's caveat would not prevent settlement of the proposed contract" (Judgment [340]). His Honour therefore held that the alleged advice was not given and that Mr Kassem in fact gave advice to the contrary.
4. The primary judge rejected the fourth to sixth allegations of breach for the following reasons: "368 … [E]ven if the advice alleged to constitute each [of] the fourth to sixth breaches of duty was given, and there is a dispute about that, it was clearly given in circumstances where it had no direct effect upon the instructions given by Mr Abu-Mahmoud to Mr Kassem which did not reflect the advice he was being given by Mr Kassem from time to time. The context also clearly was that the circumstances were fluid and changing [and] Mr Abu-Mahmoud was seeking to exploit the opportunities which presented from time to time to obtain more favourable terms. He was also seeking to ensure that Challenger, the provider of the finance for the purchase, was not dissuaded from their offer of finance. He knew that if a Notice to Complete was issued, he had to be in a position to complete the contract if called upon. In short, he and Mr Kassem were confronted with a complex set of circumstances including the unsuccessful desire of the Receivers to remove the caveat, a process which was entirely under the control of the Receivers. 369 Whilst it is entirely possible that different advice may have been given from time to time by Mr Kassem, I am not prepared to find that such advice as was given, if it accorded with what was alleged, was negligent and in breach of his duty of care. Even if it was, it is clear that the course which Mr Abu-Mahmoud took, was one which he charted without relying on the advice of Mr Kassem, and which he thought, given the position which existed from time to time, was in his best commercial interests.

The pleadings

1. Paragraph 68 of Mr Abu-Mahmoud's Statement of Claim alleged that his loss, principally constituted by the judgment against him on his guarantee of the St George Bank debt, would not have been suffered if Mr Kassem had not given the allegedly negligent advice. He asserted, inter alia, that he lost the opportunity to sell the Fairfield property to a Mr Alf Chehab for $5 million (which would have enabled the payment of substantially the whole of Fairchild's debt to the St George Bank) and, alternatively, lost the opportunity to complete the sale of the Fairfield property to NorthAxis "at a price that discharged Fairchild Development Ltd's liability to St George arising out of the St George Loan". The latter allegation presumably assumed that that completion would have occurred in time to take advantage of the bank's agreement to accept $4.87 million in full discharge of its debt.
2. The final form of the appellants' Defence denied paragraph 68 of the Statement of Claim and alleged in the alternative that Mr Abu-Mahmoud "failed to exercise reasonable care for his own interests" and was therefore guilty of contributory negligence. The only particular of this remaining, from earlier forms of the Defence, in the final Defence was an allegation that Mr Abu-Mahmoud failed to make any reasonable attempt to have Mr Chehab purchase the Fairfield property from Fairchild. In an earlier form of the Defence, the appellants had alleged that Mr Abu-Mahmoud had failed to mitigate his loss by not exercising his rights of contribution from his co-guarantors.

Primary judge's findings

1. The primary judge held that Mr Abu-Mahmoud's losses flowed from Mr Kassem's restructure advice because that advice led to the restructure scheme being implemented and, absent that scheme, there would not have been an event of default under the bank charge entitling it to treat its debt as immediately due and payable and to call upon Mr Abu-Mahmoud's guarantee of it (Judgment [374], [381]-[383]). After reviewing the evidence concerning Fairchild's financial position, his Honour rejected the appellants' argument that Fairchild "was heading inexorably toward liquidation" in the period prior to November 2007 and found that "although the financial position of Fairchild was difficult in the period from 1 July 2006 to November 2007, it was not likely that Fairchild would in that period have ended up in voluntary administration or liquidation" (Judgment [402], [404]).
2. Moreover, his Honour held that although "Mr Abu-Mahmoud and his fellow investors wanted to hold onto the Fairfield property because they anticipated that a significant profit would be realised if the development could go ahead to completion" (Judgment [394]), they had other options. In particular, they could have sold the Fairfield property to Mr Chehab for $5 million, providing enough money to enable the St George Bank debt to be discharged (Judgment [395]-[399]). Further, his Honour was satisfied that there were means by which the tax debt could have been paid or otherwise taken care of (Judgment [400]-[401]).
3. His Honour then noted that although the appellants had "originally pleaded that the plaintiff had failed to mitigate his loss, in written submissions at the conclusion of the hearing, the defendants did not press this defence" (Judgment [406]) and continued: "407 This position bespeaks an acceptance that even though there may be criticisms of the way in which the plaintiff went about: (a) trying to organise funding for NorthAxis to purchase the property, and failing so to do; (b) giving instructions about the attitude which NorthAxis should take with respect to the position of Mr Antar, and whether it ought require the Receivers to attempt to remove the caveat; and (c) taking any step towards assisting the Receivers to obtain any higher bid at the public auction of the Fairfield property, his actions cannot be regarded as unreasonable or a failure to mitigate his losses."
4. His Honour then rejected the appellants' contributory negligence defence (see [28] above) on the basis that they had not shown that Mr Abu-Mahmoud did not introduce Mr Chehab to the Receivers (Judgment [415]).

