Cooper v Hobbs

Court of Appeal (NSW)|2012-09-25|Before: McColl JA, Meagher JA, Bergin CJ

outh Wales v Earthline Constructions Pty Ltd (in liq) [1999] HCA 3; (1999) 73 ALJR 306 Suncorp Metway Insurance Ltd v Owners Corporation Sp 64487 [2009] NSWCA 223 Tomko v Palasty [2007] NSWCA 258 Waterways Authority v Fitzgibbon [2005] HCA 57; (2005) 79 ALJR 1816 Watson v Foxman (1995) 49 NSWLR 315 Wentworth v Lloyd (1864) 10 HL Cas 589; 11 ER 1154 Texts Cited: J D Heydon, Cross on Evidence, LexisNexis Butterworths Category: Principal judgment Parties: Dean Cooper - appellant Maxwell Hobbs - first respondent Karen Hobbs - second respondent Representation: Counsel: C D Freeman - appellant R McKeand SC - respondents Solicitors: Inner West Legal Solicitors - appellant John F Morrisey & Co - respondents File Number(s): 2011/272472 Publication restriction: No Decision under appeal Citation: Hobbs v Cooper (unreported, 28 July 2011) Date of Decision: 2011-07-28 00:00:00 Before: Letherbarrow SC DCJ File Number(s): DC 2009/334586

Judgment 1McCOLL JA: Dean Cooper, the appellant, appeals from a decision of his Honour Judge Letherbarrow SC DCJ finding in favour of Maxwell and Karen Hobbs, the respondents, in a dispute concerning an amount of $150,000. The respondents were successful in persuading his Honour that they had lent that sum to the appellant to invest in a company, Maxlaw Pty Ltd ("Maxlaw"), contrary to his assertion that it was an investment by them in that company: Hobbs v Cooper (District Court of New South Wales, unreported, Letherbarrow SC DCJ, 28 July 2011). 2For the reasons that follow, I am of the view that the appeal should be allowed and the matter remitted to the District Court for a new trial.

Statement of the case 3The controversy arose from the following facts, substantially all of which emerge from the primary judgment or are not otherwise in dispute. 4Mr Cooper ran a mortgage broker's business, arranging loans through finance companies and banks. He and Mr Hobbs had known each other for about 10 years at the time of the trial. In 2005, Mr Hobbs contacted Mr Cooper for assistance in raising around $600,000 to build a property for his son and another $200,000 for landscaping the respondent's property. Shortly thereafter there was a meeting at Mr Hobbs' business premises attended by Mr Hobbs, Mr Cooper and Mr Scott Ferguson. Mr Hobbs and Mr Ferguson were both principals of a business, All General Whitegoods. Mr Cooper said he would organise the loan through Euro Finance Pty Ltd ("Euro Finance"), and the Adelaide Bank would be the mortgagee. A few weeks later, paperwork in respect of loans totalling $800,000 was completed over lunch between the same three men. 5It was common ground that the property development and landscaping would not take place for some time. Accordingly, there was also a discussion at the lunch as to some of the loan monies being invested in Maxlaw, in which Mr Cooper had already invested a considerable amount. Around the time of the lunch Mr Hobbs agreed that he would invest $100,000 of the loan monies in Maxlaw. Mr Ferguson apparently agreed to be responsible to Mr Hobbs for $50,000 of that loan if the investment failed. 6What happened after the $100,000 investment was agreed was a matter of controversy. 7The respondents' case was that in late November or early December 2005, Mr Cooper telephoned Mr Hobbs and advised him that $250,000 would be required to make up the investment in Maxlaw. Mr Hobbs said that Mr Cooper said he intended to "come into this investment" and asked Mr Hobbs if he would lend him $150,000 upon which he would pay interest. According to Mr Hobbs, Mr Cooper also said that he would "only need the $150,000 for a few weeks until [his] other investment [came] through": primary judgment (at [19]). 8Mr Hobbs said that after speaking with Mr Ferguson, he called Mr Cooper and agreed to lend him $150,000 on the condition that it be returned within a few weeks, that Mr Cooper agreed to this and said he would organise the $250,000 to be paid directly to Maxlaw from the loan settlement monies: primary judgment (at [20]). 9Mr Cooper gave what the primary judge described as "a very different" version of the conversation. He said that he did not ask to borrow any money. Rather, he said he told Mr Hobbs that the latter would need to supply a further $150,000 if the investment was to proceed and that after speaking to Mr Ferguson, Mr Hobbs called him back and said that "we are happy to invest $250,000 ...": primary judgment (at [21]). 10The $250,000 was paid directly to Maxlaw in about the first week of December 2005. The details of the payment were set out in what Mr Hobbs described as a "draw down notice" which he said he received from Mr Cooper in early December 2005. The notice appears to be a statement from the Adelaide Bank Ltd dated 2 December 2005 setting out the distribution of the total loan funds of $800,000. Relevantly the statement shows two payments by bank cheque to Maxlaw, one of $196,030.58 from the $200,000 advance and the other, of $53,969.42, from the $600,000 advance. Maxlaw went into liquidation in July 2007. 11Mr Hobbs also said that in "the latter part of 2008" he attended a meeting at the Greengate Hotel with Mr Cooper, Mr Ferguson and a Mr Moore who was a consultant to All General Whitegoods. Mr Hobbs said that at this meeting, Mr Cooper "confirmed the nature of the loan of $150,000", but when asked about its repayment said: "I am broke. I haven't any money to pay. I know I owe you the money but you can't get blood out of a stone". 12Mr Cooper's version of the Greengate Hotel meeting was substantially different. In short, he contended that at that meeting, those present discussed the fact that Maxlaw had gone into liquidation and its "funds have been frozen" and how their moneys might be recovered, but that there was no mention of a loan to him. 13Mr and Mrs Hobbs filed a statement of claim on 14 April 2009 seeking to recover the alleged loan of $150,000 from Mr Cooper. Counsel represented them at the trial. Mr Cooper was self-represented.

