Dual Homes Pty Ltd v Moores Legal Pty Ltd & Anor [2016] VSC 86

NEGLIGENCE - Causation - Wrongs Act 1958 (Vic) s 51 - Whether solicitor's conduct contributed to losses sustained by reason of the winding up.

TRADE PRACTICES - Misleading and deceptive conduct - Whether conduct of solicitor was "in trade or commerce".

DAMAGES - Substantial losses suffered due to winding up - Whether lost opportunity established - Contributory negligence.

PROPORTIONATE LIABILITY - Solicitor a principal or employee of each defendant firm consecutively during relevant period - Assessment of proportionate liability as between defendants for plaintiffs' loss.

1 The first plaintiff ('Dual Homes') was the trustee of The Roiniotis Family Trust of which members of the Roiniotis family were beneficiaries. The second and third plaintiffs are members of the Roiniotis family and creditors/shareholders of the first plaintiff. Dual Homes was a builder and a developer. Its solicitor was Alex McKellar ('McKellar') who was a principal or employee of each defendant firm consecutively during the relevant period. The defendants, Moores Legal Pty Ltd ('Moores Legal') and Pilley McKellar Pty Ltd ('Pilley McKellar') were separate independent legal practices until 1 May 2011, when Mr Pilley retired and Mr McKellar merged the practice with Moores Legal. Except when it is desirable to identify the particular defendant, I will refer to the defendants as McKellar.

2 The plaintiffs sued the defendants for damages in negligence, for breach of retainer, and for misleading or deceptive conduct contrary to section 18 of the Australian Consumer Law. The plaintiffs based their claims on McKellar's conduct in respect of two creditor's statutory demands ('CSD1' and 'CSD2') served on Dual Homes by an Owners' Corporation, and a subsequent winding up application against it, including when he failed to appear on the return of the adjourned winding up application on 6 July 2011. The application was undefended and on that date, the court ordered that Dual Homes be wound up in insolvency. Dual Homes alleged that at all relevant times it was solvent and, ultimately, after the court terminated the winding up on 2 April 2102, the liquidator's balance sheet as at 17 April 2012 showed a surplus of assets over liabilities of $150,898. Dual Homes alleged that it suffered substantial losses due to the winding up.

3 For the following reasons, there will be judgment for the first plaintiff against the first defendant for $388,189.68 and against the second defendant for $196,894.84.[1]

1. The parties agreed an extensive list of issues as arising on the pleadings, but when the trial commenced, Moores Legal conceded that it had breached its duty of care to the plaintiffs in failing to attend court on 6 July 2011, or otherwise arrange for Dual Homes to be represented, on the return of the application to wind up Dual Homes in insolvency. The defendants submitted that the dispute would be determined on three broad topics: the advocates immunity, causation, and damages.
2. I do not agree. As will appear, the defendants' admission was convenient for their defence of advocates immunity but I am satisfied that their wrongful conduct was far more extensive, meaning that there were a number of further issues to be resolved.

6 The issues in the trial were, in summary, the following:

(a) The solvency of Dual Homes and McKellar's knowledge of its solvency.

was McKellar's conduct and/or any failure to advise the plaintiff in respect of it negligent, in breach of his retainer, and/or misleading and deceptive conduct contrary to the Australian Consumer Law ('wrongful conduct')?

(c) If yes to (b), in respect of any wrongful conduct was McKellar immune from liability to the plaintiffs?

(d) If no to (c), was that conduct a cause of the loss alleged?

(e) What sum is assessed to be the plaintiffs' loss and damage?

(f) Are the defendants concurrent wrongdoers and are the plaintiffs restricted to a proportionate judgment against each of them?

7 The defendants contended that the failure to attend the adjourned hearing of the winding up application triggered the liquidation of Dual Homes. Moores Legal submitted that it was immune from suit for this breach of duty and in respect of all work done out of court that led to a decision affecting the conduct of the application in court. The defendants contended that, assuming McKellar's wrongful conduct prior to 6 July 2011, there was no causative link between such conduct (implicating Pilley McKellar prior to 1 May 2011 and Moores Legal from that date) and the plaintiffs' loss and damage. The proximate cause of the plaintiffs' loss and damage was Dual Homes' inability to prove its solvency at the hearing on 6 July 2011 (or such later adjourned hearing as might have been granted by the court) as a result of Moores Legal's failure to appear.

8 The defendants submitted that but for Moores Legal's admitted breach of duty, Dual Homes could at any time between 4 May 2011 (being the date on which the presumption of insolvency arose) and 6 July 2011 (being the adjourned date of the winding up application) have proved its solvency in the winding up proceedings to avoid liquidation. Moores Legal did not explain how Dual Homes might have established solvency in the winding up proceedings. They argued that it was open for it to have done so because of the subsequent termination of the winding up on that basis. Moores Legal's failure to appear on 6 July 2011 effectively deprived Dual Homes of the opportunity to avoid winding up by proving its solvency.

9 The plaintiffs contended that that McKellar's wrongful conduct commenced from the first statutory demand and continued up to his failure to appear on 6 July 2011 and caused its loss. The plaintiffs submitted a schedule of thirteen events that they labelled 'McKellar's Miscellany of Mishaps' covering this period and many of those events will be analysed below.

10 I will first set out my findings in respect of the events that led up to the winding up order on 6 July 2011.

11 On liability issues, George Roiniotis, and his sons John and Peter Roiniotis gave evidence for the plaintiff and Alex McKellar gave evidence for the defendants. There were contemporaneous emails, letters and other documents in evidence generated by the parties.

12 Based principally upon the concessions extracted in cross-examination and the inconsistencies between Mr McKellar's evidence and both the pleadings and his witness statement, I found McKellar's evidence was unreliable and I reject it. I have not acted on it except to the extent that contemporaneous documents or the relevant testimony of other witnesses supported it. There were occasions when McKellar did not persuade me that he was giving a frank account or explanation of his conduct or, more often, his failure to act. I viewed him as prone to reconstruct events to lessen the appearance of his want of care in his dealings with Dual Homes' affairs. I have referred to some of those occasions, to contradictions between McKellar's witness statement and the defence, and to the concessions McKellar made under cross-examination when setting out my factual findings.

13 Dealing at this stage with the evidence in respect of liability issues, I found George Roiniotis to be a truthful and mostly reliable witnesses. He appeared to conflate advice given in relation to each statutory demand when referring to the offsetting claim. John Roiniotis was a truthful and reliable witness and I accept his evidence.

14 To the extent that there is inconsistency between the evidence of John and George Roiniotis and McKellar, I prefer the evidence of John and George Roiniotis.

15 I accept that language and translation difficulties restricted Peter Roiniotis in telling his story, and he appeared consistently to have problems with recollection. However, making appropriate allowances, Peter Roiniotis did not persuade me that he was a reliable witness and his evidence did not assist me. For example, I was not convinced, as Peter Roiniotis suggested, there was no resistance to the idea of Dual Homes paying out the first statutory demand, had McKellar advised it to be a prudent course to adopt. There was a history of animosity between Dual Homes and the owners' corporations and in an affidavit sworn for the purposes of the application to terminate the winding up, Peter Roiniotis accepted responsibility for a deliberate decision not to pay monies to the owners' corporations because he was unwilling as a matter of principle to pay monies that were being improperly sought.

16 It was common ground that the two defendants were responsible for any wrongful conduct by McKellar. He was a principal of Pilley McKellar until its dissolution, and employed as special counsel by Moores Legal from 1 May 2011 until the end of that financial year, and thereafter as principal until the end of June 2014.

17 The plaintiff initially engaged McKellar over disputes with owners' corporations. Because Peter Roiniotis, who was the sole director of Dual Homes, has limited English language skills, McKellar dealt primarily with George Roiniotis who worked in building and development and, to a lesser extent, John Roiniotis, who is a biochemist by training. The exact date when Dual Homes initially instructed McKellar was unclear. Both George Roiniotis and McKellar agreed that George met with McKellar around mid-2009. Both McKellar and George agreed that their communications throughout the retainers were rushed and irregular. They were both busy men.

18 Dual Homes was the registered proprietor of Units 4 and 5, 36 Railway Place, Fairfield ('4 Railway Place' and '5 Railway Place') and Lot 6, 83 Station St, Fairfield ('Station St'), each of which had an owners' corporation that are the owners' corporation referred to throughout these reasons. Dual Homes was also the owner of properties at 1362 Murradoc Road, St. Leonards ('Murradoc Road'), and 108 Bluff Road, St. Leonards ('Bluff Road') that were development opportunities.

19 It was common ground that McKellar learned during the retainers that Dual Homes owned the Fairfield land and that it owned other land.

20 Dual Homes developed and built Station Street and developed, but did not build, the two Railway Place units. Disputes between Dual Homes and the owners' corporations of Station St and Railway Place resulted in the following litigation:

(a) The Railway Place Owners' Corporation issued VCAT proceeding 829/2010 against Dual Homes seeking payment of certain charges ('Fees Claim');

(b) The Railway Place Owners' Corporation issued VCAT proceeding D918/2010 against Dual Homes seeking damages for alleged building defects at Railway Place ('Railway Place Property Damage Claim');

(c) Dual Homes issued VCAT proceeding 1054/2010 against the Railway Place owners' corporation seeking payment for cleaning works completed by Dual Homes at Railway Place ('Cleaning Claim'); and

(d) The Station St Owners' Corporation issued VCAT proceeding D996/2010 (subsequently renumbered D100/2011) against Dual Homes seeking damages for alleged building defects at Station St ('Station St Property Damage Claim').[2]

21 This litigation commenced during Pilley McKellar's retainer. The Railway Place Owners' Corporation obtained a judgment at VCAT for $13,388 on 30 November 2010. On 22 December 2010, it served CSD1 on Dual Homes seeking payment of $13,435. The deadline for compliance with that demand, 12 January 2011, passed without payment. Dual Homes applied, on 13 January 2011 to set aside the statutory demand. By agreement, on 22 February 2011 Dual Homes withdrew that application. On 13 April 2011, the Railway Place Owners' Corporation served CSD2 for the same debt. On 30 April 2011, Pilley McKellar merged with Moores Legal. The deadline for compliance with that demand, 4 May 2011, also passed without payment. On 27 May 2011, the owners' corporation applied to wind up Dual Homes. On 22 June 2011, the court adjourned that application until 6 July 2011 when it made a winding up order appointing Mr Gideon Rathner as liquidator.

22 The first issue was that of the solvency of Dual Homes. The plaintiff tendered documentary evidence that satisfied me that Dual Homes was solvent at all material times,[3] and on or before 4 May 2011 could have accessed funds sufficient to pay CSD2, and other debts later claimed against it, had it been advised to do so and thus averted a presumption of insolvency.

23 There were two relevant bank accounts. Dual Homes operated a bank account in respect of the Railway Place project that had a credit balance of $27,798 on 13 April 2011 and had a credit balance of $21,332 on 4 May 2011. In addition, Dual Homes could be, and was when necessary, financially supported by the Roiniotis family. Dual Homes, as trustee of the Roiniotis Family Trust, guaranteed a NAB Flexi Plus mortgage faculty for George, John and Nick Roiniotis, which had a debit balance with NAB of $235,654 and on 4 May 2011 an undrawn amount of $164,345.48 was available. That facility had been used to financially support Dual Homes and I am satisfied that the undrawn funds were available to Dual Homes at all material times. The facility was increased to $400,000 on 17 March 2011 and on 23 March 2011, $60,000 was transferred into the account of Dual Homes' 'Railway Place Project' which thereafter had a credit balance. It was abundantly clear that Dual Homes could have paid the judgment debt, interest, and costs to discharge the creditors statutory demand prior to 4 May 2011.

24 As will appear, in May 2011 the owners' corporation undertook for 14 days not to wind up Dual Homes to permit McKellar to submit a bill of costs. On 19 May 2011, the Railway Place project bank account had a credit balance of not less than $16,282. Further, $164,345 was available for drawdown in the NAB facility. On 27 May 2011, when the winding up application was filed, the bank account had a credit balance of $15,015 and $159,346 was available for drawdown in the NAB facility. During the period through until the winding up order was made, not less than $140,229 was available for drawdown in the NAB facility. The credit balance of the Railway Place project bank account was $3,997 on 22 June 2011, partly because of payments made to Pilley McKellar on account of costs, and for counsel's fees and withdrawals by members of the Roiniotis family.

25 In unusual circumstances, which I discuss later, Moores Legal paid the judgment debt on behalf of Dual Homes. I am satisfied that Dual Homes could have paid that debt in the ordinary course of its business from the facilities referred to. The owners' corporations claimed that this payment did not discharge the total indebtedness of Dual Homes and that $24,833 remained outstanding. I am also satisfied that Dual Homes could have paid that other debt in the ordinary course of its business from the facilities referred to.

26 Also in evidence were financial statements prepared by Dual Homes' accountant, Mr Caripis for the year ending 30 June 2011. The trading statement for that year for Dual Homes as trustee for The Roiniotis Family Trust stated total assets of $2,296,928 and total 'non-Roiniotis family' liabilities of $365,395. Mr Rathner's balance sheet for Dual Homes after termination of the liquidation showed an asset surplus of $150,895.

27 Dual Homes was also the registered proprietor of unencumbered land in mid-2011.[4] Dual Homes mortgaged the Murradoc Road property to the extent of $275,000. On 1 June 2011, Mr McKellar instructed counsel that Dual Homes owned approximately $3 million in property assets. McKellar stated in contemporaneous documents including correspondence with the liquidator in July 2011 that Dual Homes was solvent. I accept the plaintiffs' evidence and the contemporaneous assertions of McKellar in his written advice that at all material times McKellar believed Dual Homes was solvent and had sufficient funds to pay not just CSD2, but also all of its outstanding debts.

28 The defendants, as interested creditors, did not contest an application later made, on 16 October 2011, under s 482 of the Corporations Act to terminate the winding up of Dual Homes on the grounds that Dual Homes was not solvent; rather they actively supported that application. At trial, the defendants led no evidence on the issue of solvency and did not directly challenge the plaintiffs' accountant Mr Caripis in cross-examination as to the balance sheets or financial statements prepared by him, or as to his assertions concerning the solvency of Dual Homes in 2011, or the ability of Dual Homes to pay the sums sought by the owners' corporations.

29 Finally, I do not accept that Dual Homes advised McKellar it could not pay CSD2.

30 VCAT heard the Fees Claim and the Cleaning Claim on 11 October 2010 and published its reasons, with an indicative costs order subject to further submissions, on 5 November 2010. Dual Homes lost on each claim. VCAT foreshadowed making an order for costs in the sum of $2,500 in the unpaid fees proceeding. In McKellar's view that order was a better result than Dual Homes would have obtained if the other party made costs submissions and further submissions on costs were unlikely to be commercially justifiable. McKellar permitted the deadline for filing costs submissions to pass.

31 On 12 November 2010, LMS Lawyers (representing the owners' corporation) sought an extension of time for costs submissions. Although LMS Lawyers copied McKellar into the request, he did not respond to it. On 17 November 2010, LMS Lawyers made a costs submission. McKellar did not make any response, or take objection, to the submission, assuming that VCAT would first determine the application for extension of time that he had ignored.

32 McKellar did not seek instructions from Dual Homes about these matters. George Roiniotis, who was aware of the VCAT Ruling, was not aware that the owners' corporation had sought an extension or made submissions and assumed McKellar was dealing with the costs issue because he had told George that he would do so.

33 On 30 November 2010, VCAT ordered that Dual Homes pay $13,388, including costs assessed at $8,995.90. On 16 December 2010, the Magistrates' Court registered this order for enforcement. The costs order surprised McKellar due to the significant increase in costs awarded, and also because the order was made without giving Dual Homes the opportunity to respond to the late submissions.

34 The first statutory demand ('CSD1') was served on Dual Homes on 22 December 2010. The deadline for compliance with the demand passed on 12 January 2011.

35 It is common ground that Pilley McKellar was retained to advise and act in respect of CSD1 very shortly after it was served. Dual Homes instructed McKellar to 'do what he thought necessary.' I am satisfied, because there was no greater specificity in the evidence of the terms of the retainer, that the parties failed to define their relationship with any precision.

36 On or about 13 January 2011, McKellar told George Roiniotis that VCAT's order made 30 November 2010 was irregular and that Dual Homes could appeal. McKellar told Dual Homes not to immediately pay the claim and it believed that it had a good chance of successfully avoiding the consequences of 30 November 2010 VCAT Order, which it believed that McKellar would manage on its behalf. McKellar advised George that Dual Homes had good prospects on an appeal and should apply to set aside the statutory demand. I accept George Roiniotis' evidence of Dual Homes' instructions to McKellar:

I rang McKellar after receiving the first statutory demand. I told him we had received a document that I did not understand and I asked him what this was all about. He said something along the lines of, 'These guys never give up. They just dig their heels in deep as much as they can. They work together, the manager and these solicitors and they've done this to quite a few people. We've got a genuine dispute and we'll set it aside.' This advice gave me comfort and in substance I told McKellar to do what he thought necessary.

37 McKellar asked an employee to prepare a research note about statutory demands. That research focused on the requirements for service by post and noted the possibility of setting aside a statutory demand by an offsetting claim. The author set out extracts from textbooks that referred to the consequences of presumed insolvency which follow from non-compliance with a statutory demand.

38 On 13 January 2011, McKellar wrote to VCAT inviting it to reconsider the costs order.

39 I do not accept McKellar's claim that, at this time, he advised Dual Homes that it would be grossly uncommercial to further challenge the order and the simplest way to avoid pointless expense was to pay the judgment debt. It may be that at a later stage George Roiniotis and McKellar discussed that option. McKellar told Dual Homes that he was going to deal with the issue and have the amount reduced or set aside. McKellar did not inform Dual Homes of the legal consequences of non-compliance with a statutory demand and I accept that Dual Homes was not told of any risk of an application to wind it up or that the family might lose control of Dual Homes. McKellar could not specifically recall giving any such advice and John and George Roiniotis each denied receiving any such advice. The cross-examiner did not challenge that denial. With McKellar not identifying any risk to Dual Homes, it instructed him to do whatever he thought necessary.

40 John Roiniotis stated that McKellar was going to write some letters and get it sorted out, and that he seemed very confident about this. That was what McKellar did. He wrote to VCAT on 13 January 2011, which refused his request that it reconsider the costs order. In doing so, VCAT made a specific finding that it gave Dual Homes an opportunity to be heard.

41 The defendants suggested that George Roiniotis was familiar with and understood statutory demands from prior experience. George Roiniotis accepted that he was 'loosely familiar' with the concept of a statutory demand, but I am satisfied that he did not fully appreciate the legal consequences of non-compliance with a statutory demand, and did not understand the presumption of insolvency, or that the 21 day compliance period was strict. John Roiniotis' knowledge of statutory demand procedure was similarly general. Consistently, in cross-examination McKellar conceded that the Roiniotis family as a whole only had a layperson's view of the law.

42 I find that at this stage Dual Homes was reluctant to pay the VCAT judgment debt to the owners' corporation given a history of animosity between them due to Dual Homes' objection to a levy to fund a proceeding against it. I find that Peter Roiniotis expressed Dual Homes' attitude in an affidavit in the termination proceedings:

I accept that the Company had deliberately chosen not to pay the owners corporation the money which was sought by it, notwithstanding the award made in VCAT and notwithstanding the judgment entered against it in the Magistrates' Court. I was largely responsible for that decision. It was my view that the money sought from the Company was improperly sought, and the Company was unwilling to pay the money as a matter of principal, rather than a matter of inability to make the payment.

43 Although George Roiniotis interpreted Peter Roiniotis' affidavit for him, I accept that both George and John Roiniotis rejected the notion that Dual Homes would not have paid the debt because of animosity between it and the owners' corporation if McKellar had either recommended it or explained the legal consequences of the situation that was developing.

44 Four matters are clear. Dual Homes did not pay the judgment debt that was the subject of CSD1. It would have been able to do so, but McKellar did not advise it of the legal consequences of not paying the statutory demand within time. Dual Homes instructed McKellar to apply to set aside CSD1 based on his advice to it.

45 Acting prudently, a solicitor instructed as McKellar was, would have understood that s 459F of the Corporations Act stated that if at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to have failed to comply with the demand. In that event, the Court is required, pursuant to s 459C(2), to presume that the company is insolvent for the purposes of a winding up application under s 459P.

46 In David Grant & Co Pty Ltd (Receiver appointed) v Westpac Banking Corporation[5] the High Court stated that the Supreme Court does not have power to extend time within which to file such an application. A prudent solicitor would have appreciated the need to give advice, obtain instructions, and act within the 21-day period. Pursuant to s 459H, a court must set aside the demand where it is satisfied that there is a genuine dispute between the company and the creditor about the existence of the debt, unless any amount in respect of which there is no such dispute exceeds $2,000.

47 On 13 January 2011, McKellar applied, outside of the 21-day time limit, to set aside CSD1. The basis for this application was unclear. Although McKellar had advised that there was an offsetting claim in respect of costs, and the affidavit in support of the application refers to the apparent denial of natural justice by VCAT when making the costs order, McKellar's strategy was obscure as any reduction in the costs ordered would not reduce the debt below $2,000.

48 McKellar attributed the lateness of the application to his mistaken belief that the time provisions under Chapter V of the Rules extended the strict legislative time limit under s 459G(2). McKellar did not have an adequate grasp of the practices and procedures in insolvency law concerning statutory demands, the operation of the presumption of insolvency, and winding up applications.

49 Within days, on 18 January 2011, VCAT dismissed McKellar's application seeking reconsideration of its costs decision. Dual Homes never challenged that dismissal. From 18 January 2011, there was no basis for the application to set aside CSD1. George Roiniotis was unaware that McKellar had written to VCAT or that it had refused to reconsider the costs order and he believed that McKellar was dealing appropriately with the issue.

50 On 22 February 2011, McKellar negotiated with LMS Lawyers that he would withdraw Dual Homes' application to set aside CSD1 on condition that it pay the owners corporations' costs fixed at $2,800. I accept George Roiniotis' statement that McKellar did not seek instructions concerning this 'settlement'. McKellar did not compromise the underlying debt of $13,434.93. McKellar told George Roiniotis at some point in early 2011 that he had dealt with, or fixed, the first statutory demand and Dual Homes did not need to pay anything. But McKellar's efforts achieved nothing. Rather, Dual Homes' position had deteriorated. It remained indebted for the existing judgment debt and costs, had incurred a costs liability to Pilley McKellar, and incurred an additional $2,800 costs liability in favour of the Railway Place Owners' Corporation.

51 Seven weeks after the compromise of the application to set aside CSD1, on 13 April 2011, the owners' corporation served another statutory demand (CSD2) for the same debt ($13,434.93). This demand fell to be satisfied by 4 May 2011.

52 In the interim, Dual Homes succeeded in the Railway Place Property Damage Claim, commenced against it on 1 November 2010, and was awarded its costs on 19 April 2011 ('19 April 2011 Costs Order').

53 Dual Homes retained McKellar in respect of CSD2. George Roiniotis described the scope of the retainer in similar terms to the retainer for CSD1:

In my conversations with McKellar about what I know [sic] understand to be the second statutory demand, he said he would set the statutory demand aside. He said we had an 'off-setting claim' which we could rely on the set aside the statutory demand. He said the 'off-setting claim' was the 19 April Costs Order. He said this could be set-off against the statutory demand. Accordingly, I accepted his advice and told McKellar to deal with the matter. I trusted him to deal with the matter, in part, because, as far as I believed, he had successfully dealt with the first statutory demand. I did not take any steps, or cause Dual Homes to take any steps, separately to satisfy the second statutory demand or pay the judgment debt, nor to apply to set it aside. I relied on McKellar to do what needed to be done, having accepted his advice about the 'off-setting claim'.