The grounds of appeal

1. The appellants' ground of appeal concerning causation was as follows: "3. The Primary Judge erred in finding that the breach of duty by the Appellants caused any loss to the Respondent. Particulars (a) The failure by Salem Kassem to refer to the risk that the ATO may issue notices to the directors personally was not a risk that came home because the ATO did not issue such notices; (b) If Salem Kassem in giving the restructure advice had made reference to the likelihood of the bank exercising its powers of sale upon the liquidation of Fairchild Development Pty Ltd, there was no or insufficient evidence that the Respondent would have acted differently; (c) In the alternative, even if the Respondent had not implemented the restructure advice, the likelihood was that Fairchild Development Pty Ltd would have been placed into liquidation in any event."
2. I have already addressed and rejected the allegation contained in Particular (a) (see [13]-[15] above).
3. Particular (b) is not significant as I have already concluded that, but for the negligence referred to in Particular (a), Mr Abu-Mahmoud would not have implemented the scheme. It is therefore irrelevant whether, but for the negligence in Particular (b), the same result would have followed. I do not however see any reason why the primary judge's assumption that it would have was erroneous. If, as the appellants contended on appeal, Mr Abu-Mahmoud had known that the scheme would automatically put Fairchild into default and enable the bank to call up the loan and recover its debt under the guarantee, the causative effect of Mr Kassem's failure to advise as to the probabilities of the bank immediately enforcing its rights in those circumstances might be in question but the evidence did not demonstrate that Mr Abu-Mahmoud knew what the appellants contended he knew (see [21] above). It can readily be inferred that had he known that he would be creating an immediate default, he would have regarded that knowledge as a highly significant and likely reason not to enter into the scheme.
4. So far as Particular (c) is concerned, the primary judge dealt in detail with the evidence relevant to whether Fairchild would have been placed into liquidation in any event. On appeal, the appellants did not engage in any detailed examination of that evidence, nor proffer any compelling reason for rejecting his Honour's conclusion.
5. For these reasons, the appellants' causation ground of appeal, as particularised, must be rejected.

The appellants' written submissions and oral argument

1. In addition to seeking to support the particulars contained in their Notice of Appeal, both the appellants' written submissions and oral argument advanced a further submission to the effect that "it was not the appointment of the receivers which caused the respondent to personally suffer financial loss but his own subsequent conduct in attempting to negotiate a reduced debt repayment to the bank and also to remove Mr Antar as a tenant … " (Written Submissions, [56]). Thus, they submitted that, in accordance with this Court's decision in Hudson Investment Group Ltd v Atanaskovic [2014] NSWCA 255, Mr Abu-Mahmoud's "independent unreasonable conduct" precluded a finding of causation in his favour (ibid, [57]).