The trial 14It was accepted at trial that Mr Hobbs had represented his wife's interest in whatever transaction took place. She did not give evidence and there was no suggestion any inference should be drawn from that fact. The respondents called two witnesses to support their version of the transaction, Mr Scott Ferguson and a Mr Moore. Mr Cooper was the only witness in his case. 15Mr Cooper denied the respondents had lent $150,000 to him, saying they had themselves invested $250,000 in Maxlaw. In support of this contention, and in addition to his evidence to that effect, he relied on a letter dated 15 July 2008 Mr Hobbs' solicitor wrote to Euro Finance (the "Euro Finance letter") which he contended was inconsistent with the respondents' claim. 16The primary judge described the Euro Finance letter, as raising "[t]he only concern as to Mr Hobbs' credibility": primary judgment (at [28]). It was dated 15 July 2008, was on the letterhead of "John F Morrissey & Company" (described by his Honour as "the plaintiffs' solicitors"), was apparently signed by the principal of that firm and relevantly stated: "Re: Maxwell Charles Hobbs, Karen Joy Hobbs and all General Whitegoods Pty Ltd I confirm I act for Maxwell Charles Hobbs, Karen Joy Hobbs and All General Whitegoods Pty Ltd. I am instructed as follows:

My clients Maxwell Charles Hobbs and Karen Joy Hobbs and Mr Scott Ferguson are the Principals of All General Whitegoods.
All General Whitegoods is a substantial business in the Western suburbs of Sydney.
In December 2005, my client instructed Mr Dean Cooper to act on their behalf in obtaining finance in relation to a security property at 17 Carinya Road, Picnic Point that was owned by Maxwell Charles Hobbs and Karen Joy Hobbs beneficially.
At the time that the loan was entered into, the property at 17 Carinya Road was not encumbered.
My clients understood that Mr Cooper was an agent for Euro Finance Pty Ltd.
At the request of Mr Cooper, my clients consented that the loan funds were to be partly drawn to a company, Maxlaw Pty Ltd. Enclosed is a letter of Matthews Folbigg of the 2nd December 2005 where an amount of $53,969.42 was advanced to Maxlaw Pty Ltd. In addition, a further sum of $196,030.58 was also advanced to Maxlaw Pty Ltd. Total $250,000.00.
My clients relied on the representations made by Dean Cooper that the money advanced to Maxlaw Pty Ltd was secured and would give them a good return. Mr Cooper indicated that he had other client[s] who invested in Maxlaw Pty Ltd and they were receiving good returns.
The totality of the monies invested by my clients in Maxlaw amounted to $250,000.
My client is now aware that Maxlaw Pty Ltd is a company that has gone into liquidation. Maxlaw Pty Ltd had no ability to repay the monies.
My client relied on Mr Cooper's advice. My clients would not have entered into the loans to Maxlaw Pty Ltd if they understood that Maxlaw Pty Ltd was a company that was not capable of meeting its obligations.
There were no loan agreements between my clients and Maxlaw Pty Ltd. At all times they relied on the representations of Mr Cooper.
My client is of the view that Mr Cooper was either an employee or agent of Euro Finance Pty Limited.
My client is of the view that Euro Finance Pty Limited is liable for any losses that my client has suffered and should indemnify my client for any losses incurred. You may like to arrange for your solicitors to contact me to discuss the resolution of this matter. Yours faithfully, JOHN MORRISEY." (Emphasis added) 17On 27 February 2009, Mr Morrissey sent a letter of demand to Mr Cooper. On this occasion he again asserted that he was acting for the respondents but on this occasion relevantly stated: "I am instructed that on or before 2 December 2005, my clients agreed to lend you the sum of $150,000.00, which you directed to Maxlaw Pty Ltd. The loan of $150,000.00 was borrowed by you from monies borrowed by my clients from the Bank of Adelaide. On 2 December 2005, various amounts were drawn from a loan organised by you with the Adelaide Bank and secured against my client's property. You agreed prior to the 2nd December 2005 that you would repay the amount plus interest costs on demand." (Emphasis added) The letter demanded payment of $186,975.95 comprising the principal loan of $150,000 and accumulated interest. 18The witnesses' principal evidence was given by affidavit. The primary judge observed (at [26]) that "Mr Hobbs gave his evidence in cross examination in a somewhat jovial but determined and confident manner." His Honour noted that in his cross examination, Mr Hobbs said that "he had lent significant sums of money to other people in the past without documentation and that he had done so to Mr Cooper because he had grown to trust him". Mr Hobbs said that although he was prepared to "gamble" $100,000 by investing in Maxlaw, he never would have increased this amount by another $150,000. 19Mr Hobbs' explanation of the Euro Finance letter, as described by the primary judge (at [29]), was in substance, that "he felt sorry for Mr Cooper and didn't want to sue him if the monies could be regained from Euro Finance ... that the wording of the letter was not his own but that of his solicitors and that he always regarded the $150,000 lost as being a loan made to Mr Cooper at his request". The respondents did not call their solicitor. 20Mr Hobbs called Mr Ferguson, who the primary judge observed (at [31]) appeared "straightforward and confident". Mr Ferguson gave evidence of a conversation he had had with Mr Hobbs in the latter part of 2005 which his Honour described as "corroborating Mr Hobbs' version of the conversation with Mr Cooper wherein Mr Cooper asked for a loan of $150,000." Mr Ferguson also gave evidence of conversations he had with Mr Cooper in 2005 and 2006 in which Mr Cooper "confirm[ed] the loan to him of such an amount". Finally, Mr Ferguson gave evidence that during the meeting at the Greengate Hotel in 2008, Mr Cooper said, among other things, "I will get you the money that you lent me back to [Mr Hobbs]": primary judgment (at [30]). 21Mr Hobbs also called a Mr Moore who the primary judge described (at [32]) as a "straightforward and confident witness". His Honour said (at [31]) that in his affidavit, Mr Moore gave evidence of a conversation he had with "Mr Forbes in 2008 in which Mr Collins described the arrangement with Mr Cooper in terms consistent with [Mr Hobbs' case]". [I interpolate that this appears to have been an error in transcription as there is no reference in Mr Moore's affidavit either to a "Mr Forbes" or a "Mr Collins" - only, relevantly, to a conversation with Mr Hobbs.] In relation to the Greengate Hotel meeting, Mr Moore said that when Mr Hobbs asked Mr Cooper about the loan, Mr Cooper replied that he was broke and "[he would] pay [Mr Hobbs] back as soon as [he] [got] the money from Maxlaw": primary judgment (at [31]). 22As to Mr Cooper's evidence, the primary judge observed (at [33]) that: "Whilst [he] appeared reasonably confident whilst making submissions ... and during the questioning of the plaintiffs' witnesses, he became noticeably nervous in the witness box and expressed himself less confidently than the other witnesses. However, he adhered to his version of the transaction and denied that at any time he asked Mr Hobbs for a loan." 23The primary judge noted, and the parties agreed, that the determination of the proceedings would largely depend on which of the parties Letherbarrow SC DCJ believed: primary judgment (at [25]). 24The primary judge recorded (at [37]) that Mr Cooper's version of the Greengate Hotel meeting was "significantly different from that deposed to by the other witnesses and [did] not include any suggestion that $150,000 was loaned to Mr Cooper or any later acknowledgment that it was owing". 25The primary judge said (at [38]) that there was no documentary evidence in support of the alleged loan and little documentary evidence in relation to the $800,000 loan and the payment of the monies to Maxlaw. 26The primary judge was of the view (at [39]) that "little assistance to either party [was] available from the documentary evidence". His Honour did not give much weight to the fact that Mr Cooper's demeanour in the witness box was "rather unimpressive compared to that of Mr Hobbs and his witnesses" because Mr Cooper was self represented: (at [43]). His Honour did, however, give weight to the fact that Mr Hobbs' version of the transaction was corroborated by two witnesses whom he had "no reason to disbelieve". He said that the Euro Finance letter was "of some concern" but he accepted Mr Hobbs' explanation about it and did not believe "its contents outweigh [Mr Hobbs'] evidence and that of his two witnesses": (at [44]). 27Accordingly, his Honour (at [45]) accepted Mr Hobbs' version of the transaction as a loan of $150,000 including interest at the rates levied by the Bank of Adelaide (it having been the original source of the funds) to Mr Cooper. He gave judgment for the respondents for $201,000 and ordered Mr Cooper to pay their costs.