54 I am satisfied the parties did not define the scope of their obligations with any greater precision than this. It is not clear precisely when the conversation establishing this retainer took place. The question of the apportionment of responsibility between the defendants is affected by when McKellar first received Dual Homes' instructions in respect of CSD2. Dual Homes maintained that it instructed McKellar by 28 April 2011 at the latest, when he was at Pilley McKellar, and plainly that is correct because he wrote to LMS Lawyers about CSD2 on that date.

55 I reject McKellar's evidence that he had advised George or John Roiniotis in conversation that 'the only sensible thing to do in the circumstances was to pay the statutory demand in full' or 'you're playing with fire,' and that George Roiniotis told him that Dual Homes was unable to pay the debt by 4 May 2011. I am persuaded that McKellar told George Roiniotis that Dual Homes had an offsetting claim on which they could rely to set aside CSD2. His advice to Dual Homes was to leave the matter with him and he would deal with it. McKellar consistently posed to Dual Homes as a solicitor who could deal with its legal issues.

56 By this time, George Roiniotis wanted Dual Homes to resolve the debt with the owners' corporation that had returned, but he relied on McKellar's advice not to do so and to permit him to continue to deal with the demand. McKellar gave the same advice to John Roiniotis. McKellar did not explain to either of them the strict 21-day time limit for dealing with the demand or the prospect of a presumption of insolvency arising if the demand was not satisfied and his counsel did not suggest otherwise in cross-examination.

57 The documents confirm the account of George and John Roiniotis. When cross-examined, McKellar could not recall his advice in writing to Dual Homes concerning CSD2. However, on 2 June 2011, McKellar wrote to Dual Homes about his fees. He also stated that the 'prospects of setting aside the demand [were] good', a statement that was not consistent with the evidence just mentioned of his negative advice in a conversation. However, by 2 June 2011, the period for compliance with the statutory demand had expired and the owners' corporation had issued a winding up application returnable on 22 June 2011. McKellar made this written statement to Dual Homes despite having communicated about the issues with a barrister the preceding day to which I will return.

58 On 28 April 2011, McKellar wrote a letter to LMS Lawyers, asserting the inappropriateness of CSD2 given the owners' corporation's liability for costs pursuant to the order of 19 April 2011, and stating that he was instructed to apply to set it aside unless LMS Lawyers withdrew it beforehand.

59 30 April 2011 was McKellar's last day practising as Pilley McKellar before merging his practice with Moores Legal. Pilley McKellar ceased operation on 30 April and McKellar recommenced practice with Moores Legal, initially as an employee solicitor, on 1 May 2011. McKellar agreed in cross-examination that he was very distracted by the process of the changeover.

60 On 2 May 2011, LMS Lawyers emailed to McKellar a letter advising they were considering his letter of 28 April 2011. LMS Lawyers requested a bill in taxable form for the total costs said to be owing to Dual Homes.

61 On 4 May 2011, the deadline for compliance with CSD2 expired. McKellar did not apply to set it aside or apply for an extension of time for compliance pursuant to s 459E of the Corporations Act.

62 Instead, McKellar, now at Moores Legal, emailed LMS Lawyers on 4 May 2011 requesting withdrawal of CSD2 and a further 21 days to present a bill for costs recoverable from the owners' corporation under the 19 April 2011 Costs Order, noting 'we are presently preparing a bill in taxable form, however, in part due to our merger with this firm we will not be in a position to provide it today.' McKellar stated 'in the circumstances, we require your written confirmation by 12 noon today that the demand will be withdrawn failing which our client will be forced to make application to set aside the demand.' By midday, there was no response. McKellar could give no reasons for his failure to apply that afternoon to set aside the statutory demand in accordance with Dual Homes' instructions.

63 The particular significance of McKellar's failure to file such an application was that from 5 May 2011, the Court was required, pursuant to s 459C(2) of the Corporations Act, to presume that the company was insolvent for the purposes of an application under s 459P for the company to be wound up. A prudent solicitor who held to instructions to deal with the matter by having the demand set aside would not have permitted an avoidable statutory presumption of insolvency to arise against his client in this way.

64 On 5 May 2011, LMS Lawyers responded, undertaking on behalf of the owners' corporation not to initiate a winding up application if a bill in taxable form for the costs the subject of the 19 April 2011 Costs Order was received by 19 May 2011, noting that it was highly unlikely that, after setting off the costs, the remaining debt would not exceed the statutory minimum amount claimed in the demand.

65 These considerations became irrelevant because no bill in taxable form was prepared. McKellar gave two reasons for his failure to prepare the bill.

66 First, McKellar did not feel qualified to prepare the bill of costs himself. In his witness statement, McKellar said that he raised this issue with George or John Roiniotis and offered them the option of paying a costs consultant or paying the demand in full, referring to the practical timing difficulties. George and John Roiniotis denied the conversation and there was no documentary record of it. During cross-examination, McKellar recalled personally attempting to prepare a bill and speaking with a costs consultant, but he could not recollect any conversation with George or John Roiniotis about preparing a taxable bill. I am satisfied that McKellar did no more than commence the process of preparing a bill and did not finish it. I reject his assertion of the conversation with his client.

67 McKellar conceded that he did not give written advice to Dual Homes about the risks in his strategy to deal with the statutory demand, or about his discussion with the costs consultant and the possibility the bill could not be prepared in time. He could not explain why he did not give written advice. McKellar said that it was a busy time with the merger and I accept this as the probable excuse for the absence of a bill in taxable form for the 19 April 2011 Costs Order.

68 Secondly, by their defences, the defendants asserted that Dual Homes could not fund a costs consultant to prepare the bill of costs. In his witness statement and in cross-examination, McKellar described Dual Homes as 'recalcitrant payers'. Pressed to justify this description, McKellar identified three small bills issued in late April 2011. These events appear to be after the relevant period and irrelevant on the issue of whether McKellar's failure to prepare the bill of costs was excusable. In his witness statement, McKellar said:

Each of George Roiniotis and Dual Homes were recalcitrant payers and clients and I was again being asked to fund the defence of a very minor claim for a company that claimed to have assets. I was reluctant to do so in circumstances where I had significant doubts about the capacity of Dual Homes to pay. The risk to Dual Homes of failing to quantify the costs was not immediate and would only materialise later. I was in the final stages of closing down Pilley McKellar and arranging our move to Moores and I prioritised other issues I had to contend with at that time.

69 McKellar, by this statement, was defending his own ineptitude by attacking the character of his client. The only part of it that I accept to be true is that he was prioritising his own interests over those of his clients. First, there was no evidence of recalcitrance on the part of Dual Homes in paying McKellar's fees. Rather, McKellar appears to have been dilatory in rendering his invoices. The documentary evidence before the court suggested that Pilley McKellar had rendered the following accounts but the invoices show each account as paid. Precisely when these documents were generated was unclear.

• 10 September 2010, #00002075, $7,865, status - paid
• 26 April 2011, #00002320, $4,570, status - paid
• 26 April 2011, #00002321, $1,232, status - paid
• 26 April 2011, #00002325, Nil invoice
• 29 April 2011, #00002360, $1,815, status - paid.

I accept as probable that McKellar sent out the invoices dated 26 and 29 April 2011 at that time, claiming $7,617 in total.

70 On 2 June 2011, McKellar wrote to Dual Homes and the text of the letter suggests that fees were outstanding. McKellar stated that he had a problem committing to further work and further costs exposure 'given that no payment of any account has ever been made.' McKellar accepted in cross-examination that in June 2011, he spoke with George Roiniotis and agreed that the sum of $8,300 would be sufficient for him to continue. McKellar could not tell his cross-examiner why he did not address the payment of $8,300 from Dual Homes in his witness statement. It is plainly a sufficient sum to discharge the outstanding indebtedness. McKellar accepted that the assertion that Dual Homes was a recalcitrant payer was false and that, when asked to pay for legal work, Dual Homes generally speaking would do so promptly and without complaint.

71 I do not consider that McKellar was truthful when he said that he 'was again being asked to fund the defence of a very minor claim for a company that claimed to have assets.' I have already stated why I am satisfied that McKellar understood the financial position of Dual Homes, but, more significantly, McKellar's complaint about funding litigation for his client cannot sit with his willingness to pay out the debt demanded by the statutory demand on the morning of the return of the winding up application, which I will come to in due course.

72 Finally, McKellar's suggestion that there was no immediate risk to Dual Homes in failing to quantify the costs underscores other observations I have made that McKellar did not have a sufficient understanding of the law and procedures of winding up in insolvency to have prudently given legal or strategic advice to Dual Homes.

73 I am satisfied that as a result of McKellar's conduct of his retainer, Dual Homes did not prior to 4 May 2011:

(b) apply for an extension of time to comply with CSD2;

(c) issue an originating motion to set aside CSD2 pursuant to s 459G of the Corporations Act; or

74 Dual Homes properly understood that McKellar was 'dealing with' CSD2. I am satisfied, for the reasons already given, that Dual Homes had the necessary funds available to comply with the statutory demand, otherwise satisfy the creditor's claims, and meet the costs of preparing a taxable bill. Had Dual Homes been advised by McKellar to take any of these actions or make such payments, I find that it would have done so. Further, had Dual Homes been properly advised about probable outcomes, risks, and likely expenses associated with resolving the dispute represented by CSD2, I find that Dual Homes would have instructed McKellar that it would pay out the creditor's claims, or any lesser sum that McKellar was able to negotiate in full satisfaction prior to 4 May 2011, and it would have made that payment.

75 On 27 May 2011, the Railway Place Owners' Corporation applied to wind up Dual Homes, pursuant to s 459P of the Corporations Act. The application was listed before the court on 22 June 2011. Because of McKellar's failure to apply to set aside the demand, Dual Homes was presumed to be insolvent by virtue of s 459C(2)(a) of the Act. McKellar knew that his failure to negotiate a satisfactory resolution of CSD2 using the offsetting claim constituted by the costs order was problematic and, belatedly, he sought advice from counsel.

76 Section 459S of the Act was now relevant. It provides that a company cannot, without the leave of the court, oppose an application to wind up on a ground, (a) that the company relied on for the purposes of an application by it for the demand to be set aside; or, (b) that the company could have so relied on, but did not so rely on (whether it made such an application or not). Section 459S(2) provided that the court was not to grant leave under subsection (1) unless it was satisfied that the ground relied on was material to proving that the company was solvent.

77 Dual Homes, not having been informed about the progress of the dispute by McKellar, learned of the winding up application in an unusual way. On 31 May 2011, John Roiniotis noticed a reference to 'an action in the Supreme Court to place Dual Homes into Bankruptcy' in a consultant's report relating to other litigation.[6] John Roiniotis enquired of McKellar about the grounds upon which that could be done.

78 An email from John Roiniotis on 28 May 2011 constituted a retainer for McKellar to deal with the application to wind up Dual Homes. In that email, John Roiniotis asked McKellar:

Finally, the one of most concern: He has an action in the Supreme Court to place Dual Homes into Bankruptcy?? [sic] Is this something we know about? Under what grounds can he do this, the fact that we have outstanding money owing? Or is this another case of him trying to raise some revenue for himself and his LMS Mates. How much should we be worrying about and is there any course of action against all this dribble?

79 McKellar addressed John's query by written advice to George Roiniotis on 2 June 2011. In an email dated 3 June 2011, John Roiniotis wrote:

In follow up to my email earlier this week we have been served with the Supreme Court papers as of this morning/last night. Well, actually they were dropped off without an envelope in the junk mail section of my parent's letter box. I haven't read them, but my dad say's [sic] it's regarding the $13,000 owed due to our loss at the VCAT hearing, the cleaning debacle and there is a 21 day time frame to reply. Can I drop these off to you Monday and are we going to need to have a chat about this and other matters?

80 McKellar responded on 3 June 2011 to John Roiniotis as follows:

I have a copy of the documents. I have e-mailed George about them. He is planning on coming on Monday morning to discuss how to proceed.

81 As I noted, the application prompted McKellar to seek advice from counsel and on 1 June 2011, McKellar emailed counsel, referring to an 'ill-fated [sic] attempt to set aside a statutory demand' prior to Pilley McKellar's merger with Moores Legal. McKellar stated that Dual Homes had a 'winding up application made against it' and that 'the client is not insolvent as it has approx. 3M in property assets to its name.' McKellar instructed counsel that two matters that were not in doubt. First, Dual Homes had an offsetting claim based on a consent order.[7] Second, Dual Homes was solvent, having approximately $3M in property assets. The reference to the solvency of Dual Homes persuades me that McKellar was well aware that a presumption of insolvency was operative and aware of the potential obligation on Dual Homes to prove solvency.

82 Counsel replied promptly by email. McKellar now understood from counsel that it was more difficult to resist a winding up application after expiry of a statutory demand and if an offsetting claim arose prior to the expiration of the time in which the demand fell to be satisfied, the leave required under s 459S of the Corporations Act would only be granted if the claim was material to establishing solvency. A prudent solicitor would have immediately appreciated that the quantum of the costs claim rendered it immaterial in establishing solvency. Counsel explained to McKellar that in the alternative, a rather heavy onus of proof was borne by the company to prove solvency by audited accounts. A prudent solicitor would have also appreciated the implications flowing from this course of action being the only defence to the application.

83 Counsel offered to discuss the matter with McKellar but McKellar gave no evidence of any discussion. I do not accept that a prudent solicitor would have provided such generic and perfunctory instructions to counsel and then failed to follow through to obtain a clear understanding of what was required to retrieve his client's situation after receiving the information that counsel provided. I am satisfied that McKellar well understood that the winding up application had been filed because he had failed to do anything about the offsetting costs claim he had identified when the creditor had undertaken not to act. I am also satisfied that when he read counsel's email McKellar appreciated that it was too late to apply to set aside the demand and that the only option available to Dual Homes was to satisfy its creditors and prove its solvency.

84 I am satisfied that the parties did not define this retainer with any greater specificity than these communications, either at this point, or at a later stage as the matter progressed to hearing.

85 I find that, at this point, McKellar ought to have been aware of the risk that Dual Homes would be wound up if it failed to prove its solvency, and I am satisfied that he was so aware. So much is clear from his correspondence with LMS Lawyers and with counsel and his dealings with his client immediately thereafter.

86 For reasons that I will later explain, the crux of McKellar's wrongful conduct was in essence complete by this time and he knew this. The following cross-examination occurred:

COUNSEL: Is that because you were concerned for your own position, given the failure by you on 4 May and the further failure by you by 19 May to do anything?---I was concerned on two fronts. I was concerned for Dual Homes, as my client, and I was concerned for the history of the matter and some of the errors that you've pointed to.

COUNSEL: Why did you not tell your client about your errors and your legitimate concerns about the history then?---I don't have a good answer to that question.

COUNSEL: I suggest to you that [counsel's] advice to you is put in clear, cogent and accurate terms?---The accuracy I couldn't comment on, but yes.

COUNSEL: But he made it plain to you - - -?---Spells it out clearly.

...

COUNSEL: Why did you not attach that email of 1 June 2011 to your email to George Roiniotis of 2 June 2011?---Can I have a look at the 2 June email, please?

COUNSEL: Yes. The email to Mr Roiniotis - in fact, it is a letter - is at 301 and 302, with his handwritten annotations. I think your file copy is at 303 and 304?---I suspect at this point in time there is an element of self-preservation in some of the correspondence.

COUNSEL: Because if your client had seen Mr Greenway's email, that would have alerted them to the fact that nothing had been done in relation to the second statutory demand, do you agree with that?---Yes, if they'd had Mr Greenway's email, they would have been aware of that.

87 I earlier referred to McKellar's email/letter of 2 June 2011 in the context of dealing with outstanding accounts, which was its primary purpose, but this letter also included McKellar's written advice for Dual Homes. McKellar wrote:

We have discussed with counsel the basis upon which the application to set aside the application to wind up might be made. We are of the view your prospects of setting aside the demand are good however serious consideration needs to be given to the cost of continuing to fight the claim and the alternative of paying the outstanding amounts and recovering your entitlements in the usual way.

88 That was the full extent of McKellar's report of his communications with counsel. He did not attach the email. By omitting the email, McKellar sought to preserve his own position in stating that the chances of setting aside the demand were 'good.' McKellar admitted under cross-examination that by 2 June 2011, he was aware the presumption of insolvency had arisen.

89 This advice fell well short, in both its content and its correctness, of advice that a prudent solicitor would have given in the circumstances. McKellar agreed with the cross-examiner that he was aware that the offsetting claim was never going to be sufficient to reduce the debt below the threshold limit. He did not inform his client of that fact nor did he alert Dual Homes that he had done nothing to 'deal with' the second statutory demand. He failed to inform his client that on the winding up application it was subject to a presumption of insolvency and, despite being solvent, faced a difficult and expensive exercise to avoid being wound up.

90 McKellar stated in his witness statement and in cross-examination that he thought Dual Homes still had good prospects of resisting a wind up application at the time he sent the advice, but he accepted that he was wrong to state in that letter that the prospects of setting aside the demand were good. He also accepted that Dual Homes would be obliged to pay out all creditors and not just the judgement debt. McKellar understood that Dual Homes had refused to pay Railway Place Owners Corporation levies to fund the VCAT litigation against it and that the Station Street Owners Corporation claimed similar levies.

91 George Roiniotis viewed the 2 June 2011 letter in the context of McKellar's advice that Dual Homes should not pay out the demand. In his witness statement, George Roiniotis stated:

I did not at the time understand this advice to be saying that it would be uncommercial for Dual Homes to fight the winding-up application and that Dual Homes should simply pay whatever amount was required in order to have the winding-up application withdrawn. McKellar never gave me any direct advice to that effect. Rather, I noted his advice that we had good prospects of winning this case in court (according to McKellar and, so he then said, his barrister). Accordingly, I thought there was a good chance we would win and get our costs back, or most of them, from the owners' corporation, all of which might assist us in other ongoing matters with the oc. In particular, Dual Homes' dispute with the Station Street owners' corporation, which was managed by the same owners corporation manager, who had appointed the same lawyers, was ongoing at the time.

I understand that McKellar now claims that he gave Dual Homes advice that, in order to avoid being wound-up, it should pay the judgment debt owed to the oc. I understand that he claims that he gave me advice on numerous occasions that 'the only real option' was to pay before 22 June 2011 otherwise the company would be wound up. That is not true and I never received advice to that effect, from McKellar.

92 In cross-examination, he maintained his evidence.

COUNSEL: Mr McKellar was suggesting to you that serious consideration ought be given to the cost - in effect, to the commerciality of continuing to fight the debt?---He has - he did write this, but he always said 'we will win, we have got to run this, we will do it, no problem'. For this small amount, we could have paid it any time. If he said 'let's pay, forget it about it, let's move on', we'll pay it.

93 On 3 June 2011, John Roiniotis emailed McKellar, saying he had not yet read the Supreme Court papers that had been served, but that his father told him it concerned the $13,000 owed due to the loss at VCAT and that there was a 21 day time frame to pay. John Roiniotis agreed in cross-examination that he was aware of the time limit, but maintained McKellar never suggested paying the debt.

94 Despite counsel's advice, and McKellar's failure to prepare a taxable bill, at a meeting on 6 June 2011, he advised George Roiniotis that Dual Homes could recover $10,000 on the 19 April 2011 Costs Order. George referred to hand-written notations on his copy of the 2 June 2011 email/letter that supported his recollection and the cross-examiner did not challenge his evidence of this meeting.

95 George Roiniotis and McKellar conferred immediately prior to the winding up application. I accept George Roiniotis' account that the meeting was after hours on 21 June rather than early in the morning of 22 June. McKellar did not dispute that during the meeting he acknowledged that no payment had been made. He appeared to have realised the urgency of the situation. McKellar advised George Roiniotis that it was necessary for Dual Homes to pay the judgment debt by bank cheque before the hearing commenced. McKellar told George Roiniotis that the payment would satisfy the debt.

96 George Roiniotis pointed to the impracticality of making such a request at that time of the evening. McKellar said that he would pay it for Dual Homes because he trusted the Roiniotises' to reimburse him. The documentary evidence showed that on 22 June 2011, McKellar procured that Moores Legal paid $13,434 by electronic funds transfer to LMS Lawyers. McKellar confirmed that payment by letter to LMS Lawyers that day, in which stated that the payment was 'on account of the above matter'. The payment was not made pursuant to any agreement with the creditor or its solicitors.

97 McKellar maintained that Moores Legal, rather than Dual Homes, made this payment because there was a question of Dual Homes' financial capacity. McKellar asserted that George Roiniotis told him that 'we don't have the money available'. Dual Homes agreed that McKellar paid the judgment debt on its behalf. I am satisfied that he did so because he had turned his mind to Dual Homes' problems too late and outside of banking hours when Dual Homes could not reasonably obtain a bank cheque. McKellar believed, wrongly, that payment of the debt would avoid the consequences of his earlier want of care.

98 In cross-examination, McKellar conceded that the problem was the need to immediately transfer the money and not that Dual Homes lacked financial capacity. That concession, and the implicit trust that Dual Homes would repay the solicitors, was inconsistent with McKellar's other evidence of Dual Homes' financial capacity. This was one example, of many, of McKellar's capacity in the preparation of his witness statement, to state what he thought best supported his position or explained his defaults. I accept Dual Homes' account that McKellar paid the funds because of the timing issue, rather than Dual Homes' lack of capacity.

99 McKellar's awareness of the precarious position of Dual Homes was evident in this last minute attempt to pay the judgment debt with the defendants' funds. What is also evident, as I find, is that McKellar was now aware of his own precarious position in the sense of being aware that he was responsible for the position in which Dual Homes now found itself. In his email of 22 June 2011, instructing a staff member to pay $13,434.93 to LMS Lawyers, McKellar stated:

Dear Connie,

Can we pay $13,434.93 in account xxx-xxx-xxx immediately and can you send me a transfer confirmation?

I can explain later and we will get the money back but I need to avert a winding up for a company with approx. 3M in assets.

100 McKellar stated in evidence that he had thought the payment of $13,434 to LMS Lawyers would satisfy the owners' corporation and he understood the purpose of the adjournment to 6 July 2011 to be to ensure that the transferred funds had cleared. I do not accept these statements as truthful. McKellar plainly understood the need to provide cleared funds paying out the creditor before the application was called on by either bank cheque or bank transfer. He organised the payment before court and he provided an electronic payment receipt to LMS Lawyers when he informed them of the payment. McKellar then engaged a barrister to appear for Dual Homes, instructing him of both the fact of the payment and that Dual Homes' unencumbered property asset holding. He recognised the need for an affidavit to be prepared. McKellar understood on 22 June 2011 that the matter was not yet fully resolved for his client. I am satisfied McKellar did not believe the payment of $13,343.93 made that day had resolved the application or the wider dispute with the creditor.

101 Counsel obtained an adjournment of the winding up application to 6 July 2011 and informed McKellar by email that day. McKellar did not advise the plaintiff of the adjourned date, or the potential requirement to prove solvency.

102 The evidence did not disclose what, if any, advice counsel gave to McKellar concerning the preparation required for the hearing on 6 July 2011. I am satisfied that McKellar either recognised then, or was told, that the court would require evidence of the dealings between the company and the petitioning creditor before granting the petitioning creditor leave to discontinue the application. Even if McKellar honestly believed that the payment had settled the debts between the owners' corporation and Dual Homes, which I do not accept, he ought to have been aware that another creditor could substitute as petitioning creditor and he was aware of the other debts claimed against Dual Homes by both owners' corporations. There remained the probability that Dual Homes would be required to prove solvency despite the $13,343 payment. Although McKellar claimed to be unaware of that prospect, he had been told as much by counsel and his assertions to the contrary were undermined by his recognition of the need to place Dual Homes' asset position before the court on affidavit.

