EVIDENCE - whether principles in Browne v Dunn apply - whether respondent or respondent's witnesses were put on notice that statements made in documentary evidence may be used against them or were put on notice that an adverse inference may be drawn against them in order that they may respond to that issue and give an explanation - inference that the purpose in instituting the proceeding was to delay paymen

REASONS FOR JUDGMENT Introduction and background to application for costs to be paid by solicitors The motion before the Court is for an order that the respondent, Flower & Hart, a firm of solicitors, pay the costs of the applicant White Industries (Qld) Pty Ltd ("White") of the proceeding which was brought by Caboolture Park Shopping Centre Pty Ltd (in liquidation) ("Caboolture Park") a wholly owned subsidiary of Hersfield Development Corporation Pty Ltd ("HDC") against White on an indemnity basis. White excludes from the costs it seeks those costs which are solely referable to it prosecuting its cross‑claim against Caboolture Park. (From time to time in these reasons the names Caboolture Park and HDC are used interchangeably because it is not clear in what capacity a person was speaking or acting or being addressed. As Caboolture Park was a wholly owned subsidiary of HDC and either had, or used, the same officers and employees as HDC nothing turns on whether Caboolture Park or HDC is referred to at any relevant time.) The motion arises out of the proceeding which was commenced on 23 December 1986 when Caboolture Park, for whom Flower & Hart was acting, filed an application supported by a statement of claim claiming damages and other relief against White in respect of conduct alleged to contravene s 52 of the Trade Practices Act 1974 (Cth), or to constitute fraudulent misrepresentation, or negligent misstatement arising out of a building contract entered into between White and Caboolture Park for the construction of a shopping centre at Caboolture. White filed a defence and cross‑claim on 10 April 1987 denying the allegations against it and seeking payment of moneys owing by Caboolture Park under the building contract. The application and the cross‑claim came on for trial on 7 June 1988 together with proceedings which had been commenced in the Supreme Court of Queensland by subcontractors against White and Caboolture Park arising out of the construction of the shopping centre and which had been transferred to the Federal Court. Flower & Hart acted for Caboolture Park in the proceeding until 9 August 1989 when it applied for leave to file a notice of cessation to act for Caboolture Park. That leave was granted. By that date the proceeding had occupied approximately 150 hearing days. On the same day Ryan J ordered that a notice be served on Caboolture Park that the Court might, and in default of appearance would, enter judgment dismissing Caboolture Park's action. On 17 August 1989, some two and a half weeks after the appointment of receivers to Caboolture Park's parent company, HDC, a receiver and manager was appointed to Caboolture Park. On 17 August 1989 there was no appearance on behalf of Caboolture Park. Ryan J ordered that Caboolture Park's application against White be dismissed and that Caboolture Park pay White's costs, including reserved costs, to be taxed or fixed in accordance with reasons to be published on a date to be fixed. Judgment was entered on 18 August 1989. On 6 April 1990, judgment was given on White's cross‑claim against Caboolture Park in favour of White for $5,525,652.61 together with interest and costs. The costs order was in the following terms: "That White Industries (Qld) Pty. Ltd.'s costs, including the costs referred to in paragraph 1 of this order, the costs ordered on 17 August 1989 to be paid to it on a dismissal of the application herein, any reserved costs and any costs previously ordered to be paid to it which have not yet been taxed, be specified as a gross sum by Ryan J on a date to be fixed, or be ascertained in such other manner as on that date he may direct." Judgment was entered on 30 April 1990 but as Caboolture Park was in liquidation no proceedings have been taken by White to recover the costs awarded to it under the order. After judgment was entered, as a result of information coming into the possession of White, White filed a notice of appeal in respect of the costs order on 23 November 1992, sought an order that the time for filing and serving the notice of appeal be extended and sought an order that its costs be paid by Flower & Hart on an indemnity basis. The grounds of the appeal were that since the making of the costs order on 6 April 1990 fresh evidence had been discovered by White consisting of correspondence and memoranda passing between Caboolture Park, Flower & Hart and counsel retained by Flower & Hart for Caboolture Park which contained statements that the proceeding was: "(a) commenced and maintained by [Caboolture Park and Flower & Hart] in the belief that [Caboolture Park] had no or substantially no prospects of success; (b) commenced and maintained by [Caboolture Park and Flower & Hart] for an ulterior purpose." The appeal came on for hearing before a Full Court on 29 April 1993 and it was stood over on White undertaking to file a notice of motion in the original proceeding seeking to join Flower & Hart as a party. This it did on 7 May 1993 and in the notice of motion White sought orders that Flower & Hart be joined in the proceeding and that it pay all of the costs of White, other than those solely referable to the cross‑claim, so as to provide to White a complete indemnity for those costs and interest thereon. Flower & Hart filed a notice of motion on 25 May 1993 disputing the jurisdiction of the Court to entertain White's notice of motion and, at the request of the parties, a question was stated for the Full Court whether the Court had jurisdiction to entertain White's motion as an application in this proceeding. For the purposes of the case stated the Court was asked to assume that White had evidence from which it would ask the Court to conclude: "... that Flower & Hart: (a) Commenced and continued litigation on behalf of Caboolture Park Shopping Centre Pty Ltd in the knowledge that it had no worthwhile prospect of success in that litigation in order to vex White Industries (Qld) Pty Limited. (b) Commenced and conducted litigation on behalf of Caboolture Park Shopping Centre Pty Ltd when the purpose of Caboolture Park Shopping Centre Pty Ltd of such litigation was: (i) to delay an action by White Industries (Qld) Pty Limited against Caboolture Park Shopping Centre Pty Ltd to recover monies payable under the contract referred to in paragraph 2 above [between White and Caboolture Park]; (ii) to put White Industries (Qld) Pty Limited under pressure to compromise such claim. (c) Delivered a Statement of Claim dated 22 December 1986 containing an allegation of fraud in circumstances when it was not justified in making that allegation in a pleading. (d) Accepted instructions to conduct the litigation in a manner designed to obstruct and delay the hearing of the Cross‑claim [filed on 10 April 1987]." On 22 September 1993 the Full Court (Lee, Hill and Cooper JJ) answered that question in the affirmative: Caboolture Park Shopping Centre Pty Ltd (In liquidation) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224. White alleges in paragraph 9 of its amended statement of facts and contentions that Flower & Hart, in the course of acting for Caboolture Park: "(a) commenced and continued the proceedings on behalf of Caboolture Park in the knowledge that it had no worthwhile prospects of success in the proceedings in order to vex the applicant or in circumstances where had the respondent given reasonable attention to the relevant law and facts the respondent would have had such knowledge; (b) commenced and continued the proceedings on behalf of Caboolture Park not for the purpose of litigating the claims set forth in the statement of claim but for the collateral purpose of: (i) delaying action by the applicant against Caboolture Park to recover monies repayable under the building contract [between White and Caboolture Park]; (ii) putting the applicant under pressure to compromise such claim; (c) delivered a statement of claim dated 22 December 1986 containing an allegation of fraud in circumstances where there was no factual basis for making that allegation; (d) accepted instructions to conduct the proceedings in a manner designed to obstruct and delay the hearing of both Caboolture Park's application ... and the applicant's cross‑claim ... and did in fact conduct the proceedings in a manner designed to so obstruct and delay the hearing." White alleges that this conduct was in breach of the duty which Flower & Hart owed to the Court. Flower & Hart in its statement of facts and contentions admits that at all material times it owed a duty to the Court: "(a) To conduct the proceedings before the Court with due propriety. (b) To be honest with the Court. (c) Not to act so as to obstruct or defeat the administration of justice by the Court. (d) Not to be a party to an abuse of the Court's process." Flower & Hart then says: "10 At all material times the instructions of Caboolture Park to the Respondent were that Caboolture Park was entitled to relief against the Applicant because of the circumstances surrounding the making of a contract between the Applicant and Caboolture Park in relation to the construction of a shopping centre for Caboolture Park. 11 The Respondent believed, at the time when the claim by Caboolture Park was commenced, and at the time when the pleadings were finalised, that on the basis of its instructions the case of Caboolture Park in relation to relief under the Trade Practices Act, and for damages for fraud, was weak but fairly arguable. 12 In those circumstances it was not improper to include such claims in the pleading." These allegations need to be understood against the background of the original transaction between Caboolture Park and White and the circumstances which led to the commencement of the proceeding. Execution of building contract between Caboolture Park and White By 1985 HDC had become a substantial developer and builder itself of shopping centres in a number of Australian States. During 1985 HDC was in the process of extending its Capalaba Shopping Centre in Queensland. HDC proposed to build a shopping centre at Caboolture and this was ultimately undertaken by its wholly owned subsidiary Caboolture Park. It called for tenders and, on 19 August 1985, White submitted to Caboolture Park's architect its pricing for the construction of the shopping centre in the amount of $14,820,000. Two other tenders were received but both were substantially in excess of White's tender. Thereafter a meeting was held on 27 August 1985 attended by Messrs Herscu, Bennett and Briggs on behalf of HDC and Messrs Dugan, Dempster and Anderson on behalf of White. At that meeting Mr Herscu, the principal of HDC, told the White representatives that their price was too high and they should come in with a lower price. On 2 September 1985, White sent a telex to HDC noting that full drawings were not available from the architect and engineer, that the architect believed that sufficient documentation to enable the gross maximum price to be established would not be available for at least another two weeks and White said it was refining its pricing "as best as possible on current documentation received today". On 10 September 1985 White sent HDC a letter in which White confirmed its revised price of $15,075,000 and noted that the alteration to the price was contributed to by changes in structural details. White noted that it was still concerned that the structure may run over budget as structural details were still not complete. As with the earlier pricing submission the letter included a brief description of the items covered and included a number of prime cost items. This letter was subsequently annexed to and formed part of the building contract that was entered into on 9 October 1985. On 10 September 1985 a second meeting was held between HDC and White representatives at which the letter of 10 September 1985 was discussed and Ian Bennett, the chief estimator for HDC, discussed with the White representatives ways in which they could reduce their price. White had produced a summary sheet dated 6 September 1985 showing how its pricing was made up and, of the amount of $15,075,000, $13,789,545 was provided for subcontract items, $986,000 for preliminaries and $300,000 for White's fee. Mr Bennett went through this schedule with the White representatives and suggested lower figures to them which were then shown in the schedule and this resulted in an all up price of $13,375,000. As a result of this negotiation and what Mr Bennett told the White representatives, the figures were reduced to a total of $13,375,000. On 12 September 1985, White wrote to HDC and confirmed the discussions on 10 September 1985 that it was prepared to construct the shopping centre on the basis of what was described as a "target sum contract" for a target sum of $13,375,000 with a White target fee of $350,000. The letter also referred to the savings and overruns to be shared on a 60/40 basis. In the letter White said: "H.D.C. REQUIREMENTS Under the target sum arrangement W.I.Q. would require H.D.C. to use its purchasing power on all trades to assist in achieving the target trade budgets. TENDERS W.I.Q. would wish to participate in negotiations with all trades tenders to ensure these target budgets are met."