Whether "independent unreasonable conduct" submission put at first instance

1. The appellants asserted on the appeal that although this argument had been put to the primary judge, his Honour had not addressed it. Assuming for the moment that this is correct, the appellants should, in my view, have applied to the primary judge pursuant to r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") to set aside or vary his Honour's judgment on the ground that he had not dealt with a significant submission that they had made. That course was particularly appropriate in the present case because there had been a lengthy hearing before the primary judge involving detailed evidence and submissions and the allegedly overlooked point required findings of fact possibly involving questions of credit to be made. The submission (still assuming it was in fact made) was not one that could conveniently be dealt with on appeal in the absence of findings by the primary judge.
2. I do not suggest that parties must always approach a primary judge if it appears that the judge has overlooked a significant point in formulating the Court's judgment. It is however a course that should be adopted in the absence of particular, valid, reasons for not doing so. The primary judge is almost always in a better position than an appellate court to decide an overlooked point and appellate courts are entitled to have the benefit of a primary judge's views about matters in issue on appeal. The requirement in s 56 of the Civil Procedure Act 2005 (NSW) to have regard to the "just, quick and cheap resolution of the real issues in the proceedings" strongly supports the adoption of this course in the absence of particular reasons for the point being taken directly on appeal.
3. As Mr Abu-Mahmoud contended that the argument had not in fact been put to the primary judge and should not be allowed to be put for the first time on appeal, I turn now to consider what relevantly occurred at first instance.
4. The appellants referred only to a portion of their opening, and to the following part of their closing address, to support their submission that the argument was put below: "There is one further submission, and it is a bit ill-informed, for which I apologise. It is a causation submission. That is that the tax advice, assuming it was given, did not cause any loss, the real cause was the caveat. I think this ties in with the submissions I made about the plaintiff instructing Kassem to grant Mr Antar the lease that Mr Antar wanted. It was really the subsequent decision by Northaxis not to grant Mr Antar that lease which caused the conveyance not to settle. The receiver had no objection to the lease being granted, because the conveyance would complete and the receiver would get his money. The receiver took the course it did because the appointment of the receiver gave Northaxis the right to rescind and a refund of the deposit. Both parties knew. It is what I referred to in opening as the commercial brinkmanship. I suppose, on the alternative case on damages, your Honour would need to determine the difference between the plaintiff's present position and the position that probably would have been the case if Northaxis had completed the contract. We say Northaxis wouldn't, because of the reasons we have given" (Transcript p 378).
5. The earlier submission to which counsel referred "about the plaintiff instructing Kassem to grant Mr Antar the lease that Mr Antar wanted" was to the effect that Mr Kassem's alleged advice that Mr Antar's caveat had to be removed in order for the sale contract to be completed was irrelevant "because Kassem had been instructed to grant a lease to Antar that Antar wanted, and the plaintiff knew that doing so would remove the caveat" (Written Submissions, [127]).
6. The appellants' counsel at trial (who did not conduct the appeal) used the expression "commercial brinkmanship" in his opening address on the first day of the hearing below in the course of describing the negotiations that occurred after Fairchild and NorthAxis entered into the contract of sale concerning completion of that contract, removal of Mr Antar's caveat and payment out of the bank. Counsel did not put in opening that Mr Abu-Mahmoud acted unreasonably and that that was the real cause of his loss. Rather, counsel concluded his description by saying: "So very broadly, post-exchange the issue between the parties would appear to be on causation could Northaxis have settled if my client had gone to Northaxis and said okay, you can do this, the caveat is not standing in your way, et cetera. My client also contends post-exchange that Northaxis would not have settled on the contract with Mr Antar in possession and having his rights under the agreement for lease. All of the contemporary documents suggest that Northaxis simply did not want Mr Antar to be in there for a term conforming with the term in the agreement for lease" (Transcript p 38).