Issues on appeal 28The critical issue on appeal is whether the primary judge correctly evaluated the implications of the Euro Finance letter. In particular, Mr C D Freeman, who appeared on appeal but not at trial, argued that the two primary issues are whether: "(a) His Honour ought to have made a Jones v Dunkel inference by reason of the failure of the respondents to call their Solicitor to support the first respondent's evidence that [the Euro Finance Letter] was sent on the Solicitor's advice (the letter stated that the agreement the subject of these proceedings was with another party and not the appellant); and (b) If yes, and in the context of the substance of the claims in the Euro Finance Letter, was the evidence of oral conversations by the respondents' three witnesses thereby 'glaringly improbable' or 'contrary to compelling inferences'?"

Submissions 29Mr Freeman first submitted that the Euro Finance Letter gave rise to a compelling inference as to the identity of the party with whom the respondents had contracted in respect of the $250,000 investment. He argued that the primary judge should have treated it as an unambiguous admission by the respondents that they invested the sum of $250,000 with Maxlaw and, correlatively, an admission that they did not lend $150,000 to the appellant. He contended that the primary judge's finding that there was a loan agreement between the appellant and the respondents was contrary to the compelling inferences arising from the Euro Finance letter. 30Secondly, Mr Freeman submitted that in the light of the compelling inferences to which the Euro Finance letter gave rise, the primary judge ought to have drawn a Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 inference adverse to the respondents because of their failure to call their solicitor to support Mr Hobbs' evidence as to the circumstances in which the Euro Finance Letter was sent. While noting that the primary judge was given no explanation for the respondents' failure to call the solicitor, he argued that even if the inferred basis could be legal professional privilege, Mr Hobbs' evidence of his solicitor's advice constituted an implied waiver of such privilege. 31Thirdly, Mr Freeman submitted that had the primary judge drawn the Jones v Dunkel inference that the solicitor's evidence would not have assisted the respondents' case, his Honour would not have accepted Mr Hobbs' explanation for the genesis of the Euro Finance letter. Rather, he contended, the Euro Finance letter would have been a key piece of objective evidence which was wholly at odds with the conversations to which the respondents' witnesses deposed. In those circumstances, he submitted, the primary judge would have been left with: a) A letter which established that the loan was made directly to Maxlaw and not to the appellant; b) A compelling piece of objective evidence of the respondents which supported, and was wholly consistent with, the agreement for which the appellant contended; c) No written evidence establishing any contractual obligation with the appellant, notwithstanding that the respondents alleged they were providing a personal loan to him in circumstances where the moneys were to be paid to a third party (which his Honour found unusual); d) The impossibility of reconciling the oral recollections of the conversations of the respondents' witnesses given 51/2 years after the event, against a letter written on the first respondent's instructions; and e) Being unable to accept Mr Hobbs' explanation for the Euro Finance Letter either because of the Jones v Dunkel inference or because his explanation of knowingly serving a demand on an entity claiming a loan which he knew to be untrue did not assist his credit and was not supported by the evidence of the solicitor because he was not called. 32Fourthly, Mr Freeman submitted that there were other problems with the primary judge's acceptance of Mr Hobbs' explanation of the genesis of the Euro Finance letter. I have already mentioned the implications for Mr Hobbs' credit. In addition, Mr Freeman argued that the Euro Finance Letter remained unexplained despite the fact that the primary judge had clearly drawn the respondents' counsel's attention to his concern that the "letter on its face is very inconsistent with your claim" and had expressly noted in the course of the trial (albeit not in his judgment) that that counsel "on further instructions chose not to further explain this letter" and that "[his Honour] had not heard from the author of the Euro Finance letter". 33Fifthly, Mr Freeman submitted that the Euro Finance Letter was evidence of post-contractual conduct admissible on the issue as to whether a contract had been formed between the appellant and the respondents as the latter contended. 34Sixthly, Mr Freeman argued that the explanation Mr Hobbs gave for sending the Euro Finance letter was his subjective opinion which could not bear on the objective question of whether a contract had been formed. Accordingly, he contended this evidence was irrelevant to the objective determination of whether an agreement had been entered into and by whom. 35The notice of appeal sought a verdict for the appellant in lieu of the order entered below. In the course of argument, however, Mr Freeman accepted that, if his submissions to the effect that the primary judge had erred in his approach to the exercise of fact-finding were accepted, a new trial would be necessary.