103 George Roiniotis thought McKellar had dealt with the winding-up application, and no further action was required of Dual Homes, apart from reimbursing Moores Legal for settling the judgment debt.

104 Both McKellar and George Roiniotis regarded LMS Lawyers and its client, the manager of the owners' corporations, as tenacious and aggressive in their dealings with Dual Homes. McKellar was aware that statutory interest runs on judgments, and although he stated he did not recall considering that the petitioning creditor would seek legal costs, I do not accept that as a truthful statement. I do not accept that McKellar honestly believed that payment of the judgment sum without interest or costs or any agreement to forgo such claims could resolve the dispute. It is probable that by this strategy, formulated in 'time-on' desperation, McKellar intended to force a period for further negotiation that he wholly failed to use.

105 McKellar conceded to his cross-examiner that he was aware 'with hindsight' that there could be a problem in finally resolving the winding up application, given the presumption of insolvency, and the existence of other creditors including the Station Street Owners Corporation which also claimed fees and interest. A prudent solicitor would not accept that a unilateral payment of a judgment debt, without interest or legal costs, ignoring other claimed debts, and absent the prior agreement of a tenacious and aggressive creditor would have settled the matter and I do not accept that McKellar believed it to be a formality that the winding up application would be dismissed on the return date without any input from him on behalf of Dual Homes.

106 On 4 July 2011, LMS Lawyers made plain to McKellar that there was no agreement to accept $13,343 in settlement of the winding-up application, although McKellar would only accept the proposition that LMS Lawyers did not positively assert that the payment was the end of the matter. LMS Lawyers stated that after receipt of $13,343, Dual Homes remained indebted for additional outstanding owners' corporation fees of $24,883 and that the owners' corporation believed Dual Homes was insolvent. Significantly, the owners' corporation offered to accept $24,883 plus $4,702 in costs in return for withdrawing the winding-up application.

107 McKellar forwarded this email/letter from LMS Lawyers to George Roiniotis that day, stating only that 'this shit rolls on.' The letter did not identify the adjourned date of the hearing. He proposed discussing the letter at a conference with George Roiniotis on 7 July 2011 (the day after the adjourned date of the winding up hearing). I am not persuaded that McKellar actually read this letter at the time of receipt or that its receipt reminded him of the imminent return before the court of the adjourned application. He did not inform George Roiniotis of the adjourned hearing date. He did not advise Dual Homes about the offer to discontinue the winding up application on payment of $29,585, or that he had not prepared Dual Homes' defence of the application for the 6 July 2011 hearing. McKellar had not even briefed counsel to appear. It is not apparent that he had considered the consequences of Dual Homes not appearing at the hearing. He did not explain the cost implications for Dual Homes of attempting to prove solvency.

108 Of the email, George Roiniotis said in his witness statement:

I would have read McKellar's email of 6.28pm shortly after that time because I had access to my emails on my mobile phone. I understood from McKellar's email and the attachments that:

1. the Railway Place owners' corporation was now claiming to be entitled to a further $24,882.83 from Dual Homes, plus $4700 in costs (a total of $29,582.83);
2. the owners' corporation intended to proceed with the winding-up application unless Dual Homes paid those amounts to it; and

1. McKellar wished to discuss this demand with me, and Dual Homes' strategy for dealing with it, on the coming Thursday, which was 7 July 2011.

There was nothing in his email or its attachments informing me that the adjourned date of the winding up was 6 July 2011 and I assumed that McKellar's invitation for me to meet with him on Thursday 7 July 2011 gave him sufficient time to do what may have been necessary for him. Nor did McKellar then advise me or inform me that Dual Homes ought to pay the further $29,582.83 demanded by the Railway Place owners' corporation, or negotiate some lesser amount.

109 On 5 July 2011, McKellar flew to Townsville for an unrelated mediation. On 6 July 2011, with Dual Homes unrepresented, this Court ordered that Dual Homes be wound up and appointed Mr Rathner as liquidator. McKellar returned to Melbourne by the early morning of 7 July 2011, unaware of the winding up order.

110 On 7 July 2011, McKellar met with George Roiniotis. They did not discuss the winding up application. Of this meeting, McKellar said:

COUNSEL: So notwithstanding the concerning letter you'd received from LMS on 4 July, raising an additional $29,500 of moneys they said they wanted, as best you can recall, that was not discussed on 7 July?---Yes, that's right.

COUNSEL: And that's because you'd entirely overlooked the looming application date of 6 July?---Yes.

COUNSEL: And the sole reason why there was nothing done for that date was simple human oversight?---That's certainly part of it. I believe I also had a view at the time that payment of the amount claimed in the statutory demand would dispose of the winding-up application.

COUNSEL: But when you saw the LMS email of 4 July, surely that landscape changed and you realised that there was another $29,500 in play?---I was aware that they were claiming that there was another $29,500 payable.

COUNSEL: So whatever one could do, you couldn't simply rest on your laurels and assume the payment of $13,434.93 had made the problem go away?---With hindsight, that is certainly true.

COUNSEL: And that was your belief at the time as well?---I'm not sure it was, no.

111 For the reasons set out earlier, I do not accept that McKellar believed that his $13,343 payment on behalf of Dual Homes resolved the winding up application, and if there were any doubt about this, it is certain he would be aware the issue was not resolved on receipt of the LMS email of 4 July 2011 demanding $29,582.83.

112 McKellar's concession that he had entirely overlooked the adjourned application date contradicted the defence.[8] In response to this defence, George Roiniotis said the following in his witness statement:

I understand that McKellar now claims that he told me that the winding-up application had been adjourned to 6 July 2011 during a telephone conversation with me prior to that date. That is not true. I was unaware that there was a hearing scheduled for 6 July 2011, and McKellar never told me that there was. His email of 4 July 2011 made no reference to that hearing, nor did I understand there to be any urgency. Had I known that there was a hearing scheduled for 6 July 2011, I would never have waited until 7 July 2011 to speak to McKellar about the owners' corporation's latest demands. I would have discussed those matters and the hearing with McKellar prior to 6 July 2011, so that I could get advice from McKellar and provide him with instructions prior to the hearing.

113 Of the 7 July meeting, George Roiniotis stated in his witness statement:

I do not recall if I actually met with McKellar as planned on 7 July 2011. However, I did send him an email at 9.37am that morning inquiring about a lease at 343 Mont Albert Road. It is possible I may subsequently have had a phone discussion with McKellar on 7 July 2011 instead of a meeting, and that we may have discussed the recent correspondence from the Railway Place owners' corporation's solicitors. But I do not have a specific recollection of having such a discussion. I certainly do not recall McKellar telling me on 7 July 2011 anything about a hearing on 6 July 2011 or that a winding-up order had been made against Dual Homes.

114 McKellar did not challenge this evidence. There was no indication in writing given to Dual Homes of the adjourned date and I am satisfied that Dual Homes was unaware of it.

115 McKellar's concession that he overlooked the adjourned application was one of a number of concessions made by Mr McKellar during his evidence under cross-examination that contradicted either his witness statement or the pleaded defence. Other concessions include statements contradicting George Roiniotis' supposed knowledge and understanding of statutory demands,[9] Dual Homes' supposed inability to fund a costs consultant to tax the 19 April 2011,[10] the payment of $13,434 by the second defendant on 22 June 2011 being because Dual Homes supposedly could not do so, rather than being a mere matter of convenience,[11] and the purported adequacy of McKellar's advice given 2 June 2011[12] in the defence.

116 Further, as noted above, McKellar did not challenge in cross-examination much of the evidence of George and John Roiniotis about the content of advice given to Dual Homes. The focus of the defendant's case appeared to shift from assertions put forward in the defence as to the content of McKellar's advice, many of which McKellar subsequently contradicted in cross-examination, to the defendants' trilogy of issues - causation, immunity and quantum.

117 The response of a prudent solicitor in the circumstances would have been quite different to that of McKellar. Assuming for present purposes that a prudent solicitor found him or herself in McKellar's circumstances on 4 July 2011, that solicitor would have advised Dual Homes of the offer to resolve the application. The prudent solicitor would have assisted the client with estimates of the risks and the expense of alternative courses of action that were open. Dual Homes would be invited to make a commercial decision whether to undertake the risks and incur the expense of contesting the winding up application or to pay the sum demanded. A prudent solicitor would have stressed the need for an urgent response in order that counsel could be instructed to appear on the application, armed with an appropriate affidavit explaining the dealings with the petitioning creditor and the future intentions of Dual Homes with respect to the application.

118 If Dual Homes had been properly appraised of the risks and expenses involved in contesting the winding up application, I am satisfied that it would have paid the sum demanded or some lesser sum if negotiated with the creditor.

119 It is trite law that a solicitor owes a client a duty to exercise reasonable skill in the performance of the solicitor's retainer. The duty derives from both contract and tort.[13] The scope of the duty includes warning the client of material risks inherent in implementing a proposed transaction in a particular way, if a reasonable person in the client's position, if warned of the risk, would be likely to attach significance to it.[14] What is required for the performance of this duty in the particular case depends upon the circumstances, including the scope of the retainer and the nature of the task entrusted to and undertaken by the solicitor.[15] As Winneke P observed in Carew Counsel Pty Ltd v French:[16]

A solicitor who brings a reasonable degree of skill and knowledge to his task, and exercises reasonable care, in the circumstances, in carrying it out will not be liable per se for an error of judgment; nor will he be liable, necessarily, for a mistake made upon a "nice and difficult point of law". In giving advice or making decisions in the exercise of the retainer, the solicitor does not warrant or guarantee the soundness of the advice or decision but only that the requisite degree of skill and care has been used in arriving at them.

120 Expert evidence may be admissible in a claim against lawyers where there is a question of particular practices, but that is not this case and the Court is well positioned to determine the standard to be expected of a prudent solicitor in advising in respect of debt recovery by statutory demand processes and in taking or defending action under the Corporations Act and the Corporations Rules.[17]

121 I would adopt, with respect, the observations of Kyrou J (as he then was) in Simply Irresistible Pty Ltd v Couper[18] drawing on the observations of Ashley JA, speaking for the Court of Appeal, in Stipanov v Mier.[19] Kyrou J stated:

Where alternative courses of action are available to a client, it is not sufficient for a solicitor simply to satisfy himself or herself that the client is aware of the alternatives. The solicitor has a duty to consider, and to advise the client of, the comparative legal merits of each course of action - including the prospects of success, the risks, the costs and the likely outcomes of each course of action - in order to enable the client to make an informed choice.

122 A lawyer may be required to bring reasonably foreseeable risks to the attention of the client.[20]

123 To the extent that the plaintiff alleges a failure to exercise reasonable care on the part of the defendants, causation is governed by s 51 of the Wrongs Act 1958 (Vic),[21] and s 52 makes clear that the plaintiff always bears the burden of proving, on the balance of probabilities, any fact relevant to the issue of causation.

124 Section 51 of the Wrongs Act states:

(1) A determination that negligence caused particular harm comprises the following elements -

(a) that the negligence was a necessary condition of the occurrence of the harm (factual causation); and

(b) that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused (scope of liability).

(2) In determining in an appropriate case, in accordance with established principles, whether negligence that cannot be established as a necessary condition of the occurrence of harm should be taken to establish factual causation, the court is to consider (among other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.

(3) If it is relevant to the determination of factual causation to determine what the person who suffered hard (the injured party) would have done if the negligent person had not been negligent, the matter is to be determined subjectively in the light of all relevant circumstances.

(4) For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.

125 In Adeels Palace Pty Ltd v Moubarak[22] the High Court considered the statutory test for causation expressed in the New South Wales equivalent of s 51(1)(a) of the Wrongs Act, being s 5D of the Civil Liability Act 2002 (NSW), and how it differed from the common law principles. The High Court held that dividing the issue of causation into factual causation and scope of liability:[23]

... expresses the relevant questions in a way that may differ from what was said by Mason CJ, in March v E and MH Stramare Pty Ltd, to be the common law's approach to causation. The references in March v Stramare to causation being 'ultimately a matter of common sense' were evidently intended to disprove the proposition that 'value judgment has, or should have, no part to play in resolving causation as an issue of fact'. By contrast, s 5D(1) [i.e. the NSW equivalent of section 51(1) of the Wrongs Act] treats factual causation and scope of liability as separate and distinct issues.

126 More recently, in Wallace v Kam,[24] the High Court further explained the relationship between the common law test and the statutory test:

The distinction now drawn by s 5D(1) between factual causation and scope of liability should not be obscured by judicial glosses. A determination in accordance with s 5D(1)(a) that negligence was a necessary condition of the occurrence of harm is entirely factual, turning on proof by the plaintiff of relevant facts on the balance of probabilities in accordance with s 5E. A determination in accordance with s 5D(1)(b) that it is appropriate for the scope of the negligent person's liability to extent to the harm so caused is entirely normative, turning in accordance with s 5D(4) on consideration by a court of (amongst other relevant things) whether or not, and if so why, responsibility for the harm should be imposed on the negligent party.

127 The Victorian Court of Appeal considered causation under the Wrongs Act in Settlement Group Pty Ltd v Purcell[25] and drew the following seven propositions about the operation of the statutory causation test in the Victorian context from the decisions of the High Court in respect of similarly worded interstate legislation.

(a) Division 3 of Part X of the Wrongs Act applies to any claim for damages for harm resulting from negligence, regardless of whether the claim is brought in tort, in contract, under statute or otherwise.

(b) 'Negligence', for the purpose of Part X, means failure to exercise reasonable care.[26]

(c) Section 52 provides that, in determining liability for negligence, the plaintiff always bears the onus of proving, on the balance of probabilities, any fact relevant to the issue of causation.

(d) The determination of factual causation under s 51(1)(a) is a statutory statement of the 'but for' test of causation: the plaintiff would not have suffered the particular harm but for the defendant's negligence.

(e) Under the statute, factual causation requires proof that the defendant's negligence was a necessary condition of the occurrence of the particular harm. A necessary condition is a condition that must be present for the occurrence of the harm.

(f) There may be more than one set of conditions necessary for the occurrence of a particular harm and it follows that a defendant's negligent act or omission which is necessary to complete a set of conditions that are jointly sufficient to account for the occurrence of the harm will meet the test of factual causation within s 51(1)(a). In such a case, the defendant's conduct may be described as contributing to the occurrence of the harm. It is not necessary that the defendant's negligence be the sole necessary condition of the occurrence of the harm.

(g) Section 51(2) makes special provision for cases in which factual causation cannot be established on a 'but for' analysis. The provision permits a finding of causation in an appropriate case,[27] notwithstanding that the defendant's negligence cannot be established as a necessary condition of the occurrence of the harm.

128 In the present case, the 'scope of liability' consideration (s 51(1)(b)) presented little difficulty, it not being in contention that, if the plaintiffs proved factual causation, it was appropriate that the scope of the defendants' liability extended to the harm that they had suffered.

129 There was an issue raised on the pleadings of whether the defendants, at the time of their respective retainers by Dual Homes, owed a duty of care to George and Peter Roiniotis. Although the plaintiffs put an attractive submission that, as a matter of law, I should find the existence of such a duty, I do not consider it necessary to decide this question for a number of reasons.

130 First, the defendants did not advance any positive submissions against the imposition of a duty of care owed by the defendants to Peter and George Roiniotis.

131 Secondly, the items of loss claimed by George and Peter Roiniotis as plaintiffs are expenses incurred when Dual Homes was in liquidation and for its benefit. These amounts were necessarily incurred on Dual Homes' behalf. It is a simple accounting exercise for George and Peter Roiniotis to claim the sums they expended on behalf of the company as debits in their loan accounts, and by that process, bring these expenses into account as losses suffered by Dual Homes. It is appropriate to permit recovery of these items by Dual Homes on the basis that the company would be required to credit the quantum of these items to the loan accounts of George and Peter Roiniotis.

132 There are practical reasons why such an approach is appropriate. At all material times, Dual Homes was the trustee of the Roiniotis Family Trust. Peter Roiniotis was the sole director and a contributory of Dual Homes. Through his beneficiary loan account, he was also a creditor of Dual Homes. George Roiniotis was a former director and a former contributory of Dual Homes, but appointed by the company as its primary officer in dealings with McKellar. George Roiniotis was also a creditor of Dual Homes through his beneficiary loan account.

133 Section 471A of the Corporations Act, suspends the power of directors to administer the affairs of the company in liquidation, subject to limited exceptions. In the circumstances, Peter and George Roiniotis were persons with relevant standing to press an application for termination of the winding up under s 482 of the Corporations Act. Dual Homes, at the instance of its director, had no standing to bring a s 482 application.[28] Further, the claimed expenses are confined to the direct expenses incurred in connection with that termination application.

134 However, if I am wrong in this conclusion, I am otherwise satisfied that McKellar owed a duty of care to Peter and George Roiniotis in the circumstances on the basis of the plaintiffs' submissions.

135 Reasonable foreseeability is not enough to impose a duty in the present case. However, as with the beneficiary in Hill v Van Erp,[29] Peter and George Roiniotis were vulnerable in the sense that they were unable to protect themselves from the consequences of McKellar's want of reasonable care.[30] McKellar was in control of the risk. He assumed responsibility for it. Neither Peter nor George Roiniotis was challenged in cross-examination about their reliance on McKellar to manage, or fix, the demands that were being made against Dual Homes by the owners' corporations.

136 The first issue of wrongful conduct by Pilley McKellar concerns the discharge of its retainer between about 30 November 2010 (the date of the VCAT judgment) and 23 February 2011 (the date of the withdrawal of CSD1). The primary question is whether Pilley McKellar failed to prudently advise Dual Homes about the enforcement action against it over the judgment debt and failed to exercise reasonable care in dealing with the matter.

137 A prudent solicitor would have given advice to Dual Homes about the commercial considerations inherent in challenging the statutory demand in the manner described in Simply Irresistible Pty Ltd v Couper. McKellar did not do so. He formulated the prospect of a successful offsetting claim - constituted by a claim that VACT denied Dual Homes procedural fairness in respect of a costs order - as a basis for setting aside the statutory demand.

138 McKellar's execution of this flawed strategy was wanting. It was common ground that CSD1 was served on 22 December 2011 requiring payment by 12 January 2011. McKellar's application (including his supporting affidavit filed on 14 January 2011) was out of time. The petitioning creditor had, from 13 January 2011, the benefit of a statutory presumption of insolvency if it applied to wind up Dual Homes.

139 More significantly, this strategy was conceptually flawed in several respects. The 28-day period for seeking leave to appeal the 30 November 2011 costs order on a question of law under s 148(2) of the Victorian Civil and Administrative Tribunal Act expired before the application was filed on 14 January 2011. Further, VCAT considered, and rejected by a further ruling dated 18 January 2011, Dual Homes' request by letter dated 13 January 2011 that it reconsider its costs order. Dual Homes never challenged that rejection. By 18 January 2011, the basis for the application to set aside CSD1 had fallen away.

140 Further, at best, Dual Homes could only have reduced the quantum of the statutory demand by about $6,495, the difference between the costs ordered ($8,995) and the $2,500 originally foreshadowed, which McKellar considered would be a good outcome. If the costs had been reduced to $2,500, the claim remained above the statutory minimum and the demand would not have been set aside. Given that the VCAT member foreshadowed $2,500 in ignorance of the settlement offers, it is likely that any reduction achieved by this 'offsetting claim' would have been either nil or an amount substantially less than $6,495. Every available scenario left a demand substantially in excess of the statutory minimum, which would not be set aside.

141 McKellar's advice was consistently incorrect and imprudent, and his execution of it was deficient because he acted out of time. From 18 January 2011 at the latest, McKellar's strategy to deal with the statutory demand was foredoomed to fail. In effect, all that then remained was the availability of a statutory presumption of insolvency for the benefit of the creditor, leaving a negotiated compromise of the application to set aside CSD1 as the only option.

142 Further, McKellar's advice fell well short of providing sufficient information to enable Dual Homes to make an informed choice about whether to pay the statutory demand or apply (out of time) to set it aside. In addition, the manner in which he 'dealt with' the statutory demand failed to resolve the issues between his client and its creditor in a satisfactory manner.

143 In this case, the risk that the owners' corporation might issue another statutory demand seeking resolution of the unpaid judgment debt, or more likely, issue a proceeding for winding up of Dual Homes for non-compliance with CSD1 was obvious. McKellar's advice to Dual Homes that he had dealt with CSD1 fell well short of drawing to his client's attention the extant risks that it faced.

144 For these reasons, I am satisfied that Pilley McKellar's advice to Dual Homes was negligent, as was its execution of the instructions that it received.

145 The plaintiff claimed that Pilley McKellar's wrongful conduct caused the following loss:

1. Legal fees and disbursements rendered by Pilley McKellar in respect of CSD1;[31]

b) The costs of $2,800 paid to the owners corporation; and,

1. The losses suffered by Dual Homes and/or Peter and George Roiniotis because of its winding up.

146 It is clear that the adverse costs order of $2,800 against Dual Homes was a capitulation negotiated by McKellar and his negligent advice and conduct was a necessary condition for that costs liability to arise. A prudent solicitor would not have advised applying to set aside the demand on the basis that was advanced and, if instructed by an informed client to do so, would have issued the application within time. I am satisfied that, if prudently advised about the prospects of success, the risks, the costs and the likely outcome of the VCAT costs review and the application to set aside the demand, Dual Homes would have differently instructed McKellar and acted to ensure timely performance by him in protecting its interests. McKellar did not seek instructions before compromising the application on the basis that Dual Homes pay costs of $2,800, and McKellar did not warn Dual Homes that the judgment debt was not resolved by the settlement. The commencement of the application directly caused the costs liability. The only conclusion that is open is that Dual Homes would not have suffered liability for the costs of the withdrawal of its application but for the defendant's negligence.

147 I do not accept that the wrongful conduct so far identified caused the losses suffered because of the winding up of Dual Homes.

148 The High Court has stated that where the negligence is said to arise from something that was not done, proof of a causal link between the omission and the harm 'requires consideration of the probable course of events had the omission not occurred'.[32]

149 Section 51(3) of the Wrongs Act provides that the question as to what Dual Homes would have done if McKellar had not been negligent 'is to be determined subjectively in the light of relevant circumstances'. The sub-section preserves the common law admissibility of subjective evidence as to what a particular plaintiff would have done had the defendant not been negligent.

150 George and John Roiniotis both stated that had Dual Homes been properly advised in the sense of understanding what they now understood about the prospects of success, the risks, the costs and the likely outcome of the VCAT costs review and the application to set aside the demand, the demand would have been paid, and that Dual Homes at all relevant times, had the capacity to pay it.

151 I accept this evidence, noting in doing so that Dual Homes may have been reluctant to pay CSD1. I accept that John and George Roiniotis, properly advised, would have identified that contesting the costs order and the statutory demand was uncommercial, carrying high risk of a negative result for Dual Homes and that they had the capacity to, and would have, paid the debt.

152 However, McKellar's 'settlement' postponed or spent the effect of CSD1 and the creditor chose not to further rely on that demand, or a presumption of insolvency arising from non-compliance with it. The wrongful conduct so far identified played no part in the liquidation of Dual Homes, as will later become clear. It cannot therefore be said that Pilley McKellar's negligence in connection with CSD1 was a necessary condition for the losses that Dual Homes suffered consequent on the winding up order. It cannot be said that but for the negligence of Pilley McKellar in connection with CSD1, the winding up of Dual Homes would have been averted.

153 Section 51(2) makes provision for cases in which factual causation cannot be established on a 'but for' analysis, permitting a finding of causation in an appropriate case,[33] notwithstanding that the defendant's negligence cannot be established as a necessary condition of the occurrence of the harm. This is not such a case.