On 9 October 1985 Caboolture Park and White entered into a building contract. A standard form contract was used but its description was amended to read "target lump sum contract". It incorporated the White letters of 10 and 12 September 1985 except that the references to $15,075,000 and prime cost items were deleted from the letter of 10 September 1985. Clause 1.06.07, which set out the contract sum, had been amended to describe the contract sum as "the target contract sum" and at the end of this clause there was an insertion: "Wherever the words 'contract sum' apply in this agreement read the words 'target contract sum'". The contract provided a break down of the figure of $13,375,000 which comprised forty‑one provisional sums totalling $11,975,000, an amount of $1,050,000 for preliminaries and an amount of $350,000 for White's fee. In short, it was not a lump sum contract but the equivalent of a "cost‑plus" or schedule of rates contract. The forty‑one provisional sum items were expressly described as "provisional sums as per clauses 4.03" which allowed for a variation in the sum depending upon what the cost turned out to be. After the contract was signed and construction had commenced, it became apparent and known to HDC and Caboolture Park that there would be cost overruns and that the final cost of construction would substantially exceed the contractual target sum of $13,375,000. HDC and Caboolture Park acquiesced in, and accepted, these cost increases. On 17 December 1985 Mr Poppleston, HDC's supervisor on‑site who received quotations from the subcontractors, approved or rejected their quotations and passed their accounts for payment, said in a memorandum to Mr Herscu: "In summary, as attached, White estimates that the final cost will exceed the original budget of $13.375M by $2.451M, resulting in a final cost of $15.826M. This summary shows savings on the original budget in the order of $686,000.00, for which there are various reasons, and overruns of $3.137M, which are also noted". The attached summary set out the differences between the budget estimates for the various provisional sums, the contract price and the estimated final costs and gave explanations for the differences. On the following day, 18 December 1985, Mr Poppleston sent a further memorandum to Mr Herscu in which he said that the final cost would certainly exceed the target budget of $13,375,000 and he gave the reasons which included under‑estimated costs and designs not completed at the time the target budget was set. From time to time HDC issued financial statement reports showing the cost overruns and it was apparent from these reports that the overruns by December 1985 were running in excess of $2,000,000. Events leading up to the issue of the proceeding by Caboolture Park Before turning to the critical events leading up to the issue of the proceeding it is important to refer to what was described as HDC's or Mr George Herscu's attitude and approach to litigation for it is relied on by Flower & Hart. I refer in particular to Mr Herscu's attitude and approach because Mr Herscu personally took all important decisions in relation to any litigation. Mr Herscu's attitude and approach was described in various ways by HDC's general manager Mr Pearce and by HDC's solicitors. It was a robust approach and HDC was not frightened to commence litigation to get what it wanted or to defend vigorously any claim made against it. HDC's policy was to pursue vigorously any litigation undertaken. Its objective was either to win at trial or settle on favourable terms. Mr Herscu did not believe anything was impossible and was unconcerned about entering into litigation with limited prospects. HDC was unconcerned to enter into litigation to achieve its commercial purposes even if the advice was it could not win. The policy was no settlement discussions. Mr Herscu always took an optimistic view of litigation and as a result HDC viewed prospects of success in litigation more favourably than was indicated in the legal advice it received. Over the years prior to 1985 Flower & Hart, of which Mr Michael Meadows was a partner, had carried out a substantial amount of legal work for HDC. Mr Herscu was regarded as a sensitive and difficult client and Mr Meadows was the partner who had the contact with Mr Herscu whether the matter was commercial, conveyancing or litigation. HDC had been involved in other substantial litigation and on difficult and contentious matters Mr Meadows was instructed to obtain the advice of Mr Callinan QC. (Mr Callinan was subsequently appointed to judicial office but as all relevant events occurred long before his appointment I will refer to him as Mr Callinan except when referring to his evidence in court.) Mr Meadows' approach was to ensure that legal advice given to HDC was practical and took account of the relevant commercial issues. Mr Meadows knew that Mr Herscu would want to take a small prospect of success and convert it into an impregnable case and he was concerned to ensure that this did not occur. The critical events leading up to the issue of the proceeding on 23 December 1986 commenced in November 1986 when HDC decided it had paid enough to White and Mr Pearce asked Mr Meadows on 9 November 1986 whether they could stop the architect from issuing further certificates under the contract. Mr Pearce told Mr Meadows that the project had gone way over budget and they were paying White more than they had expected to pay with the prospect of having to pay even more. Mr Pearce said that Mr Herscu's reaction was that White must have been charging too much. They wanted to see how they could stop payment. Mr Pearce did not suggest, or raise any issue, that there had been any misrepresentations by White. On 11 November 1986 the architect was agreeable to HDC's request that no further certification would be made without first giving HDC five days notice of any certification proposed to be issued. The architect told Mr Meadows that they had certified payment of $16,000,000 under the contract and that they had not certified any more than what Mr Poppleston had approved in writing. On the same day, Mr Meadows brought this to Mr Pearce's attention when he advised HDC, in substance, that any proceedings against the architect would not be successful. The matter was brought to a head on 8 December 1986 when White wrote to HDC, a certificate of practical completion having been received from the architect, and told HDC that the contract price to date including all claims and variations and provisional sum adjustments was $19,668,608. White identified the currently approved contract sum of $17,532,509.11, payments to date of $16,474,250.78, required immediate payment of the difference, namely $1,058,258.33 and required approval of adjustments to the approved contract sum of $2,136,098.89. On 9 December 1986 Mr Meadows went to Melbourne and conferred with Mr Pearce, Mr Bennett, Mr Perch (an HDC architect) and Mr Poppleston. Mr Meadows was told that costs in relation to the project had gone many millions over budget. Mr Meadows tried to find out what increases were associated with the numerous variations and what increases were simply overruns. He also tried to find out why, and in what circumstances, the target contract sum agreement had been entered into. Mr Bennett said that White was the lowest of four tenders at $14,800,000 fixed and that negotiations had taken place to settle upon the contract sum. Mr Bennett told Mr Meadows that he had been delegated by Mr Herscu the task of negotiating the price with White, that tenders were called on a target sum basis due to the expedition required and that prime cost items in the tender were rejected by Mr Herscu as being too expensive. Mr Herscu told Mr Bennett and White that $13,500,000 was the most he could spend on construction. Mr Bennett said that in response to White's figures he had put it to the White representatives that the shopping centre could be constructed for $13,375,000 which was the aggregate of his estimate for each trade which would be involved and that he based his estimates on his experience and HDC's costs and the carrying out of extensions to its Capalaba Shopping Centre. Mr Bennett told Mr Meadows that he went through each item on White's summary sheet with White, proposed lower figures for most items and supplied the figures that made up the $13,375,000. Mr Bennett had told White that HDC would help White negotiate prices with subcontractors as HDC had the purchasing power. Mr Bennett said that the representatives of White considered the matter overnight and the next day they met with Mr Briggs and himself and said words to the effect that they agreed with the figures that he had put forward and believed they could do the job for that price. Mr Bennett said that he then summarised the position for the meeting. He went through the figures which he had provided for the individual trades again and explained why he thought they were reasonable. He stressed that some of the trades might come in under or over the budget, nevertheless White was to carry out the works for around $13,375,000. Mr Bennett said that Mr Dugan from White had agreed with his summary. Mr Bennett said he outlined the agreement reached to Mr Herscu who agreed and Mr Bennett then returned to the meeting and said they had an agreement and White said they would submit the formal contract for signature as soon as possible. At this meeting with Mr Meadows on 9 December 1986 HDC's only complaint to him was that it had been over charged under a cost‑plus contract. There was no complaint that there had been any misrepresentations by White which were false, misleading or fraudulent and Mr Meadows was aware from what he had been told that all payments which had been made had been certified by the architect and approved by Mr Poppleston. At this time Mr Meadows realised that further millions were payable, that Mr Herscu did not want to pay, that under the contract a claim by Caboolture Park was hopeless if the architect certified that further amounts were payable and that Caboolture Park's bargaining position was poor. Mr Bennett did not tell Mr Meadows that the figures he had given White were unreasonable, but rather said that the figures he had given White were reasonable. Mr Meadows realised he needed a stronger bargaining card and he wanted to put his client in its strongest position. Following this conference Mr Meadows wrote a letter to Mr Pearce on 16 December 1986 in the following terms: "We refer to our discussions with you, Mr Ian Bennett, Mr Sol Perch and Mr Rick Poppleston in Melbourne on 9 December, and confirm Messrs Bennett & Poppleston instructed us as follows:- A. Tenders were called from some four (4) builders on a 'target sum' basis (for the purpose of expedition). Following assessment or these tenders discussions were held with White Industries (Qld) Pty Ltd ("Whites"). B. Whites had included in its tender a list of provisional sums for what are now items 1 to 41 of Clause 15.03 of the Building Contract. C. The figures proposed by Whites were rejected by your company and do not appear in the Building Contract. A new set of figures proposed by Mr Bennett and others of your company (and based to some extent on your company's experience at Capalaba Park) were included as the contract provisional sums. It is important to note that the final 'provisional sums' adopted were those proposed by your company, not Whites. As your company proposed these sums, we cannot see how it can be said Whites misrepresented the position here. It might have been possible, had Whites original figures been used, to say Whites represented the Works could be completed for a figure 'in the order' of the total nominated. But this is clearly not the case here. We do not even think it would be of much use comparing the final cost of the Works (excluding variations) with the original Whites 'target sum' for those works. It does not really seem that your company has relied on Whites' expertise here. If you wish, we can discuss the matter with Mr Callinan, Q.C. to see if he can come up with any avenue of relief to your company. We are not at all optimistic but at least your company would then have pursued all possible avenues. We confirm we think your company would now be best advised to ascertain:- (a) the cost of the Works approved by your company to date; (b) the claims for, nature of and authority for any variations to the Works, bearing in mind that if the Architect was authorised to direct variations, he need only have done so 'in writing' ie., even a plan might be sufficient; and (c) the best possible and worst possible situations for your company in relation to the outstanding claims. We confirm that the Architect is under a duty to Whites to certify progress certificates etc. in accordance with the Building Contract. Failure to do so may expose the Architect to an action for fraud and/or collusion. In these circumstances, your company can expect the Architect to seek to protect his position one way or another. Please let us have your further instructions after you have considered this letter." Mr Pearce instructed Mr Meadows to confer with Mr Callinan which he arranged to do on 17 December 1986. Before that meeting Mr Pearce told Mr Meadows that White had ceased work on the site, was threatening legal proceedings for some millions of dollars claimed due and that he believed the commencement of legal action by White was imminent. Mr Meadows said that before he met with Mr Callinan he was advising Caboolture Park that proceedings were not alive and he was not contemplating issuing proceedings as a result of what he had been told on 9 December 1986. Mr Meadows met with Mr Callinan in his chambers between 8.30pm and 9.30pm on the evening of 17 December 1986. He took with him a copy of his letter of 16 December 1986. He had no recollection of taking a copy of the contract although he thought it quite likely that he had done so. He had no witness statements at that time. He outlined to Mr Callinan the result of his meeting in Melbourne and discussed his letter of 16 December 1986 to Mr Pearce. There is an issue as to whether Mr Callinan told Mr Meadows that Caboolture Park had an arguable case, albeit weak or whether he told Mr Meadows that as long as there was evidence of a number of matters which he specified there was an arguable case albeit weak. For present purposes it is sufficient to record that there was discussion in the course of which Mr Callinan said that it did not matter who had initially suggested the contract figure so long as it was adopted by White and that there was an arguable case but it was fairly weak. I will return to the dispute about the context of this statement and the findings I make in relation to it. In the course of the conference Mr Callinan told Mr Meadows that he was concerned that Mr Herscu should be under no misapprehension as to the comparative weakness of Caboolture Park's position. Mr Callinan said that these cases had a habit of building up a momentum of their own and that he did not want Mr Herscu to come along in six months time, convinced that he had a strong case and refusing to follow his legal adviser's advice regarding some reasonable settlement. Mr Callinan said that the matter was one which would probably have to be settled with some cost to Mr Herscu and he did not want Mr Herscu building up any unrealistic expectations of success. Mr Meadows and Mr Callinan then discussed the terms of a letter to be forwarded by Mr Meadows to Mr Herscu and this was sent the following day, 18 December 1986. Mr Callinan said he did not settle the letter although he may have had input into it. A diary note of Mr Meadows on that evening records that Mr Callinan dictated the letter. In any event Mr Meadows sent a copy of it to Mr Callinan on 18 December 1986 and said that Mr Callinan approved of its contents albeit after it was sent to Mr Pearce. It matters not whether Mr Callinan dictated the letter or only approved of its contents. What is clear is that Mr Callinan has not suggested that there is anything in the letter which does not accurately record his view or opinion and I am satisfied that it records his views and his advice and that he approved it. As action by White to recover outstanding payments claimed due to it was believed to be imminent according to Mr Meadows' instructions, Mr Callinan proposed that Caboolture Park should immediately institute proceedings in the Federal Court against White under s 52 of the Trade Practices Act alleging misleading or deceptive conduct rather than waiting to raise this claim as a defence to an action commenced by White. Mr Callinan told Mr Meadows that he thought Mr Herscu should get on the front foot and he was anxious to have the s 52 action commenced in the Federal Court. Mr Meadows' letter of 18 December 1986, which was quite deliberately expressed in stronger terms than his letter of 16 December 1986, was in the following terms: "I conferred with Ian Callinan Q.C. last night. We are both very concerned about your position. I advise as follows: 1. The strict legalities are against you and your contractual position is weak. 2. Shortly stated, pursuant to Clause 4.03.03 of the Contract, the nominated amount is a provisional amount, subject to all necessary adjustments and subject to certification by the Architect as to their reasonableness. 3. As you know, the Architect either has said or will say in respect of most items that the amounts claimed are reasonable. At law, the Architect has a preliminary arbitral function and is generally regarded (in the absence of positive misconduct) as being the final umpire on disputed issues of cost for all practical purposes. 4. Your position is further weakened by the fact that in almost every case, proposed sub‑contract prices were expressly referred to your Company's officers for approval. In some instances, there were express approvals and in others, approval may well be inferred from tacit acceptance or absence or protest. 5. I do not deal with other than matters of principle at this stage. To quote Ian Callinan, 'in a word, your legal position is weak'. 6. Is there anything that can be done to try to give you, at the very least, a temporary bargaining stance? (Underlining in letter as sent) I think there is one possibility, but please do not over‑estimate its ultimate strength. Ian Callinan and I think that you should immediately start Section 52 proceedings (under the Trade Practices Act) in the Federal Court alleging deceptive conduct and relying upon the proposition that in each and every case i.e. in respect of the target contract price, its components and the submitted tenders, the builder represented they were reasonable when in fact they were not. Fraud on the ground of recklessness may also be available to be pleaded against the builder. 7. To put you in the best possible position, I have instructed Ian Callinan and Richard Perry (Junior Counsel) to draw proceedings for urgent filing in the Federal Court. I expect the pleadings to be completed and filed by Monday, 22 December at the latest. 