7. This passage is concerned with the question of whether Mr Kassem's alleged advice given after Mr Antar's caveat was lodged (see the second to sixth alleged breaches at [24] above) was, if negligent, causative of Mr Abu-Mahmoud's loss. As I have noted, the primary judge rejected those allegations of breach and the alleged breaches were not put in issue on appeal. A fortiori, the question of whether the alleged breaches were causative is not in issue on appeal. The passage of the opening adress quoted above was not directed to the presently arising question of whether Mr Abu-Mahmoud's losses were caused by the first alleged breach of duty, being his advice to implement the restructure scheme.
8. Nor do I consider that the passage from the appellant's closing submissions quoted in [42] above made the point now sought to be made on appeal. In that passage, counsel asserted that the "real cause" of Mr Abu-Mahmoud's loss was "the caveat". He expanded by saying that NorthAxis' decision not to grant Mr Antar a formal lease prevented the sale to NorthAxis from settling.
9. This is different from the submission now made that Mr Abu-Mahmoud's loss was caused by his unreasonable conduct in, first, attempting to negotiate a reduced debt repayment to the bank and, secondly, attempting to remove Mr Antar as a tenant. Although it is closer to the latter than the former, the submission below focused on only one particular aspect of the dealings with Mr Antar, namely, the grant of a formal lease, and not on the broader questions of whether his alleged lease agreement should be recognised or whether the contract for sale should be settled notwithstanding the existence of the caveat. Further, the submission did not characterise Mr Abu-Mahmoud's conduct as unreasonable (see [42] above).
10. For these reasons, I do not consider that the references that the appellants gave to support their contention that the point they now seek to raise was raised at first instance, provide that support.
11. Furthermore, as evident from the appellants' decision not to refer this Court to them in this context, the appellants' written submissions on causation at first instance did not advance the point now sought to be raised.
12. In those written submissions, the appellants dealt first with the alleged causative effect of Mr Kassem's initial advice to Mr Abu-Mahmoud to enter into the restructure scheme. They sought to refute Mr Abu-Mahmoud's submission that, but for the scheme, Fairchild would have retained the Fairfield property or, alternatively, would have sold it for a sufficient amount to pay out the bank loan. The primary judge addressed and rejected their contention. They did not advance any alternative submission to the effect that the real cause of Mr Abu-Mahmoud's loss was his unreasonable conduct concerning Mr Antar's lease interest and the bank's debt.
13. As noted earlier, the advice Mr Kassem allegedly gave after Mr Antar lodged his caveat (the subject of alleged breaches two to six) and its consequences are not in issue on the appeal. It is nevertheless pertinent to note that the appellants did not, even in this presently irrelevant context, submit that the cause of Mr Abu-Mahmoud's loss was his unreasonable conduct. They submitted, first, that Challenger (NorthAxis' intended financier) would not have advanced funds to enable NorthAxis to settle if the caveat remained in place and that the caveat would not have been removed given NorthAxis' unwillingness to grant Antar a lease. Secondly, they submitted that NorthAxis was only willing to complete the contract if Antar was removed and, thirdly, that NorthAxis did not have the funds to enable it to complete the purchase. These submissions had some relationship to what is sought to be put on appeal but they fell short of raising, even in that different context, the question of whether Mr Abu-Mahmoud's failure to recognise Mr Antar's lease interest, or to grant him a lease, and his dealings with the bank constituted unreasonable conduct that broke the chain of causation.
14. The primary judge recognised the confined nature of these submissions in stating that no argument was "propounded that the plaintiff failed to act reasonably in seeking to minimise the loss which he had suffered" (Judgment [406]) and that that omission recognised that the various activities of Mr Abu-Mahmoud that his Honour identified could not be regarded as unreasonable or as amounting to a failure to mitigate his losses (see [31] above). The limited nature of the contributory negligence defence (see [28] above) is further evidence that this argument was not put.
15. I therefore conclude that the argument sought to be put on appeal was not advanced at first instance.

