Cooper v Winter

Background 9The plaintiff was a builder. In 1991 he and Ms Cooper purchased the Ross Street Property with a view to developing it into 40 lots. This was to be done in two stages: the first stage was to comprise 12 lots and the second was to comprise 28 lots. By about 1995, Stage 1 was completed. By 1994, if not earlier, the plaintiff and Ms Cooper each had substantial tax liabilities for which inadequate provision had been made as well as other significant debts. 10It is common ground that the plaintiff and Ms Cooper first consulted Mr Winter in 1994 to obtain advice on their taxation liabilities. The plaintiff says that he also sought advice from Mr Winter on how best to proceed with the Stage 2 development of the Ross Street Property. Mr Winter denies that advice was sought on this topic. 11In 1995 Ms Lockrey caused Blamathon to be incorporated. From the outset and at all material times thereafter, Ms Lockrey owned at least 95% of its shares. The plaintiff introduced Mr Winter to Ms Lockrey and, from its incorporation, Mr Winter acted for Blamathon and Ms Lockrey, except on two occasions (which are referred to in more detail below) where he recommended that they seek legal advice from another firm. 12The plaintiff gave evidence that Mr Winter advised him in about 1996 that he should transfer the Ross Street Property to someone he could trust, wait for two years and then go bankrupt. When he was discharged from bankruptcy, he could then ask for the property to be returned to him. Mr Winter denies ever giving such advice. 13According to Mr Winter, in 1997 Ms Lockrey offered to assist her daughter and son-in-law by purchasing the Ross Street Property from them for its market value of $250,000. This amount would then be applied to discharge the first registered mortgage. There is no evidence to suggest that the $250,000 paid to the mortgagee was less than the market value of the property. Ms Lockrey and Mr Winter gave evidence that the purchase price was sufficient to discharge the existing mortgage but there was no surplus paid to the plaintiff or Ms Cooper. 14Mr Winter prepared an agreement, dated 10 October 1997, between Ms Lockrey on the one hand and the plaintiff and Ms Cooper on the other ( the Ross Street Agreement ). The recitals record: "Cooper has sold to Lockrey the land comprised in Lot 1 Macquarie Street, Windsor... consisting of a subdivisible acreage having the benefit of a valid and subsisting development consent issued by the Hawkesbury City Council allowing for subdivision..." 15Mr Winter said that, in respect of the Ross Street Agreement, he acted on behalf of Ms Lockrey, the plaintiff and Ms Cooper. He gave evidence that he was uncomfortable that all parties wanted him to prepare the agreement and sign it in front of him. In oral evidence he confirmed the underlying facts of the agreement, which provides, at clause 5: "Each of the parties hereto acknowledge that they have been given the opportunity to seek legal advice with respect to these provisions and financial advice and that they have satisfied themselves with respect to the legal and financial obligations and meaning of these agreements." 16Mr Winter's memorandum of account to the plaintiff and Ms Cooper recorded that he charged them for two hours for: "Our professional costs on providing general advice with respect to financial position." 17The Ross Street Agreement contemplated that Ms Lockrey would herself develop and ultimately sell the Ross Street Property with the assistance of the plaintiff and Mrs Cooper who would have a contractual entitlement to share in the profits, if any, made from the development. 18Although Mr Winter acted for Ms Lockrey in respect of the drafting of the Ross Street Agreement, he referred her to another solicitor, Mr Bellantonio, to act on the actual transfer of the property. The transfer to Ms Lockrey did not proceed as envisaged in that the Ross Street Property was transferred to Blamathon rather than to her. Ms Lockrey gave evidence that she accepted her accountant's advice that it would be better if the property was purchased in the name of Blamathon rather than in her own name. 19Mr Winter accepted in cross-examination that he took no steps to ensure that the plaintiff and Ms Cooper had the same rights against Blamathon to the profits from the development as they would have had had Ms Lockrey purchased the Ross Street Property. However, it is clear from Mr Winter's evidence that he was not involved in either implementing the Ross Street Agreement once he had drafted it and witnessed the signatures of Ms Lockrey and the plaintiff or in implementing the changed arrangements to transfer it to Blamathon. Furthermore he regarded it as a "family arrangement". 20Mr Winter's evidence was that Ms Lockrey "habitually changed her instructions" in relation to matters concerning the family, how the affairs of Blamathon would be conducted, who would be its directors and what legal relationships would apply. The change in the identity of the purchaser of the Ross Street Property was the first of these. The evidence reveals that several documents were drafted by Mr Winter on Ms Lockrey's instructions but either not executed, or only partly executed, and not implemented. Mr Winter summed up this situation in the following terms in cross-examination: "Q. What happened to this document sir? [the undated Deed of Arrangement, referred to below] A. I don't think - I think that was another document that was never actioned. Kath Lockrey was at pains to try to resolve these family situations over a long period of time and did many things and instructed me to do many things. But in the end it availed her nothing and the family situation was not recoverable. That's the reason for the plethora of documents that you have here." 21Mr Winter also said, in cross-examination: "Quite a lot of things that I did for Blamathon were prompted by emotions and were urgent as a result..." 22In May 1998, Mr Winter was again called upon to advise and act on behalf of the plaintiff and Ms Cooper, this time in their dealings with the ATO. The plaintiff and Ms Cooper had been served with statements of claim for tax debts amounting at that time to over $200,000 each. In October 1998, Mr Winter was party to communications with the plaintiff and Mrs Cooper and tax officers. He wrote a letter dated 20 November 1998 on their behalf in which he acknowledged that the ATO was entitled to bankrupt them for their tax debts. The letter contained the following passages: "The reason that our clients are without means is that the business which generated the income upon which these taxation assessments were made has collapsed and they now find themselves with a modest income, children to support and no assets. We have been requested to explain that all of our clients assets were sold some time ago in order to satisfy the demands of their major secured creditor, namely their Bank." 23On 3 August 1999, the plaintiff and Ms Cooper were made bankrupt. At the time of the commencement of the bankruptcy, each owed creditors in the order of $400,000. The principal creditor in each case was the ATO but there was also another substantial creditor associated with a previous development. The evidence reveals that sequestration orders were made as a result of the filing of debtors' petitions by the plaintiff and Mrs Cooper. According to the evidence, they were not required to make contributions to their trustees during their bankruptcies as their income did not exceed the threshold. 