8. At this time, Ian Callinan sees no reason for your Company to appoint a new Architect pursuant to the obligation in that regard imposed on your company under the Contract. I do have to make it clear however that you could not win any litigation if put to the test. I have not for example, attempted to describe the significant legal obstacles standing in your way, such as the general law of building contracts with particular reference to the role of an architect, estoppels and quantum merit. I have also not dealt with variations where generally the same obstacles exist. It is better I think that at present I apply myself and my firm's resources to the urgent institution of proceedings to attempt to secure some bargaining position for you." The letter's reference to "you could not win any litigation if put to the test" Mr Meadows said that the letter was meant to reflect the advice given to him by Mr Callinan but that the statement "I do have to make it clear however that you could not win any litigation if put to the test" did not fully or accurately state his views on the matter at the time. He said that this blunt statement was intended to convey to Mr Herscu that notwithstanding any argument he might raise, Mr Callinan and Mr Meadows, on the material before them, thought Caboolture Park would not in the end be successful. Mr Meadows said he did not mean to say that Caboolture Park had no arguable cause of action but rather wished to make it clear that in the end, on the fairly sparse material then before them, he did not believe the argument would ultimately prove successful. Mr Meadows said the position was put bluntly in the letter because Mr Herscu had some limitations in his command of English, was never concerned with the niceties of legal argument and they did not want Mr Herscu to build up any false hope. Mr Meadows and Mr Callinan saw a need to get a realistic and pessimistic message across to Mr Herscu lest he build up a delusion that he had a strong case and would win. I find Mr Meadows' explanation or qualification for the words "you could not win any litigation if put to the test" unconvincing. If Mr Meadows was intending to put the position, as he and Mr Callinan saw it bluntly, nothing could be clearer than "you could not win". The words he used in the letter are not consistent with a view that Caboolture Park had an arguable case. Mr Meadows had difficulty with this proposition in cross‑examination. He said that he held the view that if the case on misrepresentation was to go to trial it would be lost until his conference with Mr Callinan. That view was consistent with his letter of 16 December 1986 and was dictated by the fact that the figures in what was said to be the representation were provided by HDC which placed a substantial obstacle in any proceeding that might be issued. He said that Mr Callinan disagreed with him and said that there was scanty material before them but he believed that there was an arguable case that White had adopted the figure provided by HDC and represented that it could achieve that figure. However after Mr Meadows saw Mr Callinan he formed the view that on the material before him the action would ultimately fail. He put the matter another way when he said that Mr Callinan advised him that the s 52 action was never going to be wholly successful and that Mr Herscu would have to pay a substantial amount in the long run. This is another way of saying that the action will fail as it is difficult to see how the s 52 action or fraud action could be partially successful. Either there was misleading and deceptive conduct and/or fraud or there was not. In the former case having regard to what had been paid, Caboolture Park would not be obliged to pay any further amounts to White. In the circumstances if the s 52 case and fraud case was unlikely to be wholly successful, as Mr Meadows put it, and money was to be paid to White under the contract that must be because the s 52 case and fraud case would fail. I am satisfied that the letter of 18 December 1986 accurately and honestly recorded and reflected the views held by Mr Meadows and Mr Callinan at that time as to Caboolture Park's prospects of success in any litigation brought under s 52 or in fraud. That is to say any such litigation could not be won. As I noted earlier Mr Meadows' approach to giving advice to HDC was practical and took account of the relevant commercial issues. When Mr Meadows signed the statement of claim and instituted the proceeding his view was that if the proceeding went to trial and judgment it would fail. This conclusion is confirmed when one looks at the whole of the terms of the letter and puts the statement "you could not win any litigation if put to the test" in the context of all of those terms. In particular it must be read in the light of Mr Meadows' search for "a temporary bargaining stance" for his client. Mr Meadows said that there was no discussion in his conference with Mr Callinan about seeking the delay of payment of any amount payable under the contract and he said that he had not been given any instructions on behalf of anyone at HDC that they had an interest in delaying payment. This evidence does not lie easily with the statement in his letter of 18 December 1986: "Is there anything that can be done to try to give you, at the very least, a temporary bargaining stance?" More particularly is this so when Mr Meadows emphasised the matter by underlining the words "a temporary bargaining stance". Mr Meadows did not give any explanation for the reason he underlined these words other than to suggest that the words were underlined as over enthusiasm on his part in an attempt to dampen down any false expectations of success Mr Herscu might have. I will return to a consideration of this sentence. There is another passage in the letter which highlights the temporary nature of what Mr Meadows was seeking to achieve. Mr Meadows and Mr Callinan were proposing the institution of an immediate s 52 case based upon the proposition that White had represented that the components of the target contract price were reasonable when in fact they were not. This was a surprising proposition because on 9 December 1986 Mr Bennett had told Mr Meadows that the figures he had suggested to the White representatives were quite reasonable. That delay was the purpose for the institution of the proceeding is also borne out by the final paragraph of the letter: "It is better I think that at present I apply myself and my firm's resources to the urgent institution of proceedings to attempt to secure some bargaining position for you." For the reasons to which I shall refer, I am satisfied that the purpose which Mr Meadows had for the proceeding proposed in the letter was not to vindicate any right which Caboolture Park had, or was thought to have, under or in relation to the building contract but rather to stall White in its quest for the moneys due under the building contract. The terms of the letter taken as a whole, as well as the particular passages to which I have referred and subsequent evidence to which I shall refer lead me to this conclusion. Institution of the proceeding Later that day (18 December 1986), Mr Pearce instructed Mr Meadows to issue and serve proceedings against White as soon as possible. In response to questions from Mr Pearce Mr Meadows said he saw no grounds for the issue of proceedings against the architect and that proceedings against Mr Poppleston seeking to restrain him from taking employment elsewhere would be quite inappropriate and fruitless. Mr Meadows also spoke to Mr Herscu on 18 December 1986 who told him of the three meetings which had been held between representatives of HDC and White in relation to negotiating the construction cost. Mr Herscu told Mr Meadows that the discussions took place in relation to the preliminary budget and Mr Herscu said he told White that he had a fixed sum of money, $13,500,000, to spend and he invited White to bring the figures down to the lower price he sought. Mr Herscu said that on the basis of the subcontracts originally let by White pursuant to the contract and after taking into account some variations and on site labour and site allowances, a total of $15,500,000 all up would have been payable by Caboolture Park to White (some $2,000,000 above the budget allowance) but Mr Herscu said he had already paid $16,000,000 to White and the job was nowhere near finished. Mr Herscu told Mr Meadows that White had told him they could build a shopping centre for the tendered figure ($13,375,000) and that while he expected some cost overruns, a 50% increase was never contemplated. Mr Herscu told Mr Meadows to confer further with Mr Callinan and to issue proceedings first before communicating with White. Mr Meadows asked Mr Herscu to have Mr Bennett prepare a spreadsheet showing the budget figures for each trade, the figures at which subcontracts for those trades were let and the value of any amendments or variations. Mr Herscu told Mr Meadows to speak to Mr Poppleston about the gravity of the situation and the fact that legal proceedings would be instituted. The spreadsheet was sent to Mr Meadows after the proceeding was instituted on 28 January 1987 and it showed subcontracts let totalling $15,687,745.13, variations certified by the architect totalling $2,262,194.73 and total variations claimed of $5,036,920.36. Mr Meadows did not read it. The statement of claim was drawn by junior counsel, Richard Perry, and settled by Mr Callinan after they had discussions with Mr Poppleston. They returned the statement of claim to Mr Meadows under cover of a memorandum of advice dated 22 December 1986, which was in the following terms: "We have been asked to advise in relation to this matter and to draw appropriate pleadings. Although the enclosed Statement of Claim sets out three alternative causes of action against White Industries Querist should be under no misapprehension that this is anything other than a relatively weak case. We have had discussions with Mr Poppleston and from the information that he has imparted to us it is clear that the target sum was arrived at by virtue of Querist's insistence rather than as an offer by White Industries. It is clear also from the correspondence that Querist's architects have indeed sanctioned many, if not all, of the sums now claimed by White Industries. Nonetheless it is Querist's contention that the target sum was understood by Querist to bear some relation to the final construction cost. That assumption is perhaps a reasonable one in the circumstances. Whether that assumption founds an action is perhaps debatable. Nonetheless the purpose of the pleadings (sic) is to place Querist in the advantageous position of having struck the first blow." The last sentence is significant and I will come back to it later. The application and statement of claim signed by Mr Meadows, although dated 22 December 1986, were filed with the Court on 23 December 1986. The statement of claim pleaded: "7. During the course of the negotiations and prior to the making of the said agreement the aforesaid JOHN DUGAN, ALAN ANDERSON and BRIAN DEMPSTER represented to the applicant that: (a) the agreed target contract sum of $13,375,000.00 or a sum very close thereto was attainable; (b) the target contract sum or a sum very close thereto represented and was the attainable total cost of construction; (c) the Respondent was capable of and undertook to achieve a total construction cost consistent with the amount of the target sum or a sum very close thereto. 8. By making the representations referred to in Paragraph 7 hereof the said JOHN DUGAN, ALAN ANDERSON and BRIAN DEMPSTER impliedly represented that: (a) they, or the Respondent, through its other servants or agents, knew of facts, matters or circumstances which justified the making of such representations; (b) the Respondent, by its servants or agents possessed sufficient and requisite skill, competence and experience so as to have properly considered and assessed an appropriate target contact sum and total construction cost; 9. By virtue of the matters alleged in Paragraph 5 hereof the making of the said representations and implied representations referred to in Paragraphs 7 and 8 hereof constituted conduct engaged in by the Respondent. 10. The making of the representations and implied representations by the Respondent was: (a) conduct engaged in in the course of trade or commerce; (b) conduct engaged in that was misleading or deceptive or likely to mislead or to deceive. 11. Further and alternatively the making of the said representations and implied representations was negligent and the Respondent, by its servants and agents including but not exclusively the said JOHN DUGAN, ALAN ANDERSON and BRIAN DEMPSTER: (a) had no reasonable basis for making the said representations and implied representations, and (b) knew that the Applicant intended to and would rely upon such representations in entering into the said agreement. 12. Further and alternatively the representations referred to in Paragraphs 7 and 8 hereof were made fraudulently in that they were made with knowledge that they were false, or without knowledge that they were true or with reckless indifference as to their truth or falsity. 13. Induced by and in reliance upon the truth and faith of the said representations the Applicant entered into the aforesaid agreement. …"

It is important to note that the statement of claim as settled alleged fraud on the basis of knowledge of falsity or without knowledge of truth or on the basis of reckless indifference as to the truth or falsity of the representations. It is not clear what was the genesis of the decision to plead fraud. Neither Mr Meadows nor Mr Callinan ventured an explanation as to why or how a decision was made at the time to plead fraud or as to the basis, factual or otherwise, upon which such a decision was made. No evidence was led in any of the affidavits of any discussions about pleading fraud. I also note that the statement of claim did not plead an allegation that the representations were false nor any particulars of such falsity. At the time the proceeding was instituted Mr Meadows had not seen any documentary evidence in relation to the cost overruns or how they had come about. Mr Meadows did not see or read any documents which came into existence prior to the date of the contract before the proceeding was issued. He had not read White's tender or any documents relevant to the circumstances under which the contract price increased. He had not seen any communications between the HDC people on the site and the HDC people at its head office in Melbourne. He realised that he ought to look at any documentation that came into existence prior to the contract but he did not ask for documents to be made available to him as he wanted to issue quickly as Mr Herscu wanted the proceedings issued as soon as possible and he had advice from Mr Callinan that this was an appropriate course to follow. He wanted to make a pre‑emptive strike and Mr Herscu told him not to tell White that they were intending to issue proceedings. Mr Meadows was anxious, on the advice of Mr Callinan, to strike the first blow, get on the front foot and be the plaintiff in an impending action. Had Mr Meadows not been in a hurry to issue the proceeding he said he would have assembled a full brief and presented it to counsel. At the time he issued the proceeding he expected that it would not go to trial and that they would be able to settle although he said he did not intend that the proceeding should not go to trial. Mr Meadows expected when he issued the proceeding that it would provide his client with a bargaining tool in negotiations in relation to its liability under the contract because he always believed that his client would have to pay a substantial amount under the contract. At the time Mr Meadows issued the proceeding he said that the falsity on which he was relying and was alleging was that when White made the representation that it could build and complete the shopping centre for around $13,375,000 it had no reasonable basis for the statement. This was a surprising aspect of falsity on which to rely because Mr Meadows' only source of instructions as to the representations made was Mr Bennett. It will be recalled that the component amounts which made up the $13,375,000 came from Mr Bennett. When asked in cross‑examination about what Mr Bennett had told him on 9 December 1986, Mr Meadows said that Mr Bennett did not say to him that the figures suggested by Mr Bennett were said by White to be reasonable or unreasonable. Mr Bennett did not tell Mr Meadows that the components of the target price he had suggested to White were unreasonable. Rather Mr Bennett told Mr Meadows that the figures he had suggested to the White representatives were reasonable. It is difficult therefore to see what possible basis Mr Meadows had for claiming that there was no reasonable basis for the representation. Mr Meadows said that he had three things in mind - White's original tender of $14,800,000 fixed, White's second figure of $15,075,000 and the factual end result where White was looking for close to $20,000,000. However this explanation does not lie easily with his acknowledgment that Mr Bennett, the progenitor of the representation, thought the representation reasonable. Mr Meadows did not recall paying any great attention to that factor or taking it into account before issuing the proceeding claiming fraud and misleading conduct. However, he said that before he issued he believed that the fact that Mr Bennett had based his estimates on his own experience at Capalaba was a highly relevant factor and he thought that the fact that Mr Bennett thought those figures were reasonable was an important factor. The fact that Mr Meadows was advising the issue, and procuring the issue, of proceedings in these circumstances supports the finding that Mr Meadows not only believed that Caboolture Park had a hopeless case but was prepared to institute the proceeding for an ulterior purpose that is a purpose unrelated to the vindication of a right claimed by his client. I will return to this issue. What advice did Mr Callinan QC give? I return to the issue as to what advice Mr Callinan gave to Mr Meadows on the evening of 17 December 1986. Mr Meadows' version is that Mr Callinan said that on the facts as they were then known, Caboolture Park had an argument, albeit weak, that White had represented to Caboolture Park that the ultimate cost of construction of the shopping centre would bear some reasonable relation or approximation to the nominated target sum of $13,375,000. According to Mr Meadows, Mr Callinan said that as the ultimate cost was many millions of dollars in excess of the nominated target sum an action under s 52 of the Trade Practices Act would lie and that he did not think the fact that HDC had put forward the figures on which the target sum had been based defeated that