Whether the Court should permit the appellants to advance their unreasonable conduct argument for the first time on appeal

1. Authorities such as Suttor v Gundowda [1950] HCA 35; 81 CLR 418 at 438, Coulton v Holcombe [1986] HCA 33; 162 CLR 1 at 7-8 and Water Board v Moustakas [1988] HCA 12; 180 CLR 491 at 497-8 confirm that a party does not have an unrestricted right to present a new argument for the first time on appeal. The present point is not a discrete point of law which does not require factual findings. On the contrary, addressing the argument would require a detailed factual analysis which the appellants should have given the primary judge the opportunity to undertake. After undertaking that analysis his Honour would have been required to make an evaluative decision as to the reasonableness of Mr Abu-Mahmoud's conduct.
2. Further, it cannot be said that additional evidence could not have been called in response to the argument, and fairness demanded that any allegations of unreasonable conduct (if they were made) should have been put to Mr Abu-Mahmoud in cross-examination to give him the opportunity to respond to them. It was not suggested on appeal that this had occurred. Indeed, the fact that the appellants gave only the limited references noted above (see [42]-[44]) to establish that their point had been advanced at first instance indicates that he had not been given that opportunity.
3. The present is a prime example of a case in which parties should be held to be bound by the conduct of their legal representatives at first instance and precluded from presenting a new argument for the first time on appeal.