24There was a conversation between Mr Winter and the plaintiff which the plaintiff says occurred in about January 2002. According to the plaintiff, the conversation was in the following terms: "I said to Ron Winter 'Ron my marriage is not going well. Kim and Kath are holding everything over my head. I want to start paperwork to get this sorted out. I have only six months to go until I come out of bankruptcy.' Ron Winter said to me 'It will only take two weeks to change it over. Kath has to sign it over. She holds it in trust.' I said to Ron 'They are saying that they're not signing it back over to me.' Ron said: 'Kath isn't saying that to me'." 25Mr Winter accepted that he had a conversation with the plaintiff which may have taken place in early 2002 in which he was told that the plaintiff's marriage was not going well but he denies the balance of the plaintiff's version. He denied that he was speaking to the plaintiff in his capacity as the plaintiff's solicitor. The following exchange took place in Mr Winter's cross-examination: "Q. Why would you see him to discuss his marriage, if it was not going well, if you did not take instructions from him? A. Why would I not see Peter Cooper? I dealt with him on a regular basis as a director of Blamathon." 26Although the plaintiff was not, at that time, a director of Blamathon, it is common ground that he managed the Ross Street Development for Blamathon and performed the building work. 27In about June 2002, the plaintiff identified a property on the Bells Line of Road ( the Bells Property ) which he considered to be suitable for development. There is a substantial dispute of fact about the contents of a conversation between the plaintiff and Mr Winter concerning the acquisition of the Bells Property. 28The plaintiff's evidence, in his statement made on 14 April 2010, was that in June 2002, in the course of a single telephone conversation, Mr Winter advised him to proceed with the purchase of the Bells Property in the name of Blamathon because it would be easier to borrow the funds needed to develop the property using that company structure. When the plaintiff raised with him the question whether he would be able to get the benefit from the Bells Property if it was owned by Blamathon, Mr Winter said: "...there would be no problems as Kath [Lockrey] owns Blamathon and Blamathon would hold the property in trust and would have to sign it back to you... We'll just put it all in Blamathon's name and then when you're discharged from Bankruptcy, it will all come back to you." 29The plaintiff's evidence was that Mr Winter had made this statement to him notwithstanding that it was the first time he had raised the acquisition of the Bells Property with him, and that Mr Winter had not had any opportunity in the course of that telephone conversation to consult with Ms Lockrey or obtain her instructions as to Blamathon's preparedness or otherwise to acquire the property and hold it in trust for the plaintiff's sole benefit. According to the plaintiff, in the same conversation, Mr Winter instructed him to approach Mr Godwin, Blamathon's accountant, to get the paperwork started for the transfer of Blamathon's shares "back to" him. There is, accordingly, an inherent inconsistency in the plaintiff's statement as to whether the shares in Blamathon, or the Bells Property itself, were to constitute the trust property. 30The plaintiff gave a different version in examination in chief: "I rang Ron [Winter]'s office and left a message. He rang me back the next day and I said to him: 'I found a property at 39 Bells Line of Road'. I said: 'I want to buy it. Should we buy it in a new company?' His reply was: 'No, buy it in Blamathon's name. It's easier to get finance' and I said to him: 'Well I'm worried about Kath and Kim' and he said: 'It will come back to you. Trust me. I am in control'." 31At the time the alleged conversation occurred, it was probable that the plaintiff knew that Mr Winter was neither a director nor a shareholder of Blamathon and could in no sense be said to be "in control". When the inconsistency between what he said in his statement and what he said in oral evidence was put to the plaintiff in cross-examination, the plaintiff said: "Q. A few minutes ago, Mr Cooper... I asked you whether you drew a distinction between the property and the shares and you agreed? A. Correct. Q. Did Mr Winter say to you, in early June 2002, that the property would be held in trust or that the shares would be held in trust or something else? A. He just said, I'm in control and it all comes back to you, don't worry about Kath. Q. What did he tell you would be held in trust? A. Everything. Q. All right. Can you, doing the best you can, tell her Honour what Mr Winter said to you. That is, he said to me words to the effect of. A. I'm in control, it all comes back to you. Q. Right. I'm asking about that part of the conversation when he's talking about what would be held in trust. A. Everything. Q. What did he say to you, everything? A. Blamathon is held in trust for you and it all comes back to you. That is all I ever got out of him. Q. So you have no recollection of him saying that Blamathon would hold the property in trust for you? A. No. He just said, it all comes back to you. " [Emphasis added.] 32That a version is given for the first time in oral evidence tells against its reliability. As Campbell J (as his Honour then was) said in White v Shortall [2006] NSWSC 1379; 68 NSWLR 650 at 664-665: "Frequently, it is very damaging to the credibility of a plaintiff's case if important evidence relating to it emerges only late in the course of evidence. The reason for this is that the Court is usually justified in assuming that the legal representatives of a plaintiff embarking on something as significant and potentially expensive as Supreme Court litigation will properly proof their client, obtain from their client all relevant details of the story relevant to the case, and include that material in affidavits in chief." 