action. However, Mr Callinan stressed that at this stage before any detailed written statements had been obtained Caboolture Park's argument must be seen as relatively weak. Mr Meadows said that after some discussion he accepted Mr Callinan's view as correct, namely that Caboolture Park had an argument it could legitimately raise against White even though that argument was fairly weak. Mr Meadows said that Mr Callinan's advice was recorded in his memorandum enclosing the statement of claim on 22 December 1986. Mr Callinan's version is somewhat different and more qualified. Mr Callinan said that he took a contrary view to Mr Meadows's view that as the figure of $13,000,000 or thereabouts had initially been suggested by Caboolture Park to White that it would be difficult to argue that it was a representation by White. Mr Callinan continued in his affidavit sworn 26 March 1993: "Although I was not overly optimistic about the final outcome of the action (though, it was too early at that stage to form an opinion about that) I did not believe that the fact that Caboolture Park may have suggested the ultimate construction cost figure was, on that account, fatal to any Section 52 claim. It seemed to me that it did not matter who initially suggested the figure as long as there was evidence that it had been adopted by White Industries, that White Industries had consequently represented that it could be constructed at that approximate cost, and that Caboolture Park had been induced to contract with White Industries on that basis. I considered that there was an arguable case, the prospects of which would obviously ultimately depend on how the evidence unfolded." Justice Callinan elaborated on this evidence in cross‑examination when he said that at the time he considered that if there was evidence to support the adoption of the figure by White, the representation by White that it could construct for that approximate figure, the inducement of Caboolture Park to contract with White on that basis, the falsity of the representation and the suffering of loss by Caboolture Park as a consequence of the making of the representation there was an arguable case, albeit a weak one. What is in issue is whether Mr Callinan communicated this view to Mr Meadows in this way. Justice Callinan agreed that he advised that if there was evidence of the three matters set out in his affidavit, namely adoption of the figure by White, a representation by White and inducement together with falsity, there might be an argument, albeit weak, that a representation was made which was actionable. Justice Callinan said he wanted evidence of adoption, the consequential making of the statement, inducement and loss although he thought that the evidence of adoption was probably already available. Justice Callinan said that his advice was not that there was a case but rather that if there was evidence of the four matters of adoption, the consequential making of the statement, inducement, falsity and loss there might be a case albeit weak. He said that he sent back the statement of claim on the basis that in effect instructions had to be obtained on those matters. Justice Callinan put the matter succinctly when in response to the question: "When you sent the statement of claim back you had already advised that provided evidence can be produced in relation to the three matters you set out in your affidavit and the fourth [falsity]", he answered: "It went without saying, I would have thought" and went on to say that it was fundamental that provided evidence could be obtained Mr Meadows could issue the statement of claim. However Justice Callinan did not suggest that he told this to Mr Meadows, namely that provided evidence could be obtained he could issue the statement of claim. Mr Meadows did not recollect receiving advice from Mr Callinan in these terms, that is to say in terms that provided there was evidence of these matters there was an argument albeit weak that a representation had been made. Mr Meadows' recollection was that Mr Callinan referred to there being very scanty material before them but that Mr Callinan believed that there was an arguable case that White had adopted the figure provided by HDC and represented that it could achieve that figure. Mr Sofronoff QC who appeared with Mr Newton for Flower & Hart, submitted that it was not open to me to make a finding that Mr Callinan's advice was in substance that provided there is evidence you have a case because that distinct proposition was never put to Mr Meadows and because such a finding was inconsistent with the documentation which Mr Callinan subsequently wrote, signed or settled, in particular the letter of 18 December 1986, the advice of 22 December 1986 the settled statement of claim and the opinion of 13 April 1987 (to which I refer later). However the distinct proposition was put to Mr Meadows (Transcript 309) and he did not recollect receiving advice in those terms. Further such a finding is not inconsistent with the documentation emanating from Mr Callinan. The point is not that Mr Callinan said to Mr Meadows that he should not institute the proceeding until he had the evidence available but rather that as long as there was evidence available as to the matters to which Mr Callinan referred there was an arguable, albeit weak, case. A conclusion along these lines is not inconsistent with any of the documentation emanating from, or approved, by Mr Callinan. The letter of 18 December 1986 does not state or suggest that the s 52 case was arguable; it simply gives advice - immediately start s 52 proceedings and then, after referring to instructions to counsel to draw proceedings, it says - you could not win any litigation if put to the test. I am satisfied that on the evening of 17 December 1986 Mr Callinan advised Mr Meadows that as long as there was evidence available as to the matters to which he referred in evidence, namely adoption of a construction cost figure by White, White's representation that the project could be constructed at that approximate cost, that Caboolture Park had been induced to contract with White on that basis and that the representation was false, Caboolture Park had an arguable, albeit weak, case. I am also satisfied that Mr Callinan advised that proceedings should be instituted immediately. However I do not accept that Mr Callinan told Mr Meadows that provided there was evidence Mr Meadows should issue proceedings or that proceedings should not be instituted until he had evidence available. To the extent to which Mr Callinan considered and advised on the issue of evidence he considered that there was probably evidence of adoption of Caboolture Park's figures by White and that provided there was evidence of the matters to which he had referred there was an arguable, albeit weak, case. Such a finding is not inconsistent with the relevant documentation or the other advices given by Mr Callinan. Mr Callinan may have thought that it was fundamental that proceedings should not be issued unless evidence could be obtained but he did not specifically raise that matter with Mr Meadows. Indeed the letter of 18 December 1986 and Mr Callinan's advice of 22 December 1986 are only consistent with the view that Mr Callinan was advising and/or approving of the issue of the proceeding immediately. Mr Meadows said as much in the letter of 18 December 1986 and Mr Callinan did not dispute this proposition. It was submitted by Mr Sofronoff that such a conclusion was inconsistent with the settling of a statement of claim and its return under cover of the advice of 22 December 1986 which was not expressed in such qualified terms but was only consistent with the writers of the advice, Messrs Callinan and Perry, holding the view that there was a relatively weak case not dependent upon the determination whether there was appropriate evidence. I do not accept that submission having regard to the circumstances under which the application and statement of claim were settled by counsel. Those circumstances are that the situation, as Mr Meadows and Mr Callinan understood it, was urgent as White was expected to commence proceedings against Caboolture Park in the near future and Mr Herscu was adamant that he wanted action taken. Mr Meadows' letter of 18 December 1986, either dictated and/or subsequently approved by Mr Callinan, accurately recorded the views then held by Mr Meadows and Mr Callinan and accurately recorded that the purpose of the pleading was to gain a temporary bargaining stance and bargaining position for the client who had a case that could not be won if put to the test. Further, Mr Callinan's advice was in pessimistic terms and after pointing out the extreme difficulties involved concluded: "Nonetheless the purpose of the pleadings [sic] is to place Querist in the advantageous position of having struck the first blow". That was the purpose of the pleading, in my opinion, from the solicitor's point of view, having regard to the client's adamant view that it did not want to pay any more money. The purpose of pleading was, notwithstanding that the case could not be won, to put the client in the position of an applicant or plaintiff so that it could obtain a temporary bargaining stance and bargaining position. The pleading was settled, returned by counsel and filed not because it pleaded a case thought to be capable of being won but because it provided a procedure or mechanism by which White's recovery of monies due under the building contract could be forestalled or delayed. The urgency was for Caboolture Park to issue a proceeding first; there was no time to investigate, collect or collate evidence. Although Mr Callinan turned his mind to the question of evidence and advised that subject to the evidence being available there was an arguable, albeit weak, case he did not make the obtaining of the evidence a pre‑condition to the issue of the proceeding. The whole tenor of the letter of 18 December 1986 is that - you cannot win but we think you should issue proceedings urgently to obtain a temporary bargaining stance and bargaining position. There is nothing in Mr Callinan's and Mr Perry's memorandum of advice of 22 December 1986 which is inconsistent with Mr Callinan's advice that if the evidence was available there was an arguable, albeit weak, case. There was no time to take the matter of evidence further more particularly when: "... the purpose of the pleadings (sic) is to place Querist in the advantageous position of having struck the first blow." I am satisfied that Mr Callinan expressed no view on the merits of the case by reference to such evidence as was available. His advice that the case was arguable was limited substantially to the key issue that Mr Meadows had raised with him, namely had White made a representation that it could build for a figure? Progress of the proceeding On 13 February 1987 the first directions hearing in respect of the proceeding was held before Pincus J who directed Caboolture Park to deliver an amended statement of claim with particulars. Mr Meadows travelled to Melbourne on 16 February 1987 when he took a statement from Mr Herscu and he spent all day on 17 February 1987 taking a statement from Mr Bennett. Sometime prior to 19 February 1987 Mr Meadows suggested to Mr Pearce that he obtain advice from a competent quantity surveyor as to his best estimate of the cost of construction of the shopping centre as at the contract date. He received conflicting advice from the quantity surveyor but the end result of that advice was the expression of a view that "no one should have accepted the price in the first place and that the builder was an idiot". An amended statement of claim was delivered on 24 February 1987 in an expanded form which reflected the subject‑matter of the statements taken by Mr Meadows. On 25 February 1987, White sought further and better particulars of the statement of claim which were delivered in the form of a further amended statement of claim on 2 March 1987. Mr Meadows was not a litigation practitioner and he brought in one of his partners Mr Robert Lockhart to manage the litigation. Mr Lockhart was handling the matter by 26 February 1987 and he sought counsel's advice on the issue of damages. On 26 February 1987 Mr Morris sent Mr Lockhart a draft joint opinion of Mr Callinan, Mr Perry and himself which had not been considered by Mr Callinan or Mr Perry and which Mr Morris said did not purport to represent their views in which the following statement appeared: "We should preface our observations by noting our instructions that it is presently regarded as unlikely that this action will ever go to trial. Whilst the possibility that a trial may ultimately occur should not be lost sight of, the present priority is to particularise a claim for damages in a manner which will withstand attack during the course of interlocutory steps." Mr Lockhart said that those instructions probably came from him as he took the view that the action was one that should settle because of the sheer size of the action. White delivered its defence and cross‑claim on 23 March 1987 and on 2 April 1987 Caboolture Park's junior counsel were delivered instructions to draw a request for further and better particulars of the defence and cross‑claim. Mr Lockhart said that he did not seek by the delivery of the request to be obstructive and he did not instruct counsel to seek to draw an obstructive request. However, counsel returned the request the following day under cover of a letter which stated: "We consider that, having regard to the general strategy which has been adopted in this action to date, there is some merit in taking the Respondent's solicitors to task in respect of certain aspects of their client's Defence and Counter‑Claim; to that end, we have drafted a letter to those solicitors, which is self‑explanatory. Subject to obtaining appropriate instructions, we recommend that a letter in substantially the same terms as our draft should be sent to the Respondent's solicitors at the earliest possible time. We have also, as instructed, drawn a Request for Further and Better Particulars, which is enclosed herewith. We were tempted to prepare a Request which was even more searching and extensive; however, on reflection, we consider that the client's tactical objectives will be best served by adopting an attitude which is not transparently obstructive. We regard the Request which we have drawn as being not unreasonable, having regard to the breadth of issues in the action, and the substantial amounts of money involved."

On 10 April 1987 Mr Callinan and Mr Meadows went to Melbourne to review HDC's documents. On 13 April 1987 Mr Callinan provided an opinion in which he set out in considerable detail the steps which had to be taken in the preparation of the case. He said that full statements were required from the clerk of works and Messrs Poppleston, Briggs, Pearce, Herscu and Bennett. (The three affidavits that were finally prepared were not prepared for over twelve months). He identified four likely lines of defence to Caboolture Park's claim, the fourth of which was that Caboolture Park in all respects acquiesced in or accepted "the escalating prices and ultimate contract figure". He referred to these defences and then said: "There are a number of as yet unanswered questions. Querist is itself a builder of some experience. That does not of course absolve a builder in the position of Whites from performing the work arising under its contract. But how, any judge will ask, could it be that Querist could simply continue to pay out the amounts of money which it did to contractors who had far exceeded the estimated price of the work, the subject of their contracts? The great underlying question is, how could Querist have paid out some many millions of dollars in the vicinity of or more than the target price up to the end of September, 1986, while it was apparent that the work was then unfinished, that claims were outstanding, and that there was no, even remote chance, of completing the work for anything like the target price. That is the great unanswered question, and at present, no satisfactory response comes readily to mind. All statements should pay close attention to this matter." In the opinion Mr Callinan said that junior counsel should commence to draft interrogatories for his consideration and he explained the extensive nature of the interrogatories he had in mind. Later in the opinion he said: "Querist is anxious to make the matter difficult generally as it can for Whites, and I reiterate that the most promising way of achieving this is by having ready as soon as possible, an extremely comprehensive set of Interrogatories."

On 8 September 1987 an order was made directing Caboolture Park to deliver a draft set of interrogatories. A first draft was delivered on 22 October 1987 and a further set of draft interrogatories was delivered on 16 December 1987 comprising 700 pages dealing with over 500 variations. An order was never made that the interrogatories be answered. Throughout April and May 1987 further interlocutory steps were taken at directions hearings further directions were given and pleadings and particulars were filed and served. Commencing in December 1986 a number of White's subcontractors had commenced proceedings in the Supreme Court of Queensland against White and Caboolture Park for monies due for work carried out on the construction of the shopping centre. On 11 May 1987 at a directions hearing before Spender J counsel for White foreshadowed an application to have two separate trials, one in respect of Caboolture Park's s 52/fraud/negligence claim and the other in respect of White's cross‑claim under the building contract. Mr Lockhart was concerned that if White succeeded in its application, Caboolture Park's claim would be brought on for trial very quickly as the issues involved would be simplified, as he put it, "to merely a claim under the Trade Practices Act". He wrote to Mr Pearce that day, said that Flower & Hart would oppose such an application and said he had put before counsel a number of options which, if adopted, would out‑manoeuvre White in relation to its proposed application. Those options included: "… immediately applying to join the sub‑contractors as Defendants to the action, or applying to amend the statement of claim so that the issues involved in your company's claim under the Trade Practices Act become so interwoven with the counterclaim of White Industries that it would be impossible to have the issues split." Flower & Hart amended Caboolture Park's reply and answer on 19 May 1987 by adding paragraph 14(c) which raised allegations of negligence by White in the administration of the building contract. On 19 May 1987 Flower & Hart reported to Mr Pearce that: "This has been done in an effort to prevent White Industries from arguing that your company's Trade Practices claim is separate from the claim which it has against your company under the building contract and is thereby designed to frustrate any attempt to split the issues."