CONCLUSION ON APPEAL

1. For the reasons that I have given, the appellants are precluded from raising their unreasonable conduct causation argument for the first time on appeal. Further, as I have indicated, the remainder of the appellants' arguments, concerning issues of negligence and causation, should be rejected. As a result, their appeal should be dismissed with costs.

APPLICATION FOR LEAVE TO APPEAL ON COSTS ISSUE

1. By judgment of 26 June 2015 the primary judge rejected Mr Abu-Mahmoud's application for an order that the costs payable by the appellants to him from 4 October 2013, the day after Mr Abu-Mahmoud served an Offer of Compromise, be on an indemnity basis.
2. The relevant facts were: 1. On 19 June 2013 Mr Abu-Mahmoud amended his Statement of Claim to add an allegation that Mr Kassem's giving of the restructure advice was of itself a breach of duty as distinct from simply part of the context in which other advice that was asserted to be in a breach of duty was given. 2. On 18 July 2013 the proceedings were listed for a five day hearing commencing on 9 December 2013. 3. On 14 August 2013 directions were made for the appellants to file all further affidavits by 13 September 2013 and for Mr Abu-Mahmoud to file all affidavits in reply by 4 October 2013. The time for Mr Abu-Mahmoud to file his affidavits in chief had expired earlier. 4. On 3 October 2013 Mr Abu-Mahmoud served an Offer of Compromise. 5. At a directions hearing on 4 October 2013 orders were made extending the time for the appellants to serve a further affidavit of Mr Kassem and for Mr Abu-Mahmoud to serve an affidavit in reply. 6. On 25 November 2013 the Court made a series of orders designed to ensure that the proceedings were ready for hearing on 9 December 2013. 7. On 3 December 2013, without leave and not in conformity with the directions that had earlier been made, Mr Abu-Mahmoud served a supplementary expert report of Mr Stephen Martin. This was evidence-in-chief, not in reply. 8. The hearing commenced on 9 December 2013.
3. Mr Abu-Mahmoud's Offer of Compromise was served in accordance with UCPR r 20.26. As the offer was not accepted and he obtained a judgment more favourable than that which he had offered to accept under his Offer of Compromise, he sought the order for indemnity costs referred to above, relying upon UCPR r 42.14.
4. This rule states: "42.14 Where offer not accepted and judgment no less favourable to plaintiff (cf SCR Part 52A, rule 22; DCR Part 39A, rule 25) (1) This rule applies if the offer is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer. (2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim: (a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and (b) assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made."
5. The sole issue before the primary judge was whether the Court should "otherwise order" in accordance with r 42.14 so as to deprive Mr Abu-Mahmoud of his prima facie entitlement to indemnity costs under that rule.
6. The primary judge reviewed the relevant authorities and, relying on South Eastern Sydney Area Health Service v King [2006] NSWCA 2 and Nominal Defendant v Hawkins [2011] NSWCA 93, concluded that "a significant change in a plaintiff's case after the offer of compromise is made, and [before] the trial, may be a sufficient circumstance to justify the Court otherwise ordering" (Judgment [26]). He continued: "31 There is little doubt that the expert opinion of Mr Martin contained in his report of December 2013, was an expert opinion properly to be regarded as a part of the evidence in chief to be relied upon by the plaintiff. It was an important feature of the plaintiff's case against the defendants that not only would a solicitor acting reasonably have foreseen the relevant risks, but that the failure to advise the plaintiff of those relevant risks would constitute a breach of duty. It is surprising that an expert opinion about this fundamental aspect of the plaintiff's case was not obtained earlier, and served earlier. 32 Given that the expert opinion of Mr Martin, which was central to the plaintiff's case, was not served until after the Offer of Compromise expired, I am satisfied that the defendants did not have a reasonable opportunity to consider the strength of the case being made against them by the plaintiff."
7. Mr Abu-Mahmoud sought leave to appeal, on the basis that leave was required under s 101(2)(c) of the Supreme Court Act 1970 (NSW). This rule precludes an appeal except by leave where the appeal is against a decision "as to costs only which are in the discretion of the Court." The application for leave to appeal was heard concurrently with the appeal that would lie if leave were granted.
8. In support of his application for leave, Mr Abu-Mahmoud contended, first, that there was a difference between decisions of this Court concerning the circumstances in which the Court could and should "order otherwise" in accordance with UCPR r 42.14 which needed to be resolved. Although the language used by members of this Court has differed at times, I do not consider that their Honours' approach has differed in substance. Plainly, there has to be a reason, consistent with the policy behind the Rules relating to Offers of Compromise encouraging settlement of litigation and therefore the just, quick and cheap and resolution of disputes, to depart from the general rule established by r 42.14. As Hodgson JA (with the concurrence of Beazley JA as her Honour then was and Sackville AJA) said in Nominal Defendant v Hawkins: "[g]enerally, exceptional circumstances are required" (at [56]) but by this his Honour was merely indicating that there must be circumstances that justify departure from the general rule, that is, circumstances that are out of the ordinary. This is apparent from South Eastern Sydney Area Health Service v King (to which Hodgson JA referred) in which Hunt AJA (with whom Mason P and McColl JA agreed) indicated that whether or not the word "exceptional" was used to describe the relevant circumstance in that case did not matter (at [85]).
9. Accordingly, I reject Mr Abu-Mahmoud's first argument.
10. Secondly, Mr Abu-Mahmoud submitted that there was no basis in the evidence for the primary judge's conclusion, which founded his decision to make an order under r 42.14, that without Mr Martin's supplementary report the appellants could not properly have considered the merits of Mr Abu-Mahmoud's case. Implicit in this submission is a concession, which I consider to be well-founded, that in exercising his discretion under r 42.14 the primary judge was entitled to consider whether the appellants had, prior to expiry of the currency of the Offer of Compromise, "a reasonable opportunity to consider the strength of the case being made against them" (Judgment [32]). As Hunt AJA observed in South Eastern Sydney Area Health Service v King, "the fact that the plaintiff's case had changed significantly between the date of the plaintiff's offer and the trial in which the judgment obtained is higher than the amount of the offer does provide a sufficient basis for an order denying the plaintiff's entitlement to indemnity costs" (at [85]).
11. Mr Abu-Mahmoud submitted that the primary judge could not conclude that this was the position in the present case without evidence from the appellants to that effect. Whilst, on occasions, evidence of a party's state of mind and reasoning may assist in resolving an application such as that before his Honour, such evidence is unnecessary where the Court is able to reach a relevant conclusion based upon the proceeding's objective features. That was the case here. Mr Abu-Mahmoud's success in the proceedings was based upon his Honour's acceptance of the allegation in the Statement of Claim in June 2013 that Mr Kassem's restructure advice was negligent. Although the time for Mr Abu-Mahmoud to file his evidence-in-chief had expired, he had, at the date of his Offer of Compromise and its expiry, not served any expert evidence to support that allegation. His Honour's finding of negligence was based on Mr Martin's subsequently-served report. In these circumstances, it was open to his Honour to conclude on the costs argument that the appellants had not, during the currency of the Offer of Compromise, been in a position to assess the strength of the case upon which Mr Abu-Mahmoud succeeded because the evidence that proved to be critical was served late.
12. This argument should therefore also be rejected and the application for leave to cross-appeal should be dismissed with costs.

ORDERS

1. I propose that both the appeal and the application for leave to cross-appeal be dismissed with costs.
2. TOBIAS AJA: I agree with the orders proposed by Macfarlan JA for the reasons he has comprehensively expressed.

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