154 This case can be distinguished from Walton v Efato Pty Ltd (in liq)[34] where a solicitor failed to apply to set aside a creditors statutory demand for about $11,000 within 21 days, which was found to have caused a presumption of insolvency to arise. In that case, there was no postponement or determination by the creditor not to proceed with a winding up application based on that statutory demand.

155 Dual Homes alleged that Pilley McKellar conveyed representations that:

(a) The 30 November 2010 VCAT Order would not survive challenge;

(b) Any challenge to the 30 November 2010 VCAT Order would be regular, and for example within the time limited by s 148 of the Victorian Civil and Administrative Tribunal Act 1998;

(c) It would be better for Dual Homes to challenge the 30 November 2010 VCAT order and apply to set aside CSD1 than pay the judgment debt; and

(d) Dual Homes should appeal the 30 November 2010 Order and apply to set aside CSD1.[35]

156 I am satisfied these representations were conveyed to George Roiniotis and that he relied on them in giving instructions to McKellar to do what was necessary, including seeking a rehearing of the costs ruling and applying to set aside the statutory demand. These are statements of opinion, but McKellar had no reasonable basis to express such opinions. I am also satisfied on the grounds set out above that these representations were misleading.

157 At an earlier stage, the parties identified a question of whether McKellar had made representations to Dual Homes in the course of trade or commerce. The issue was not addressed by counsel in final submissions.

158 Concrete Constructions (NSW) Pty Ltd v Nelson[36] is the leading case.[37] The High Court considered the purpose of s 52 of the Trade Practices Act and held: [38]

What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character.

159 It is important to identify the character of the conduct in question. The conduct was making representations that were legal advice by a lawyer to a client about a statutory demand based on an adverse judgment for a commercial debt, which caused the client to engage the lawyer to have dealings in the course of his commercial activities as a solicitor. The representations induced Dual Homes' decision to challenge a VCAT order and to seek to set aside CSD1.

160 A series of cases have considered the meaning of 'trade or commerce' in the context of the provision of legal advice. A statement made to a court is not made in trade or commerce. In Little v Law Institute of Victoria (No 3),[39] Mr Little purported to rely on a representation constituted by a statement made by the secretary of the Law Institute to the trial judge during the course of a hearing in which the respondent sought to enjoin the appellant from practising as a solicitor. Kaye, Beach and Ormiston JJ rejected the proposition that a statement made to a court by a party in litigation was made 'in trade or commerce'. In particular, Kaye and Beach JJ held:

In our opinion, statements made during the course of litigation cannot be categorised as statements made in trade or commerce nor can they be categorised as representations ...

A statement made to a court during the course of litigation is not a statement made in connection with or as part of a commercial arrangement.[40]

So too in W J Green & Co (1984) Pty Ltd v Wilden Pty Ltd[41] a statement made in the course of a mediation that was part of court process was held not to be in trade or commerce.

161 In LT King Pty Ltd v Besser,[42] Osborn J (as he then was) doubted that giving professional advice (which lies at the core of practice of a profession) constituted conduct in trade and commerce, but recognised that in many circumstances solicitors undertake a significant role in the conduct or completion of commercial transactions.[43] Such conduct may be conduct in trade or commerce. The relevant conduct in that case was a communication made by solicitors on behalf of their client in the completion of a commercial transaction. Osborn J held that it was conduct in trade or commerce identifying the guiding principles to be:

(a) The question of whether conduct in the course of providing professional services is conduct 'in trade or commerce' requires an assessment of the essential character of those services.

(b) When the conduct in issue constitutes services provided by a member of a profession such conduct will not automatically amount to conduct in trade or commerce by reason only that the services are provided for fee or reward.

(c) It is clear that the essential character of core activities undertaken by the legal profession is not that of trade and commerce.

(d) Conversely the essential character of some activities undertaken by the legal profession is that of effecting or directly facilitating commercial transactions.

(e) The characterisation of particular conduct will always be a matter of fact and degree and it is not possible or desirable to judicially define the concept by prescribing specific criteria.

(f) In the present case it is sufficient to conclude the essential character of the conduct in issue was commercial being a communication prior to settlement (in a non-litigious context) of the payment of moneys outstanding under a loan agreement and associated costs.[44]

Osborn J added, citing Little, that 'in the case of the practice of the law it is not appropriate to describe conduct in the area of litigation as conduct in trade or commerce'.[45]

162 In Goddard Elliott (a firm) v Fritsch,[46] the misleading and deceptive statements were made by lawyers giving professional legal advice out of court, albeit at the door of the court. Bell J disagreed with Osborn J's characterisation of the core work of the legal profession stating:

I regret I cannot agree with his Honour's characterisation of the work of the legal profession. On the clear view I take of that work, most of it is trading or commercial in character, although exceptionally some of it will not be. I would put the matter the other way around to Osborn J.

163 Bell J distinguished Little on the basis that, as in this case, the conduct of the lawyers in communicating misleading and deceptive statements in the course of giving professional legal advice was out of court, albeit at the door of the court. Little involved statements made to a court where the majority, Kaye and Beach JJ said a statement made 'during the course of litigation' was not made in trade and commerce. Bell J reasoned that, understood in the light of facts of the case, the ratio of the decision was that a statement made 'to a court during the course of litigation' was not made in trade and commerce. Bell J preferred the reasoning of Ormiston J (in dissent, but not on this point), which was expressed in more narrow terms:

where the allegedly misleading and deceptive statements are made in the course of evidence, whether on affidavit or otherwise, for the purpose of persuading a judge of this or any other superior court to exercise his judicial functions in making an order in favour of a litigant.[47]

164 Bell J concluded that the phrase 'activities or transactions which of their nature, bear a trading or commercial character' is apt to describe the out-of-court provision of professional services by a lawyer to their client in litigation, whether the lawyer is acting as a solicitor, a barrister, or an amalgam of both. Bell J accepted that the High Court has not expressly determined that the provision is to be interpreted in this manner.

165 In Boland v Yates Property Corporation Pty Ltd,[48] the issue did not have to be decided and Callinan J described the issue as controversial.

166 In Middleton v Aon Risk Services Australia Ltd,[49] McClure JA (as she then was) distinguished Little in circumstances where the respondents' representation was made after court action had been settled. The respondent's representation therefore was not made in the course of or for the purposes of court proceedings.

167 In Stockland (Constructors) Pty Ltd v Retail Design Group (International) Pty Ltd,[50] Hodgson JA (Sheller JA and Davies AJA agreeing) distinguished Little from a case that concerned 'representations made in connection with the bringing of proceedings but not made in the course of the proceedings themselves'.[51] Hodgson JA described Little as limited to representations during the course of litigation.[52]

168 The characterisation of particular conduct will always be a matter of fact and degree, and these cases, while demonstrating some uncertainty over the proper characterisation of legal advice, emphasise the importance of careful analysis to determine whether the relevant conduct was a part of a legal proceeding, rather than activities or transactions that bear a trading or commercial character.

169 In this proceeding, the representations were not made in or to a court, or in the course of litigation, or even for the purposes of bringing court proceedings.[53] McKellar essentially directed his conduct to the manner in which Dual Homes would continue with activities or transactions that bore a trading or commercial character. The representor and the representee were in a commercial relationship, as well as a professional relationship, and McKellar's conduct engaged no more than his duty to his client. McKellar's representations concerning the basis for an attack on the statutory demand, and the quantum of the sum demanded was not part of a court process.[54] It did not engage his duty to the court.

170 Although, on one view, McKellar's conduct was connected with a court's continuing adjudication of issues between litigants, the better view is that a mere connection to a judgment debt or a prospective challenge to a debt recovery procedure is not sufficient to characterise the conduct as being in the course of the litigation. The purpose of the conduct best identified its character: to assist Dual Homes in its management of a trading or commercial relationship, a dispute over the payment of a debt. McKellar's conduct bore the requisite trading or commercial character and was conduct in trade or commerce.

171 McKellar's representations were misleading or deceptive or likely to mislead or deceive because:

(a) The time limited by s 148 of the Victorian Civil and Administrative Tribunal Act 1998 to seek leave to appeal the 30 November 2010 VCAT Order had expired and a challenge to that order could not be described as regular.

(b) For reasons already stated, the most optimistic outcome achievable on an appeal or other review of that order would not lead to a court order setting aside the demand and it was misleading for McKellar to suggest that it was better for Dual Homes to engage in litigation about the quantum of the debt or the status of the demand.

172 Having regard to the nature of the representations, Kenny J in Carey v Freehills elegantly expressed the distinction: [55]

First, in relation to representations as to the law, it is useful to bear in mind the distinction between a lawyer's advice to a client as to the law (including its application to the circumstances disclosed in the lawyer's instructions) and a submission prepared by a lawyer, again on instructions from a client, to make out the client's case as best the lawyer can (and so far as the law and the lawyer's professional obligations permit). In the former case, the lawyer's advice includes an implied representation to the client that the opinion stated in it is honestly held and based on reasonable grounds: see, for example, Heydon v NRMA Ltd at 108 [329]-[330]; Inn Leisure at 167. In the latter case, the lawyer's submission does not incorporate an implied representation to the client or, to adopt French J in Inn Leisure, a "message", that the opinion stated in it is the author's own unqualified opinion and a complete expression of his legal knowledge and expertise. This is because the client knows that the lawyer is the client's representative (or mouthpiece) who is acting on the client's instructions to present the client's own case in the best possible light in order to advocate for the position as the client would have it: see Inn Leisure at 167. A misstatement in a submission prepared for the client is not likely to mislead the client because it is not proffered to the client as necessarily being correct: see Heydon v NRMA Ltd at 108 [329] and Inn Leisure at 164-167.

173 In not paying the judgment debt, in seeking a rehearing of the costs argument in VCAT and, applying to set aside CSD1, Dual Homes relied on McKellar's conduct when it instructed Pilley McKellar. McKellar did not challenge the plaintiffs' witnesses about their reliance on his conduct.

174 Dual Homes alleges that Pilley McKellar's misleading or deceptive conduct caused it the same three heads of loss as were claimed in negligence/breach of retainer.

175 A plaintiff must allege and prove that conduct in breach of the Australian Consumer Law caused the claimed loss or damage.[56] The common law test of causation applies generally as the test of causation of damage by misleading or deceptive conduct.[57]

176 In Spar Licensing Pty Ltd v MIS Qld Pty Ltd, Griffiths J, summarised the leading authorities when he stated:[58]

Before turning to the relevant evidence it is convenient to note that it is well established that, in this context, for the cross-claimants to recover damages or compensation under either ss 82 or 87 of the TP Act, they need only establish that the relevant representations were a cause of their consequential loss or damage, and not necessarily the only cause of such loss or damage. Accordingly, a representation need not be the sole inducement for the representee to enter into a contract, as long as it plays some part (even if it only be a minor part) in contributing to the formation of the contract.

177 Gaudron J stated in Henville v Walker that:[59]

It was held in Wardley Australia Ltd v Western Australia that 82(1) [of the Act] should be understood as taking up the common law practical or common-sense concept of causation ... discussed ... in March v Stramare (E & MH) Pty Ltd ... except in so far as that concept is modified or supplemented expressly or impliedly by the provisions of the Act. As already indicated, that common-sense approach requires no more than that the act or event in question should have materially contributed to the loss or injury suffered. And there is nothing in the Act to suggest that any different approach should be taken in the case of a misrepresentation that constitutes a contravention of s 52(1).

178 Pilley McKellar's conduct materially contributed to Dual Homes' liability for the costs of the application to set aside CSD1 incurred by the Railway Place owners' corporation. McKellar did not have explicit instructions to agree to compromising the application on the basis that Dual Homes paid costs of $2,800. As I have stated, McKellar caused his client to capitulate and terminate an ill-considered application that had no prospect of achieving the outcome that was his recommended strategy for dealing with the creditor.

179 However, for the reasons discussed above in connection with the claim in negligence, Pilley McKellar's conduct in making the representations did not contribute in any material way to the winding up of Dual Homes.

180 The CSD2 was served on 13 April 2011. The deadline for compliance with CSD2 was 4 May 2011.

181 I have found that, prior to 30 April 2011, McKellar did not advise George or John Roiniotis that the only sensible thing in the circumstances was to pay CSD2 in full, and that McKellar advised George Roiniotis that CSD2 could be set aside because of the offsetting claim and that he would do what was needed to deal with CSD2. However, again, McKellar failed to appreciate that an application to set aside CSD2 pursuant to s 459G of the Corporations Act required a sufficiently large offsetting claim under s 459H to reduce the debt below $2,000. Absent such an offsetting claim, the court could vary CSD2 and allow an additional (short) period for Dual Homes to pay it but it would not set it aside.

182 A reasonably competent solicitor in the position of McKellar would have taken various steps on receipt of CSD2. First, that solicitor would have advised Dual Homes about the following matters:

(a) The process that would follow on service of the demand including the legal consequences of not paying CSD2 or otherwise compromising it or setting it aside.

(b) The process and the expense and delay involved in quantifying the costs order that was the basis of the offsetting claim.

(c) The risks for Dual Homes in proceeding with an application to set aside based on the identified offsetting claim for costs. A major risk factor was that the 19 April 2011 Costs Order had not been taxed and both the quantum of the offsetting claim and the date on which it would be due for payment were yet to be determined. Further, the quantum of the taxed costs order was not likely to extinguish the debt demanded and a prudent solicitor would have informed Dual Homes of the likely delay and expense of taxation and advised Dual Homes that interest and costs (for both parties) would also be accumulating.

(d) That it was improbable that the demand would be set aside and that it would need to negotiate a payment to the creditor to obtain the withdrawal of CSD2.

(e) That its realistic options were either to pay the judgement debt and accumulating interest and costs or to negotiate withdrawal or compromise of the statutory demand by reference of the unliquidated offsetting claim.

(f) It was necessary for payment or compromise to be completed before the period set by the demand expired, and in the event negotiations were unsuccessful, an application to set aside CSD2 had to be filed but that the application would only buy time at a considerable cost in legal expenses, which the solicitor would estimate.

(g) Finally, a prudent solicitor would have advised Dual Homes of the winding up application that could follow if it failed to pay, compromise or set aside the demand and of the particular provisions of the Corporations Act that would operate to presume Dual Homes' insolvency. Dual Homes would be required to prove its solvency, and the prudent solicitor would explain that process with an estimate of the expense, delay, and other consequences for Dual Homes.

183 Next, a prudent solicitor would have obtained instructions to take action within the applicable time constraints in order to resolve the matter or issue proceedings before 4 May 2011 and would have taken the necessary action.

184 My findings, set out above, show that McKellar fell short of this standard. Pilley McKellar's advice to Dual Homes concerning CSD2 was negligent and its conduct up to 30 April 2011 was inadequate to protect Dual Homes, although the relevant period for action did not expire until 4 May 2011.

185 McKellar commenced practice with Moores Legal on 1 May 2011 and Dual Homes' continuing retainers with Pilley McKellar were effectively assigned or novated to Moores Legal on that date. McKellar failed to act on the ultimatum set for the creditor in his email to LMS Lawyers of 4 May 2011 (the day payment was due). No written confirmation was received from LMS Lawyers by 12 noon on that day that the demand would be withdrawn and McKellar failed to cause Dual Homes to make an application to set aside the demand within the stipulated period.

186 McKellar had instructions to apply to set aside CSD2, which he did not follow. McKellar could give no reasons, when cross-examined, for his failure to apply to set aside the statutory demand in accordance with Dual Homes' instructions during the afternoon of 4 May 2011. This omission was critical, for it gave the creditor the benefit of a presumption of insolvency on any application to wind up Dual Homes.

187 Further, despite LMS Lawyers undertaking not to initiate a winding up application if served with a bill by 19 May 2011, McKellar subsequently did not prepare the bill or seek instructions for its preparation by a costs consultant. McKellar failed to advise Dual Homes of the need to give a bill of costs in support of the offsetting claim within 14 days or of the need to take steps to draw such a bill in the period between 5 May and 19 May 2011. The cross-examiner did not put to either George or John that McKellar gave them any advice about the exchange of 4-5 May 2011. McKellar conceded to his cross-examiner that he did not inform his clients of the missed deadline for CSD2 or the 14-day extension afforded by the undertaking on 5 May 2011.

188 This correspondence would have highlighted to a prudent solicitor the flaws in McKellar's strategy for Dual Homes. First, even if proof of a pre-existing offsetting claim is presumed relevant after the period limited by a statutory demand has expired, there was no basis for McKellar to expect that the process he had initiated could establish an offsetting claim resulting in a discharge of the statutory demand. In addition, McKellar was also aware that there were other debts claimed by the owners' corporation, but disputed by Dual Homes. Secondly, and more significantly, a prudent practitioner would have foreseen that the omission to apply to set aside the statutory demand on 4 May 2011 immediately gave rise to a significant risk of serious harm for Dual Homes by the presumption of insolvency that arose for the benefit of the creditor in a winding up application.

189 McKellar was also negligent in failing to act to draw up the bill of costs or cause a costs consultant to do so, and in failing to advise Dual Homes of the consequences of not submitting that bill to the creditor within the 14-day period.

190 McKellar's provision of negligent advice and his failure to act prudently concerning CSD2 ran from soon after 13 April 2011 to 4 May 2011 when the CSD2 expired. McKellar's negligence was continuing and the failure to act on CSD2 became increasingly pressing as the deadline approached. A reasonably competent solicitor would have appreciated the increasingly urgent need to deal with CSD2 as the deadline for compliance with it approached. McKellar's advice and conduct in respect of CSD2 implicates both Pilley McKellar and Moores Legal.

191 The consequences in law for Dual Homes that followed when the creditor applied after 4 May 2011 to wind up Dual Homes in insolvency were that it:

(a) was taken pursuant to s 459F of the Corporations Act to have failed to comply with CSD2;

(b) was presumed to be insolvent in that consequent application by the creditor; and

(c) would be prohibited from opposing the creditor's winding up on the ground of the offsetting claim for costs under the 19 April 2011 Costs Order.

Further, in failing by 19 May 2011 to serve on LMS Lawyers a taxable bill of costs, the undertaking that LMS Lawyers gave on behalf of the creditor lapsed and the owners' corporation was then at liberty to institute an application to have Dual Homes wound up in insolvency as it did on 22 May 2011.

192 Dual Homes alleges that the negligence of McKellar caused:

(a) the incurring of unnecessary legal fees, including by virtue of a presumption of law which arose that Dual Homes was insolvent;

(c) the particularised losses suffered by Dual Homes and Peter and George Roiniotis as a result of its winding up (which are discussed in due course).

193 The defendants submitted that there was no reason to extend factual causation beyond the harm suffered because of Moores Legal's failure to appear on 6 July 2011 to oppose the winding up application. The antecedent breaches cannot be said to have been causative of the Plaintiff' loss or damage because the winding up order placing Dual Homes in liquidation could have been avoided at any time before it was made on 6 July 2011.

194 Dual Homes contended that McKellar's failure to advise the pressing need to comply with or otherwise deal with CSD2 prior to the expiration of the 21-day period of the demand caused Dual Homes' inactivity and gave rise to the presumption of insolvency that later founded the winding up application. Had the creditors demand for payment of the judgment debt of $13,434 and any interest and costs been dealt with before 4 May 2011, by either payment or a successful setting aside application, Dual Homes would not have been exposed to a winding up application being made.

195 Based on my findings, I am satisfied that the plaintiffs would not have suffered the particular harm that it did but for McKellar's negligence, as so far identified. The content of his advice to Dual Homes induced it to instruct him to deal with CSD2 in the manner that he did and his conduct in dealing with CSD2 was, in general terms,[60] a necessary condition for the occurrence of each claimed head of loss as caused by this particular conduct. But for the failure of McKellar to advise Dual Homes to pay the creditor or to apply pursuant to s 459G of the Corporations Act to set the demand aside, or to quantify the offsetting claim prior to 4 May 2011, a statutory presumption of insolvency would not have arisen, and no winding up application would have been brought against Dual Homes by the creditor on the basis of CSD2. McKellar's failings in the period from service of CSD2 until the deadline for compliance with it became causally operative on 4 May 2011. As I will in due course explain, subsequent events did no more than provide an opportunity for Dual Homes, if properly advised, to have avoided the consequences of McKellar's negligence during this period.

196 Further, it is clear that the offsetting claim would at best have diminished the judgement debt, although not below $2,000, and an application based on it would have avoided or delayed the presumption of insolvency from arising and provided an opportunity for compromise of the creditor's claims. The failure to properly advise Dual Homes and the failure to make the application both satisfied the necessary condition test and caused the creditor to apply to wind up Dual Homes with the benefit of a statutory presumption of insolvency.

197 I find that McKellar's negligence in the period up to and including 4 May 2011 caused the plaintiffs' damage.

198 The fact that McKellar's continuing negligence deprived Dual Homes of the opportunity to exploit an opportunity to avoid the loss sustained is irrelevant to the conclusion that McKellar's negligence during this period was a necessary condition for the occurrence of each of the heads of damage claimed by the plaintiffs. The defendants sought to isolate one later negligent omission, the failure to appear on the adjourned hearing of the winding up application on 6 July 2011, as the sole operative cause of the plaintiffs' damage, which, they argued, was conduct for which Moores Legal was immune from suit, protected by advocates' immunity. Although McKellar's later conduct also contributed to the damage suffered by the plaintiffs in the sense that he failed to take reasonable opportunities to avoid Dual Homes being wound up, it is not necessary that the defendant's negligence be the sole necessary condition of the occurrence of the harm. The later occurrence of a set of conditions necessary for the occurrence of particular harm which are immune from suit (assuming that to be so for present purposes) will not deprive conduct that is not protected by the immunity from meeting the test of factual causation within s 51(1)(a) of the Wrongs Act.

199 My conclusion on causation is unaffected by the 'scope of liability' consideration under s 51(1)(b). The second limb of the test ultimately asks a normative question, namely, whether to hold the defendant liable to pay damages for that harm. It is in this context that the concept of causation as a matter of common sense is most often expressed, and there is no suggestion that the application of common sense is in any way foreign to the statutory task. The appropriateness of the scope of liability extended from the relevant causal connection is determined according to common sense ideas, taking into account any relevant policy considerations.

200 The categories of relevant policy considerations sensibly to be considered is not a closed list. On the contrary, statutory language in very broad terms requires the Court to consider policy considerations that might assist in determining whether and why the defendant should bear responsibility for harm to the plaintiff. Liability might justifiably be denied where the connection between the relevant harm and the defendant's conduct is remote.

201 As I set out below, the defendants have not established that the omissions admitted by Moores Legal in respect of the winding up application had any causal effect on the operation of the presumption of insolvency in the judgment of the court to wind up Dual Homes. The failure of McKellar to display the skill and knowledge expected of a prudent and careful solicitor and to exercise reasonable care in the conduct the winding up application represented a series of missed opportunities for Moores Legal to address and avert the risk of harm (the presumption of insolvency) that it had created, and the foreseeable consequences of that harm (the winding up of Dual Homes). The harm was not remote on the facts and I am satisfied that McKellar was aware that Dual Homes was in danger of being wound up after the presumption of insolvency arose.

202 In Walton v Efato Pty Ltd (in liq),[61] the NSW Court of Appeal considered the question of remoteness of damage in the context of costs orders made in applications that followed on a negligent failure to set aside a statutory demand. The Court of Appeal held that the general sequence of events leading to the costs liability must be foreseeable for that liability to be caused by the earlier negligence. The precise manner in which the events unfolded to create that costs liability need not be foreseeable.