Respondents' submissions 36Mr R McKeand of Senior Counsel, who appeared for the respondents on appeal, but not at trial, submitted in his written submissions first, that the Euro Finance letter was not an incontrovertible fact nor uncontested testimony in the sense referred to in Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 (at [29]) as warranting the view that the primary judge's decision was "glaringly improbable" or "contrary to compelling inference". He argued that the complaint in the Euro Finance letter that the appellant had engaged in misleading conduct (an assertion he contended clearly demonstrated legal advice and recommendation as Mr Hobbs asserted) was equally susceptible to the interpretation that the loan monies had been applied by Mr Hobbs to the appellant and to Maxlaw or entirely to Maxlaw. Accordingly, he argued there was no basis for appellate intervention. 37Secondly, Mr McKeand contended that the Euro Finance letter did not amount to an admission to the appellant that there was no loan to him, but only to a contrary assertion to a third party. Nor, he argued, was it evidence of relevant post-contractual conduct admissible to prove the existence of a contract. 38Thirdly, Mr McKeand accepted in his written submissions that the Euro Finance letter was a basis for challenging the credibility of the respondents' three witnesses. He contended that the primary judge appropriately tested (at primary judgment [29] and [44] - the substance of which are set out respectively at [19] and [26] above) the oral evidence of those witnesses against the appellant's evidence and against the assertion in the Euro Finance letter that the respondents had invested $250,000 of the money they borrowed from Euro Finance in Maxlaw. He also argued that the weight of the contrary assertions in the Euro Finance letter was limited having regard to the circumstances in which it was written and that the primary judge was correct in giving it little weight when considered in the context that Mr Hobbs' evidence was corroborated by two witnesses. 39Fourthly, Mr McKeand submitted that it would not have been open to the primary judge to draw a Jones v Dunkel inference from the failure to call the solicitor as a witness because the respondents' instructions as to the drafting of the letter were protected by legal professional privilege. He argued that Mr Hobbs' evidence as to the circumstances in which the letter was drafted was too vague and general to reveal the substance of the solicitor's advice, hence there had been no waiver of the respondents' entitlement to claim legal professional privilege. 40Finally, Mr McKeand submitted in his written submissions that even if a Jones v Dunkel inference that the solicitor's evidence would not have assisted the respondents were drawn, that would not advance the appellant's position. He contended that a Jones v Dunkel inference could not rise as high as supporting the positive inference that Mr Hobbs told his solicitor that the money was paid to Maxlaw solely for investment by the respondents. 41In oral argument, Mr McKeand properly accepted that the Euro Finance letter was capable of being seen as an admission against interest on the respondents' part. He also accepted that the Euro Finance letter was capable of reflecting adversely on Mr Hobbs' credit if his explanation for its genesis was accepted having regard to him having given the respondents' solicitor the instructions to which the letter referred. Finally, he accepted that the latter fact had to be weighed against Mr Hobbs' other evidence, an exercise he accepted the primary judge had not undertaken in his reasons.

Mr Hobbs' evidence about the Euro Finance letter 42I have set out the primary judge's description of the substance of the Euro Finance letter (at [19] above), however it is necessary to look at the evidence in greater detail to determine its significance to resolution of the appeal. 43The Euro Finance letter was an attachment to the appellant's affidavit. The primary judge commented that it seemed arguably to contradict the respondents' case. Counsel for the respondents objected to its admission. He also said that the letter's "account of events ... are [sic] coloured by the circumstances surrounding a [semble, "the"] letter being sent", as to which his Honour remarked that he "might want to call some evidence as to why that letter was written and in what circumstances". His Honour stated that the appellant's case was that the respondents' case was "entirely contradicted by [the Euro Finance letter]". Counsel for the respondents also sought to argue that the letter was inadmissible by virtue of s 131 of the Evidence Act 1995 (exclusion of evidence of settlement negotiations), a submission his Honour rejected in a judgment not reproduced in the appeal papers, but in the course of which it is apparent he ruled that the letter was admissible. That ruling was not challenged in this Court. 44After ruling the Euro Finance letter was admissible, the primary judge sought to raise with the respondents' counsel why he might allow him to call evidence explaining the circumstances of its creation having regard to the time the respondents had been on notice that the appellant was relying upon it. Counsel advised his Honour that he was not instructed to put on such evidence and that there was no application to adduce further evidence in relation to the letter. 45Mr Hobbs' evidence to the effect that he had "felt sorry" for the appellant emerged after a passage of evidence concerning documentation for both the original loan of $250,000 from the Bank of Adelaide and what he contended was the advance of $150,000 of that amount to the appellant. That line of questions commenced in the course of his cross-examination by the appellant, but was first elicited by the primary judge. The appellant pursued that line to some extent in a manner that does not require repetition. In the course of that cross-examination, Mr Hobbs said: "A ...the issue here is did you [meaning the appellant] borrow the $150,000 as a friend and a business acquaintance?... Q. Yep A. And all I wanted - your Honour, the only reason I let things lie [was] because I felt sorry for this man. I didn't want to send him bankrupt and have him losing his house, and it just got to the point where he wouldn't even admit to the fact that he borrowed this money, and now he's denying it. It wouldn't have got this far." 46As can be seen, this statement was non-responsive. The primary judge then directed Mr Hobbs' attention to his solicitors' letter of demand to Mr Cooper dated 27 February 2009 and asked whether that was when he had first instructed them to seek to recover the funds from the appellant, to which Mr Hobbs replied affirmatively. His Honour also directed Mr Hobbs' attention to the draw-down notice (see [10] above) which Mr Hobbs said he had first read when he "realised ... that we had problems with ... repayment". His Honour asked whether Mr Hobbs had "told [his] solicitors to seek the monies out of other companies" to which the response was: "...when we spoke to the solicitor, and he said well maybe because Dean was contracted or - or worked for Euro Finance we may be able to go down that - that avenue as well." 47There was then some cross-examination by the appellant about when in relation to the Greengate Hotel meeting Mr Hobbs had decided to commence proceedings against Euro Finance in the course of which the following exchange occurred: "[His Honour] Q. Did you just agree that you started some proceedings against Euro Finance? A. Yeah, I would have taken advice of my solicitor and yes we did, because the loan was from Euro Finance and my recollection would be advice we got from the solicitor was, well this guy works for Euro Finance. Q. What happened, where were those proceedings commenced? A. I don't think there's any proceedings I think it was more a matter of just sending a letter and put a bait out there and see what come of it." (Emphasis added) 48The following exchange took place soon after between the primary judge and Mr Hobbs: "Q. Mr Hobbs, in your solicitor's letter to Euro Finance in July 2008 amongst other things they say 'that the totality of the moneys invested by my clients in Maxlaw amount to $250,000 and my clients would not have entered into loans to Maxlaw' etcetera. Do you say that that letter is not really what happened? A. I don't believe it, well, I think ... the point of that was, your Honour, the loan itself was to Maxlaw but it was basically like a mortgage because I had no intention of investing a quarter of a million dollars... Q. What do you mean by when you said, 'The loan itself was to Maxlaw but it was like a mortgage to Dean Cooper'? A. Your Honour, Dean said Okay I'm going to invest this money for you in this company or with these people. As a friend I just thought Well okay he's taken $100,000 he said we'll probably get around 5% interest a month which I thought, Fantastic." [as transcribed] 49The appellant elicited from Mr Hobbs that Euro Finance's response to the letter of demand had been to write that "they [knew] nothing about your investments" and that he had not pursued that aspect of the matter. The final evidentiary reference to the Euro Finance letter in Mr Hobbs' cross-examination was an exchange with the appellant as follows: "What changed in your mind between July 08 and February 09 to have me responsible instead of Euro Finance responsible? A. Well, the thing was, the loan, I didn't hold Euro Finance responsible, personally, I didn't, I was acting on instructions from my solicitor. I've always held you responsible. I agree the solicitor was acting I was acting on the solicitor's recommendation but I've always held you responsible and you know that." (Emphasis added) 50In re-examination, Mr Hobbs was asked what he meant when he said proceedings were commenced against Euro Finance, to which he responded: "Well I think it was more a matter of ascertaining whether or not there is some sort of liability on part of Euro Finance because Dean Cooper was there [sic] representative and I think any proceedings were taken against Euro Finance were [sic] because Dean was working for Euro Finance at the time that that money was transferred. I think they probably thought there is an avenue there, well okay if Euro Finance don't take it they might give us back something in return, I don't know, but that was the idea of it. Q. So you said that it means taking steps to ascertain liability? A. Liability, yes. Q. Do you mean that in terms of formal process? A. Well basically I think it's more a matter of wait and see what type of response they come back with, whether or not they would accept, okay something bad has happened here where this guy's acted not irresponsibly, fraudulently, I don't know but basically there was this feeling the water so to speak. That was my understanding of why John Morrissey suggested we go down that avenue as well." (Emphasis added)