33Mr Winter's affidavit evidence is that the following exchange occurred at about that time: "PC: There's a property at Bells Line of Road that I wouldn't mind buying. RWW: I don't see how you can do that, you are a bankrupt. PC: What if I form another company to buy it? RWW: I can't see how. You are a bankrupt. PC: Kath might buy it. RWW: As long as she is happy to do that and instructs me to do it. That's fine." 34Mr Winter rejected the proposition put to him in cross-examination that even if the conversation occurred as he recalled it, he was acting as the plaintiff's solicitor and denied that the conversation constituted a retainer. As far as Mr Winter was concerned the plaintiff had been his client "some years previously in a disconnected matter". Nonetheless, Mr Winter, in my view correctly, accepted that he had a duty, even absent a retainer, to give the plaintiff correct advice. 35On 23 July 2002, the plaintiff wrote to Mr Batiste of AMP Finance purporting to provide an update on the future of Blamathon. The letter reads in part: "This is an update on the future of the company known as Blamathon Pty Limited, during the month there will be a name change from Blamathon Pty Limited to Minoan Constructions. Kathleen [Lockrey] will be resigning as a director of the company known as Blamathon Pty Limited. The charges will be changed into a trust for Nathan and Madison Cooper [the children of the plaintiff and Ms Cooper, and the grandchildren of Ms Lockrey]. Kim Cooper will become the director/ trustee of the company." 36Mr Batiste referred the letter to Mr Winter on the basis that the plaintiff was not a director of Blamathon and had no authority to request such changes. 37On 4 August 2002 the plaintiff was discharged from bankruptcy. 38By letter dated 21 August 2002, Mr Winter wrote to Mr Godwin, Ms Lockrey and Blamathon's accountant, to advise that he had been instructed to transfer Ms Lockrey's shares in Blamathon to Kim Cooper to be held on trust for Madison and Nathan Cooper, who will be the "specific beneficiaries" with Ms Cooper and the plaintiff as "further general beneficiaries". Although a sentence in the letter suggest that Mr Winter was not only acting for Ms Lockrey but also for Ms Cooper and the plaintiff, he said in evidence that this was a mistake since at that time he was acting only for Ms Lockrey, the transferor of the shares. 39There is an undated draft document in evidence entitled "Discretionary Trust Deed" for a trust to be called "The Cooper Family Trust" which nominates Minoan Pty Limited as the trustee and Madison and Nathan Cooper as specified beneficiaries. Ms Cooper and the plaintiff are nominated as additional members of the class of general beneficiaries. The document does not reveal its date of preparation. Neither Mr Winter nor Ms Lockrey could put a date on it. However, the document does establish that the creation of a discretionary trust for Ms Lockrey's grandchildren was in Ms Lockrey's contemplation at some time. Having regard to the terms of the plaintiff's letter to Mr Batiste and Mr Winter's letter to Mr Godwin, both of which refer to such a trust, I infer that this proposal was in contemplation at least from 2002, although it was not acted on, beyond the preparation of draft documents. 40On 30 August 2002 contracts were exchanged for the purchase of the Bells Property by Blamathon for $730,000. Mr Winter acted for Blamathon on the purchase. I accept Ms Lockrey's evidence that the plaintiff wanted Blamathon to lend him the money so that he could buy the Bells Property on his own account but Ms Lockrey refused to permit such a loan. 41The plaintiff's evidence is that he would not have permitted the purchase to go through in the name of Blamathon had he appreciated that the shares of Blamathon were not held in trust for him. It is, however, difficult to imagine what the plaintiff could have done to stop the purchase given that he had no access to funds to purchase it himself. 42Indeed, when it was put to Mr Winter that the plaintiff could have bought the Bells Property on his own account because contracts were not exchanged until after he had been discharged from bankruptcy, Mr Winter said that the plaintiff could not have done so "because he had no ability to borrow money to buy it". Mr Winter said further: "My recollection is that Blamathon borrowed from Terry Leckie at Balmain NB and that in the main it was Kath who did the talking to Balmain NB. Peter may have had some part of it, but the reason Blamathon was successful in getting that loan was because they had a track record and capability and assets." 43At about this time, Mr Winter was instructed to prepare deeds of indemnity whereby Ms Lockrey would be indemnified by Blamathon, the plaintiff and Ms Cooper respectively in respect of guarantees she had given and obligations she had incurred on behalf of the indemnifying party. Mr Winter gave evidence that he prepared these documents at a time when Ms Lockrey was endeavouring to extricate herself from Blamathon and hand it over to the plaintiff and Ms Cooper. He acted in respect of these deeds on behalf of Ms Lockrey and Blamathon. 44On 21 November 2002, the plaintiff lodged a document with ASIC which indicated that he had been appointed, and Ms Lockrey had resigned, as a director of Blamathon on 9 October 2002. In cross-examination, Ms Lockrey accepted that she had signed a document dated 14 October 2002 in which she resigned as a director of Blamathon as of 9 October 2002, but said that she had signed it "under duress". This evidence was not challenged. 45When Ms Lockrey was asked why the deeds of indemnity referred to above were never implemented she said: "Because I had found that Mr Cooper had changed my company over to his name without my knowledge and that's why I changed my mind on this." 46At a meeting of the shareholders of Blamathon on 28 November 2002, at which Mr Winter was appointed Chair, the plaintiff was removed as a director of Blamathon. At about this time the plaintiff and Ms Cooper separated. 47In early January 2003, the plaintiff instructed Mr Weller, his current solicitor, to act on his behalf. He instructed Mr Weller to write to Mr Winter and ask for any trust deed or agreement between the plaintiff and Blamathon. Mr Winter's firm responded that there was no such document but Mr Weller sought further assurances and nominated 1998 as the date of such a deed. Mr Winter wrote the following response by letter dated 29 January 2003: "I confirm that no Trust Deed or Deed of Arrangement was prepared between the parties and no instructions were ever received to prepare such a Deed. Your client and his wife sold land to Blamathon Pty Ltd and no money in respect of that acquisition was ever provided by your client or his wife. Indeed your client and his wife subsequently declared themselves bankrupt. Your client to the best of my knowledge and belief has no claim whatsoever against the assets of Blamathon Pty Ltd other than perhaps as an employee of that corporation." 