203 In Walton, a solicitor failed to apply to set aside a creditors statutory demand for $11,000, which, if challenged within time, would have been set aside. The company averted liquidation when a late application to set aside the demand failed and on the hearing of the winding up application the presumption of insolvency was invoked. The company had terminated the negligent solicitor's retainer and, assisted by new solicitors, ultimately established its solvency rebutting the statutory presumption. The company incurred adverse costs orders in favour of the creditor, first, in an application to set aside the statutory demand (first costs order) and secondly in defence of the resulting winding up application (second costs order). The second costs order was attributable to the failure of the company to obtain adequate evidence to rebut the presumption of solvency in compliance with Court directions.

204 However, the company was then unable to pay those costs and in a general meeting resolved by special resolution to be wound up. The company succeeded in its claim against the solicitor, contending that the solicitor's negligence directly caused the two sets of adverse costs orders in favour of the creditor, the company's own legal costs, and the liquidator's fees in administering the winding up. At trial, the solicitor conceded negligence with respect to his failure to file the s 459G application within time and made no claim of immunity with respect to that conduct. His negligence included failing to obtain adequate evidence to rebut the presumption of insolvency. The court rejected his claim to immunity from suit in respect of that negligence.

205 Tobias JA,[62] considered whether the negligent solicitor's failure to apply to set aside the creditors statutory demand might be said to have caused those costs.[63] Tobias JA held that foreseeability of the general sequence of events is sufficient,[64] and a reasonably competent solicitor in the position of the appellant would have foreseen that if a s 459G application was out of time, a presumption of insolvency would arise, and the onus of its rebuttal in any consequent winding up application would lie with their client. The client would incur legal costs and expenses. If the respondent was unable to rebut the presumption, such costs would extend to the creditor's costs of the winding up application on the basis of the rule that costs would follow the event, and further, it was foreseeable that circumstances could occur even though the winding up application was dismissed that would result in an order that the company pay the whole or part of the legal costs of the winding up application. The second costs order was held to not be too remote.

206 Turning to the final head of damage arising from the liquidation, Tobias JA found that the company had later resolved to wind itself up, thereby incurring liquidator's fees, due to its inability to pay the two costs orders.[65] The sequence of events that led to that result was reasonably foreseeable. Even if the company was able to rebut the presumption of insolvency in the winding up application, which it did albeit with evidence adduced at the last minute, it was foreseeable at the time of the defendant's breach that it might incur the costs orders as a result of the winding up application and it was but a short step to foresee that if the company was unable to meet those costs it was likely that it would be wound up, either on the application of the creditor or voluntarily, and that liquidator's fees would thereby be incurred.

Accordingly, in my view not only were the two costs orders reasonably foreseeable but so also was the incurring of liquidator's fees if the inability of the respondent to pay those costs resulted in its winding up, as occurred. A reasonably competent solicitor in the position of the appellant at the time of the breach of his duty of care would in my opinion have reasonably foreseen 'some such sequence of events' as those that actually occurred, namely, that the respondent would be ultimately placed in liquidation and liquidator's fees thereby incurred (paraphrasing Castellan [v Electric Power Transmission Pty Ltd (1967) 69 SR (NSW) 159,] 169).

208 The determination of the appeal in favour of the company did not depend on a finding that the solicitor was in breach of his duty of care in failing to obtain the evidence to rebut the presumption of insolvency in a timely manner. It was therefore unnecessary for the court to consider the issues of reliance and immunity that were raised by the solicitor in respect of that breach.

209 Returning to the present circumstances, the reasoning identified by Tobias JA is generally apposite, despite factual differences. The winding up of Dual Homes was a foreseeable consequence of McKellar's negligent advice in respect of CSD2 and his conduct in his dealings with the creditor's solicitors in respect of it, even though the precise circumstances in which Dual Homes was ordered to be wound up (McKellar's failure to appear or brief counsel to appear on the application) was not.

210 A reasonably competent solicitor, in McKellar's position, would have foreseen that a failure to address CSD2 would result in a presumption of insolvency and that defending a winding up application would become a difficult, expensive and time consuming process carrying significant risk. I have found that McKellar knew these matters by no later than 5 May, 2011 and certainly by 1 June 2011. A reasonably competent solicitor would have advised Dual Homes of these risks, and in particular would have appreciated the need for urgent action by or on behalf of Dual Homes. It is clear that no further steps were taken, either before the expiry of CSD2 or prior to the determination of the winding up application, to negotiate with the creditor or to obtain evidence to establish the solvency of Dual Homes.

211 McKellar did foresee the winding up of Dual Homes and the subsequent costs that were incurred, but he failed to act to avert those consequences. A reasonably competent solicitor in McKellar's position as at 5 May 2011 would have reasonably foreseen 'some such sequence of events' as those that actually occurred, namely, that the respondent would be ultimately placed in liquidation and that loss would be suffered by Dual Homes and Peter and George Roiniotis.

212 I am satisfied that none of the heads of damage that the plaintiffs allege were sustained by reason of the wrongful conduct of McKellar in respect of CSD2 prior to 4 May 2011 can be characterised as remote from that conduct. It is appropriate within the scope of s 51(1)(b) of the Wrongs Act 1958 (Vic) to impose liability.

213 Given my findings thus far, it is not necessary to consider whether McKellar was negligent in the advice that he gave, and his conduct, in respect of the winding up application. That said, I am satisfied that he was negligent for the following reasons.

214 At this point, a prudent solicitor in McKellar's circumstances would have recognised a conflict of interest and duty and advised that Dual Homes retain independent lawyers. McKellar recognised, at least to his cross-examiner at trial, that his advice to, and conduct of the affairs of, Dual Homes was infected with an interest in self-preservation. A prudent and independent solicitor would have recognised a duty to provide competent advice about both the circumstances then pertaining, and the consequences for Dual Homes, following McKellar's failings in respect of CSD2, as discussed above.

215 McKellar ought to have advised Dual Homes that a presumption of insolvency applied in the application because of its failure to comply with or apply to set aside CSD2 and that rebutting that presumption was a necessary step in defeating the winding up application, absent compromise. Proof of insolvency for a small private company would be costly, and that there would be risks for Dual Homes, in the sense that it might not achieve dismissal of the application, that could result in the catastrophic consequence of liquidation. A prudent solicitor would recommend that Dual Homes might consider that the better course was to compromise with the creditor, and in the circumstances known to McKellar, Dual Homes would also be advised about the prospect that other related debts may need to be paid. As already stated, a prudent solicitor would have provided his client with estimates of the costs, risks and delays involved with the alternatives open to it.

216 As stated in my factual findings, McKellar advised by the letter of 2 June 2011 that the plaintiffs' prospects of setting aside the demand were good, and that, furthermore, he had discussed with counsel the 'basis on which the application to set aside the application to wind up might be made'. This advice borders on gibberish. McKellar omitted the substance of what counsel had told him on 1 June 2011. Further, McKellar knew and did not disclose that CSD2 had expired without being satisfied or set aside despite the plaintiffs' instructions for him to do so having been given as early as 28 April 2011. McKellar did not mention that counsel advised that the application needed to be met by proof of solvency, or seek instructions to gather the necessary proofs. Dual Homes reasonably interpreted the letter as McKellar's advice, with which counsel agreed, that the prospects of defeating the winding-up application were good. I have concluded that these assertions were false. However, McKellar induced Dual Homes to allow him to deal with the application as he thought best.

217 There was no basis for McKellar to believe that the prospects referred to in his 2 June 2011 letter were 'good', and he conceded the view he expressed was 'utterly wrong'. He conceded the presence of an element of self-preservation in this letter. McKellar also knew at this time that a presumption of insolvency had arisen, which he did not bring to his client's attention and that there were other potential debts owed to the applicant, and other, creditors.

218 Over the next couple of weeks McKellar did nothing in respect of the application, until, as set out above, early on the return date, 22 June 2011, he transferred the sum of $13,434 to LMS Lawyers. I have found that McKellar made this payment on instructions from Dual Homes, but not pursuant to any arrangement with the creditor and did not expect that this payment would resolve the winding up application or the issues between Dual Homes and the creditor.

219 A competent practitioner would then have advised Dual Homes that the payment of $13,343 had not resolved the application, and taken steps to address the risk caused by the presumption of insolvency, and the imminent return before the court of the adjourned winding up application. The advice given by McKellar that payment of the $13,343 had resolved the issue of the statutory demand did not meet this standard.

220 I find that in respect of the winding up application McKellar negligently failed to advise:

(a) that he may have a conflict of interest and Dual Homes should seek independent legal advice;

(b) as to the legal consequences of CSD2 having gone unsatisfied;

(c) that the payment of $13,343 would not resolve the winding up application;

(d) Dual Homes about the requirements for contesting the winding up application, the costs of rebutting a presumption of insolvency, the risks of other creditors supporting the winding up application, and the prospects and nature of adverse potential consequences for Dual Homes if it failed to successfully contest the application.

221 I have found that, had it been properly advised, Dual Homes would have promptly taken steps to pay out the creditor's claims in full. In those circumstances, having regard to its trading position, Dual Homes would have been able to secure a dismissal of the application to wind it up. Given the offer that was made by the creditors on 4 July 2011, dismissal of the application could readily have been achieved.

222 When acting for a client in connection with litigation, a solicitor receiving an offer from the other party to the litigation to resolve it plainly has an obligation to obtain his client's instructions about the offer. The proper discharge of that duty involves more than simply informing the client of the receipt of offer. I reject the suggestion that McKellar intended to provide advice that would enable Dual Homes to properly consider the offer at the conference he arranged with George Roiniotis on 7 July 2011. First, that conference was scheduled for the day after the hearing date for the application and, second, if that were so, McKellar would have discussed the offer with George Roiniotis at that conference, but did not.

223 Forwarding the 4 July 2011 letter from LMS Lawyers to George Roiniotis saying 'This shit rolls on. I will discuss with you on Thursday' constituted wrong advice that the formulation of a strategy to deal with the winding up application could be deferred until the day after the application was to be heard.

224 McKellar's failures, first, to take any steps to prepare for the adjourned hearing in order to protect the position of his client and, second, to deal with the creditor's offer fell well short of the standard of care expected of a prudent solicitor. I am persuaded that McKellar had overlooked the return date of the application, during the period from 22 June 2011 and was not reminded of it by LMS Lawyer's letter of 4 July 2011, probably because he did not properly read and consider that letter. McKellar accepted that he overlooked the need to provide advice in relation to the settlement offer.

225 McKellar had no specific recollection of advising George Roiniotis of the hearing on 6 July 2011 and there is no evidence of any written communication that may have given Dual Homes notice of that hearing. I have found that Dual Homes never learned of the hearing date.

226 Moores Legal admitted that it did not advise the plaintiffs of the need to prepare for the 6 July hearing, nor brief counsel to appear, following which Dual Homes did not appear at the hearing including by counsel and McKellar did not inform Dual Homes of the consequences of there being no appearance, including that an order could be made winding up the company. In a plain, gross and admitted breach of his duty to Dual Homes, McKellar simply forgot the hearing on 6 July 2011 and did not attend to Dual Homes' position as the respondent to this application.

227 A prudent solicitor, in McKellar's circumstances as at 5 and 6 July 2011, would have advised on and obtained instructions about the creditor's offer of settlement and prepared an affidavit for the hearing seeking a further adjournment to enable other solicitors to be instructed, for that offer to be properly considered, and for the circumstances to be explained to the court. Had that course been adopted it is highly likely that no winding up order would have been made on 6 July 2011 for the reasons already explained.

228 It is plain that McKellar's negligence following the issue of the application to wind Dual Homes up materially contributed to the making of the winding up order, which is the key event relating the damage suffered to the breach of duty. The winding up order would not have been made absent his negligence.

229 However, Dual Homes, having let the statutory demand lapse, was already presumed to be insolvent, and nothing that McKellar later did affected the availability to the creditor of the presumed insolvency of Dual Homes. It was on that basis that the court ordered the winding up. Thus, nothing occurred by reason of McKellar's negligence after the issue of the application to disrupt the foreseeable chain of events set off by McKellar's failure to advise about, or respond to, CSD2, which was that the creditor made the application, and Dual Homes, being presumed to be insolvent, was placed in liquidation.

230 The defendants submitted that antecedent breaches did not cause the plaintiffs' damage because the winding up order was avoidable at any time up until it was made on 6 July 2011. For the reasons already stated, I reject the defendants' submission that all heads of loss and damage flowed from the Court's order of 6 July 2011 by which Dual Homes was placed in liquidation, which was caused in the strict legal sense by Moores' Legal's admitted breach of duty in failing to appear at court on 6 July 2011, and not caused by any earlier proved breach.

231 The plaintiffs claim that McKellar's conduct in making the statements that he did and in omitting to state what ought to have been said, which I have already described, in the 2 June 2011 letter to Dual Homes was misleading or deceptive conduct. The defendants disputed that this conduct was in 'trade or commerce.'

232 Applying the principles already discussed, I find that this conduct was in 'trade or commerce.' The essential purpose of the letter was commercial, being to set out the state of various matters being handled by McKellar for Dual Homes and, in particular, to deal with the issue of fees. The impugned conduct was not a communication to a court, or for the purposes of litigation. McKellar's conduct was an element of activity - reporting on outstanding matters, accounts, and future work - that bears a commercial character, and is therefore in 'trade or commerce.'

233 The letter represented that McKellar's opinion that the prospects of defeating the winding up application were good was supported by a barrister, which was misleading or deceptive or likely to mislead or deceive contrary to s 18 of the Australian Consumer Law in that counsel had not advised as such. Further, there was no basis for McKellar's opinion that the prospects of setting aside the demand were good because the time for applying to set aside CSD2 had expired. Dual Homes had no prospects of defeating the winding up application by setting aside CSD2.

234 The plaintiffs submitted that this misleading and deceptive conduct caused the damage that flowed from the winding up of Dual Homes, and the difference in fees charged by Pilley McKellar and Moores Legal during the retainers and what would have been charged but for the negligence. Again, it is not necessary to consider the fees.

235 For the reasons discussed when considering causation in the context of the negligence claim in respect of McKellar's conduct after the winding up application was issued, I am satisfied that McKellar's conduct in communicating to Dual Homes by the 2 June 2011 letter materially contributed to Dual Homes' failure to appreciate that it would be uncommercial for it to fight the winding up application. Although these representations were qualified by the suggestion that serious consideration should be given to the cost of continuing to fight the claim and the alternative of paying the outstanding amounts, the operative effect of McKellar's conduct was to induce Dual Homes to believe that it had good prospects of winning the court application, recovering some or all of its costs, and improving its position in respect of other ongoing matters involving the owners corporations.

236 As I have already stated, had McKellar invited Dual Homes to make a commercial decision about continuing to contest the creditor's claims that was accompanied by a careful and prudent statement of the position it faced, I am satisfied that a winding up order would not have been made.

237 I now turn to the principal defence raised against the plaintiffs' claims.

(a) As solicitors, they are able to invoke the advocates' immunity;

(b) The advocates' immunity applies irrespective of the nature of the cause of action pleaded against the defendants;

(c) Advocates' immunity applies irrespective of whether the plaintiffs' claims are based on acts or omissions; and

(d) The critical consideration for the court is to determine whether the plaintiffs' claims relate to work done by the defendants out of court which leads to a decision affecting the conduct of the case in court.

239 The defendants argue that at its narrowest, Moores Legal's omission was the failure to appear on 6 July 2011 or arrange for Dual Homes to be represented at that hearing. On a broader level, Moores Legal's omission was the failure to take steps on behalf of Dual Homes to oppose the winding up application by seeking to prove Dual Homes' solvency. The various claims made against the defendants must be seen as part of a continuum that ultimately led to the winding up proceeding at which Dual Homes was not represented. Conduct antecedent to McKellar's failure to appear or arrange representation before the court is part of that continuum of events and that such conduct, whether it be act or omission, is within the broad scope of the advocates' immunity. The immunity offers complete protection to the defendants from all claims made in the preceding.

240 The plaintiffs noted that the defence pleaded was that each of the plaintiffs' claims related to either conduct of the case in court or work done out of court that led to a decision affecting the conduct of the case in court. They submitted that I should reject the first limb of this plea because there was no allegation of negligent in-court conduct. As I have stated, the defendants rely on the second limb of this plea and in final submissions did not suggest that the plaintiffs' claims related to in-court conduct.

241 Next, the plaintiff submitted that the plea should be dismissed as not properly pleaded and not supported by proper particulars. Such an application is unsuited to a final address and ought to have been pressed prior to trial.

242 The plaintiffs submitted that, with the exception of briefing counsel immediately prior to the first return of the application to obtain an adjournment of it, there was no respect in which the defendants conducted the winding up application in court. Further, no conceivable act or omission out of court by either defendant affected any decision or could realistically affect any decision made in court because the defendants never attended, briefed, or prepared for the hearing on 6 July 2011 at all and no decision that affected the conduct of the winding up application on 6 July 2011 was made by reason of any work done out of court by the defendants.

243 Further, the conduct of Pilley McKellar could not affect the conduct of a case in court because no court proceeding was on foot, or contemplated, when that firm's retainer ceased on 30 April 2011. The same reasoning is applicable to the conduct of Moores Legal for part of its retainer. There was in place until 19 May 2011 an undertaking by the creditor that it would not commence any proceeding to permit a commercial negotiation and it was not until 27 May 2011 that the winding up proceeding, which constitutes the relevant case in court for the purposes of the immunity, was commenced.

244 The claims in negligence and misleading and deceptive conduct based in events prior to 27 May 2011 did not lead to any decision affecting the conduct by Dual Homes of the winding up application and the immunity defence in respect of such claims cannot succeed. Similar reasoning commended itself to Tobias JA in Walton.[67]

On this basis one asks with respect to the present case: what work was not performed but which ought to have been performed by the appellant which led to a decision affecting the conduct of the respondent's case in court? The work not performed was that of obtaining additional evidence of solvency in the form of that ultimately provided by Mr Burke. However, it is difficult to identify the decision to which that failure led and which affected the manner in which the case was conducted in court.

245 The defendants' admitted negligence in failing to represent Dual Homes on 6 July 2011 was not, the plaintiffs submitted, an instance of any work being done out of court leading to a decision affecting the conduct of the case in court. No reported Australian case has ever upheld the immunity for a legal practitioner who failed to attend court at all. In D'Orta-Ekenaike, McHugh J reviewed the old case law:[68]

The first of them is Fergusson v Lewis where the plaintiff had retained the defendant, a solicitor, to defend him on a charge of "permitting a horse belonging to the company to be taken out in an unfit condition". The defendant was found to breach his retainer because he "did not attend the Court, though at his request the case was put off for an hour and a half, and the plaintiff was convicted and fined". It is hardly surprising that the jury found for the plaintiff. Any barrister today who failed to turn up to court would equally be liable.

246 The plaintiffs referred me to Corp v Robinson,[69] where the defendants applied for summary dismissal of Mr Corp's claim based on advocates' immunity. The plaintiff had been convicted on 15 of 21 counts before a jury and sentenced to periods of imprisonment. Following the quashing of the convictions by the Court of Appeal based on errors in the judge's charge to the jury, the plaintiff sought damages in negligence against counsel and the instructing solicitor who conducted his trial. Counsel had failed to attend for three days in a nine-week trial, although the experienced instructing solicitor was present. During counsel's absence, the trial judge was charging the jury. In the particular circumstances, Kenneth Martin J held that the immunity applied for the benefit of each defendant, observing:[70]

There are of course other cases where misconduct by counsel in failing to attend court may lead to an unprotected exposure to professional negligence if, for example, in consequence of Council's absence a party went undefended at the hearing and because of that, judgement then went against the unrepresented party.... But the situation of an adverse result going against a party by reason of the party's advocate not attending court, leaving the party undefended, is a far cry from the present case.[71]

The plaintiff submitted that Corp recognised a distinction between a lawyer's complete failure to attend a hearing and a decision by a lawyer not to attend with the client otherwise represented in the absence of that lawyer. Even assuming that so, it is not a distinction which is of assistance in the present case.

247 The High Court stated the relevant test for the application of the advocate's immunity in D'Orta-Ekenaike v Victorian Legal Aid as follows:[72]

(a) An advocate is immune from suit whether for negligence or otherwise in the conduct of a case in court;[73] and

(b) The immunity extended to 'work done out of court which leads to a decision affecting the conduct of the case in court'.[74]

248 In Symonds v Vass,[75] the NSW Court of Appeal observed that advocates' immunity applies irrespective of whether 'the work is negligently performed through act or through omission, and whether or not it leads to an overt decision'.

249 In Goddard Elliott v Fritsch,[76] Bell J held that s 9 of the Fair Trading Act 1985 (Vic) did not abrogate the common law immunity from suit and applying his Honour's reasoning, I am satisfied that the Australian Consumer Law has not abrogated or restricted advocates' immunity.[77]

250 D'Orta-Ekenaike settled that the immunity protects a legal practitioner, whether acting as an advocate or a solicitor instructing an advocate.[78] In Donnellan v Woodland,[79] Beazley JA stated of the immunity:

It extends to a solicitor who acts in the litigation qua solicitor provided that, on the facts, the negligent conduct falls within the reach of the immunity, namely, work done out of court that leads to a decision affecting the conduct of the case in court.

251 The difficulty with the application of the immunity lies in drawing the line implicit in the words 'which leads to a decision affecting'. What sufficiency of connection is necessary?

252 In recent New South Wales decisions,[80] the immunity has been held to embrace negligent advice given by a solicitor to a client that results in a settlement; at least where consent judgment was entered in the underlying proceeding.

253 In Donnellan v Woodland,[81] Beazley JA said of the broad scope of the extension of advocates' immunity:

If the giving of advice, or the omission to give advice, led to a decision to continue with the case, or meant that the case was continued because of that omission, such conduct would lead to a decision affecting the conduct of the case in court, namely, its continuance by way of full argument before a judge.

254 In Kendirjian v Lepore,[82] Macfarlan JA stated that:

... the immunity principle applies to "work done out of court which leads to a decision affecting the conduct of a case in court" and to "work intimately connected with" work in court. Both formulations sufficiently cover cases such as the present where the alleged negligence was the failure to advise properly in relation to acceptance of a settlement which led to a plaintiff continuing with court proceedings, in particular where a court hearing was in progress.

255 Leeming JA observed in Kendirjian[83] that a trial court need only apply the D'Orta-Ekenaike test to the evidence before it. It need not look to the underlying rationale for advocates' immunity, except in novel cases, and the finality principle is the rationale for immunity rather that the test as to whether the defence succeeds.

256 Most recently, in Jackson Lalic Lawyers Pty Ltd v Attwells,[84] the New South Wales Court of Appeal considered the refusal of the primary judge to answer, by way of separate question, whether advocates' immunity was a complete answer to a negligence claim. The claim arose out of advice given by solicitors in a guarantee proceeding, which led to the settlement of the proceeding by a consent order. The Court of Appeal held that the advice fell within the scope of the advocates' immunity as it led to settlement of the guarantee proceedings and was therefore intimately connected with that proceeding.

257 In Victoria, the Court of Appeal in Finch v Arnold Thomas & Becker Pty Ltd[85] observed that it is 'not free from doubt' that the immunity does not apply where there has been no court adjudication, but rather only a compromise of litigation.

258 In Sims v Chong,[86] the Full Federal Court held that advocate's immunity did not apply in circumstances where the plaintiff sued his solicitor for failing to represent him competently and for engaging in misleading or deceptive conduct. The plaintiff had retained the solicitor in a claim relating to ownership of certain trademarks, patents and strategies (referred to in the reasons as 'the WA claim'). A series of interlocutory orders were made striking out successive versions of the statement of claim, culminating in that action being summarily dismissed.