Consideration 51In my view, the primary judge erred in the view he took of the Euro Finance letter in such a manner that the process of fact-finding miscarried. 52The Euro Finance letter was important to the resolution of the critical issue in the proceedings for a number of reasons. First, it was capable of being treated as post-contractual conduct containing admissions by the respondents adverse to their case that they had lent the appellant $150,000 to invest in Maxlaw. Secondly, the failure to call the solicitor on whose advice Mr Hobbs said the Euro Finance letter was written entitled the primary judge more confidently to draw an inference favourable to the appellant's case, as well as to infer that the solicitor's evidence would not have assisted the respondents. Thirdly, even if Mr Hobbs' explanation of the letter's genesis was accepted, at the very least, its writing carried implications for his credibility (and possibly that of his corroborating witnesses) that needed to be taken into consideration in determining whose evidence should be accepted. Finally, it was arguable on the basis of the Euro Finance letter, taken with other aspects of the evidence discussed below, that the respondents' case was contrary to compelling inference. 53I will say something briefly about each of these matters.

Post-contractual conduct 54Post-contractual conduct if constituting admissions adverse to the respondents' interests was relevant to, and admissible on, the question whether the contract for which the respondents contended was formed: Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 (at [25]) per Heydon JA (Mason P and Ipp AJA agreeing) and whether a particular person was a party to it: Tomko v Palasty [2007] NSWCA 258 (at [68]) per Einstein J (Mason P agreeing); see also Basten JA at [13] - [14] (with whom Mason P also agreed); approved in Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 (at [122]) per Campbell JA (Basten JA and Sackar J agreeing) and Suncorp Metway Insurance Ltd v Owners Corporation Sp 64487 [2009] NSWCA 223 (at [55]) per Sackville AJA (Campbell and Macfarlan JJA agreeing). 55In order to determine whether the Euro Finance letter contained admissions adverse to the respondents' interests, it is necessary first to identify what, as a factual proposition, it was capable of conveying concerning a fact in issue, bearing in mind that it was a communication to a third party, rather than one between parties: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 (at 550) per Gleeson CJ (Clarke and Mahoney JJA agreeing). Secondly, it is necessary to determine the significance of the fact that the Euro Finance letter was not written by the respondents, but by their solicitor, ostensibly on their instructions. 56Subject to the second issue, in my view the Euro Finance letter (see [15] above) was capable of amounting to admissions by the respondents that they invested the entire sum of $250,000 in Maxlaw in their own right and that they authorised the appellant to arrange for $250,000 of the loan funds he had assisted them to procure to be advanced to Maxlaw for that purpose. If that is the proper construction of the letter, then the admissions were admissible as evidence of their truth: s 81, Evidence Act. They were clearly capable of "rationally affecting the assessment of the probability of the existence of the facts asserted by [the respondents]": R v JGW [1999] NSWCCA 116 (at [41]) per Wood CJ at CL (Barr and Greg James JJ agreeing). While I accept Mr McKeand's submission that those parts of the letter that apply a legal characterisation to the appellant's conduct were most probably the product of legal advice, the same cannot be said of the critical factual contention, that "the totality of the monies invested by my clients in Maxlaw amounted to $250,000". It is highly improbable, in my view, that a solicitor would have made that factual assertion if it were not based upon instructions. 57As to the second issue, the Euro Finance letter was not written by a party to the proceedings but, ostensibly, by its signatory, John Morrissey. However, it was not disputed at trial or on appeal that, as the respondents' solicitor, Mr Morrissey had authority to write the letter on their behalf, nor sensibly could it have been. The Euro Finance letter was, accordingly, capable of being taken to be an admission by the respondents: s 87, Evidence Act.