48This correspondence establishes that at least from January 2003 the plaintiff knew that neither Blamathon, nor Ms Lockrey, accepted that either its shares or its property were held on trust for him. 49By letter dated 6 June 2003, Balmain NB, a finance broker, wrote to Banksia Financial Group with a view to refinancing the borrowings of Blamathon from both AMP Finance and Ms Lockrey and to provide some funds for future investment. The credit submission attached to that letter seeks a loan of $1,090,000 for 2 years. There is a comment about the Bells Property as follows: "Additionally the North Richmond property [Bells Property] is to be sold when D/A for mixed residential/ Commercial Development is achieved. This will substantially reduce loan amount and further improve the loan servicing." 50By letter dated 13 June 2003, Balmain NB wrote to the plaintiff and Ms Cooper as directors of Blamathon (although at that stage neither was) to offer finance to Blamathon, on behalf of Banksia Financial Group. The plaintiff and Ms Cooper accepted the letter of offer on behalf of Blamathon on 3 July 2003, by which time they had been appointed directors of Blamathon (see below). The loan was ultimately settled on 19 December 2003. 51There is another document in evidence, which refers to 2003, but which is otherwise undated ( the 2003 Draft Deed ). It records in the recitals, that Ms Lockrey wants to retire as a director of Blamathon and appoint the plaintiff, Ms Cooper and Mr Winter as directors. 52Recital B of the 2003 Draft Deed reads: "Blamathon is the Trustee of the Cooper Family Trust and holds real estate and other property in its capacity as Trustee under the Cooper Family Trust (hereinafter referred to as 'the Trust')." 53Clause 2 of the 2003 Draft Deed provides: "Upon receipt of a written loan approval which is satisfactory in all respects and which has the effect of discharging every personal guarantee previously given by Kath [Lockrey], then Kath will forthwith cause a meeting of Blamathon to be held at which Directors shall be elected, being Ronald William Winter, Peter Cooper and Kim Cooper and once these Directors have been elected then Kath will resign her Directorships of Blamathon." 54Mr Winter's evidence is that he acted for Ms Lockrey and Blamathon in relation to the preparation of the 2003 Draft Deed. He said that it was not "actioned" or dated. 55The plaintiff and Ms Cooper were appointed directors of Blamathon on 17 June 2003, as was Mr Winter, who was appointed Chair. Ms Lockrey resigned as a director. Ms Lockrey explained that she had, by this time, become very busy with her farmstay business and felt that it might be better for the plaintiff and Ms Cooper to run Blamathon together as directors. 56From time to time thereafter, the plaintiff gave instructions to Mr Winter on behalf of Blamathon, as he was authorised to do as a director of Blamathon. It was put several times in cross-examination to Mr Winter in respect of such occasions that the plaintiff had thereby become Mr Winter's client. Mr Winter rejected these propositions and confirmed that he was taking such instructions from Blamathon, which was his client, from the plaintiff as one of its directors. 57Later in 2003 the relationship between the plaintiff and Ms Cooper deteriorated. On 27 August 2003, Ms Cooper obtained an interim Apprehended Violence Order ( AVO ) against the plaintiff. 58On 15 September 2003, there was a board meeting of Blamathon at which various resolutions were made that, if implemented, would have had the effect of buying out Ms Lockrey from Blamathon. In part this would have involved the sale of one of the company's properties at 11 Tollgate Crescent, Windsor and the transfer of a property known as Lot 21 to Ms Lockrey. There is no reference to Ms Lockrey holding her shares in Blamathon in trust for anyone in these minutes. 59Four days later, on 19 September 2003, Mr Winter wrote to Ms Lockrey and set out the terms of the settlement that had been resolved at the board meeting. His evidence was that he wrote the letter in accordance with what he understood her instructions to be. The last sentence of the letter reads: "We further note that the shares which you hold in Blamathon Pty Limited are held in trust for Kim Cooper and Peter Cooper [the plaintiff]." 60The foot of the letter has been signed by Ms Lockrey and by the plaintiff. 61There is no evidence that this settlement was implemented. 62In his oral evidence, Mr Winter said that Ms Lockrey: "...had held the shares in her own right and at stages she felt disposed to perhaps... have them held in trust for the two children of Peter and Kim but never in favour of the Peter and Kim." 63When the inconsistency between this oral evidence and the note in the letter of 19 September 2003 was put to him, Mr Winter said: "It was my expression of what I understood to be Kath Lockrey's intentions. My view is that since that time I was incorrect in making that assumption, because she never indicated that that was the case." 64Ms Lockrey was cross-examined about the last sentence of the letter: "Q. The question is: That was your belief at the time; that you held the shares in trust? A. Yes I don't remember, I'm sorry, but I have signed it, so it must have happened." 65Although Ms Lockrey at times in her cross-examination appeared to admit that she intended to hold her shares in Blamathon on trust for the plaintiff and Ms Cooper, I am satisfied that she did not intend that to be the case and that her instructions were incorrectly recorded by Mr Winter. Her evidence in cross-examination set out above, is in my view a reflection of her fading memory and her trust in Mr Winter, rather than an admission that she ever had an intention to create a trust in favour of the plaintiff and Ms Cooper. She agreed that she had at times wanted Kim to hold the shares in trust for Nathan and Madison (and this is reflected in the draft discretionary trust deed referred to above) but I do not accept that she ever intended the plaintiff and Ms Cooper to hold those shares, although she did nominate them as additional general beneficiaries of the discretionary trust that was proposed. 66It would be wholly at odds with her consistent policy of providing for her daughter and grandchildren while also providing work for her son-in-law in a manner that did not put her assets at risk, for her to grant to the plaintiff an equitable interest either in her shares in Blamathon or in Blamathon's assets. 67In September 2003 a Development Approval was granted by the Hawkesbury Council in respect of the Bells Property, the effect of which was to approve a change in the use of the police station to a restaurant and leave the second lot as vacant land. Ms Lockrey and the plaintiff had discussed further development that could be undertaken on the Bells Property, including the construction of a four-storey building with underground parking on Lot 2. However, this proposal did not proceed, either when Blamathon owned the property or subsequently. Photographs of the Bells Property taken more recently show a low-rise commercial development of one, or at most two, levels. 