259 The Full Court of the Federal Court was concerned to identify the line between work done out of court that is immune and work that is not, and for that purpose it applied the finality principle. The court stated:[87]

The consequence is that, whilst the primary public policy considerations supporting the immunity have been refined and further explained, the plurality reasons in D'Orta-Ekenaike evince a clear intention to continue to recognise the immunity as recognised in Giannarelli and to maintain the line between where immunity comes into existence and where it does not exist as explained in Giannarelli. The reasons of the majority in Giannarelli, in particular of Mason CJ referred to above, indicate that the line is to be drawn where the work is advocate's work (whether provided by a barrister or a solicitor) and is in relation to work done in court or work done out of court which leads to a decision affecting the conduct of the case in court.

In that regard, the observations of McHugh J in D'Orta-Ekenaike in agreeing with the plurality are also apposite. His Honour said at [166] and [168]:

So, it is possible to sue a practitioner for the negligent settlement of proceedings or for the negligent loss or abandonment of a cause of action. Such claims lead to the litigation of a primary claim even if that claim can no longer be pursued. These results flow even though there is a public interest in the finality achieved through the statutes of limitations and the promotion of out-of-court dispute settlement. But where a trial has taken place, as the judgment of Gleeson CJ, Gummow, Hayne and Heydon JJ demonstrates, public confidence in the administration of justice is likely to be impaired by the re-litigation in a negligence action of issues already judicially determined.

...

Accordingly, the immunity should extend to any work, which, if the subject of a claim of negligence, would require the impugning of a final decision of a court or the re-litigation of matters already finally determined by a court.

This appeal concerns the drawing of the line. There is, as Giles JA said in Symonds v Vass, some difficulty in drawing that line where the relevant advocate's work or advice was done or given (or not done or given) prior to the commencement of the proceeding. There are similar observations by Giles JA and by Tobias JA in Attard v James Legal Pty Ltd respectively. In that case, one issue concerned whether an appellant could recover costs wasted by having to defend (successfully) a claim when there was a readily available defence not pleaded and which was likely to have led to the claim against that appellant not proceeding at a much earlier stage. There was no attempt to impugn the final decision, or to relitigate matters already decided, to use the phraseology of McHugh J in D'Orta-Ekenaike at [168].

Moreover, there appears to be a more robust application of the finality principle in some cases than in others. It is evident that the line is to be drawn at least where the proposed claim might cause an inquiry (and outcome) with a result which might differ from the judicially quelled controversy. In addition, a number of subsequent decisions support the conclusion that the line should be drawn in favour of immunity where the inquiry that would be prompted by the proposed claim might lead to a decision that the outcome of the judicially quelled controversy - even though it is accepted as being correct as it was presented - might be found to have produced a different result if the case had been conducted in a different way: see eg Donnellan v Woodland and Nikolaidis v Satouris, and the cases referred to by Barrett JA (with whom Beazley P and Ward JA agreed]: cf Nikolaidis and Alpine Holdings Pty Ltd v Feinaeur. (Citations omitted)

260 In the case before it, the Full Federal Court reasoned that the immunity was inapplicable. The assertions of negligence that were made against the solicitor did not involve a collateral attack on the decisions on the pleadings in the WA claim. If successful, it would not suggest that the decision in the WA claim was erroneous. It would not clearly provoke any lack of confidence in the administration of justice, in the manner described in Giannarelli. The court added:[88]

Whilst it may be the case that a final judgment, when entered by consent, may reflect a judicial quelling of a controversy between the two parties (as the cases such as Donnellan and Symonds demonstrate), an interlocutory order striking out an action is not final.

261 On 7 August 2015, the High Court granted special leave in Attwells & Anor v Jackson Lalic Lawyers Pty Ltd[89] on the issue of the application of the immunity in conduct in settlement of litigation. That appeal is yet to be determined. It seems likely that the High Court's decision may be of direct relevance to the application of the immunity to some of the claims of negligent conduct in this case.

262 Based on the present exposition of the applicable principle, I have concluded that the immunity, although having some application, does not protect the defendants from an award of damages in this case. In explaining my reasons for this conclusion, it is convenient to distinguish McKellar's negligence prior the issue of the winding up application on 27 May 2011 (McKellar's earlier conduct) to his negligence after that time (McKellar's later conduct). I have concluded that McKellar's earlier conduct is not immune from suit but that the immunity could protect McKellar's later conduct.

263 The proceeding conducted in court by Dual Homes was the winding up application and it was that application that resulted in the winding up order on which the plaintiffs claim damages. The defendants claimed the immunity extended to work done out of court that led to a decision affecting the conduct of that application in court. No proceedings in court were on foot on or prior to 27 May 2011. It cannot properly be said that the creditor contemplated such proceedings prior to 4 May 2011, because the deadline for compliance with CSD2 had not passed. Further, the creditor's undertaking extended that date to 19 May 2011. From 19 May 2011, Dual Homes and McKellar could have reasonably contemplated that a winding up application would be issued.

264 McKellar's earlier conduct neither related to nor affected the conduct of that application. It related to the conduct by Dual Homes of a commercial transaction. The issue for Dual Homes was whether to resist enforcement of debts against it. The process of enforcement engaged the statutory demand procedures under the Corporations Act. At this stage, McKellar's conduct could not involve a case in court because there was none. When there is no case in court, it is not possible to identify any work done out of court that might lead to a decision that affected the conduct of the case in court. It is irrelevant that when the later winding up application was issued, the creditor was entitled to rely on the presumption of insolvency. It did so using a statutory procedure available to it as a consequence of Dual Homes' failure to pay the debt. It cannot be said that the initiation and conduct of the creditor's application, based on the statutory presumption available as a matter of law, was a decision affected by McKellar's conduct in relation to that proceeding, or was a decision that attracted the immunity. The decision was made by the creditor. Although the burden of an insolvency presumption for Dual Homes was caused by McKellar's earlier conduct, no aspect of Dual Homes' conduct, as induced by McKellar's earlier conduct, affected the conduct of the winding up application by either McKellar or Dual Homes.

265 In other words, neither Dual Homes nor McKellar made a decision that affected Dual Homes' conduct of the winding up application before that application was commenced. McKellar's negligence in advising Dual Homes about CSD2 induced it to act in a way that, by operation of statute, afforded to the creditor a presumption of insolvency on the expiry of CSD2. McKellar's negligence prior to 19 May 2011 does not cast any doubt upon, or question in any way, the decision of the court to wind up Dual Homes, a decision that has never been questioned. The later application made by the Roiniotises' was not for a rehearing based on the company's non-attendance at court but was an application to terminate the winding up by proof of the solvency of Dual Homes.

266 No question of immunity arises in respect of McKellar's earlier conduct because it was not in respect of a case in court and cannot be said to be work that led to a decision affecting the conduct of the later winding up application. In the context of my earlier findings concerning causation of loss by that earlier conduct, this finding establishes the claims of the plaintiffs to recover their losses. For this reason, it is not necessary for me to express a concluded view about whether McKellar's later conduct is immune from suit.

267 Nonetheless, I make the following observations. The kernel of McKellar's later conduct was that he failed to give prudent advice about the conduct of the defence of the application, he failed to prepare appropriate material on the return of the application, he failed to take instructions on an offer to compromise the application, and he failed to ensure that Dual Homes was represented before the court. Each of these aspects of his conduct was work done out of court and each affected the conduct of the case in court. McKellar's conduct was by way of omission. Rather than leading to a decision (action), the defence of the winding up application was characterised by inaction. McKellar's conduct, that is, his work done out of court for the winding up application, resulted in the application being heard and determined by the court as undefended. It does not matter in those circumstances that no overt decision is identified. His conduct lead to a consequence that affected the outcome of the application. As discussed above, there were alternative outcomes that might have been achieved by a prudent solicitor. McKellar's failure to take instructions on the settlement offer led to the application continuing before the court in the absence of Dual Homes. His failure to prepare an affidavit led to the application continuing before the court without any material providing a basis to defer, or refuse, making a winding up order.

268 Although there is some dicta in the cases that advocate's immunity does not apply to the failure to appear or organise for Dual Homes to be represented on 6 July 2011, that is a small aspect of McKellar's wrongful conduct after the winding up application commenced. It is artificial not to take into account the totality of McKellar's omissions that contributed to the non-conduct of the defence winding up application.

269 It cannot be argued, having regard to the principle of finality, that there is no occasion for the application of the immunity in the present case in respect of McKellar's later conduct. An aspect of the plaintiffs' claim is that McKellar's negligence brought about a decision of the court to wind up a solvent company that would otherwise have been different. The winding up application is, essentially, reopened by contentions that the winding up order would have been avoided altogether had McKellar not been negligent.

270 For these reasons, I do not find that the plaintiffs were entitled to recover damages on the basis of McKellar's conduct after 19 May 2011.

271 I can state relatively briefly what occurred following the making of the winding up order. First, George and Peter Roiniotis in August 2011 paid $115,000 into the trust account of their new solicitors, Madisons, in order to demonstrate Dual Homes' solvency. George and Peter Roiniotis applied under s 482 of the Corporations Act to terminate the liquidation. That application was not resolved until 2 April 2012. By that time, Dual Homes had incurred fees and expenses to the liquidator of $300,835.59. Other expenses were incurred to lawyers, in particular, fees of $132,119.14 were paid by George and Peter Roiniotis to Madisons in respect of the s 482 application. Other expenses were incurred for accounting fees, insolvency advice, and land valuations. A further 15-17 months passed before Dual Homes sold the remaining Railway Place and Station Street properties. Part of that delay was said to be referable to the need to discharge mortgages that had been registered over two properties as a condition of the termination of the insolvency.

272 The liquidator sold Murradoc Road, as has been mentioned, and Dual Homes claimed that it lost a valuable opportunity to develop that land by subdivision and construction of 5 two-story townhouses. Dual Homes also claimed losses suffered by reason of the delay in realising the remaining Fairfield properties, asserting that they were ultimately sold for less than their value in July/August 2011.

273 By the final particulars of loss advanced by the plaintiffs, Dual Homes claimed 12 heads of loss, some of which were not pressed by Dual Homes or admitted as to quantum by the defendants, being:

Liquidator's remuneration and related costs and expenses (detail follows)

Owners Corporations' costs on termination application

Loss of profit in delayed sale of Lot 4 Railway Place

Loss of profit in delayed sale of Lot 5 Railway Place

Costs of discharge of mortgage over Lot 5 Railway Place

Costs of discharge of mortgage over Lot 6 Station St

274 George and Peter Roiniotis claimed seven heads of loss as follows:

Madisons Lawyers - legal costs on application to terminate

In the alternative, items 2 - 5 claimed by Dual Homes

George & Peter's total claim, excluding item 20

275 At trial, Andrew Caripis, accountant for Dual Homes and Peter and Voula Roiniotis, Mr Lipson, a forensic accountant, and Mr Hendrey, a valuer, gave evidence for the plaintiffs. For the defendants, Messrs Torr and Cations, valuers, gave evidence. Messrs Lipson, Hendrey, Torr, and Cations met in a conclave of experts and produced a joint report.

276 The parties objected to some of the evidence of Mr Lipson and Mr Torr and those objections can conveniently be considered when discussing individual item claims. However, I will immediately deal with the objections to the registered land valuers, Mr Hendrey and Mr Cations.

277 I considered the principles governing the admissibility of expert evidence in Dura (Aust) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 3),[91] when summarising the judgment of Heydon J in Dasreef Pty Ltd v Hawchar.[92] There is no dispute as to the relevance of the valuer's evidence. The matters therefore to be considered in evaluating the evidence of the valuers are:

(a) has the witness properly based 'specialised knowledge' (the expertise rule);

(b) is the opinion to be propounded 'wholly or substantially based' on specialised knowledge (the expertise basis rule);

(c) is the opinion to be propounded 'wholly or substantially based' on facts assumed or observed that have been, or will be, proved, or more specifically (the factual basis rules):

1. are the 'facts' and 'assumptions' on which the expert's opinion is founded disclosed (the assumption identification rule);
2. is there evidence admitted, or to be admitted before the end of the tendering party's case, capable of proving matters sufficiently similar to the assumptions made by the expert to render the opinion of value (the proof of assumptions rule);
3. is there a statement of reasoning showing how the 'facts' and 'assumptions' relate to the opinion stated to reveal that that opinion is based on the expert's specialised knowledge (the statement of reasoning rule)?[93]

278 I first consider the evidence of Mr Cations. The plaintiffs contended that his evidence should be discounted. I agree.

279 Mr Cations was instructed by the defendants' solicitors to conduct a kerbside valuation of Bluff Road, Murradoc Rd, and the Fairfield properties namely Units 4 and 5 Railway Place and Lots 4 and 6, Station St. Mr Cations based his valuations on kerbside observations of the properties, and he claimed to have also used comparative sales evidence. The comparative sales evidence that he used was not revealed in his report and was not made available to Mr Hendrey at the joint conclave. When cross-examined, Mr Cations asserted that his valuations were based on information he obtained during his investigations, but conceded that the full detail of that information was not revealed in his report. Mr Cations did not explain how he specifically used the undisclosed information. Mr Cations did not inspect any of the Fairfield properties internally or identify their dimensions. He relied on conversations with unidentified selling agents, the substance of which was not set out in his report.

280 Ultimately, Mr Cation's evidence was shared with other experts in the joint conclave and placed before the court. However, in my view it was inadmissible. First, Mr Cations did not properly identify the factual basis upon which his opinion is based. Second, he did not comply with the Expert Code of Conduct in that he failed to qualify his report by reference to his inadequate instructions and investigations. Third, he did not provide an adequate statement of his reasoning that demonstrated how his opinion of value was properly based on his specialised knowledge and his assumptions and investigations. As the evidence was received, I give it no weight.

281 In any event I prefer the evidence of Mr Hendrey. Mr Hendrey mostly inspected the properties and measured them. Mr Hendrey set out the evidence of comparable sales that were the basis upon which his opinion was based, including where available rental agreements or contracts for sale. His valuation was reasoned by reference to his investigations and assumptions concerning the properties and his analysis of relevant comparable sales.

282 However, there were legitimate objections to his evidence as well. Mr Hendrey valued the Railway Place properties on the basis of the working drawings, but the units were not constructed in accordance with those drawings. Mr Hendrey valued the Railway Place properties on the basis that they had ensuites, when they do not. Mr Hendrey accepted that the absence of the expected ensuites would cause him to reconsider his values for the Railway Place properties. Mr Hendrey accepted his valuations excluded overriding maintenance or structural issues affecting the properties, an assumption to be assessed in light of the on-going disputes regarding alleged building defects at Railway Place. These omissions were taken into account in assessing Mr Hendrey's evidence.

283 A principal basis upon which the defendants deny liability for damages was that they denied having caused the plaintiffs to suffer any loss or damage. Section 51(3) of the Wrongs Act provides that the question as to what the person who suffered harm would have done absent negligence is to be determined subjectively in the light of relevant circumstances. I do not accept that the evidence of what the plaintiffs would have done had they been properly advised by McKellar can be dismissed as 'bathed in hindsight', and 'so hypothetical, self-serving and speculative as to deserve little (if any) weight, at least in most circumstances'.[94] For the reasons given above, I have rejected this submission. However, I accept that this submission has relevance in respect of the lost opportunity claims and I will return to it in that context.

284 In respect of a number of items the defendants have submitted that Dual Homes will be overcompensated unless confined to amounts that are exclusive of GST. The defendants submitted, and I accept, that Dual Homes is a company registered for GST and entitled to claim credit for GST on its business inputs. Dual Homes submits that its registration for GST is irrelevant to the assessment of damages and indicates no more than the possibility of an obligation to account to the ATO when appropriate. There is no doubt that Dual Homes had an obligation to account to the ATO for GST collected in respect of services supplied by it, but it can claim the benefit of a refund in respect of GST paid by it and it is that benefit that the defendants contend could lead to over-compensation.

285 A New Tax System (Goods and Services Tax) Act 1999 (Cth) governs liability to pay GST. GST is payable on a 'taxable supply', as defined by s 9-5, which includes a supply of services. Relevantly, there must be a 'supply for consideration'. The GST consequences of court orders are dealt with in Public Ruling GSTR 2001/4, and it provides that a payment made under a court order may be consideration for an 'earlier supply'. Whether there is a sufficient nexus for a court order to constitute consideration for the earlier supply is a question of fact. The fact that payment is made by compulsion under a court order rather than in the ordinary course of commercial dealings is irrelevant.

286 Generally, an input tax credit is available to a registered business for any GST included in the price paid for goods and services used as part of their business. Effectively, in those circumstances, these businesses will not bear the GST component of the acquisition costs. The tax is effectively paid by the consumer or end-user of the goods or services. Many businesses are entitled to input tax credits for GST included in the litigation expenses incurred on their behalf in relation to the business by solicitors.

287 In Gagner Pty Ltd v Canturi Corporation Pty Ltd,[95] the primary judge awarded damages for the cost of rectification of premises, including the GST on the repairs. The plaintiff was registered under the GST Act and was entitled to an input tax credit for the GST component of any costs incurred on replacement items and other repairs. An issue on appeal was whether the primary judge erred by including GST in the assessment of damages by including an amount inclusive of GST for which the respondent would be entitled to recover through input tax credits. Campbell JA (with Macfarlan JA and Sackville AJA agreeing) said, regarding the inclusion of GST in an award of damages:[96]

I accept that the consequence of these provisions is that, even though the Respondent might pay out an amount of GST in connection with the goods and services which it acquired for the purpose of making good the damage to its premises, it would be able to recover that amount back, either in the form of a reduction of the net amount it must remit to the Commissioner for the quarter in which the payment was made, or as a refund. Thus the amount of GST component of any payments it made for making good the premises would not ultimately be a loss that it suffered. Given the compensatory purpose of the damages award, it was wrong to include that component in the award of damages.

288 In Millington v Waste Wise Environmental Pty Ltd,[97] Croft J considered the like question. At trial, Waste Wise claimed damages for negligence, its loss being property damage to a garbage truck. The costs of repair included amounts for GST. The defence raised was that as Waste Wise was registered for GST, its loss was overstated as it could recover the GST as an offset or a refund when accounting to the ATO. Waste Wise was the only entity capable of recovering the GST. A magistrate ordered that the defendant pay damages assessed on a GST inclusive basis, and later refund the amount of GST to the defendant. After analysis of the decision in Gagner and two Victorian trial decisions,[98] Croft J concluded that as the amount of the prospective GST input credit was certain, the magistrate had failed to properly apply the compensatory principle to the assessment of damages.

289 In each case where GST is in issue, there has been a taxable supply of services to Dual Homes that attracted GST, and Dual Homes, or the liquidator on its behalf, received a tax invoice. The quantum of the prospective GST input credit is certain. The question is whether the services rendered (and collecting GST) were used as part of the business of Dual Homes or, to put it another way, whether there was a sufficient nexus for the court order awarding damages to be a consideration for the supply of the services. Although related to the winding up and termination of the winding up of the business, rather than its core business activities, I see no reason to conclude that the services were not connected with the business of Dual Homes. Dual Homes made no submission to that effect. There was a paucity of evidence of GST accounting by Dual Homes both before and after the winding up order. In the circumstances, I am satisfied that if the relevant items of damage are quantified exclusive of GST, Dual Homes will suffer no net loss because it is entitled to an input credit or a cash refund in its accounting with the ATO.

290 The defendants contended that some items of loss must be reduced pursuant to s 26 of the Wrongs Act due to the contributory negligence of Dual Homes. The defendants contended that the liquidation was prolonged, and the liquidator's remuneration consequently increased for two reasons. First, Dual Homes failed to fully cooperate with the liquidator by responding promptly to his requests for information and, second, Dual Homes' financial statements had not been prepared since the end of the 2009 financial year. In an extension of this submission, the defendants also contended that the liquidator's remuneration was increased because the liquidation was prolonged by the liquidator's concerns as to the solvency of Dual Homes and the opposition of the creditor to termination of the winding up. These allegations were more limited than the defendants' pleaded case.

291 I reject the defendants' contentions, about which the plaintiffs witnesses were not cross-examined. I am not satisfied that these factors did cause the expenses of the liquidation to be unnecessarily inflated. I am satisfied that the plaintiffs acted reasonably in seeking to terminate the winding up in the circumstances. It is clear that the relationship between the plaintiffs and the liquidator was not harmonious, but I am not persuaded that responsibility for the nature of that relationship and for its impact upon the costs of liquidation should lie with the plaintiffs.

292 An example is the claim for locksmith expenses. The liquidator made three requests of Dual Homes for it to provide the keys to its properties, between 2 and 8 August 2011. When Dual Homes did not respond within that restricted time period, the liquidator promptly engaged a locksmith. It was not apparent why such haste was warranted. More generally, the liquidator asserted his need to observe his statutory duties, and I am satisfied that the substantial costs of the liquidation flowed from a rigorous enforcement by the liquidator of those duties in the absence of any request for court intervention.

293 The solution for the plaintiffs would have been a prompt application for interlocutory relief in support of an application to terminate the liquidation, but the plaintiffs were denied that opportunity because they continued for some time to be advised by McKellar. He admitted that he never advised the plaintiffs to seek to enjoin the liquidator or otherwise stay the winding up. Given that the plaintiffs lacked for competent legal advice at the relevant time, I am not persuaded to find that they failed to act reasonably.

294 To the extent that there was some delay attributable to a want of cooperation, or a failure to have kept its financial statements up-to-date, the extent of such matters was not beyond the reasonable expectations that a prudent solicitor would entertain about the performance of a small privately owned company that suddenly, and unexpectedly, found itself in liquidation. The prospect of some delay in terminating winding up was not an unlikely consequence and was a part of the general sequence of events foreseeable as likely to enlarge to some extent the quantum of losses sustained as a result of the defendants wrongful conduct.

295 Dual Homes purchased the Murradoc Road property for $320,000 in September 2004 and obtained a permit to build five town houses. It was sold by the liquidator for $528,000 inclusive of GST in November 2011. At the time of sale it was mortgaged, securing $275,000. Dual Homes contended that but for its liquidation, it would have developed Murradoc Road for a profit of $437,958. The claims in respect of this property did not admit of reconciliation.

296 For Dual Homes, Mr Lipson, by his supplementary report, assessed the lost opportunity at $496,758 on a five unit development. He calculated that, accepting the defendants' expert Mr Torr's valuation of the completed units, the development would have realised $1.67 million inclusive of GST on sale, with Dual Homes making a profit of $1,072,000 inclusive of GST before selling expenses. His allowance for GST and selling expenses was $255,242. His allowance for the purchase costs was $320,000, resulting in a total net profit on development of $496,758.

297 The property was sold by the liquidator for $480,000 plus GST ($528,000) before selling expenses, in respect of which he allowed $9,600 for agent's commission. A further credit was allowed to Dual Homes for the net gain received from the liquidator's sale of $150,400. The proper assessment of damages for the lost opportunity was said to be $346,358. Two observations can be made. No allowance appears to have been made for the discharge of the mortgage on the property. The evidence did not permit the final figure of $346,358, to be reconciled with the loss claimed on $437,958.

298 For the defendants, Mr Torr concluded that the project was not viable due to risks, asserting that the lost profit lay in the range from $11,835 to $34,238. The sale by the liquidator represented the best return to Dual Homes.

299 A number of points of difference were evident between Mr Torr and Mr Lipson. First, they disagreed about the applicable methodology. Mr Torr used the Turner Method, by which a valuer calculates the residual value of land for development after allowing for construction costs, selling costs, interest and a developer's margin. Mr Lipson applied orthodox accounting principles. Mr Torr postulated that Dual Homes would have built the development in five separate stages, that is, each townhouse would have been built and sold before the next one was commenced. This assumption was driven by Mr Torr's assessment of the size and turnover in the St. Leonards market. He assumed the project, if all units were constructed at the one time, would take 22 months to sell and carry greater interest charges that would consume the developers margin, making the project uneconomic.