On 26 May 1987 Mr Lockhart wrote to Mr Pearce informing him that White had served an application seeking orders that the issues in the proceeding be split so that it could be dealt with speedily and seeking to strike out paragraph 14 of the reply and answer. Mr Lockhart said: "You will recall that we specifically inserted paragraph 14 in the reply and answer so that all issues in the action would be bound together thereby making it impossible for a separate trial of the individual issues to occur." On 28 May 1987 Pincus J ordered that some parts of paragraph 14 be struck out but paragraph 14(c) remained in the pleading and a split hearing was not ordered. An application was made in May 1987 to stay one of the subcontractors' claims in the Supreme Court of Queensland and judgment was given on 24 December 1987 refusing the stay. That application was treated as a test case. An appeal against that refusal was dismissed on 23 February 1988. On 10 November 1987 there was a hearing before Pincus J at which the issues of a Court appointed expert and the fixing of a trial date were canvassed. White sought an order for the fixing of a trial date but no trial date was fixed. Caboolture Park was represented at the hearing by two junior counsel Messrs Morris and Perry. There was a reason for this representation which Mr Lockhart set out in a letter to Mr Pearce of 10 November 1987: "We had a conference with Mr Callinan Q.C. on 9 November at which time it was decided that he should not be present at the mention today. The reason for this was that it was considered that there would be questions asked by the Court as to the lack of progress in the action, what further steps would be taken in the action by your company and that the Judge might press for a commitment that the matter would be pursued in a more diligent manner by your company. It was considered that if only Junior Counsel was present the Judge would not be able to press such questions and it may frustrate White's attempts to obtain a trial date."

In February 1988 Mr Callinan recommended that Caboolture Park apply to the Federal Court to join the various subcontractors in the Federal Court proceeding. This advice was communicated by Mr Lockhart to Mr Pearce by letter dated 18 February 1988 in the following terms: "You will recall that late last year we raised with you the prospect of joining the subcontractors who had commenced proceedings in the Supreme Court as parties to the Federal Court action ... We have now received advice from Mr Callinan to the effect that he recommends that we apply to the Court to join the various subcontractors as parties in the Federal Court action. While Mr Callinan cannot say for certain that your company would be successful on such an application due to problems associated with the jurisdiction of the Federal Court he is however of the opinion that to now join the actions is of immense advantage to your company. Mr Callinan considers that your company has now exploited to the full the fact that the actions up to this time have been conducted in separate Courts. The first advantage to your company in joining the parties in one action is that the Federal Court action has reached the stage where it is now difficult to delay the matter proceeding to trial. By joining the subcontractors to the Federal Court action you will add fourteen new parties (each individually represented). As a result of the new parties being added pleadings will have to be amended, discovery will have to be made by the subcontractors and interrogatories will have to be delivered to the subcontractors. In essence the joining of the subcontractors should delay the action considerably and will be relatively inexpensive when compared to the cost of preparation for trial. The second and probably the most important advantage is that it creates very real difficulty for Whites in the conduct of its case. Whites will be left in the position where it will have to allege in the same Court that it does not owe the subcontractors money while at the same time alleging that your company owes it money. A similar situation will arise in respect of variations to the works. The third advantage is that the joining of the subcontractors may facilitate a settlement of the action. Finally, the joining of the subcontractors to the Federal Court action will not expose your company to any additional cost as the various subcontractors have already commenced proceedings against your company in the Supreme Court and your company is already exposed to costs in the Supreme Court actions. Please let us have your instructions to make the application to join the subcontractors to the Federal Court Action."

On 1 March 1988 Mr Callinan and Mr Perry delivered an opinion in relation to the current position and the future course of the proceeding. They said: "Querist will recall that at the outset we advised that its claim pursuant to Section 52 of the Trade Practices Act was a relatively weak case. Mr Poppleston has yet to be interviewed in detail with respect to such representation as may have been made by the representatives of White Industries. In the absence of further material we remain of the view that Querist could not and should not be confident of success in that facet of the action. Nonetheless, the bringing of the application under the Trade Practices Act has more than served its purpose in that it has provided, a (so far) impregnable means whereby Querist's legal advisors have been able to maintain a considerable degree of control over the proceedings."

On the next day, 2 March 1988, Mr Lockhart sent a letter of advice to Mr Pearce summarising Mr Callinan's and Mr Perry's opinion and in the letter he said: "In respect of this aspect of the case you will recall that Mr Callinan had previously advised your company on 22 December, 1986 that the claim pursuant to Section 52 of the Trade Practices Act was a relatively weak case. Mr Callinan has advised us that he still retains this view and that your company could not be confident of success in that facet of the action. The Trade Practices Action commenced by your company has in Mr Callinan's view more than served its purpose in that it has provided an impregnable means whereby your company has been able to maintain a considerable degree of control over the proceedings thus causing considerable delays in the conduct of the counter‑claim made by White Industries. Mr Callinan is of the view that the Trade Practices action commenced by your company still has the potential to serve your company by causing further delays in the conduct of White Industries' counter‑claim. ... In summary therefore, Mr Callinan's advice is as follows: 1. Your company has little prospect of success in respect of the Trade Practices action which it has commenced against White Industries. 2. Despite the lack of prospects in respect of the Trade Practices action it should be continued as it gives to your company very real tactical advantages over White Industries. 3. Your company at this stage appears to have very good prospects of success in substantially reducing the amount of the claim which White Industries has made against your company." The reference in paragraph 3 is a reference to reducing the subcontractors' claims which formed part of White's claim and had nothing to do with Caboolture Park's claim. On 8 March 1988 Caboolture Park applied to join the subcontractors in the proceeding. White joined in the application and on or about 8 April 1988 an order was made that the proceedings of the various subcontractors in the Supreme Court of Queensland be joined in the Federal Court proceeding. On 22 October 1987 Pincus J had proposed that a Court appointed expert be appointed to assist the trial judge and on that day he adjourned White's application to enable him to consider who the expert should be and what his duties should be. An application for leave to appeal against what Pincus J was proposing was dismissed on 2 December 1987 on the ground that the appeal was premature as Pincus J had not made any order from which an appeal could lie. On 2 November 1987 Mr Lockhart wrote to Mr Pearce in relation to the appeal saying: "It is our view that apart from the time delay caused by an appeal, it is also important that your company appeal against the order for a Court Appointed Expert for the reasons set out in the enclosed affidavit of Mr Lockhart." White did not pursue the appointment of an expert because of its concern about further appeals. On 8 April 1988 Ryan J gave directions for the filing of affidavits containing Caboolture Park's and White's evidence‑in‑chief. He also directed that in June 1988 Caboolture Park open its s 52 case against White, that White was to make a similar opening and that the subcontractors' actions commence on 14 June 1988. On 11 April 1988 Mr Lockhart wrote to Mr Pearce setting out what needed to be done to prepare for trial. In the course of the letter he said: "We have previously advised you that in our opinion your company has little prospect of succeeding on its claim under Section 52 of the Trade Practices Act but we think that you have good prospects in respect of the claim by White Industries against your company for approximately $5 million." On 25 May 1988 Mr Briggs' affidavit was filed in relation to the s 52 claim and on 3 June 1988, Caboolture Park served on White and filed the affidavits of Messrs Herscu and Bennett. None of these affidavits dealt with "the great unanswered question" to which Mr Callinan had said in his opinion of 13 April 1987 "all statements should pay close attention". In March 1988 an issue had arisen between the parties in relation to the inspection of documents produced on subpoena by an accountant on behalf of White. White said that Flower & Hart had resisted such an inspection and a contested hearing was only avoided as a result of advice from counsel on 29 March 1988, the day before the hearing, that authority was "firmly against" the stand being taken and that it was inconceivable that the Court would not allow the accountant to inspect the documents provided an appropriate undertaking as to confidentiality was given. Prior to the commencement of the trial Mr Lockhart wrote to Mr Pearce on 23 May 1988 reporting on the steps taken in respect of the preparation of the trial. The letter referred to the retainer of counsel, the trial of the subcontractors' actions, the preparation of a statement from Mr Poppleston, the finalisation of affidavits in the s 52 case and at the end of the letter he made the following observations: "In respect of the trade practices case the preparation of this is progressing well and apart from the affidavits (dealt with above) your company's case is nearly ready to open. We are concerned (as we have been throughout this action) that your company's prospects on this aspect of the case are not good. This has been confirmed by the statements obtained from Messrs. Herscu, Bennett and Briggs. We expect to advise you further on this point and what action your company should take after further consultation with Mr Callinan."

Commencement of the trial There were further interlocutory hearings and Ryan J directed that Caboolture Park open its case against White on 7 June 1988 which it did. On 6 June 1988, the day before the opening Mr Lockhart wrote to Mr Pearce, reviewed the preparation which occurred, analysed issues involved in White's cross‑claim and said as a prelude to suggesting a payment into Court: "We have as you are aware maintained that your company has little prospect of succeeding on the trade practices claim. In respect of the building case we believe based on the instructions given by Mr Bennett and Mr Priestly the contract price is in the order of $17.5m."

Caboolture Park opened its case on the basis of affidavits filed by Messrs Herscu, Bennett and Briggs. On the next day 8 June 1988, White filed a notice of motion in which it applied in substance for summary judgment. The matter was argued and on 22 July 1988 Ryan J dismissed the application by White for summary dismissal of Caboolture Park's claim. Ryan J referred to Brimson v Rocla Concrete Pipes Ltd (1982) 2 NSWLR 937 at 944 which provides that summary dismissal should only occur in "the clearest of cases". However Ryan J did not dismiss White's application on the basis that Caboolture Park's case was not the clearest of cases; nor did his Honour refuse to dismiss Caboolture Park's case because it was not hopeless and not a clear case. Rather his Honour dismissed the application on the grounds that it was still open to Caboolture Park to rely upon evidence which emerged in the separate trials of the subcontractors' claims, to rely upon documents produced on subpoena and to rely upon further evidence led pursuant to leave granted. His Honour did not accept that it should be conclusively presumed that the affidavits filed by Caboolture Park up to that time were exhaustive of Caboolture Park's evidence. His Honour also found a more fundamental objection to the application for summary dismissal which was that the application involved essentially a submission of no case to answer having regard to the totality of Caboolture Park's evidence. His Honour concluded that he would not rule on the submission at that stage because Caboolture Park might supplement its evidence in the manner to which he had referred. Having regard to that fact his Honour said he had not yet reached the stage of requiring White to elect whether or not to call evidence before ruling on its submission. His Honour specifically did not consider the sufficiency of Caboolture Park's affidavits filed at that stage and said that his refusal to entertain the application to dismiss the proceeding did not preclude White from renewing it later when the relevant evidence could be regarded as complete. After the motion by White for dismissal of the case was heard and judgment was reserved Mr Lockhart wrote to Mr Pearce on 23 June 1988 and explained the basis of the application to strike out the trade practices case, namely that there had been a failure to comply with a self‑executing order for the filing of affidavits and that the affidavit material filed and sworn disclosed no cause of action. The letter then said: "The basis for the comments made by Mr Callinan on 10 June concerning the prospects of your company on such an application was that the statements made by Messrs. Herscu, Bennett and Briggs show: a. That the position appears to be that your company's representatives merely out negotiated White Industries; b. Your company did not rely on the statements made by White Industries but rather made its own assessment as to the cost of the shopping centre (all be it a rough estimation); c. Your company was experienced in the construction of shopping centres and various construction techniques; d. Your company directed White Industries as to the subcontractors which were to be used for the project; and e. The target sum was entered into on the basis that your company would use its purchasing power to reduce the subcontract prices. We have always advised you that your company's trade practices case is weak and we think that White Industries are seeking to capitalise on this weakness by making an application to the Court to strike out your company's trade practices case. In the event that the Trade Practices case is struck out your company will be left basically in a position where it will not be able to challenge cost overruns which occurred in respect of the provisional sums on the letting of the subcontracts." The reference to Mr Callinan's comments on 10 June appears to be a reference to a telephone conference held on that day. After the trial commenced a number of the subcontractors' claims were heard first and by the end of August 1988 all the subcontractors' claims had been settled or heard with judgment reserved. On 30 August 1988 Mr Lockhart wrote to Mr Pearce bringing him up to date on a number of matters. In the course of the letter Mr Lockhart said: "Depending on the outcome of the applications referred to above your company will be required to commence its Trade Practices and Building case today. We have on a number of occasions previously advised you that your company's Trade Practices case is very weak and that we do not think that your company has any real prospects of success on this part of the case."