68On 17 November 2003, the plaintiff was charged with a breach of the AVO. He agreed in cross-examination that during this period his relationship with Ms Cooper and with her mother, Ms Lockrey, was "poisonous". 69In January 2004, at a board meeting of Blamathon, Mr Winter raised concerns about its solvency. By February 2004 these concerns were assuaged by the prospect that Blamathon had agreed to sell certain properties which would repay some of its loans, including the Bells Property. The plaintiff agreed that he had participated in Blamathon's decision to sell the property, the price and the identity of the purchaser and the decision to rescind the first contract (referred to below) and the time for completion. 70The minutes of a board meeting of Blamathon on 29 March 2004, at which the plaintiff was present, record a resolution that "all properties are to be sold in an orderly manner". 71On 23 April 2004, contracts were exchanged for the sale of the Bells Property for $950,000 on the instructions of the plaintiff as a director of Blamathon. By authorisation dated 27 April 2004, the plaintiff instructed Mr Winter to sign on his behalf as a director of Blamathon. The first contract was rescinded on 31 May 2004 and another contract for sale entered into with Dalco Pty Limited which had a completion date of 27 October 2004. 72For the financial year ended 30 June 2004, Blamathon recorded a loss in the order of $37,000 in its profit and loss statement and its balance sheet showed that it had net assets of $925,000. Of the total assets of $3.18 M, $2.26 M were referable to the Ross Street Development and the balance, $920,000, to the Bells Road Development. The liabilities of $2.26 M were not segregated between developments. 73On 5 July 2004 there was a board meeting of Blamathon, at which Mr Winter, on behalf of Ms Lockrey, put to Ms Cooper and the plaintiff that if they could not agree by 5 August 2004 on how the business of Blamathon ought be conducted, all assets would need to be sold. Ms Cooper took out another interim AVO, which the plaintiff signed, on 23 July 2004. 74There is another undated document which was prepared by Mr Winter on the instructions of Ms Lockrey entitled "Deed of Arrangement". The only clue as to its date of creation are the terms of recital D, which recites: "Kim and Peter have up until the 1 st September 2004 been employed by Blamathon to carry out the objects of the corporation." 75The draft Deed of Arrangement appears to be another futile and aborted attempt to resolve matters between Blamathon, Ms Lockrey, Ms Cooper and the plaintiff. The matters to be resolved included any matrimonial disputes between Ms Cooper and the plaintiff. 76In about August 2004, Mr Winter sought urgent contact with the plaintiff regarding the sale of one of the lots of Stage 2 of the Ross Street Development. Mr Winter's evidence was that he contacted the plaintiff in his various capacities as a director of Blamathon, an employee of Blamathon and as the builder who had been responsible for the construction of the houses that comprised the Ross Street Development. 77On 9 September 2004, there was a meeting of Blamathon which was attended by Ms Lockrey, Ms Cooper, the plaintiff and Mr Winter. The shareholders (of whom only Ms Lockrey was present) proposed a resolution that all directors be dismissed and that the new directors be Mr Winter and Ms Lockrey. These resolutions were passed. Ms Lockrey explained that she took the company over again because the plaintiff "wasn't doing the job properly". 78On 11 November 2004 the plaintiff lodged caveats against the real property of Blamathon, including the Bells Property. 79Schedules 1 of the caveats read as follows: "Caveat AB83706M: The Caveator has an equitable interest in the whole of the land pursuant to a Deed of Trust and an Agreement dated 10 October 1997 between Blamathon Pty Ltd, Kathleen Mary Lockrey, Peter Joseph Cooper and Kim Michelle Cooper whereby the said Kathleen Mary Lockrey and Blamathon Pty Ltd held the said lands in trust for the benefit of Nathan Joseph Cooper and Madison Kate Cooper, the children of Peter Cooper and Kim Cooper. Caveat AB83724K: The Caveator has an equitable interest in the whole of the land pursuant to verbal agreement between the said Kathleen Mary Brook-Lockrey, Blamathon Pty Ltd and Peter Joseph Cooper whereby it was agreed that the said Peter Joseph Cooper in consideration for supply of work and expertise in the building trade was granted an equitable interest in the said lands securing the amount of his unpaid services in favour of the registered proprietor and the said Kathleen Mary Brook-Lockrey, such unpaid services now amount to $1,200,000.00." 80On 12 November 2004, the plaintiff was charged with breach of the interim AVOs. 81On 18 November 2004, the plaintiff withdrew the caveats from the title of the Bells Property to permit settlement of the sale to occur that day. They remained on the other properties. 82At about this time Blamathon commenced proceedings in the Equity Division of this Court against the plaintiff for removal of the caveats lodged in respect of Blamathon's other properties. The plaintiff filed a cross-claim seeking that the caveats be extended and also seeking an injunction to restrain Mr Winter from acting for Blamathon, Ms Lockrey, Ms Cooper or himself. At that time Mr Winter, who had been the solicitor on the record for Blamathon's proceedings, ceased to act because he became a party to the proceedings. At this point he referred Blamathon to independent solicitors to act for it in the Equity Division proceedings. 83Barrett J refused to extend either of the caveats on the ground that the plaintiff had no equitable interest in any of the properties: Blamathon Pty Limited v Cooper (21 December 2004). Although Mr Winter was a cross-defendant to the plaintiff's cross-claim, the plaintiff did not seek any of the relief against Mr Winter that he claims in these proceedings, although at the time of the Equity Division proceedings he had known for almost two years that his claim to an equitable interest in the properties or shares of Blamathon was disputed. The plaintiff submitted that the proceedings concerned a different matter, namely whether Mr Winter ought be restrained from acting for Blamathon and Ms Lockrey in those proceedings. Nonetheless there are allegations of fact in the cross-claim which are relatively detailed about what transpired and yet no reference whatsoever was made to the June 2002 conversation that is said to have occurred.