300 I was not persuaded that the particularly optimistic assessment of Mr Hendrey that the five units would have sold during the prime spring/summer period of 2012-2013 was probable.

301 Another issue was the underlying assumption about whether the development was financed by debt or equity capital. Mr Lipson rejected the notion of a theoretical interest allowance as an expense against a hypothetical profit on the basis of his instructions as to the circumstances of Dual Homes and the Roiniotis family. I was not persuaded that this approach permitted a calculation of the core profitability of the development, because it fails to bring to account the lost opportunity cost of employing equity in other ways.

302 A significant difference between the two assessments was the costs of construction, particularly whether the appropriate assumption for construction costs ought to be $1,000 or $1,500 per sqm.

303 As I will explain, it is not feasible to resolve all contentious issues because, ultimately, this claim turned on two key issues: whether the property would have been developed but for the liquidation of Dual Homes, and if so, whether the project was sufficiently defined for it to be feasible to properly assess the value of the opportunity to earn a profit on the development.

304 Dual Homes contended that, but for the liquidation, it would have used the proceeds of selling the Fairfield properties, some of which were already on the market, to construct five townhouses on the Murradoc Road land which it then owned, pursuant to the planning permits which it already had, and had already paid for. As a developer/builder, its costs of the development would not have exceeded $1,000 per sqm ($598,000).

305 George Roiniotis' evidence was that the plaintiff intended to develop five two-storey townhouses on the site for a per square meter construction cost of $1,000 based on his expertise and Dual Homes' experience of comparable prior projects completed at construction costs per sqm costs of less than $1,000. He maintained this position in cross examination, asserting that, if needed, he could and would have advanced the funds beyond or in lieu of the proceed for sales at Fairfield to Dual Homes to undertake the construction. Confronted by his cross-examiner about Dual Homes' consent to the liquidator's sale of Murradoc Road, he said that giving this consent was contrary to the family's wish but followed on their solicitor's advice that they could not stop the liquidator.

306 John Roiniotis gave similar evidence concerning Murradoc Road and he suggested that the construction costs for Murradoc Road could have been funded from sources such as sales of the Fairfield properties or family moneys and not simply borrowed funds.

307 The defendants disputed this claim both as to quantum and causation. The defendants contended, and I agree, that the evidence bears out a number of matters which I find as facts.

308 First, save for demolition of the existing dwelling no work had been undertaken upon the site in the 7 years following its purchase in 2004.

309 Secondly, Dual Homes had put the property on the market prior to being placed in liquidation.

310 Thirdly, on 12 October 2011, Peter Roiniotis consented in writing to the liquidator's sale of the property. On being advised of an offer of $480,000.00 plus GST, Madisons Lawyers responded to the liquidator:

If in fact the offer for 1362 Murradoc Road, St Leonards is $480,000 plus GST, we are instructed that our clients would not like to see the Company lose the sale.

The defendants submitted that Dual Homes' response demonstrated not just its willingness to sell the property, but its recognition of the sale price as a fair value for the undeveloped property with the benefit of the planning permit.

311 Fourthly, on 8 May 2011 (i.e. prior to liquidation), Dual Homes wrote to the City of Greater Geelong to seek an extension of its planning permit for 108 Bluff Road, St. Leonards, 'due to financial and downturn of the residential market'. Although this letter related to the proposed development of Bluff Road, the defendants submitted that the court can infer that similar concerns would have applied equally to delay any development of Murradoc Road and supported an inference that Dual Homes consented to the sale of the property because it had no present intention to proceed with its development. I draw that inference.

312 Fifthly, the development of the site was dependent upon funds becoming available from the sale of the Fairfield properties. I am not persuaded that simply because the family could have financed a development by Dual Homes, in June 2011 they intended to do so. Between February 2011 and July 2011, Lots 4 and 5, Railway Place had been on the market but no buyers had emerged. I am persuaded that a purpose of the proposed sales may have been to provide funds for the development of the Murradoc Road property and there was no intention to finance a development in any other way. That inference is consistent with the lack of progress in planning the proposed development that was evident at that time. It is speculative to suggest that any development would have occurred in the absence of a sale of the Fairfield properties to fund the development.

313 Sixthly, in his affidavit of 26 September 2011, John Roiniotis swore that he was '... aware that the Company actually does very little work now, and that has been the case basically for about the past 5 years'. This contemporaneous evidence does not support the plaintiffs' contention that the Murradoc Road site would have been developed in 2011. In his affidavit of 4 October 2011, George Roiniotis swore: 'While our family remains close, I pursue my own business interests, and I have not been actively involved in the operation of the Company since my resignation, though I have been assisting my father in recent months in relation to a resolution of the disputes surrounding the winding up of the Company and its aftermath'. This statement contrasts with his evidence in court that the planning and design work for the project was complete.

314 Seventhly, not only had George Roiniotis failed to produce any concept designs, plans or specifications to support this assertion, but his evidence rose no higher than that when Dual Homes purchased Murradoc Road, the family's intention was to develop it and then re-sell it for profit. I accept that Dual Homes' intention back in 2004 when the property was purchased was to develop the property, but I remain unpersuaded that a proposed development would have taken place in 2011.

315 The credibility of the Dual Homes' claim with respect to Murradoc Road was, in a minor way, undermined by the late abandonment, during trial, of any claim to lost profits on the development of the land at Bluff Road.

316 The significant consequence of the uncertainty about the Murradoc Road development and the absence of a development proposal beyond the planning permit was that the expert evidence with respect to the potential profits on the development was based on so many theoretical assumptions as to be meaningless. The most obvious example was the controversy as to likely building costs. This controversy cannot readily be quelled by the Court because the basis of the development was not identified with sufficient particularity. Mr Torr applied a rate of $1,500/m² by reference to a standard industry guide to building costs, Rawlinsons. In contrast, Mr Lipson relied on George Roiniotis' 'back of envelope' calculations drawn in a general way from 'prior experience' that the development could be undertaken by Dual Homes at $1,000/m². It is trite to observe that proper costing of the development is an essential factor in the assessment of a possible profit and in the absence of at least concept plans, but preferably drawings and specifications, the estimated construction costs used by either expert bore no relationship to a real project. Neither expert's approach was appropriate and each of the experts should, had they properly adhered to the Expert Code, have qualified their assessment by identifying how it was dependent on these differing assumptions, when further instructions or assumptions were required to support a meaningful valuation.

317 Similarly, the Court was unable to determine how long it would take to sell any of the units once constructed. The experts had markedly different opinions on the subject, although Mr Torr's evidence was reasoned by reference to sales records, where Mr Hendrey conceded that he did not carry out any analysis of the number of sales within St. Leonards in any particular period.

318 In addition, Mr Lipson's assessment of the potential net development profit failed to include all holding costs associated with Dual Homes' ownership of the property, including land tax, rates, and legal costs of various unsuccessful VCAT applications for planning approval. George Roiniotis accepted that these costs had been incurred prior to the liquidation.

319 Largely for the reasons advanced by the defendants, I am not persuaded that the Murradoc Road development would have proceeded in the timeframe alleged by Dual Homes. Dual Homes had not taken any concrete steps towards a commencement date for a development in 2011 and I am satisfied it was content to sell the property when the opportunity presented. The specification for the development, a timeline, and the financing of the project had not been considered, let alone worked out and documented. The fact that two of the Fairfield properties were on the market and one had sold around the time Dual Homes went into liquidation does not persuade me that a development at Murradoc Road in 2011 was probable. Dual Homes instructed the liquidator to accept the offer because it was satisfied with the price as representing fair value for the property with the permit.

320 Focussing again on the issue of the lost profit, Messrs Lipson and Torr disagreed over the applicable model for land valuation. Mr Torr maintained that the Turner model was appropriate, and Mr Lipson preferred, as fairer, a conventional lost profits analysis. Mr Torr assumed that the development costs would be fully financed, pointing out that if the money was not borrowed, it would have to be taken out from equity that could be used by Dual Homes profitably elsewhere.

321 Mr Lipson assumed construction costs of $1,000 per sqm because he was instructed to do so and, as I noted, he did not test the assumption or qualify his opinion. Mr Torr's estimate included a margin of 15-20% on the general figure of $1,500 per sqm, and that estimate, drawn from Rawlinsons was for a medium standard house without any particulars of layout, fixtures or fittings. There was no basis to assume a medium standard house and the assumption of the Rawlinsons' figure ought to have been further justified or the opinion appropriately qualified.

322 Messrs Lipson and Torr disagreed over the timeline for the completion of the development. Mr Torr opined that the development would be staggered over 22 months to minimise interest costs, but Messrs Hendrey and Lipson argued that all units would all be built at the same time to minimise construction costs. These positions were not informed by proper assessment of the actual variation in interest costs or construction costs over time.

323 I need not attempt to resolve these disputes because there is no correct position. I am far from persuaded that the evidence supports either set of assumptions underlying the calculations. The experts disagreed because no drawings or full working specifications existed for Murradoc Road, nor was any clear timeline established for the development. To the extent that there was any basis for these assumptions it was the planning permit.

324 The experts calculated the gross profit for the project based on the estimated sale price of a general type of townhouse of a general size. Again, there was no basis in the evidence for any conclusion about the nature of the finish or the size of the completed townhouses. In other words, the evidence did not establish the assumptions that either expert adopted and their opinions are irrelevant.

325 I accept that there is an inherent level of imprecision in the assessment of any loss of opportunity claim. The authorities since Chaplin v Hicks[99] have made plain that such imprecision is no bar when the plaintiff has adduced the best evidence that is available to identify, and value, the lost opportunity. This court can, as the Full Federal Court did in La Trobe Capital & Mortgage Corp Ltd v Hay Property Consultants Pty Ltd[100] apply a discount factor to properly compensate for the impact of contingencies that otherwise cannot be clearly assessed. But that is not this case.

326 I am not persuaded by Dual Homes either that there was an opportunity that was lost or about the characteristics of the lost opportunity that would permit an assessment of its worth. The uncertainties about the development project cannot be subsumed into an assessment of a discount factor. Those uncertainties are more fundamental and leave me unpersuaded that Dual Homes established with sufficient clarity a loss of opportunity to develop the Murradoc Road property. I am satisfied that Dual Homes consented to the liquidators sale of the property because it regarded the return on the investment as satisfactory.

328 Next, Dual Homes claimed losses, disputed by the defendants, caused because the liquidation delayed the sales of the Fairfield properties. To deal with these claims, I need to state further findings of fact. There were a number of calculations that were put on differing valuations and I have based my findings on the positions taken by the experts at the joint conclave after they settled on the values and adjusted their calculations accordingly. The defendants did not object to Mr Lipson's methodology in calculating delayed sale loses and his opinion was based on identified assumptions, with an identified path of reasoning. I accept his evidence. The heart of the dispute lay in the assumed property values that he adopted.

329 At 83 Station Street Fairfield, Dual Homes was the proprietor of Lots 5 & 6. Lot 6 was subjected to a first registered mortgage created pursuant to the orders of 21 December 2011 terminating the liquidation as security for debts claimed by Owners' Corporation PS440878V, which mortgage was not discharged until September 2013. Following Mr Rathner's appointment as the company's liquidator on 6 July 2011, Dual Homes lost control of the properties and could not effect a sale. It alleges that but for the liquidation and the mortgage, Dual Homes intended to sell both Station Street properties in late 2011.

330 Lot 5 was sold on 26 July 2014 for $330,000 inclusive of GST. Mr Hendrey valued the property at $345,000 plus GST as at 9 August 2011 and Messrs Torr and Cations nominated the same value as at 6 July 2011. The difference in value between the date of the liquidation and July 2014 identified by both parties, after adjustment for GST, was $45,000. Mr Lipson assessed the loss through the delay in the sale by reason of the liquidation at $44,700.

331 Mr Hendrey valued Lot 6 as at 9 August 2011 at $300,000 plus GST and the defendants valued the property at $280,000 ex GST as at 6 July 2011. Although for the reasons already given, I prefer Mr Hendrey's valuation, the difference between the valuations is less than 10% and is insignificant. Lot 6 was sold on 28 September 2013 for $280,000 plus GST. Mr Lipson assessed the loss through the delay in the sale by reason of the liquidation at $19,600.

332 At 36 Railway Place, Fairfield, Dual Homes was proprietor of lots 1, 4 & 5. Dual Homes put Lots 1, 4 and 5, Railway Place on the market in February 2011, appointing a selling agent and seeking approximately $550-650,000. George Roiniotis agreed that no acceptable offers had been made for Lots 4 or 5 Railway Place by July 2011. However, Dual Homes accepted an offer of $380,000 on lot 1 Railway Place on 13 July 2011, ignorant of the fact that the company was in liquidation at that time. At that time, lots 4 and 5 were on the market but there were no willing purchasers at that price. I cannot make any finding as to when Dual Homes may have accepted a more realistic expectation in terms of selling price.

333 Lot 5 was also subjected to a first registered mortgage in favour of Owners' Corporation PS603812X pursuant to the orders of 21 December 2011, which mortgage was not discharged until July 2013. Dual Homes contended that but for the liquidation and the mortgage, it would have sold both lots in 2011. Because I am satisfied that these properties were on the market before 6 July 2011, I accept this contention in part. The liquidation precluded a sale of the property during the second half of 2011 and I accept that Dual Homes did not have any opportunity to sell the properties until the liquidation was terminated. This finding does not provide a basis for Mr Hendrey's assumption that the value of the properties should be assessed as at 9 August 2011.

334 Lot 4 sold on 9 May 2014 for $445,000 inclusive of GST. The lot was first put on the market on 11 February 2011. As at 9 August 2011, Mr Hendrey valued the property at $500,000 plus GST. However, the defendants' evidence of value was $425,000 inclusive of GST as at 6 July 2011. On these values, at the joint conclave of the experts, Mr Lipson for Dual Homes assessed a delayed sale loss at $48,900, while the defendants maintained that there was no loss.

335 Lot 5 sold on 24 September 2013 for $438,000 inclusive of GST. Mr Hendrey valued the property at $495,000 plus GST as at 9 August 2011 while the defendants valued it at $420,000 inclusive of GST as at 6 July 2011. The property was first put on the market on 11 February 2011. On these figures, Mr Torr said there was no loss, while after adjustments and following the joint conclave of experts, Mr Lipson assessed the loss to Dual Homes at $49,822.

336 Dual Homes claimed a total of $163,022 in losses occasioned by the delay in completing the sales of the Fairfield properties. The methodology adopted by Dual Homes compared the purchase price received on the actual sale with an assessment of value made as at 9 August 2011 by Mr Hendrey. The defendants' evidence assesses value as at the date of liquidation. Mr Hendrey's calculations demonstrate a decline in value of the properties from his assessment in August 2011 to the actual date of sale. However, his evidence was that in the period between 2011 and 2013 in general terms there was a marginal increase in property values.

337 There was no specific explanation of the apparent conflict between the expectation of a general marginal increase in property values and the specific decreases in value identified by Mr Hendrey. On the other hand, the assumptions made and methodology adopted by Mr Hendrey are flawed in certain respects. As I have noted, the Railway Place properties were not constructed in accordance with the working drawing plans used by Mr Hendrey as a basis for his valuation. Mr Hendrey accepted that the absence of ensuites required a reconsideration of his valuation opinion. He also assumed there were no overriding maintenance or structural issues affecting the properties, but in the context of the ongoing disputes between Dual Homes and the Owners Corporations, I am not persuaded that this assumption is valid. The valuation date adopted by Mr Hendrey is somewhat arbitrary, although it was not said against Mr Hendrey that there was movement in the market in either direction in the second half of 2011. I accept, as probable, that the Railway Place properties would have been sold within six months of the adopted valuation date.

338 Having regard to these matters, and to the inexact nature of the art of valuation of real estate, I am not persuaded to accept as probable the modest losses that Mr Lipson has calculated on the basis of Mr Hendrey's valuations. An adjustment downwards of about 7.5% in Mr Hendrey's valuations is sufficient to eliminate a profit in Mr Lipson's calculations. The exigencies affecting Mr Hendrey's valuation opinions that I have referred to require an adjustment in the vicinity of 15%. When that adjustment is made, there is no inconsistency between general market expectations and the assessed movement in the value of the properties between the second half of 2011 and the second half of 2013.

339 George Roiniotis thought that both Station Street properties were placed on the market in 2011, but there was no evidence supporting this supposition. I am satisfied that the Station Street properties had not been placed on the market on 6 July 2011. Neither am I persuaded that it is probable that, but for the liquidation, Dual Homes would have placed those properties on the market, and achieved sales, during the period when it was in liquidation.

340 John Roiniotis' said that after termination of the winding up on 2 April 2012, Dual Homes was in damage control mode and he was its sole director. There was no evidence as to when Dual Homes first engaged selling agents after the termination of liquidation but when it did so, it was not motivated to resume its prior commitment to asset sales. There was no longer any need to raise finance to develop Murradoc Road, that property having been sold. George Roiniotis stated that after termination of the liquidation the properties were sold 'because my father was getting sick of dealing with body corporate's and was ready to sell up', and I accept this as the probable explanation for both the fact, and the timing, of the sales.

341 I do not accept George Roiniotis' suggestion that the delay after 2 April 2012 in selling the Fairfield properties arose because he considered that it was not realistically practical to sell the properties until the defect liability issues with the owners' corporations, which underpinned the mortgages, were settled and this explanation was not challenged by his cross-examiner. Although it was also a condition of the order terminating the winding up that Dual Homes had to provide a mortgage over Lot 5, Railway Place and Lot 6, Station Street in favour of each Owners Corporation securing any defects liability claim and I accept that the Owners Corporations' representatives were tenacious opponents, the existence of those mortgages could not have any causative effect in respect of the claimed loss, as there was no impediment to the sales proceeding at an earlier time with the value of the defects liability claim secured against the proceeds of the sale. It provides no explanation in respect of Lot 4 Railway Place, which remained unencumbered. A further indicator of the improbability of this assertion about the effect of the mortgage on Dual Homes' ability to sell the Railway Place properties, is that Lot 5 (the mortgaged property) sold on 27 July 2013 prior to Lot 4, which sold on 9 May 2014.

342 I am not persuaded by this explanation and consider, as I have already said, that Peter Roiniotis' observation to George is the probable motivation for the fact, and timing, of the sale.

343 For these reasons, I am not persuaded that Dual Homes has established a causative link between the conduct of the defendants and the timing of the sale of the Station Street properties. Further, in relation to each of the Fairfield properties, Dual Homes has not established that it is probable that it has suffered loss by reason of the delay in the sale of these properties and its claim in respect of items 8 and 9 of its particulars of loss is refused.

344 Turning to the remaining of the heads of damage set out in the plaintiffs' Further Particulars of Loss dated 13 August 2015, the scope of the dispute between the parties was much narrower.

345 The plaintiffs asserted that by an email sent 12 August 2015 at 1.57 pm by the defendants' solicitors, the defendants did not challenge the quantum of items 2(a), (b), (c), (e), (f), (g), (i) and (l) which total $276,122.94, as opposed to $257,000 said to be admitted in the Joint List of Issues. The plaintiffs submitted the email was an admission of liability for, and the quantum of, those items, which should be allowed on a GST included basis.

346 The defendants disputed this interpretation of the email noting that the plaintiffs could not be under any misconception that the inclusion of GST was in issue, as reflected in the joint list of issues. I agree. The email when read in context of the joint list of issues which sets out the dispute over the GST cannot be regarded as an admission. In any event, the plaintiffs were not disadvantaged in closing submissions in dealing with the issue of GST on its merits and, for the reasons already given, Dual Homes would be overcompensated if all items of expenditure were awarded on a GST inclusive basis.

347 I allow Dual Homes the GST-exclusive amount of $190,000 in respect of the liquidator's remuneration. The balance of $19,000 can be sought from the ATO by set off or refund.

348 These items were not disputed and are allowed in the sums of $1,853.23 and $47,054.61 respectively.

349 The defendants deny liability for this item - insurance cover taken out by Rathner in the sum of $2,858.47 - on the basis that it has not been proved. The Court has no specific evidence as to what this item relates to, but there is sufficient evidence that the liquidator incurred an insurance expense in that sum.

350 The plaintiffs were dependent upon the liquidator to provide the information requested by the defendants to identify the specific expenditure, but the liquidator did not supply any further information. The plaintiffs relied upon the liquidator's final financial statements, and in particular the P&L Statement, as business records of Dual Homes. I am satisfied that Dual Homes incurred this expense during the liquidation.

351 Based on the entry in the liquidator's financial statements, I allow this item.

352 These items were not disputed and are allowed in the sums of $90.20, $877.92, and $12,000 respectively.

353 This item relates to other costs paid by the liquidator to the owners' corporation lawyers in the sum of $6,526.60. The defendants accept the GST-exclusive quantum of this item in the sum of $6,117.10 and accept causation. For the reason set out above, I allow recovery of this item in the sum of $6,117.10.

354 This item is the cost incurred by the liquidator when changing locks on Dual Homes' properties claimed in the sum of $1,145.98. The defendants accept the quantum of this item but do not accept a liability for it, contending that had Dual Homes provided the keys more promptly to the liquidator, it could have avoided this expense. I have already commented on this matter. In a short period, the liquidator made numerous requests of Dual Homes for it to provide the keys to its properties. At this stage, Dual Homes was still being advised by McKellar. I am not persuaded that this item should be disallowed on the basis that Dual Homes failed to take reasonable care to minimise the expenses of the liquidator. The expense was incurred by the liquidator in the exercise of his responsibilities. Irrespective of any question of whether the liquidator was overzealous in that regard, Dual Homes is entitled to be compensated and I will allow this item.

355 First Valuation Group at the liquidator's request valued Dual Homes' properties and charged fees in the sum of $10,997.00. The defendants accept the quantum of this item but do not accept a liability for it, submitting that in comparison to Mr Hendrey's fees ($5,225.00), the First Valuation Group's charges appear to be very high.

356 Valuation of the company's properties was a legitimate expense for the liquidator to incur, and the sum to be paid for those valuations was a matter between the liquidator and the valuer. It was not a matter where Dual Homes could have influenced the charges made by the First Valuation Group pursuant to the liquidator's request. These were a proper expense incurred by the liquidator. I allow this item.

357 This is a small charge of $99 for grass slashing at Murradoc Road. The defendants accept the quantum of this item but do not accept a liability for it contending that irrespective of whether Dual Homes was in liquidation, maintenance expenses would have been incurred at Murradoc Road. I do not accept this contention. It is not established these charges would have been incurred regardless. These were a proper expense incurred by the liquidator. I allow this item.

358 The liquidator incurred conveyancing costs on the sale of Murradoc Road in the sum of $4,330.58. The defendants accept the quantum of this item but do not accept a liability for it. Dual Homes had already placed the Murradoc Road property on the market prior to 6 July 2011. Conveyancing costs would have been incurred by Dual Homes in any event upon the sale of the property. Its entitlement is properly limited to the net proceeds of sale. I disallow this item.

359 The liquidator paid legal fees to B2B Lawyers in the sum of $456.50. The defendants accept the GST-exclusive quantum of this item ($415.00), but do not accept that this item is referable to any act or omission on the part of the defendants. George Roiniotis asserted that Dual Homes paid B2B Lawyers' professional fees but gave no evidence as to the work undertaken by B2B Lawyers or its connection to the liquidation of Dual Homes. The cover letter accompanying the invoice, addressed to George Roiniotis indicated that the invoice is for 'Corporate Advice' and related to the period 8 November 2011 to 31 December 2011. The narration shown on the invoice relates to a 'Conference with Mr G Roiniotis and Mr A De Luca'. The identity of Mr De Luca is a mystery. He does not appear to be a legal practitioner at B2B Lawyers and during that period, Madisons Lawyers represented George and Peter Roiniotis with respect to the termination application. It is unexplained why George Roiniotis would seek further legal advice from B2B Lawyers when he had retained Madisons Lawyers.