Should a Jones v Dunkel inference have been drawn? 58The next question is whether the primary judge should have drawn a Jones v Dunkel inference against the respondents having regard to their failure to call Mr Morrissey. It will be recalled in this respect that counsel for the respondents at trial expressly informed his Honour that he was instructed not to call the solicitor. 59In RPS v R [2000] HCA 3; (2000) 199 CLR 620 (at [26]) a majority of the High Court (Gaudron A-CJ, Gummow, Kirby and Hayne JJ) said: "In a civil trial there will very often be a reasonable expectation that a party would give or call relevant evidence. It will, therefore, be open in such a case to conclude that the failure of a party (or someone in that party's camp) to give evidence leads rationally to an inference that the evidence of that party or witness would not help the party's case (37) and that (38): 'where an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstance that the defendant disputing it might have proved the contrary had he chosen to give evidence is properly to be taken into account as a circumstance in favour of drawing the inference.' " Footnote (37) cited Jones v Dunkel (at 321) per Windeyer J and footnote (38) cited Jones v Dunkel (at 312) per Menzies J. 60However, J D Heydon, Cross on Evidence, LexisNexis Butterworths (at [1215]) ("Cross") states that: "[T]he rule in Jones v Dunkel does not apply where the witness not called is the party's solicitor, at least where the evidence which is in consequence not given is privileged and the privilege has not been waived. This is because if the solicitor gave evidence on the subject of privileged communications the privilege would be lost and the court will not permit the destruction of the privilege by this back door." 61Cross cites Standard Chartered Bank of Australia Ltd v Antico (1993) 36 NSWLR 87 among other cases as authority for this proposition. In that case, Hodgson J (as his Honour then was) considered a claim for legal professional privilege in relation to parts of the minutes of a company's board meeting which recorded statements made by a director, who was also a partner in the firm of the company's solicitors, summarising part of the legal advice he had given in his capacity as partner. Counsel for Standard Chartered Bank submitted (see 90) that the claim of privilege should be rejected, among other reasons, on the grounds of waiver and fairness. 62Insofar as the issue of waiver was concerned, Hodgson J first observed (at 93) that "since Attorney-General for the Northern Territory v Maurice [1986] HCA 80; (1986) 161 CLR 475 it is clear that fairness is central to the question of whether the conduct of a client is to be taken as waiving legal professional privilege" and that "in considering the question of fairness, it was relevant to take into account the principle stated in Wentworth v Lloyd (1864) 10 HL Cas 589; 11 ER 1154, to the effect that the court cannot draw adverse inferences from the claim of privilege." His Honour (at 94) said that Wentworth v Lloyd is "taken as authority against the drawing of any adverse inference from the claim of legal professional privilege, and is also specifically authority against applying Armory v Delamirie (1722) 1 Stra 505; 93 ER 664 or the similar principle in Jones v Dunkel ... to such a case". His Honour relevantly continued (at 94): "However, it seems to me clear that if there is other evidence from which the court may draw an inference as to the content of legal advice (or as to the commission of an offence in the case of the privilege against self-incrimination), the court may be able to draw that inference on the balance of probabilities in the absence of contrary evidence from the person claiming the privilege. What the court cannot do is to gain extra assistance in drawing that inference from the Armory v Delamirie or Jones v Dunkel principle. A fortiori, the court cannot draw an adverse conclusion if there is no other evidence supporting the conclusion. Most particularly, the court must not draw any adverse inference sub silentio without referring to it." 63Insofar as waiver was concerned, Hodgson J said (at 94 - 95): "[i]f a party, by pleadings or evidence, expressly or impliedly makes an assertion about the content of confidential communications between that party and a legal adviser, then fairness to the other party means that this assertion has to be taken as a waiver of any privilege attaching to the communication." 64Similarly, in Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405 (at 411) Giles CJ Comm D, held that where parties make allegations raising the issue of their state of mind, to which their legal advice is likely to have contributed, they cannot claim legal professional privilege for that advice. 65Although the question of waiver was not considered at trial, it is incumbent on this Court to consider it on the basis of the evidence presented at trial: Benecke v National Australia Bank (1993) 35 NSWLR 110 (at 116) per Clarke JA (Gleeson CJ and Sheller JA agreeing). 66The question whether legal professional privilege has been waived is governed by s 118 and s 122, Division 1, Part 3.10 of the Evidence Act and by common law principles: Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1. Sections 118 and 122 relevantly provide: "118 Legal advice Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of: (a) a confidential communication made between the client and a lawyer ... for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client. 122 Loss of client legal privilege: consent and related matters (1) This Division does not prevent the adducing of evidence given with the consent of the client or party concerned. (2) Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120. (3) Without limiting subsection (2), a client or party is taken to have so acted if: (a) the client or party knowingly and voluntarily disclosed the substance of the evidence to another person, or (b) the substance of the evidence has been disclosed with the express or implied consent of the client or party. ... (5) A client or party is not taken to have acted in a manner inconsistent with the client or party objecting to the adducing of the evidence merely because: (a) the substance of the evidence has been disclosed: ... (iii) under compulsion of law..." 67As I have said, Mr Freeman did not dispute that Mr Morrissey's advice to the respondents as to the Euro Finance letter was prima facie privileged, but took issue with Mr McKeand's contention that privilege had not been waived. 68In Mann v Carnell the plurality (Gleeson CJ, Gaudron, Gummow and Callinan JJ) said (footnotes omitted): "[28] At common law, a person who would otherwise be entitled to the benefit of legal professional privilege may waive the privilege. It has been observed that 'waiver' is a vague term, used in many senses, and that it often requires further definition according to the context. Legal professional privilege exists to protect the confidentiality of communications between lawyer and client. It is the client who is entitled to the benefit of such confidentiality, and who may relinquish that entitlement. It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege. Examples include disclosure by a client of the client's version of a communication with a lawyer, which entitles the lawyer to give his or her account of the communication... [29] ... Thus, in Benecke v National Australia Bank, the client was held to have waived privilege by giving evidence, in legal proceedings, concerning her instructions to a barrister in related proceedings, even though she apparently believed she could prevent the barrister from giving the barrister's version of those instructions. She did not subjectively intend to abandon the privilege. She may not even have turned her mind to the question. However, her intentional act was inconsistent with the maintenance of the confidentiality of the communication. What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large." (Emphasis added) 69Although the plurality said in Mann v Carnell (at [23]) that s 122 of the Evidence Act has the effect that privilege may be lost in circumstances which are not identical to the circumstances in which privilege may be lost at common law, neither party contended that there was any relevant distinction between the common law test of inconsistency the plurality formulated in that case and the inconsistency test in s 122(2). 70Questions of waiver are matters of fact and degree so that, whether, at common law (or, I would add, pursuant to s 122(2)), "in a given context, a limited disclosure of the existence, and the effect, of legal advice is inconsistent with maintaining confidentiality in the terms of advice will depend upon the circumstances of the case": Osland v Secretary, Dept of Justice [2008] HCA 37; (2008) 234 CLR 275 (at [49]) per Gleeson CJ, Gummow, Heydon and Kiefel JJ. 71In Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237; (2004) 140 FCR 101 (at [68]), Gyles J (Tamberlin J agreeing) held that it was "... well established that for a client to deploy the substance or effect of legal advice for forensic or commercial purposes is inconsistent with the maintenance of the confidentiality that attracts legal professional privilege". Maxwell P (Bongiorno AJA agreeing) cited Gyles J's proposition in Secretary, Department of Justice v Osland [2007] VSCA 96; (2007) 26 VAR 425 (at [20]) and applied it (at [67]) in rejecting the challenge to the Attorney-General's claim of legal professional privilege in relation to advice he had received on the basis of which he had rejected the respondent's petition for mercy. The plurality in the High Court approved Maxwell P's reasoning: Osland v Secretary, Dept of Justice (at [50]). 72In Council of the New South Wales Bar Association v Archer [2008] NSWCA 164; (2008) 72 NSWLR 236 (at [46] - [48]) Hodgson JA (with whom Campbell JA agreed) re-visited the statements he made in Standard Chartered Bank of Australia Ltd v Antico (at 93 - 95) concerning waiver (see [62] - [63] above) in the light of the decision in Mann v Carnell. His Honour concluded (at [48]) that that his "exposition [was] consistent with both Maurice and Mann, subject to the need to look for inconsistency". He added (at [48]): "It is not enough to bring about a waiver of client legal privilege that the client is bringing proceedings in which the content of the privileged communications could, as a reasonable possibility, be relevant and of assistance to the other party. For the client to do this is not inconsistent with the maintenance of the privilege, and does not give rise to unfairness of the type in question. What would involve inconsistency and relevant unfairness is the making of express or implied assertions about the content of the privileged communications, while at the same time seeking to maintain the privilege. In this respect, it may be sufficient that the client is making assertions about the client's state of mind, in circumstances where there were confidential communications likely to have affected that state of mind." (Emphasis added) 73Mr Hobbs relied on his assertions concerning Mr Morrissey's advice as to the drafting of the Euro-Finance letter to refute the inference capable of arising from it that the respondents had instructed their solicitor that they had invested the entire sum of $250,000 in Maxlaw in their own right. Rather, he twice suggested that the respondents had told their solicitor the true version (being that advanced at the trial) but on legal advice, had agreed to him writing a letter to Euro Finance which was wrong - and, it is clear on his evidence - wrong to his knowledge (see [47], [49] and [50] above). I reject Mr McKeand's submission that Mr Hobbs' evidence was "vague". Rather, in my opinion, Mr Hobbs was seeking to "deploy the substance or effect [of his solicitor's advice] for forensic ... purposes" to advance the respondents' case at trial. In those circumstances, in my view, he waived legal professional privilege in relation to that advice because he acted inconsistently with the maintenance of the confidentiality which attaches to privileged communications. This is so whether one applies the common law test as enunciated in Mann v Carnell or s 122(2) of the Evidence Act. 74Accordingly, the primary judge was entitled to draw more confidently "any inference favourable to the [defendant] for which there was ground in the evidence": see Jones v Dunkel (at 308) per Kitto J; see also (at 312) per Menzies J and (at 319) per Windeyer J. 75"The inferences licensed by Jones v Dunkel are ones which are drawn, if at all, once all the evidence in the case is in": Manly Council v Byrne [2004] NSWCA 123 (at [54]) per Campbell J (as his Honour then was) (Beazley JA and Pearlman AJA agreeing). 76There was direct evidence from the appellant and, in my view, the draw down notice (see [81] below), which supported the proposition that the respondents had not lent $150,000 to the appellant as they asserted. In my view, having regard to that evidence, the primary judge was entitled to infer from the respondents' failure to call Mr Morrissey that he could more confidently accept the appellant's case that he had not borrowed $150,000 from the respondents - or, conversely, that the respondents had advanced the entire sum of $250,000 themselves in Maxlaw.