Findings about the disputed conversations 84As appears from the narrative set out above, the principal matters in dispute are the conversations that are said to have occurred in January and June 2002 and the duration of any retainer of Mr Winter by the plaintiff. There is a contest of credit between the plaintiff and Mr Winter in respect of each of them. 85I considered that both the plaintiff and Mr Winter gave their evidence in an apparently forthright manner. However, the plaintiff was unable to explain the discordance between his versions and the surrounding circumstances or the inconsistencies between his version in his statements and his version in cross-examination. He was also unable to explain why he had not made his present complaint against Mr Winter when he joined him as a cross-defendant in the Equity Division proceedings in 2004. There is a degree of opportunism in the plaintiff's claim against Mr Winter which appears to derive from certain draft, or ambiguous, documents, rather than from the plaintiff's true recollection of events. 86Mr Winter was prepared to make appropriate concessions. For example, although it was his usual practice to document conferences and meetings, he admitted that he did not always have time to do so and was relying on his recollection. He maintained that he principally acted as the solicitor for Ms Lockrey and Blamathon but accepted, when it was put to him, that he had also signed a mortgage on behalf of Mrs Marie Cooper, the plaintiff's mother on a mortgage she had granted to Blamathon, on behalf of whom he acted and said: "Perhaps I shouldn't have done that." 87Mr Winter impressed me as a solicitor who was mindful at all times of the identity of his client and his duty to protect the interests of that person. He was uncomfortable when called upon to act for both sides of a transaction as he was when he was asked to prepare the October 1997 agreement between Ms Lockrey, the plaintiff and Ms Cooper. He not only encouraged them to seek independent legal advice, but also included an acknowledgement to that effect in the agreement. He then referred Ms Lockrey to another solicitor to act for her, and, as it turned out, Blamathon, on the actual transfer. He exhibited some embarrassment when it was pointed out to him that he had signed a mortgage for Mrs Cooper, when he had also acted for Blamathon on the same transaction. As soon as he was joined as a party in the Equity Division proceedings he ceased to act on behalf of Blamathon. 88Mr Winter was cross-examined to the effect that the sentence he included in a letter he sent to the ATO on behalf of the plaintiff and Ms Cooper was not correct since he said that they were "without means", when in fact they had the rights to the profits of the Bell Street Development. Mr Winter said that he had written the letter on their instructions. Furthermore there is no evidence that the Ross Street Development generated profits. Although Ms Lockrey in cross-examination agreed that it was "successful", there was no explanation of what she meant by the word. 89The principal basis on which I prefer Mr Winter's version of both conversations and indeed his evidence as a whole is that, unlike the plaintiff's evidence, it is consistent with the objective circumstances and consistent with documentary evidence, including the various draft documents referred to above, which reflect Ms Lockrey various endeavours to resolve the disputes between Blamathon, the plaintiff and Ms Cooper and to extricate herself from Blamathon. 90The defendants submitted that, as the plurality (Gleeson CJ, Gummow and Kirby JJ) said in Fox v Percy [2003] HCA 22; 214 CLR 118 at 129, the best guide on which to reason to my conclusions is to do so: "...on the basis of contemporary materials, objectively established facts and the apparent logic of events." 91The objective circumstances appear from the narrative above. They can be summarised as follows: (1)At the time the Ross Street Property was sold to Blamathon in late 1997, the plaintiff and Ms Cooper were in financial difficulties which ultimately led to their bankruptcy. (2)The purchase price of the Ross Street Property, $250,000, was commensurate with its market value. (3)Ms Lockrey was either unwilling or unable to assist the plaintiff and Ms Cooper to prevent their bankruptcies in August 1999. (4)By early 2002 the plaintiff and Ms Cooper were having matrimonial difficulties which continued for some years, although until 2004 they continued to participate in the developments undertaken by Blamathon. (5)Ms Lockrey was in a position to assist her daughter and had shown herself to be prepared to do so by causing Blamathon to buy the Ross Street Property for market value so as to pay out the mortgagee and derive such benefit as could be had from Stage 2 of the development. (6)The terms of the Ross Street Agreement did not confer an interest in the Ross Street Property on either the plaintiff or Ms Cooper. (7)Ms Lockrey was concerned to protect and provide for her grandchildren, Nathan and Madison. (8)Ms Lockrey, through Blamathon, was prepared to develop Stage 2 of the Ross Street Property and the Bells Property, but only on the basis that her financial interests and those of Blamathon were protected. (9)Ms Lockrey was prepared to employ the plaintiff's services in the development of properties. (10)Ms Lockrey contemplated various legal structures over time that would permit her to extricate herself from Blamathon and the development of the Ross Street and Bells Properties but none of these came to fruition. (11)Mr Winter principally acted for Ms Lockrey and Blamathon but he also acted for the plaintiff and Ms Cooper in that he: (a)gave them financial advice about the effects of bankruptcy in 1996; (b)acted for them in 1997 in respect of the agreement to transfer the Ross Street Property; (c)made some communications with the ATO on their behalf in 1998; and (d)drafted their wills in 2002. 92In these circumstances, it is entirely contrary to the "apparent logic of events" that Mr Winter would advise the plaintiff that he should transfer the Ross Street Property to Ms Lockrey, wait for two years, go bankrupt and then call for the title to be transferred back to him once he had been discharged from bankruptcy. Even if such suggestion had not been fraught with risk, it was entirely unnecessary in any event since there is nothing about the transfer of the Ross Street Property to Blamathon which suggests that it was other than a commercial arrangement at fair market value. Indeed Mr Winter's evidence was that he sought an assurance from Ms Lockrey that it would be; this was presumably to ensure that it was not voidable at the suit of any trustee in bankruptcy of the plaintiff or Ms Cooper. Furthermore the unchallenged evidence is that Blamathon provided the funds for the development of Stage 2, in circumstances where there was no prospect that the plaintiff would be able to do so. 93The allegation that Mr Winter advised the plaintiff to transfer property so as to defraud his creditors is a very serious one and requires me to be satisfied to the Briginshaw standard ([1938] HCA 34; (1938) 60 CLR 336 at 361-362, per Dixon J). I am not satisfied that any such advice was given. 