Caboolture Park presented its trade practices case and called its witnesses commencing on 31 August 1988. Mr Bennett and Mr Briggs were called and by 12 September 1988 their cross‑examination had not been completed. The case for Caboolture Park went badly as the evidence‑in‑chief of its witnesses differed substantially from their affidavits and their cross‑examination was very damaging. Flower & Hart sought Mr Callinan's advice in respect of the matter generally. That advice was delivered on 12 September 1988 and it was in the following terms: "I have been asked to advise urgently with respect to this matter. You will recall that when this action was commenced in December of 1986 the expectation was, not that the action would succeed, but that the institution of proceedings would probably defer payment, by Querist, of the money demanded by White Industries for some twelve months. I should point out that it is now some twenty‑one months since that advice. That, it then seemed to be the realistic most that might be achieved. Right at the outset I drew attention to what should have been apparent to all, the insurmountable difficulty, unless fraud could be proved, presented by the repeated and unquestioned payments by Caboolture Park of sums far in excess of the target sum. It must be emphasized that payment was made from Melbourne, and that it should have been apparent there also that gross over‑runs were occurring. You will recall also that in April of 1987 I provided a lengthy advice by way of a general review of the matter. In that advice I noted that there remained one vital and unanswered question, namely how it was that the cost of construction had increased so dramatically without any protest whatsoever being made by those representatives of Querist on site at Caboolture or in Melbourne. With respect to that matter I must say that there is absolutely no evidence able to be called on Querist's behalf which might explain that failure. Moreover that regular consolidated progressively accounts, revealing current total expenditure were kept by Caboolture Park, is well known (as a result of discovery) to the Court and White Industries. You will recall also that I have repeatedly advised that Querist's case is essentially a defensive action only and that, whilst there might be some prospect of success with respect to Querist's defence to the building claim made by White Industries, it should not be thought by anyone that Querist's claim was a strong one or that the whole matter would have any result other than the payment of a substantial sum of money to White Industries (plus such costs as would be incurred in the litigation of the case). It would seem that the impression has been formed, quite wrongly, and contrary to advice, that the action might, indeed perhaps, even would be ultimately successful in that it was thought, quite wrongly, that either a judgment wholly in favour of Querist would be obtained or that only a relatively small sum of money would have to be paid. Those impressions, if they have been formed, I repeat, do not accord with any of the advice that I have given and are not in any sense realistic. Mr Callinan then set out in considerable detail his advice on the merits of Caboolture Park's claim and why it had no case. He then continued: "In contesting White Industries' claim the prime objectives have always been those which were discussed in December, 1986 and repeated subsequently, to provide a 'breathing space' before payment and to reduce, where possible the total sum payable. The case has now reached a point where to continue to contest the matter would simply result in Whites recovering a very large sum of money for its claim, a considerable and ever increasing amount for interest and a large and ever increasing amount for costs. Lest that view seem overly pessimistic I would remind you that the documents prepared by Mr Sol Perch, who was sent to Caboolture on behalf of Hersfield Developments Corporation, are now in the possession of White Industries. He has stated or clearly implied in those documents that Whites' performance and charges are reasonable. Those documents, when put into evidence, will seriously affect Caboolture Park's prospects of success. Moreover, in my view, it is becoming apparent to both the Court and White Industries that Caboolture Park is not in a position to call evidence from Poppleston, McAlister, the architects or any other onsite consultant which might support its contention that the majority of the building claim ought not be paid. It is my clear opinion that to pursue the matter from this stage will simply be detrimental to Caboolture Park in that: (a) the likely recovery by White Industries will increase; (b) the interest to be paid on that amount will increase; (c) the costs to be paid, both to White Industries and by Caboolture Park to its own representatives will increase and may include a specific order, by way of solicitor and own client costs, for increased costs should the Court consider that the fraud and deceptive and misleading conduct allegations were never maintainable; (d) all the advantage which Caboolture Park hopes to gain from this action has been gained and no further advantage will be gained; (e) Hersfield will gain a reputation in a forum in which it most frequently litigates, for intransigence and unreasonable exploitation at [sic] the time of the Court." He then recommended settlement by payment of a substantial sum. On 14 September 1988 a telephone conference was held with Mr Callinan, Mr Perry, Mr Meadows, Mr Lockhart, Mr Herscu and Mr Pearce in which the progress of the proceeding and Mr Callinan's opinion were discussed. The outcome was that it was agreed that an attempt should be made to settle the proceeding at the earliest opportunity. Communications between counsel did not lead to any resolution. Cross‑examination of Caboolture Park's witnesses continued. On 23 September 1988 Mr Lockhart wrote again to Mr Pearce setting out a report of matters discussed with him the previous day. In short, he said that Mr Bennett's credibility as a witness was totally destroyed and Mr Briggs had been led to agree with counsel that he had lied in respect of certain aspects of his evidence‑in‑chief. There was reference to other matters and the following passage then appeared under the heading "Fraud Allegation": "The Judge has on a number of occasions invited your company to withdraw the allegations of fraud which it has made against White Industries. The basis for this invitation is that the evidence received to date does not in anyway go to substantiate an allegation of fraud against White Industries. The Solicitors acting on behalf of White Industries have indicated to us that if your company was to withdraw the allegation of fraud, it may go some way to assisting in the resolution of the dispute between the parties. We think that you should consider seriously withdrawing this allegation in view of the evidence given by Mr. Briggs and Mr. Bennett in cross‑examination. There is some authority which would indicate that if your company does not withdraw allegations of fraud (where the allegation can not be substantiated) then the Judge may make an Order that your company pay costs calculated on a Solicitor and own client basis rather than the usual party and party basis. This would mean that your company could potentially be exposed for approximately 100% of White's legal fees as opposed to potentially 60% of the costs if costs were awarded on a party and party basis. As mentioned to you, we think that it would be to your advantage to retain the leading firm of Cost Assessors in Brisbane as we believe Orders for costs will eventually be made against your company."

The allegation of fraud was not withdrawn and the case continued. Mr Herscu gave evidence in October 1988 and his evidence did not go well. The hearing was then adjourned to January 1989. Attempts at settlement were made but on 16 December 1988 Flower & Hart received instructions from HDC that the matter was to proceed. The hearing continued throughout 1989 with various applications which I need not identify. Further attempts at settlement were unsuccessful and on 28 July 1989 a receiver of HDC was appointed. Receivers of Caboolture Park were appointed on 17 August 1989. Caboolture Park's claim was dismissed by Ryan J on 17 August 1989 and on 6 April 1990 White obtained judgment on its cross‑claim. In awarding White indemnity costs in respect of its defence of Caboolture Park's claim Ryan J said: "Having regard to the evidence of Caboolture Park's own witnesses, Messrs Herscu, Briggs and Bennett, I consider that Caboolture Park, properly advised, should have known before instituting its application, or early in the lengthy process of amendment needed to torture the statement of claim into disclosing causes of action in fraud and under s.52 and to provide appropriate particulars, that it had no chance of successfully proving those causes of action."

The standard of proof The parties agree that the standard of proof applicable in relation to the issues before the Court is on the balance of probabilities but Flower & Hart go one step further and submit that I should apply the approach laid down in Briginshaw v Briginshaw (1938) 60 CLR 336. At 362 Dixon J said: "But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters 'reasonable satisfaction' should not be produced by inexact proofs, indefinite testimony, or indirect inferences." Mr Sofronoff submitted that as the matters alleged against Flower & Hart raise serious matters of misconduct in the performance of their professional obligations I should not make findings against Flower & Hart unless I have the degree of satisfaction identified in the judgment of Dixon J in Briginshaw v Briginshaw (supra). He submitted, in substance, that the degree of satisfaction required should vary according to the gravity of the fact to be proved, relying on Adamson v Queensland Law Society Incorporated [1990] 1 Qd R 498, 504 ‑ 505. Mr Karkar QC who appeared with Mr Dunning for White, submitted that as the jurisdiction was compensatory and not penal it was inappropriate to apply a standard of proof applicable to allegations of grave moral turpitude or proceedings involving professional misconduct. In Adamson v Queensland Law Society Incorporated (supra) the issue was whether the appellant should be struck off the roll of solicitors for professional misconduct but, as is made clear in the authorities, the exercise of the jurisdiction to order solicitors to pay the costs of an opposite party does not depend upon a finding of professional misconduct which would justify striking off or other disciplinary procedures: Myers v Elman [1940] AC 282; Re Bendeich (No 2) (1994) 53 FCR 422, 426. Nevertheless the allegations which are made, and which are said to enliven the jurisdiction, are serious in that they are predicated on a serious dereliction of duty, gross negligence or serious misconduct. I will refer shortly to the authorities on this issue. This does not mean that the standard of proof is anything other than on the balance of probabilities. I adopt and apply the approach suggested by Dixon J in Briginshaw v Briginshaw (supra) and the majority in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 450 (Mason CJ, Brennan, Deane & Gaudron JJ): "… the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove". I am conscious of the seriousness of the allegations made against Flower & Hart because a finding that those allegations are made out is in effect a finding that Flower & Hart has breached the duty it owes to the Court. In making the findings in these reasons I have reached a degree of satisfaction, consistently with the statements made in Briginshaw v Briginshaw (supra) and Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (supra) conscious of, and recognising, the significance and gravity of those findings. In particular, I have been assisted in making the findings and reaching the required degree of satisfaction by the contemporary documentation which came into existence in and between December 1986 and September 1988. Mr Lockhart's approach to the proceeding Before turning to the issues raised in the statements of facts and contentions it is necessary to refer to Mr Lockhart's role and view of the litigation. Mr Lockhart did not participate in the decision to institute the proceeding but rather implemented and carried into effect the purpose conceived and commenced by Mr Meadows. Although he said he held the view that the s 52 case was arguable on the basis that it was White which had made a representation that it had the means and ability to build the shopping centre for $13,375,000 and that it would build the shopping centre for that price, Mr Lockhart had no confidence that the case was other than a weak case. This is apparent from the letters he wrote to his client from time to time. Although he said that he only realised the case was hopeless after Mr Bennett gave his evidence‑in‑chief I do not consider that he had any basis for believing that the s 52 case was arguable. Throughout his correspondence with his client he was reiterating the view or advice that Caboolture Park's case was weak and had little prospect of success. I gain support for this conclusion from the fact that Mr Lockhart was continuously seeking to delay the progress of the proceeding. Even accepting that he had instructions to take every point, fight everything and make life difficult for White and its legal advisers, which might be said to be a legitimate litigation strategy (and I assume the point for the purpose of this argument although I doubt its validity), it is quite a different matter continuously to attempt to delay the progress of an action and avoid it being set down for trial. Delay can only be an advantage or an aim if there is a desire that a claim be not determined. It must also be remembered that the starting off point for the litigation was the purpose of obtaining a temporary bargaining stance or as Mr Callinan put it on 12 September 1988 "to provide a 'breathing space' before payment ...". There was a continuous theme throughout Mr Lockhart's letters to Mr Pearce of delaying the action. For example on 14 October 1987 Mr Lockhart wrote to Mr Pearce suggesting a meeting with White's solicitors to discuss variation claims. Mr Lockhart said: "One of the benefits in suggesting such a meeting to White's Solicitors may be that of side tracking White's Solicitors into concentrating their efforts on such a meeting thereby further delaying the action." Just on three weeks later Mr Lockhart wrote again to Mr Pearce about the proposal to appoint a Court appointed expert. He proposed an appeal and said: "It is our view that apart from the time delay caused by an appeal, it is also important that your company appeal [for other reasons]." This theme of delay was continued in the context of not having Mr Callinan present at a hearing before Pincus J on 10 November 1987 (letter 10 November 1987) and also in the context of the joinder of the subcontractors (letter 18 February 1988). As I noted earlier, on 2 March 1988 Mr Lockhart wrote to Mr Pearce passing on Mr Callinan's view that Caboolture Park's proceeding still had the potential to cause further delays in the conduct of White's cross‑claim. Mr Lockhart did not dissent, or distance himself, from this proposition. He implemented it. Mr Lockhart was responsible for the preparation of affidavits sworn by Messrs Herscu, Bennett and Briggs. They were prepared either by himself and settled with counsel or were prepared by counsel in conjunction with Mr Lockhart. The evidence is conflicting on this issue but that is of no consequence. Although Mr Lockhart sought in the affidavits to deal with the matters raised by Mr Callinan in his opinion of 13 April 1987 as being important he was not able to do so. Mr Bennett, according to Mr Lockhart, was relying on an oral agreement for a fixed price contract save for the prime cost items and that once a subcontract had been entered into, a prime cost item would become a fixed price. Such a contract was not executed by the parties, the contract that was executed being effectively a cost‑plus contract. But none of the affidavits dealt with the reasons for the change in the nature of the agreement; that is from an oral fixed price contract, subject to prime cost items to a contract for a provisional sum. On Mr Lockhart's instructions Mr Herscu was saying he had a lump sum contract. This proposition was demonstrably not tenable. The affidavits Mr Lockhart had prepared with Mr Lyons did not deal with what Mr Callinan had called in his 13 April 1987 opinion "the great underlying question" as to why Caboolture Park had paid so much more than the $13,375,000 when the work was still unfinished. By the time Caboolture Park's affidavits were filed at the latest Mr Lockhart must have realised that Caboolture Park's s 52/fraud/negligence case was hopeless. Justice Callinan's evidence I have already made findings as to the advice Mr Callinan gave on 17 December 1986 but it is useful to refer again to that advice and other aspects of his evidence. Mr Callinan, at all relevant times senior counsel, had acted for Mr Herscu and his companies for several years and had found that it was very difficult to persuade Mr Herscu to settle a matter when it was in his best interests to do so. He found it necessary to be very careful about giving an optimistic assessment of prospects to Mr Herscu because he viewed litigation in black or white, win or lose, terms. Justice Callinan could not recall the precise details of his discussions with Mr Meadows on the evening of 17 December 1986 but recalled that the situation was urgent as White was expected to commence proceedings against Caboolture Park in the near future. Mr Meadows told him that Mr Herscu was adamant that he had been exploited by White and wished to take action in respect of such exploitation. At the conference with Mr Meadows he was shown, and he read, a copy of Mr Meadows' letter of 16 December 1986 to HDC and he recalled that Mr Meadows was pessimistic about Caboolture Park's prospects of successfully mounting a s 52 case. He took a contrary view to Mr Meadows' view that as the target price had initially been suggested by Caboolture Park to White it would be difficult to argue that it was a representation by White. Although he was not overly optimistic about the final outcome of the action he did not believe that the fact that