Credibility 77Even if the primary judge had not been entitled to draw any Jones v Dunkel inferences from the respondents' failure to call Mr Morrissey, the existence of the Euro Finance letter in the light of Mr Hobbs' explanation for its genesis redounded substantially adversely to his credibility. As Mr Freeman submitted, Mr Hobbs had knowingly permitted his solicitor to make a demand on Euro Finance claiming that company was liable to indemnify the respondents for the entire $250,000 in respect of the Maxlaw investment which - on the basis of the case advanced at trial - he knew to be untrue. 78Contrary, with respect, to the primary judge's finding, Mr Hobbs did not say the demand on Euro Finance was made because of any feeling of sympathy for the appellant, rather, that such feelings explained why he had left recovery from the appellant for so long: see [45] above. But in any event, feelings of sympathy for one person cannot justify false claims against another. A tribunal of fact is entitled to have grave suspicions about the veracity of a witness' evidence where that person has admitted having been party to a false claim. 79In my view, having regard to the contents of the Euro Finance letter, the primary judge would have been entitled to reject Mr Hobbs' evidence in its entirety - or, at least, on the critical issue. His Honour appears not to have done so in part because he accepted the evidence of Mr Ferguson and Mr Moore. Yet if Mr Hobbs' evidence was susceptible to rejection, their evidence was clearly weakened at least, as the appellant submitted at trial, to the point where their professed recollection of conversations might be treated as unreliable: Watson v Foxman (1995) 49 NSWLR 315 (at 319) per McLelland CJ in Eq. Further, Mr Ferguson appears to have had an interest in the transaction having, on Mr Hobbs' version, had an interest in the initial agreed advance of $100,000 to Maxlaw, having been consulted - on the respondents' case - about the loan to the appellant and also having been identified in the Euro Finance letter as one of those on whose behalf it was written. 80The fact that all the respondents' witnesses' evidence may have been regarded as unreliable is particularly significant in light of the fact that the primary judge made no adverse finding about the appellant's credibility, but merely commented that he was "rather unimpressive" compared to Mr Hobbs and his witnesses, a matter explained by him representing himself.

Whether the respondents' case was contrary to compelling inference 81Although, as the primary judge said, the documentary evidence was limited, the admissions the Euro Finance letter was capable of conveying were arguably supported by inferences which could be drawn from the draw-down notice. That document demonstrated, as paragraph 6 of the Euro Finance letter stated, that the advances to Maxlaw were made in two tranches of $53,969.42 and $196,030.58 respectively, totalling $250,000 directly from the respondents' loans from the Adelaide Bank. As the primary judge himself observed at trial, albeit not in his reasons, it was "an extraordinary situation where someone [i.e. the respondents] could lend someone $150,000 and require absolutely not even a handwritten receipt". Further, as the appellant submitted at trial, albeit not in precisely these terms, it was inherently incredible that he would borrow $150,000 from the respondents to invest in Maxlaw in order to earn the attractive interest rates it was offering, yet permit the money to be remitted to Maxlaw direct from the respondents' loan funds, rather than ensure that he was identifiable as the source of the investment. If the primary judge had considered these matters, it was at the very least arguable that the respondents' case was contrary to compelling inference.