94I am satisfied that Mr Winter spoke to the plaintiff about bankruptcy and what it entailed. After all, he was communicating with the ATO on the plaintiff's behalf and the ATO was proposing to, and did, serve Bankruptcy Notices on the plaintiff and Ms Cooper. There was obvious commercial sense in the Ross Street Property being owned by a company which would not sell it to discharge the mortgage and which would not only permit it to be developed, but also fund its development for its benefit and for the potential benefit of the plaintiff and Ms Cooper. Furthermore the circumstances that the transfer divested the plaintiff and Ms Cooper of any proprietary interest in the Ross Street Property and did not confer any proprietary interest on them meant that there was no risk that the development could be upset, given the likelihood, if not inevitability, of their bankruptcies. 95I accept Mr Winter's evidence as to the conversation between him and the plaintiff in January 2002. If the conversation had occurred as the plaintiff deposed, it would have been inconceivable that the plaintiff would have placed trust in Ms Lockrey to hold her Blamathon shares in trust for him so that he could have the full benefit of the Bells Property Development, since she had, on his version, reneged on the arrangement they had had with respect to the Ross Street Development in respect of which there was at least a written agreement. The plaintiff would have me believe that he trusted Ms Lockrey and that Mr Winter gave him assurances in June 2002. I do not accept the plaintiff's version. 96The plaintiff's evidence is replete with internal inconsistencies and does not accord with contemporaneous documents and circumstances. I have referred already to the January and June 2002 conversations and why I do not accept that they both could have occurred, even if I only had the plaintiff's versions of both. 97Further, the plaintiff's version of the June 2002 conversation is, as he accepted in cross-examination, entirely inconsistent with what he wrote to Mr Batiste in July 2002. In addition, had the plaintiff genuinely believed that the shares in Blamathon had been held in trust for him, he would have identified an arrangement in 2002 (based on the conversations referred to above), rather than 1999 when he lodged the caveats on Blamathon's properties. In any event, any equitable interest created in 1999 would have had to be declared to his trustee in bankruptcy and it was not. 98The plaintiff was unable to shed any light on why Blamathon would take the whole risk of the Bells Property Development, including the substantial borrowings which it would have to make to undertake it, and yet he would get the whole of the benefit since all the shares would be held in trust for him. This arrangement would, without more, be not only improvident but also inexplicable from Blamathon's point of view. When one takes into account that Ms Lockrey was essentially the sole shareholder and that the marriage between her daughter and the plaintiff had by this time degenerated to the point where they separated just months after exchange of contracts for the purchase of the Bell Property, the proposition that it was all to the benefit of the plaintiff strains credulity. 99The plaintiff does not address these objective facts in his submissions. Rather, the plaintiff's written submissions ask rhetorically: "The plaintiff relied upon his solicitor, Mr Winter. Why would the plaintiff work for Blamathon for 5 years post the sale of the Ross Street development land to Lockrey in 1997, and then guarantee a substantial loan of $1,090,000 unless he acted in reliance upon his solicitor that his interests were protected? The advice of the solicitor was clearly wrong, as there was no trust instrument in place to protect the plaintiff." 100I consider the answer to the plaintiff's rhetorical question to be that the plaintiff had no better option than to work for Blamathon in a development that he expected to be profitable and for which he was remunerated from time to time, since he did not have access to funds to conduct the development on his own account. 101In making these findings, I do not find that the plaintiff's evidence was deliberately untrue. The plaintiff impressed me as an opportunistic entrepreneur who through misadventure, and possibly mismanagement, was dependent on his then mother-in-law to supply the finance for the development projects in which he wished to engage. It is common ground that he did much of the building involved in the development. 102He had little appreciation of the distinction between himself and Blamathon and did not seem to understand the extent to which Ms Lockrey, as majority shareholder, could control the composition of the board, the finances, and the conduct of the company. He also may not have appreciated that Mr Winter was not obliged to act in his interests, since Mr Winter was not his solicitor. 103I consider the following passage of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 to be particularly apposite to the plaintiff's evidence in the instant case. His Honour said, at 318-319: "Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory or what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience." 104It was my impression that the plaintiff's changes in version were affected by self-interest and wishful thinking. He may have subconsciously converted a sense of entitlement to the wealth of Blamathon into assurances from Mr Winter that he was actually entitled to it, in circumstances where what Mr Winter actually said bore no relation to the plaintiff's wishes.

Mr Winter's retainers 105The question of whether a retainer arises is to be judged on an objective assessment of the state of affairs between the parties: Hendriks v McGeoch [2008] NSWCA 53 per Giles JA at [11], with whom Spigelman CJ agreed. 106Once a retainer (to undertake a particular task) ends, there is no continuing duty of care, nor fiduciary duty. The only duty a solicitor owes a former client subsequent to the ending of a retainer is one of confidentiality. There is neither a continuing duty of care nor fiduciary duty: Kallinicos v Hunt [2005] NSWSC 1181; 64 NSWLR 561 at 582-583. 107I accept Mr Winter's evidence that his retainers as the plaintiff's solicitor were limited to the three assignments referred to above. I do not consider that any of the conversations that were not referable to any of these three retainers were sufficient to give him a broader retainer or to give rise to any conflict which he was obliged to avoid. Mr Winter was entitled to accept instructions from the plaintiff when the plaintiff was a director of Blamathon. This did not make him the plaintiff's solicitor. 108I do not consider that the plaintiff's allegations that Mr Winter has acted in breach of his duty of care, or his fiduciary duties have been made out. 109In so doing I reject Mr Mann's evidence on the basis that the assumptions that have underpinned it have not been established: Ramsay v Watson [1961] HCA 65; 108 CLR 642; Paric v John Holland (Constructions) Pty Ltd [1985] HCA 58; 59 ALJR 844.