Caboolture Park may have suggested the ultimate construction cost figure was, on that account, fatal to any s 52 claim. He took the view that it did not matter who initially suggested the figure so long as there was evidence that it had been adopted by White, that White had consequently represented that it could be constructed at that approximate cost, that Caboolture Park had been induced to contract with White on that basis and that the representation was false. It was his view that Caboolture Park should not wait to be sued by White but should rather commence proceedings first to ensure that the s 52 case was dealt with in the Federal Court and because it was advantageous to be an applicant rather than a respondent and cross‑claimant in any proceedings. Mr Callinan said he did not recall being given instructions by Flower & Hart to try to obstruct the progress of the proceedings and the steps that he recommended be taken were steps that he thought should and could be taken properly to pursue the claim and defend the cross‑claim. He knew that Mr Herscu wanted the case fought hard and that he never liked paying money and would always be pleased to see the time when he had to make any substantial payment postponed. Mr Callinan said that in late 1986 and early 1987 he did not understand that a desire merely to postpone a need to make a payment to White was the motivation for the proceeding. Mr Callinan believed that Mr Herscu genuinely believed that he was the victim of wrongful conduct on the part of White and that he believed that he should not have to make any further payments. Mr Callinan thought that it was likely that a substantial payment was going to have to be made ultimately following the trial or by settlement and he was concerned from an early stage that Mr Herscu should not get too optimistic a view of Caboolture Park's prospects. Although Mr Callinan, like Mr Meadows and Mr Lockhart, took the view that Mr Herscu should not be given too optimistic a view of his prospects of litigation because of his black and white approach to litigation, Mr Callinan did not suggest that any advice he gave was other than advice which honestly expressed the views which he held. He did not seek in his evidence to qualify or withdraw any of the statements he had made or the opinions which he had expressed in his various written opinions. This is an important consideration because there are a number of statements in his various advices and opinions which bear upon the issue whether the proceeding was instituted not to vindicate a right of Caboolture Park but for an ulterior purpose. What was the purpose of the proceeding? This is an unusual case because of the nature of the evidence which has been called. Witnesses have been asked to recall and record conversations and events which occurred between nine and twelve years ago and the passage of time of necessity, casts doubt on the reliability of recollections. To that extent a judge may be hesitant in accepting or rejecting evidence because of the extent of the recall and the difficulty of the recall of events and conversations that is required. But in this case such difficulty or concern is more than counter‑balanced and outweighed by the nature, extent and significance of the documentary evidence available which records contemporary events and conversations. In this case I have the unusual advantage of having available to me documents and communications which ordinarily are not available to a Court. Communications between client and legal advisers and between counsel and solicitors brought into existence solely for the purpose of, or in anticipation of, litigation are privileged from production unless that privilege has been waived. Such communications from legal advisers would be expected in the ordinary course of human experience to be candid, forthright and to express views honestly held not only because they represent the advice a legal adviser is obliged to give a client, in discharging the adviser's professional obligations to the client, but also because the legal adviser knows, at the time the communication is made, it will not be disclosed to the other party in the litigation or proposed litigation or the Court because it is privileged from production. It is important to distinguish between the purpose a client has for a proposed proceeding and the purpose which either the solicitor has in instituting the proceeding or seeing the client's purpose served. Mr Pearce said that Mr Herscu's purpose and therefore that of the corporate entity Caboolture Park was to ensure that he did not have to pay any more money and to resist any claim by White. However, it does not follow that Mr Meadows had the same purpose. It is possible conceptually for a client to have one purpose for litigation and his solicitor to have another purpose for the same litigation. For example, (and this is not the case before me) a client may believe it has a genuine claim but the solicitor may believe that the claim is absolutely untenable yet run the proceeding for the purpose of running up the costs to be paid to him. Similarly, a client may believe it has a genuine claim and have a belief albeit misconceived that it has been wronged but the solicitor instituting the proceeding for the client may have a purpose of running the proceedings fully believing that the proceeding will fail but wanting, at least, to give the client a moratorium for payment, that is to say, seeking to defer the date for payment of the amount due for as long as possible. This will occur when the solicitor believes the case is hopeless and he says words to the effect - I will run this case because at least it will postpone the day for payment and that is an advantage for my client. Mr Pearce said that prior to the commencement of the proceeding Mr Herscu had a belief that HDC had overpaid White and Mr Pearce and Mr Herscu believed that HDC was being charged far too much for the project. However they were not claiming that this had occurred as a result of any misrepresentation or fraudulent conduct. Rather it seems that they thought that White was charging too much. Mr Herscu told Mr Meadows that White was not to be paid any more money and he wanted to recover the $2,000,000 he thought he had overpaid. Mr Pearce said that the only purpose HDC had for commencing the litigation was to win it and not to have to pay White any more money and that it was not commenced solely, or in any respect, to gain a temporary bargaining stance. In commenting upon the advice of Mr Callinan of 12 September 1988, Mr Pearce said that it was not the intention or purpose of HDC in commencing the proceeding, to defer payment for twelve months and that HDC believed that instituting the proceeding would bring an offer of settlement from White. Mr Pearce said that HDC had no particular interest in merely delaying any payment which ultimately had to be made although it was obviously in HDC's interest to make any such payment later rather than sooner. Mr Pearce said that it was not an objective of the proceeding to provide a breathing space before payment. However Mr Pearce's evidence does not sit easily with the terms of the letter of 18 December 1986 or the later opinions of counsel which record or reflect the advice given to Caboolture Park and the purpose for instituting the proceeding. I am prepared to accept for the purpose of the argument that HDC had a robust approach to litigation and that it was prepared to try and win a hopeless case. Yet its decision and instructions to institute the proceeding as soon as possible was predicated upon the advice given in the letter of 18 December 1986 so that the decision and instructions must be understood and explained in the light of that advice. I therefore do not accept Mr Pearce's evidence that the proceeding was not commenced to gain a temporary bargaining stance or bargaining position or to defer payment of monies due under the building contract. HDC and Caboolture Park did have an interest in delaying payment because they held the view that Caboolture Park had overpaid and did not want to pay any more money. HDC and Caboolture Park accepted the advice in the letter of 18 December 1986. Although Mr Pearce said that instructions were not given to institute the proceeding for the purpose of deferring payment he had no recollection of the advice given at the time other than that Mr Meadows was very pessimistic about the prospects of success. However when taken through the letter of 18 December 1986 Mr Pearce did not recall the specific instructions he gave Mr Meadows about issuing the proceeding but thought the probability was that he instructed Mr Meadows to proceed in accordance with his advice. I accept that that was the probability, all the more so, because the letter recorded that it was Mr Callinan's advice as well. In such circumstances the instructions then adopted the purpose for the proceeding recorded in the letter, namely the obtaining of a temporary bargaining stance and the securing of a bargaining position. Although the letter asked the question whether anything could be done to try and give the client "at the very least a temporary bargaining stance" I am satisfied that not only was what was suggested and done "the very least" it was also the most that could be done and was proposed to be done. That is to say, the purpose of the proceeding was to give Caboolture Park a temporary bargaining stance and to secure a bargaining position; it was not to vindicate a right of the client. This is made clear by the rest of the letter, in particular the reference to "one possibility", to the client not winning the litigation if put to the test and to Mr Meadows applying the firm's resources to the urgent institution of proceedings "to attempt to secure some bargaining position for you". In the course of cross‑examination Mr Pearce was asked to read Mr Callinan's opinion of 12 September 1988 and he agreed that there was nothing in the opinion that was not consistent with what he had been told by Mr Meadows or Mr Callinan and that no‑one at the meeting on 14 September 1988 had said that any of the statements made by Mr Callinan in the opinion were wrong. Accordingly Mr Pearce was not dissenting from the propositions in the opinion that in December 1986 the expectation was that the institution of the proceeding would probably defer payment for some twelve months and that the prime objectives discussed in December 1986 were to provide a "breathing space" before payment and to reduce, where possible, the total sum payable. Although Mr Pearce in his affidavit denied that these propositions were HDC's instructions or were prime objectives in December 1986 I do not accept that denial. It is inconsistent with the terms of the letter of 18 December 1986 and the views recorded by Mr Callinan at a time when he was concerned to put plainly and bluntly before his client what the true facts were. I am satisfied that on 18 December 1986 Mr Pearce gave Mr Meadows instructions to proceed in accordance with his letter of advice of that day which involved instructions to institute the proceeding to gain a temporary bargaining stance or bargaining position as the proceeding could not be won. I am also satisfied, as Mr Callinan identified in his opinion of 12 September 1988, that there had been discussions between legal advisers and client about instituting the proceeding to obtain a breathing space before payment and to reduce where possible the total sum payable. Mr Meadows said that when he commenced and continued the proceeding he understood on the basis of his instructions, that HDC's purpose in bringing the fraud and s 52 claims was to press whatever its rights were as vigorously as possible as was proper and to secure whatever monetary relief was available to it by virtue of those rights. Two observations need to be made about that evidence. First, it is not supported or corroborated by the contemporary documentation and is not otherwise verified other than by Mr Pearce with whose evidence I have already dealt. Secondly, even if that was HDC's purpose, it is still necessary to consider what Flower & Hart's purpose was in instituting and continuing the proceeding and how it saw its role in that respect. Mr Meadows right from the start thought the proceeding could not be won and never informed his client that it had an arguable case. In his affidavit sworn on 30 March 1993 he expressed the view that Caboolture Park's case against White "was fairly arguable" on the instructions he had received. He never expressed this view to his client either in writing or orally and, as he acknowledged, it was inconsistent with his statement in his letter of 18 December 1986: "I do have to make it clear however that you could not win any litigation if put to the test." As I have found elsewhere in these reasons (page 17) I am satisfied that this statement accurately and honestly expressed the view held by Mr Meadows and Mr Callinan at the time the proceeding was instituted. I do not accept Mr Meadows' qualification of this statement or his explanation for it. The statement was made at a time when he was seeking to tell his client what he and Mr Callinan honestly thought. In re‑examination, in explaining why on 18 December 1986 he was contemplating litigation which he thought would be unsuccessful, Mr Meadows said he thought "there were some modest prospects of success" and that he would have given the case "at least a 20 per cent chance of success". He explained this on the basis that an arguable case has a 20% chance of success, this being an arbitrary figure. He never told his client this nor did he say there were some modest prospects of success; his advice was quite to the contrary. I reject this explanation; it is inconsistent with the terms of the documentation at the time which I accept as accurately recording the views held at the time by Mr Meadows. Although Mr Meadows justifies this explanation by saying, in substance, that his letter of 18 December 1986 was in blunt terms because he did not want to give Mr Herscu any false hopes, I do not accept that he was not being honest with his client nor that he was not putting the views he and Mr Callinan had actually formed. Mr Meadows agreed that the letter of 18 December 1986 was honestly expressed in stronger terms than his letter of 16 December 1986 but in cross‑examination said it did not reflect his views in two respects, namely his references to "you could not possibly win" (as he put it) and "temporary bargaining stance". The only qualification he had made in relation to that letter in his affidavit of 30 March 1993 was in relation to the statement "you could not win any litigation if put to the test". He had not suggested in the affidavit that he had not been seeking or looking for a "temporary bargaining stance" for his client. Indeed those words were underlined in the letter and I infer from that fact that Mr Meadows, by emphasising those words, was saying that what followed - the advice to commence the s 52 proceedings - was the only possibility of obtaining a temporary bargaining stance. His words in paragraph 6 of the letter "I think there is one possibility" refer to a possibility of what? The answer is - a possibility of giving his client a temporary bargaining stance. Even if he underlined "temporary bargaining stance" because of his over‑enthusiasm in an attempt to dampen down any false expectations of success Mr Herscu might have, the underlining only serves to emphasise that it is only a temporary bargaining stance which can be achieved. As I have noted earlier although the letter referred to giving the client "at the very least as temporary bargaining stance" the thrust of the whole of the letter and the purpose of the proceeding proposed was to obtain that temporary bargaining stance and bargaining position. In cross‑examination Mr Meadows was asked to read the letter of 18 December 1986 and was asked whether subject to the qualification in his affidavit of 30 March 1993 in relation to the sentence including the words "you could not win any litigation if put to the test" the letter was true and correct and represented his honest views. He read through the letter in the witness box and answered: "Yes, Mr Karkar I think that is a pretty fair representation of my views at the time." This was a considered, careful answer and, in my view, notwithstanding earlier evidence in cross‑examination that the reference to getting a temporary bargaining stance did not reflect his views after conferring with Mr Callinan, it represented his honest view. That is to say he was accepting what, in my view, is the proper interpretation and construction of his reference to "temporary bargaining stance" - he was looking for a temporary bargaining position for his client and had identified "one possibility". He had not qualified this sentence in his affidavits. I am satisfied that that was his purpose in instituting the proceeding on behalf of his client to get a temporary bargaining stance in respect of a case he knew could not be won. In re‑examination he was asked why the reference to "temporary bargaining stance" did not reflect his view. He answered: "Well it was not my view that all that could be achieved was a temporary bargaining stance; that that was the limit of what could be achieved." He was then asked what was his view and he answered: "Certainly, at the very least, there would be a temporary bargaining stance. I think that honestly reflected my view. I think that the case that we were looking at was certainly stronger than that and was arguable, one which an arguable case that I thought was weak and would ultimately not succeed but certainly it was more than something that would give just a mere temporary bargaining stance." I do not accept this evidence to the extent to which it seeks to deny that in the letter he was setting out and propounding that the only possibility was to obtain a temporary bargaining stance for a case that the client could not win if put to the test. He never told his client the case was arguable. It must not be forgotten that the letter of 18 December 1986 concluded: "It is better I think that at present I apply myself and my firm's resources to the urgent institution of proceedings to attempt to secure some bargaining position for you." His purpose in instituting the proceeding on behalf of his client was to gain a temporary bargaining stance and bargaining position because he thought that was the only possibility for his client. His