360 I accept the defendants' submission that the plaintiffs have not proved that the B2B invoice relates to any aspect of the liquidation of Dual Homes. I disallow this item.

361 The defendants accept the GST-exclusive quantum of this item in the sum of $175. The defendants accept that these legal fees paid to Cussen Legal were caused by the liquidation of Dual Homes. I allow this item at $175.

362 The defendants accept the GST-exclusive quantum of this item - fees paid to Kliger Partners of $880. The defendants do not accept that this item relates solely to the liquidation of Dual Homes. They submitted that the narration on the trust statement of account refers to 'Advice in regard to owners' corporation and Liquidation Matters'. The lack of information does not entitle the court to speculate as to what the fees relate to. It is not possible for the defendants, or the court, to identify what proportion of these fees relate to the liquidation, and which relate to the owners' corporation; the latter fees may have been incurred irrespective of the liquidation.

363 I reject the defendant's objection to this item, because issues concerning the owners' corporation were sufficiently connected to issues arising in the liquidation. I allow this item in the GST exclusive amount of $800.

364 The plaintiffs submit that this item represents costs in the sum of $6,738.25 incurred in obtaining a discharge of the mortgage of Unit 5, 36 Railway Place paid to Roy Jaffit Rochman & Co. The defendants accept the GST-exclusive quantum of this item in the sum of $6,135.46. However, the defendants deny liability for that amount, submitting that the tax invoice showed that the costs related not simply to the discharge of the mortgage but included advice with respect to the owners' corporation's claims, engaging counsel to advise and perusing advice about those claims. The tax invoice is dated 5 August 2013. By that date, the owners' corporation had reinstated their VCAT proceeding concerning the Station Street defects claim. The proceeding was not settled until 18 September 2013. I am satisfied that it appears from the face of the bill that the fees incurred extended beyond the costs associated with obtaining a discharge of the mortgage of Lot 5, 36 Railway Place.

365 The defendants submitted, and I agree, that any liability on the part of the defendants to the costs associated with obtaining a discharge of the mortgage of Lot 5, 36 Railway Place ought be limited by reference to the amount charged by Roy Jaffit, Rochman & Co for the discharge of the mortgage over Lot 6, Station Street; namely, $1,888.02.

367 The plaintiffs' claim Roy Jaffit Rochman & Co's costs in obtaining a discharge of the mortgage of Unit 6, 83 Station Street in the sum of $2,058.77. The defendants accept the GST-exclusive quantum of this item in the sum of $1,888.02. The defendants accept causation in regard to this item. I allow this item in the sum of $1,888.02.

368 The remaining items are amounts that were paid by George and Peter Roiniotis and were claimed by them. I find as a fact these amounts were paid by George and Peter Roiniotis on behalf of Dual Homes when it was in liquidation and under the control of Mr Rathner. Further, because Dual Homes is not entitled to a tax invoice that would permit it to recover the GST element of these expenses, George and Peter Roiniotis would be under compensated if these expenses are not allowed on an exclusive of GST basis. As discussed above, these payments will be treated as amounts loaned to Dual Homes and credited to George and Peter Roiniotis' loan accounts.

369 The plaintiffs contended the defendants were liable for Madisons Lawyers' legal costs with respect to the application to terminate the liquidation in the sum of $132,119.14. The defendants accept this item as to quantum but not causation, submitting that these legal fees would have been incurred in any event if Dual Homes was to have defended the winding up application on the basis of its solvency. Thus, the plaintiffs were not entitled to the entirety of this item.

370 I reject this contention. The application to terminate the winding up application was caused by the negligence of McKellar. For the reasons I have given, the prospect of defence of the winding up application on the basis of solvency is an irrelevant consideration and McKellar's negligence prior to the commencement of the winding up application caused the plaintiffs to incur the cost of the application to terminate the winding up.

372 The plaintiffs contended the defendants were liable for Caripis & Co's accountancy expenses in the sum of $33,207.17. Again, the defendants contended that had Dual Homes opposed a winding up on the basis of its solvency, the fees paid to Caripis & Co would have been incurred in any event, because much the same financial and accounting evidence had to be adduced as was used in support of the later application to terminate the winding up.

373 For the same reasons as I have stated in respect of item 14, I reject the defendants' objection to this item. However, part of these fees were incurred in the preparation of annual financial statements, tax returns and other matters, fees that would have been incurred in any event. The tax invoice in evidence from Caripis & Co did not break down the component parts of the accounting, taxation and secretarial services that it provided. Although this basis for assessing the recoverability of the accounting fees was not the subject of submissions, doing the best that I can on the evidence before me, I will discount this item by 50%.

375 The defendants accepted the quantum of Brooke Bird's fees of $3,865.64, incurred in respect of specialist insolvency advice, but challenged the amount of $1,004.10 set out in an invoice of 11 November 2011 on the basis that the narrative referred simply to 'consulting fees'. The defendants submitted that it was unclear whether these consulting fees were referable to any act or omission on the part of the defendants. The second page of the invoice details that the fees were incurred for meetings between Brooke Bird and Madisons to review the liquidator's fees and were directly incurred in connection with the liquidation of Dual Homes.

376 I reject the defendants' objection to this item and I allow the item in the sum of $3865.64.

377 The defendants accept liability for the cost of property valuations referred to in Robert Hendrey's affidavit sworn 4 October 2011 in the sum of $5225, and I allow recovery of this item in that sum.

378 In summary, I have assessed the damages claimed by Dual Homes in respect of items 1 - 12 inclusive, in the sum of $277,844.55, and the damages claimed by George and Peter Roiniotis in respect of items 14 - 18 inclusive in the sum of $157,813.37, a combined total of $435,657.92. In addition I allow, against Pilley McKellar, the sum of $2,800.[101] Damages in the nature of interest are also claimed and applying the rate from time to time under the Penalty Interest Rates Act 1983 (Vic) to the assessed damages from the date of issue of the writ, I award a further sum of $146,626.61.[102] Accordingly, the first plaintiff will recover the sum of $585,084.53.

379 By its defence, the first defendant (Moores Legal) contended that the plaintiffs claim against it was an apportionable claim pursuant to Part IVAA of the Wrongs Act and that if the first defendant was found to have caused any of the loss and damage claimed then by reason of the matters alleged in the proceeding by the plaintiffs against the second defendant, Pilley McKellar is a concurrent wrongdoer within the meaning of that term in Part IVAA of the Wrongs Act.

380 Pursuant to s 24AI of the Wrongs Act, Moores Legal's liability to the plaintiffs is limited to an amount reflecting the proportion of their loss and damage that the court considers just and equitable having regard to the extent of its responsibility, when compared with the responsibilities of Pilley McKellar for that loss and damage.

381 The same defence is taken, mutatis mutandis, by Pilley McKellar to limit the quantum of the judgment to which the plaintiffs are entitled against it. Neither defendant particularised its proportionate liability defence. Further, the issue of proportionate liability was not explored in any detail at trial and was not the subject of written submissions. The defendants' counsel maintained that the failure of his client, Moores Legal, to attend the winding up hearing was the sole cause of the plaintiffs' loss and the issue of apportionment did not arise because his client Pilley McKellar was not a concurrent wrongdoer. It was unclear whether this submission was put by counsel in his capacity as counsel for the first or for the second defendant. It might be thought that, on this question, the interests of counsel's clients were in conflict.

382 In any event, given my findings that the causes of the plaintiff's loss were far more extensive than the failure of Moores Legal to attend the winding up hearing, the submission is irrelevant.

383 Both defendants, as independent legal practices, are required to hold professional indemnity insurance and were insured by the same insurer. This may explain the fact that although each defendant pleaded a defence of proportionate liability, the defendants were jointly represented and neither adduced evidence or made submissions against the other.

384 It has been settled since the early decision of Barrett J (as he then was) in Reinhold v NSW Lotteries Corporation (No 2),[103] that although a case will ordinarily be pleaded and proved by one or more defendants so as to engage the statutory provisions, the findings ultimately made at trial determine whether the statutory conditions compelling the court to apportion damages are engaged. In short, 'claim' where it appears in s 24AI(1)(b) of the Wrongs Act, refers to a claim as proved and established, not a claim as made or advanced.[104] Here, the defence has been pleaded, and the statutory provisions compel me to apportion damages between the defendants if:

(a) the plaintiffs' claim against the each defendant is an apportionable claim;

(b) that in relation to that claim each defendant is a concurrent wrongdoer; and

(c) the court can identify the material facts by reference to which it is to assess the extent of each defendant's responsibility for the plaintiff's damage, which can include regard to the comparative responsibility of the other defendant for the plaintiff's damage.

Each of these conditions is satisfied in this proceeding.

385 This proceeding involves an apportionable claim. Section 24AF(1)(a) provides that Pt IVAA applies to:

a claim for economic loss or damage to property in an action for damages (whether in tort, in contract, under statute or otherwise) arising from a failure to take reasonable care,

and the plaintiffs' claim, as determined by the court, was a claim for economic loss in an action for damages arising from the failure to take reasonable care.

386 The defendants are concurrent wrongdoers. Section 24AH of the Wrongs Act, defines a 'concurrent wrongdoer' as a person who is one of 2 or more persons whose acts or omissions caused, independently of each other or jointly, the loss or damage that is the subject of the claim.

387 Whether a defendant is a concurrent wrongdoer is assessed by reference to the particular claims against that defendant. A finding that a defendant is a concurrent wrongdoer must necessarily involve analysis of responsibility for causing the plaintiff's damage in respect of each apportionable claim. The analysis of comparative responsibility between concurrent wrongdoers undertaken under s 24AI when determining the just apportionment requires a broad discretionary evaluation of the conduct of the wrongdoers in terms of both causation and culpability.[105]

388 I have determined that each defendant owed the first plaintiff a duty of care.[106] I have also determined that McKellar breached his duty of care to the first plaintiffs during the period from shortly after 13 April 2011 when CSD2 was served until 19 May 2011. During that period McKellar was a partner of Pilley McKellar until 30 April 2011 and an employee of Moores Legal from 1 May 2011. The acts and omissions of McKellar on which my finding of breach of duty is based span the transition in his employment from the first defendant to the second defendant. On the basis of my earlier findings, the plaintiffs' loss and damage was caused by McKellar's conduct through the whole period, and I find that each of Pilley McKellar and Moores Legal are concurrent wrongdoers.

389 These findings require me to limit the amount of the judgment to be entered against each defendant. Section 24AI(1) of the Wrongs Act provides:

(1) In any proceeding involving an apportionable claim -

(a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the loss or damage claimed that the court considers just having regard to the extent of the defendant's responsibility for the loss or damage; and

(b) judgment must not be given against the defendant for more than that amount in relation to that claim.

390 In Goddard Elliot v Fritsch,[107] Bell J reviewed the cases that establish the principles applicable in this court for the assessment of comparative responsibility under s 24AI(1).[108] I agree with his Honour's analysis. The starting point is the oft-cited passage of Gibbs CJ, Mason, Wilson, Brennan and Deane JJ in Podrebersek v Australian Iron & Steel Pty Ltd, in the context of contribution:[109]

The making of an apportionment as between a plaintiff and a defendant of their respective shares in the responsibility for the damage involves a comparison both of culpability, i.e. of the degree of departure from the standard of care of the reasonable man ... and of the relative importance of the acts of the parties in causing the damage ... It is the whole conduct of each negligent party in relation to the circumstances of the accident which must be subjected to comparative examination. The significance of the various elements involved in such an examination will vary from case to case; for example, the circumstances of some cases may be such that a comparison of the relative importance of the acts of the parties in causing the damage will be of little, if any, importance.

391 What is required of the court is a broad consideration of both the culpability of the departure from the standard of reasonable care and the relative importance of the acts of the parties which caused the damage. The concept of culpability which is applied is not 'moral blameworthiness but [the] degree of departure from the standard of care of the reasonable man',[110] while the relative importance of the conduct of the wrongdoers invokes an assessment of causal potency. These considerations may overlap.

392 The High Court in Podrebersek referred to Smith v McIntyre.[111] In that case, Burbury CJ, Gibson and Crisp JJ identified considerations that might influence a finding of apportionment, including who created the hazard which ultimately caused the injury, the age, role and position of the person causing the damage and failing to take an obvious and available last opportunity to avoid the damage. The court emphasised the need for a broad discretionary assessment of all the circumstances:

We think the true view is that there is no dichotomy between culpability and causation. A comparison of degrees of fault between two negligent actors requires an examination of the whole conduct of each in relation to the circumstances of the accident. The degree of departure from the standard of the reasonable man on the part of either should not be assessed without considering the extent to which that departure was a contributing cause of the accident. A variety of factors may enter into a judicial determination as to which party has the greater share in the responsibility for the accident. There is no single touchstone of responsibility.

393 In this case, the degree by which McKellar's conduct departed from the applicable standard of care grew as the need to address the CSD2 became more urgent. Before 30 April 2011, when Pilley McKellar was the responsible defendant, McKellar departed from the expected standard of care by failing to advise Dual Homes to settle or address the debt claimed by CSD2. Pilley McKellar informed LMS lawyers of their instructions to set aside the CSD2, and although the basis for that application was unclear, on 30 April 2011 there was a dialogue open between the parties and the deadline for CSD2 was yet to expire. However, Dual Homes was proceeding on a misunderstanding, caused by McKellar's negligent advice, that it had a good off-setting claim and CSD2 would be set aside. This misunderstanding was the source of risk, the hazard, that Dual Homes faced as the deadline for compliance with CSD2 approached.

394 After 1 May 2011, when Moores Legal was the defendant responsible for McKellar's conduct, McKellar failed to address the increasing urgency of the imminent expiry of CSD2, and he failed to commence the proceeding to set aside CSD2. When he then failed to take the opportunity extended by LMS Lawyers in its letter of 2 May 2011 to quantify the bill of costs, an obvious and available last opportunity to avoid the damage was missed. Further, that missed opportunity for a negotiation following on the bill of costs for taxation was the last chance to avoid the consequences of the presumption of insolvency that McKellar had permitted to accrue for the benefit of the creditor. In my assessment, McKellar's breach of duty in the period from 1 to 4 May in particular, and in the period from 5 to 19 May when he failed to act as instructed to protect his client's interests was both more culpable, and of greater causal potency, then his earlier breach of duty in giving advice to Dual Homes.

395 Bearing all these matters in mind, I consider it just and equitable that the damages recoverable by the respondent be paid in one third by Pilley McKellar, and two thirds by Moores Legal.

[1] Pilley McKellar is severally liable for the first $2,800 and proportionally liable for $194,094.84.

[2] This claim was stayed by the liquidation of Dual Homes.

[3] It is not necessary to consider the solvency of Dual Homes on 13 January 2011, which was the deadline for compliance with the first statutory demand. The relevant period is from 13 April 2011 when the second statutory demand was served until 6 July 2011 when Dual Homes was put in liquidation.

[4] Lots 1, 4 and 5 Railway Place, Fairfield, and Lots 5 and 6 Station Street, Fairfield.

[6] The Station St Property Damage claim.

[7] McKellar did not inform counsel that the offsetting claim was a costs order that was unlikely to sufficiently reduce the quantum of the debt.

[8] The defence, at paragraph 8(c)(ii), stated that McKellar gave winding up advice between 22 June 2011 and 4 July 2011 informing George Roiniotis of the adjournment of the winding up application.

[9] Paragraphs 23, 23A, 50(a) and 82(c) of the defence.

[10] Paragraphs 44 and 50(b) of the defence.

[11] Paragraph 73(b)(ii) of the defence.

[13] Astley v Austrust Ltd (1999) 197 CLR 1, 20-23 [44]-[48].

[14] Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1, 53 [145]-[146].

[15] Hawkins v Clayton (1988) 164 CLR 539, 579; Carew Counsel Pty Ltd v French [2002] VSCA 1; (2002) 4 VR 172, 184-185 [29].

[16] [2002] VSCA 1, 184-185 [29] (citations omitted).

[17] Yates Property Corporation Pty Ltd v Boland [1998] FCA 8; (1998) 85 FCR 84, 111 (reversed on other grounds; see Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 167 ALR 575); Simply Irresistible Pty Ltd v Couper [2010] VSC 601 (appeal on causation grounds dismissed; see Simply Irresistible Pty Ltd v Couper [2012] VSCA 128).

[18] [2010] VSC 601, 39 [162].

[19] [2008] VSCA 116 [7]-[16].

[20] Goddard Elliott (a firm) v Fritsch [2012] VSC 87, 109 [416]; citing Fox v Everingham [1983] FCA 258; (1983) 76 FLR 170, 174-175 (Woodward, Muirhead and Sheppard JJ), Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1, 53 [145]-[146] (Malcolm AJA), and Christodoulou v Christodoulou [2009] VSC 583, [131] (Kaye J); see also Simply Irresistible Pty Ltd v Couper [2010] VSC 601, 16 [161] (Kyrou J); and Tasmanian Sandstone Quarries Pty Ltd v Legalcom Pty Ltd [2010] SASCFC 6, 5-6, 14 [22]-[23], 10-11 [45]-[50] (Gray J, Nyland and Kourakis JJ agreeing).

[21] Applicable by operation of s 44.

[22] [2009] HCA 48; (2009) 239 CLR 420.

[23] Ibid, 440 [43] (citations omitted).

[24] [2013] HCA 19; (2013) 250 CLR 375, 383 [14].

[25] [2013] VSCA 370, 34-35 [99].

[26] The definition is in slightly different terms to the definition of negligence in s 5 of the Civil Liability Act 2002 (NSW).

[27] In 'exceptional cases' under the Civil Liability Act 2002 (NSW).

[28] Deputy Commissioner of Taxation v Harvard Marine International Pty Ltd [2011] FCA 1381.

[29] (1997) 188 CLR 159.

[30] Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180, 225 [118]; Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540, 577-578 [84], 597-598 [149]; Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515, 548-549[80].

[31] In final submissions, the plaintiff did not press for the loss represented by the Pilley McKellar fees given that Pilley McKellar had refunded the whole of the fees it charged.

[32] Strong v Woolworths Limited trading as Big W and Anor [2012] HCA 5; (2012) 246 CLR 182, 196 [32].

[33] In 'exceptional cases' under the Civil Liability Act 2002 (NSW).

[34] [2008] NSWCA 86, [92]-[101].

[35] Statement of Claim, paragraphs [24], [26].

[36] [1990] HCA 17; (1990) 169 CLR 594 ('Concrete Constructions').

[37] In Sigma Constructions (Vic) Pty Ltd v Morwell Investments Pty Ltd [2004] VSCA 242, 11-12 [22], in which Batt JA (Vincent and Nettle JJA agreeing) treated the observations of the High Court in Concrete Constructions as a 'safe guide' to the meaning of 'in trade or commerce' for the purposes of the Fair Trading Act.

[38] [1990] HCA 17; (1990) 169 CLR 594, 604 (Mason CJ, Deane, Dawson and Gaudron JJ).

[39] [1990] VicRp 25; [1990] VR 257.

[41] Unreported, WASC, Library No 970186, 24 April 1997.

[42] [2002] VSC 354; (2002) 172 FLR 140.

[45] [2002] VSC 354; (2002) 172 FLR 140, 145 [27].

[46] [2012] VSC 87, 131 [497] et seq.

[47] [1990] VicRp 25; [1990] VR 257, 292.

[48] [1999] HCA 64; (1999) 167 ALR 575, 638 [239].

[49] [2008] WASCA 239.

[50] [2003] NSWCA 84.

[53] Stockland (Constructors) Pty Ltd v Retail Design Group (International) Pty Ltd [2003] NSWCA 84 [18]-[23]; Middleton v AON Risk Services Ltd [2008] WASCA 239, [76].

[54] Cf W J Green & Co (1984) Pty Ltd v Wilden Pty Ltd (unreported, WASC, Library No 970186, 24 April 1997). In that case a statement made in the course of a mediation that was part of the court proceeding was held not to be in trade or commerce.

[55] [2013] FCA 954; (2013) 303 ALR 445, 552 [400] (citations omitted).

[56] Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514, 525.

[57] Henville v Walker [2001] HCA 52; (2001) 206 CLR 459, 470 [18], 480 [61] and 503 [134]; Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514, 525.

[58] [2012] FCA 116, 120 [210], citing Gould v Vaggelas (1985) 157 CLR 215, 236 [46] (Wilson J); Henville v Walker [2001] HCA 52; (2001) 206 CLR 459, 469 [14] (Gleeson CJ), 480 [59]-[61] (Gaudron J), 493-494 [106]-[109] (McHugh J), and 509 [163] (Hayne J); Sanguine Technology Pty Ltd v Abacus Calculators (WA) Pty Ltd [2010] FCA 279 at 72 [215]-[216] (Lander J); and De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) [2011] FCA 645; (2011) 200 FCR 253, 267-268 [55]-[59] (Stone J).

[59] [2001] HCA 52; (2001) 206 CLR 459, 480 [61] (citations omitted).

[60] In due course I will specifically address each disputed item of loss in respect of each head of damage.

[61] [2008] NSWCA 86.

[62] [2008] NSWCA 86, with Beazley JA (as her Honour then was) and Giles JA agreeing.

[65] [2008] NSWCA 86 [99] et seq.

[67] [2008] NSWCA 86, [84].

[68] D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1, 58-59 [175] (citations omitted).

[69] [2012] WASC 490.

[71] In making these observations, which are obiter, Kenneth Martin J was following the observations of McHugh J in D'Orta-Ekenaike to which I have just referred. See also to the like effect obiter observations by Bell J in Goddard Elliott v Fritsch [2012] VSC 87, [823] and Cavanough J in M & R Pty Ltd v Grills & Ors [2007] VSC 528, [56].

[72] [2005] HCA 12; (2005) 223 CLR 1.

[73] Ibid, 31 [85] (Gleeson CJ, Gummow, Hayne and Heydon JJ).

[74] Ibid, 31 [86] (Gleeson CJ, Gummow, Hayne and Heydon JJ citing Gianarelli v Wraith (1988) 165 CLR 543 per Mason CJ at 560), and McHugh J at 34 [95].

[75] [2009] NSWCA 139; (2009) 257 ALR 689, 695 [26] (Giles JA).

[76] [2012] VSC 87, 220-222 [834]-[838].

[77] See also Nikolaidis v Satouris (2014) 317 ALR 761; Sims v Chong [2015] FCAFC 80; (2015) 230 FCR 346, 362-363 [79]-[84].

[78] D'Orta-Ekenaike at 32 [91] (Gleeson CJ, Gummow, Hayne and Heydon JJ) and at 56 [168] (McHugh J).

[79] [2012] NSWCA 433, 67-68 [172] (with Basten, Barrett, Hoebin JJA and Sackville AJA agreeing). See also Symonds v Vass [2009] NSWCA 139; (2009) 257 ALR 689, 692 [14] (Giles JA).

[80] Commencing with Chamberlain v Ormsby t/as Ormsby Flower [2005] NSWCA 454.

[81] [2012] NSWCA 433, 77 [198].

[82] [2015] NSWCA 132, [47].

[84] [2014] NSWCA 335.

[85] [2014] VSCA 45, 8 [24].

[86] [2015] FCAFC 80; (2015) 230 FCR 346.

[88] Ibid, 362 [75] (citations omitted).

[89] [2015] HCA Trans 176.