The extent of Mr Winter's duties, absent a retainer 110A duty may arise (absent a retainer) if three conditions are met: (a)Mr Winter realised, or ought to have realised, that Mr Cooper would trust in his special competence to give that advice; (b)it would be reasonable for Mr Cooper to accept and rely upon that advice; and (c)it was reasonably foreseeable that Mr Cooper would suffer loss should the advice be unsound. ( Mutual Life & Citizens Assurance Co Ltd v Evatt [1968] HCA 74; 122 CLR 556 at 569-572, per Barwick CJ, later confirmed in Tepko Pty Ltd v Water Board [2001] HCA 19; 206 CLR 1 at 16-17, per Gleeson CJ, Gummow and Hayne JJ, and Kirby and Callinan J, with whom McHugh J agreed at 46, and summarised (as listed above) in San Sebastian Pty Ltd v The Minister [1986] HCA 68; 62 CLR 340 at 372 per Brennan J.) 111Given that I accept Mr Winter's versions, there is nothing negligent or misleading about anything he said to the plaintiff. Accordingly although he owed a duty to the plaintiff not to mislead him or give him negligent advice I find that he was not in breach of that duty. 112In finding that Mr Winter was not in breach of any duty, I am mindful that he, as I have found, misrecorded Ms Lockrey's instructions in the letter of 19 September 2003. As appears from the letter, both Ms Lockrey and the plaintiff signed the document. However, I do not consider anything flows from this. The document proposed a settlement which did not ensue. The notation about the trust was, as I have found, insufficient to amount to a declaration of trust, and when properly construed should, in my view, be read as part of the settlement. Although the plaintiff did not alleged any estoppel against Ms Lockrey (against whom no claim was made) I do not consider that any such allegation could have been proved in any event. 113Further, the plaintiff appeared to submit that Mr Winter was in breach of the duty of confidentiality that he owed to him as a former client when he disclosed to Ms Lockrey and Blamathon that the Bells Property was for sale and would be suitable for development. There are at least two answers to this submission: first, the plaintiff was not Mr Winter's client when he told him that the Bells Property was for sale; and secondly, far from its being confidential, the information was only of use to the plaintiff if Blamathon was prepared to fund its acquisition since he otherwise had no access to funds.

Causation of loss 114The plaintiff bears the onus of proving causation on the balance of probabilities; in other words, that had the "correct" advice been given he would have done something such as purchasing the property: Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 at 355, per Mason CJ, Dawson, Toohey and Gaudron JJ. 115Even had Mr Winter given the advice that the plaintiff says he gave, it is difficult to see how this could have caused any loss. Any equitable interest conferred on the plaintiff in 1997 would have been vested in his trustee in bankruptcy. There is no evidence to suggest that the plaintiff would have obtained the benefit of such interest since there is no evidence to show the value of such interest and that it would have produced a surplus on his discharge from bankruptcy. 116As to the alleged conversations in January and June 2002, even if I had accepted the plaintiff's version, the plaintiff would have had no prospect of acquiring the Bells Property on his own account. Mr Winter's evidence that the plaintiff had no capacity to borrow money was not disputed. Although the plaintiff said that Balmain NB was prepared to lend him money, the terms of the offer from Balmain NB on behalf of Banksia Finance to Blamathon indicated, as one would expect, that the loan was conditional upon real property security and the financial record of the company. The only way the plaintiff could have participated in the Bells Property Development was what actually occurred: he provided some of the labour for Blamathon to develop it with its financial resources. 117Mr Winter could only have made good the assurances that the plaintiff alleges he made if he had been able to persuade Ms Lockrey to create a fixed (rather than discretionary) trust of her shares in Blamathon in his favour. His prospects of so doing (even had he been minded to do so) were, in my view, non-existent. 118Even had I accepted that the notation in the letter dated 19 September 2003 had truly represented Ms Lockrey's instructions (as distinct from being a misapprehension or mistake by Mr Winter), I do not consider that this would have been sufficient to create a trust in favour of the plaintiff. There is insufficient certainty about the terms of any trust and whether it is to be an express trust whereby Ms Lockrey held her Blamathon shares on trust for the plaintiff and Ms Cooper equally, or whether it was to be a discretionary trust of which they were specified or general beneficiaries.

The measure of loss 119On any view, even had I found for the plaintiff on liability there is no substantial evidence of loss. 120The plaintiff seeks to overcome the paucity of evidence of loss by submitting that the net assets that are recorded in the financial statements of Blamathon for the year ended 30 June 2004 provide a suitable measure of what the plaintiff has lost by not being the sole beneficiary of a fixed trust of its shares. The plaintiff has made no attempt to distinguish between the liabilities incurred, and assets owned, by Blamathon prior to its acquisition of the Bells Property and those recorded in the financial statements. 121There is, however, a more fundamental flaw in the plaintiff's claim for damages. Damages (whether in contract or tort) against a negligent solicitor are, absent a contractual warranty, measured on a reliance, not an expectation basis: Kyriakou v Hughes (1984) Aust Torts Reports 80-646; Thomas v Adam [2000] NSWCA 127. Therefore the plaintiff, were I to find Mr Winter liable in respect of the assurances the plaintiff submits he made in June 2002, would be entitled to be put in the position he would have been in but for the representation, not the position he would have been in had the representation been true. If Mr Winter had not made the representation, the plaintiff would, on his case, not have been deterred from purchasing the Bells Property in his own name. But the evidence not only does not establish that the plaintiff could have purchased the Bells Property, but it points to the fact that he would have been unable to raise the finance. 122There is, in any event, no evidence of any of the following: (a) the development in respect of which Mr Cooper claims, would have proceeded; (b) that it would have received Council approval; (c) what that development would have cost; or (d) what that development would have sold for. 123It follows that the plaintiff's claim must be dismissed. 124The orders I make are: (1)Judgment for the defendants. (2)Order the plaintiff to pay the defendants' costs, unless within seven days any application is made for a different costs order.

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: 08 March 2012