Conclusion 82The primary judge was clearly alive to the implications of the Euro Finance letter. He raised the fact that it directly contradicted the respondents' case both when its admissibility was being debated at the outset of the trial and in closing addresses. 83The primary judge was required to subject all the evidence, including the documentary evidence, to rational analysis (including drawing whatever inferences were capable of arising having regard to all the evidence and the conduct of the trial), and, if so persuaded, conclude that his impressions of witnesses' evidence were misjudged: State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) [1999] HCA 3; (1999) 73 ALJR 306 (at [63]) per Gaudron, Gummow and Hayne JJ; (at [94]) per Kirby J (whose reasons the plurality approved (at [64]); see also Callinan J (at [139], [155]). 84In my view the primary judge erred in the process of fact finding in that he failed to examine all of the material relevant to the issue of whether the respondents had lent the $150,000 to the appellant: Waterways Authority v Fitzgibbon [2005] HCA 57; (2005) 79 ALJR 1816 (at [130]) per Hayne J. His failure to do so has occasioned a substantial wrong or miscarriage as there may have been a different outcome at trial had all issues been considered: Uniform Civil Procedure Rules 2005 ("UCPR") 51.53. 85Other matters were raised in the course of the hearing such as whether the Euro Finance letter may be a business record (s 69, Evidence Act) and thus admissible as an exception to the hearsay rule (s 59, Evidence Act). This question was not fully argued and, in my view, it is unnecessary to determine it having regard to the other conclusions I have reached.

Orders 86As I have said, in the course of the appeal Mr Freeman accepted that if his submissions were accepted, a retrial, rather than a judgment for the appellant was the appropriate order. 87This is not a case such as Fox v Percy where the High Court accepted that where there was objective evidence of the skid marks indicating the side of the road the respondent's vehicle had been on prior to the accident this Court had not erred in substituting a judgment for the respondent: see (at [43] - [46]) per Gleeson CJ, Gummow and Kirby JJ; (at [104]) per McHugh J. In contrast, even accepting that the Euro Finance letter was capable of conveying the admissions I have identified, the primary judge was not bound to regard that as conclusive. An informal out-of-court admission may be contradicted by other evidence (which was the significance of Mr Hobbs' explanation for the letter's genesis). Further, a court is not bound to accept an admission even if it is not contradicted: Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492 (at [151]) per Heydon JA (Spigelman CJ and Sheller JA agreeing). 88I propose the following orders: 1 Appeal allowed. 2 Set aside the orders made by Letherbarrow SC DCJ on 28 July 2011 and entered on 2 August 2011. 3 Remit the matter to the District Court of New South Wales for a new trial. 4 Respondents to pay the costs of the appeal and to have a certificate under the Suitors' Fund Act 1951 if otherwise qualified. 5 Costs of the first trial to be in the discretion of the judge who hears the second trial. 89MEAGHER JA: I agree with McColl JA that there must be a new trial of these proceedings. My reasons for doing so may be stated briefly. 90The letter to Euro Finance Pty Ltd dated 15 July 2008 stated that it was written for the respondents and All General Whitegoods Pty Ltd and that the writer was "instructed" as to various matters. Mr Scott Ferguson was identified as a principal of that company. The letter contained assertions that the amount of $250,000 had been "advanced to" or "invested in" Maxlaw Pty Ltd by the respondents and the company and that they would not have "entered into" loans with Maxlaw but for a belief as to its ability to repay. Those assertions were inconsistent with the respondents' case before the primary judge that $150,000 of the $250,000 had been advanced by them to the appellant and by him to Maxlaw. 91It was not argued before the primary judge or this Court that the writer of the letter, Mr Morrissey, did not have authority to send the letter on behalf of the respondents. On the contrary, Mr Hobbs' evidence was that it was sent with his knowledge and on his behalf. Accordingly, the assertions of fact in the letter were admissible against the respondents as statements adverse to their interests, as claimed in the proceedings. 92The letter was expressed to be written on instructions and it was not likely that the solicitor had any personal and direct knowledge of the underlying factual events with which it was concerned. Therefore, an inference was reasonably available that the letter reflected statements made by Mr Hobbs (and perhaps Mr Ferguson) to the solicitor as to what had happened with respect to the making of the advances to Maxlaw and Mr Cooper's involvement in them. The communication of those instructions to the solicitor was for the purpose of obtaining legal advice and therefore subject to a claim for legal professional privilege. However, for the reasons given by McColl JA, the privilege in that communication and the advice which Mr Hobbs received concerning the sending of the letter was waived because he acted inconsistently with the maintenance of the continued confidentiality which attached to those communications. 93As the primary judge's comments during the course of the trial confirmed, it was reasonable to expect, in the light of the inferences which could be drawn from the Euro Finance letter, that the respondents would have called the solicitor to give evidence if the position was that he had not been given instructions in the terms recorded in the letter. That evidence was no longer the subject of a valid claim to privilege. Taking that course, however, may have presented other difficulties for the respondents' case if the position was that the solicitor had proposed and Mr Hobbs had agreed in the writing of a letter of demand to a third party which did not reflect the true facts. 94The primary judge addressed the Euro Finance letter as follows: "[29] When it was suggested to Mr Hobbs that the contents of this letter do not contain any assertion that the money was loaned to Mr Cooper, Mr Hobbs, in effect, stated that he felt sorry for Mr Cooper and didn't want to sue him if the moneys could be regained from Euro Finance. He also suggested that the wording of this letter was not his own but that of his solicitors and that he always regarded the $150,000 lost as being a loan made to Mr Cooper at his request. ... [44] ... Whilst the plaintiffs' solicitors said letter of July 2008 is of some concern, I accept Mr Hobbs' explanation and do not believe its contents outweigh his evidence and that of his two witnesses." 95The Euro Finance letter provided a reasonable basis for an inference that the solicitor had been instructed truthfully by Mr Hobbs that the whole of the $250,000 had been advanced by the respondents and the company directly to Maxlaw. That letter also had been written in the interest of Mr Ferguson, as a principal of the company. He was one of the "two witnesses" referred to above. To be considered and weighed when deciding whether that inference should be drawn was Mr Hobbs' evidence (referred to by the primary judge at [29]), the fact that the solicitor had not been called to say that the letter did not accurately record the instructions he had been given and, in the absence of any evidence from the solicitor, the likelihood that the solicitor would knowingly have been a party to the making of a demand on Euro Finance which was based upon a misstatement of the true position as between the appellant and the respondents. 96The primary judge did not undertake this analysis. In not doing so he failed properly to consider the significance of evidentiary material relevant to the critical issue in the proceeding. Had that material properly been considered, there was a real prospect that a different conclusion would have been reached on the question whether the evidence of Mr Hobbs and the other two witnesses should have been accepted. For that reason I consider that there has been a substantial miscarriage of justice sufficient to justify a new trial: See UCPR r 51.53. 97The orders which should be made are those proposed by McColl JA. 98BERGIN CJ in EQ: I agree with McColl JA.

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: 09 April 2013

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