client adopted this purpose. His explanation in re‑examination for his reference to the temporary bargaining stance was: "... over‑enthusiasm on my part in an attempt to dampen down any false expectations of success that Mr Herscu might - might gain". He then explained why what he had said would dampen down Mr Herscu: "… the reference to a temporary bargaining stance in the first place is - is suggesting that this is not the strongest of cases that - that you have before you, that you should not see it as a - as case that ... will necessarily succeed, certainly." However this explanation does not negate or detract from the finding that so far as Mr Meadows was concerned, the purpose of the proceeding was to obtain for the client the one possibility of a temporary bargaining stance. I do not see how saying there is one possibility of giving the client, at the very least a temporary bargaining stance is an expression of prospects of success. That occurred later in the letter when, after explaining the cause of action and referring to the retainer of counsel, he made it clear that the client could not win the litigation if put to the test. Rather, the reference to the possibility of giving the client, at the very least, a temporary bargaining position was an expression of the purpose of the proposed proceeding. Mr Meadows denied that his purpose in instituting the proceedings on behalf of Caboolture Park was solely to delay payment of the amount owed to or expected to be claimed by White although he accepted that one of the purposes of instituting the proceeding was to provide a negotiating tool that was lacking under the building contract. However this denial of purpose by Mr Meadows does not sit easily with his letters and the various advices of counsel. Prior to the institution of the proceeding on 23 December 1986 Mr Meadows held the view that Caboolture Park could not win any proceedings it instituted (letter 18 December 1986) or as he put it later Caboolture Park would not be successful in any proceeding it brought (affidavit 30 March 1993). He was looking for a temporary bargaining stance and bargaining position (letter 18 December 1986). I am satisfied that Mr Callinan was privy to that purpose and at the least acquiesced in it and approved of it. The evidence does not enable me to determine whether the purpose of deferring or delaying White's recovery of monies under the building contract was the brainchild of Mr Meadows or Mr Callinan. However the evidence does enable me to be satisfied that by the time the proceeding was commenced Mr Meadows' purpose in commencing the proceeding was to delay and defer White's recovery of the money due to it and that Mr Callinan had acquiesced in that purpose and approved of it. It was the lawyers' proposal to institute the proceeding albeit a proposal approved by the client before issue. The purpose of the proceeding is made clear by the terms of the letter of 18 December 1986 and, in particular, the references to trying to give HDC "a temporary bargaining stance", putting it in "the best possible position", that it "could not win any litigation if put to the test" and to attempting "to secure some bargaining position for you". This conclusion is confirmed by the context which then existed within which this advice was given. HDC could not stop the architect certifying further payments - it had been so advised. It did not want to pay any more money because it had, in its view, overpaid. Mr Herscu was very angry and wanted something done. Mr Meadows had conferred with the client on 9 December 1986 when Mr Bennett had given him a detailed account of how the figure of $13,375,000 had been derived and had told him that he (Mr Bennett) thought that the figures which made up the $13,375,000 were reasonable. No allegation of misrepresentation or fraudulent conduct had been raised by HDC and the task of the lawyers, as they saw it, was to come up with something. Fraud on the ground of "recklessness" was raised in the letter but neither Mr Meadows nor Mr Callinan ventured an explanation in their affidavits as to why that view was held at the time particularly in the context of the instructions Mr Meadows had received from Mr Bennett as to how White's figures had been derived. This conclusion is also supported by the fact that Mr Meadows said in the letter of 18 December 1986 that he had instructed counsel to draw proceedings for urgent filing on 22 December 1986 at the latest. At the time of the drafting and sending of the letter no instructions for issuing proceedings had been received from HDC. What had happened was that, as foreshadowed in the letter of 16 December 1986, Mr Meadows, having formed the view that HDC had no case against White, had discussed the matter with Mr Callinan, as instructed, to see if he could come up with "any avenue of relief". Mr Meadows was anticipating receiving instructions to issue the proceeding settled by counsel (which instructions he obtained) but the purpose of instructing counsel was to enable the procedure or mechanism of the temporary bargaining stance and bargaining position to be put in place urgently and immediately. Subsequent documents support and confirm the conclusion I have reached: (a) Mr Callinan's and Mr Perry's memorandum of advice of 22 December 1986, in particular the references to "Querist should be under no misapprehension that this is anything other than a relatively weak case" and "Nonetheless the purpose of the pleadings (sic) is to place Querist in the advantageous position of having struck the first blow". These observations were made after they had said that it was debatable whether Caboolture Park's assumption that the target sum bore some relation to the final construction cost founded an action. Although Mr Callinan said that it was his view that Caboolture Park should not wait to be sued but should commence proceedings first so as to be in the position of an applicant rather than a respondent, and in the Federal Court, the statements in the advice must be read in the light of the context in which they came into existence, in particular, the terms of the letter of 18 December 1986. In that context the reference to the "purpose" of the pleading is supportive of the conclusion I have reached. (b) Mr Callinan's opinion of 13 April 1987, where he refers to: "Querist is anxious to make the matter difficult generally as it can be for Whites, and I reiterate that the most promising way of achieving this is by having ready as soon as possible, an extremely comprehensive set of interrogatories." Although, as Mr Sofronoff submitted, Mr Lockhart said that Mr Herscu's position was to fight every point, this explanation was not given by Mr Callinan for this statement and it should be looked at in the light of the context to which I have referred. This statement suggests that it was a purpose of the proceeding to make its conduct of the proceeding difficult for White, in my opinion, for the purpose of dragging out the proceeding as long as possible so as to defer payment. Mr Callinan did not give any explanation as to why he made this statement. I will return to the issue of the circumstances in which I should, or should not, draw inferences unfavourable to Flower & Hart and its witnesses. (c) Mr Callinan's and Mr Perry's opinion of 1 March 1988, in particular, the reference to: "Querist will recall that at the outset we advised that its claim pursuant to Section 52 of the Trade Practices Act was a relatively weak case. Mr Poppleston has yet to be interviewed in detail with respect to such representation as may have been made by the representatives of White Industries. In the absence of further material we remain of the view that Querist could not and should not be confident of success in that facet of the action. Nonetheless, the bringing of the application under the Trade Practices Act has more than served its purpose in that it has provided, a (so far) impregnable means whereby Querist's legal advisors have been able to maintain a considerable degree of control over the proceedings." Mr Sofronoff submitted that such a purpose was not improper. By that submission I understood him to mean that the purpose of the proceeding was to put Caboolture Park in the position of an applicant rather than a respondent. So stated, the purpose may not be improper. But in my opinion the purpose referred to is a reference back to the earlier purpose of seeking to obtain a temporary bargaining stance, defer the time for payment and delay the proceeding. In my opinion, the reference to the purpose served was the purpose of delaying the resolution of the proceeding which would have as its consequence an order for payment by Caboolture Park to White and the deferral of the date of that order. This conclusion is supported, in my view, by the later statement in the opinion relating to the bringing of an application to transfer all the subcontractors' actions in the Supreme Court to the Federal Court. Mr Callinan and Mr Perry said: "Should the application be unsuccessful the option remains for an appeal which, in itself, would serve to delay further the whole matter." Mr Callinan did not give an explanation for what he meant by this statement. This statement was restated to Mr Pearce in a letter from Mr Lockhart of 2 March 1988 where it was said that: "Despite the lack of prospects in respect of the Trade practices action it should be continued as it gives to your company very real tactical advantages over White Industries". (d) Mr Callinan's advice of 12 September 1988, in particular the references to: "You will recall that when this action was commenced in December of 1986 the expectation was, not that the action would succeed, but that the institution of proceedings would probably defer payment, by Querist, of the money demanded by White Industries for some twelve months. I should point out that it is now some twenty‑one months since that advice. That, it then seemed to be the realistic most that might be achieved. Right at the outset I drew attention to what should have been apparent to all, the insurmountable difficulty, unless fraud could be proved, presented by the repeated and unquestioned payments by Caboolture Park of sums far in excess of the target sum. ...", and to: "You will recall also that I have repeatedly advised that Querist's case is essentially a defensive action only and that, whilst there might be some prospect of success with respect to Querist's defence to the building claim made by White Industries, it should not be thought by anyone that Querist's claim was a strong one or that the whole matter would have any result other than the payment of a substantial sum of money to White Industries ...", and to: "In contesting White Industries' claim the prime objectives have always been those which were discussed in December, 1986 and repeated subsequently, to provide a 'breathing space' before payment and to reduce, where possible the total sum payable", and to: "all the advantage which Caboolture Park hopes to gain from this action has been gained and no further advantage will be gained;" and to: "In contesting White Industries' claim the prime objectives have always been those which were discussed in December, 1986 and repeated subsequently, to provide a 'breathing space' before payment and to reduce, where possible the total sum payable." Mr Callinan did not give an explanation for any of these statements. I am satisfied that the purpose of Mr Meadows' advice and decision to issue the proceeding, was to buy time within which Caboolture Park was insulated from having to pay White the sum or sums to which it was entitled. He knew that any proceeding issued would fail so that from his point of view the purpose of the proceeding was to delay and procure the deferment of the point of time at which Caboolture Park would be obliged to pay White the money due under the contract. In his letter Mr Meadows emphasised the significance of the "temporary bargaining stance" he wanted to obtain for his client by underlining those words in the letter. As he concluded in his letter he was attempting "to secure some bargaining position" for his client. The bargaining position he wanted to secure was one of time not one related to the vindication of his client's rights or the strength of the proceeding instituted. He did not believe that the causes of action in the application and statement of claims filed were arguable. He never said so. Mr Sofronoff submitted that a distinction should be drawn between the notions of purpose and expectation. He submitted that the fact that a solicitor might have an expectation that the institution of a proceeding would delay or defer payment by the client of an amount claimed by the party against whom the proceeding was instituted did not mean that that was the purpose for which the proceeding was instituted. I agree with that proposition. A proceeding can be instituted to vindicate a right in circumstances where it is obvious that the opposing party's expected cross‑claim will be held up pending the determination of a primary proceeding. An example of such a case is where a tenant brings a s 52 proceeding in relation to its entry into a lease and the landlord cross‑claims for unpaid rent. But it is necessary for it to be established that the tenant, by its proceeding, has the purpose of seeking to vindicate its right. That is to say the tenant may have a genuine right to be vindicated. Although Mr Callinan in his advice of 12 September 1988 referred to "the expectation" not that the action would succeed but that the institution of the proceeding would probably defer payment for some twelve months, I am satisfied that that was not only the expectation held by the lawyers, it was also their purpose in instituting the proceeding. In the circumstances of this case Mr Meadows' purpose and expectation coincided; not only was his expectation that the proceeding would defer payment, that was his purpose in instituting the proceeding. This is made clear, in particular, by the terms of the letter of 18 December 1986 and Mr Callinan's later reference in his opinion to "the prime objectives" always having been to provide "a breathing space" before payment and to reduce where possible the total sum payable. What inferences can be drawn from the evidence? Should the rule in Browne v Dunn be applied? Mr Sofronoff submitted that I should not draw any inferences or make any findings adverse to Flower & Hart as a result of, or arising out of, any statements in these opinions and advices. Nor, it is submitted, should I find that Mr Meadows' letter of 18 December 1986 accurately records Mr Callinan's views at the time because none of the contents of the opinions and advices were put to Flower & Hart's witnesses and in particular Mr Meadows and Mr Callinan to enable them to explain any of the statements in them. Nor, it is said, was Mr Callinan given the opportunity to comment upon the letter of 18 December 1986. Mr Sofronoff submitted that if any particular part of a document was to be used as an admission by a witness, then the witness' attention should be directed to that part and the witness should be given the opportunity to "answer the proposition that does not come from the document but would come from the applicant as to wrong‑doing". Mr Sofronoff submitted that this proposition particularly applied because all the witnesses had said in their affidavits that there were no instructions merely to delay and if it was intended to say that their oath should not be accepted, then the witness should have that proposition put fairly and squarely to him. Mr Sofronoff put the principle somewhat more broadly when he submitted that the effect of Browne v Dunn [1894] 6 R 67, and the cases which followed it, was that a witness had to be given an opportunity to give an explanation for matters that are later going to be alleged against him but counsel did not have to put matters to a witness if by some other means the point has been exposed in the sense that it was clear what was going to be said. Mr Sofronoff said that it was never put to Mr Pearce that the purpose of HDC in bringing the proceeding was to delay or that its lawyers were instructed to proceed for the purpose of delay or in order to obtain a bargaining position of some kind. However Mr Pearce did respond to these issues in his evidence. Mr Sofronoff also said that the existence of a collateral or other improper purpose of the lawyers was never put to Justice Callinan and that it was not open to White to rely upon opinions he wrote to prove that he or Flower & Hart had such a purpose. In order to put the submission that the purpose of the proceeding was delay it was said that counsel for White had an obligation to put that proposition to the witness to give him an opportunity to deal with it. As Mr Sofronoff pointed out the issue is particularly striking in this case because, as he put it, Mr Callinan "is completely bound" by the terms of the letter of 18 December 1986, it either having been dictated by him or sent to him and agreed by him and understood by him to contain accurately his views. Mr Sofronoff said that Mr Callinan had sworn in an affidavit that "he did not recall ever having been given any instructions by Flower & Hart to try and obstruct the progress of the proceedings" and that he did not "in late 1986 and early 1987 understand that a desire merely to postpone the need to make a payment to WI [White] was the motivation for the proceedings". As he was not challenged in cross‑examination on these statements and given an opportunity to meet the allegation Mr Sofronoff submits that it is not now open to suggest that because of what is contained in the letter of 18 December 1986 and in his opinions Mr Callinan was involved in any impropriety or ought to be disbelieved in relation to the evidence in his affidavit. It was said that as he was not given the opportunity to meet the allegation that the letter expressed or contained his views that Caboolture Park could not win the case and that the purpose of the case was to give it a temporary bargaining stance, it is not open to White to submit that he was involved in the ulterior purpose or that his statement in his affidavit should be disbelieved. The resolution of this issue of the use which can be made of the letters and opinions and the inferences which can be drawn from them so far as Mr Callinan is concerned is important because Mr Sofronoff submitted that a finding could not be made fairly against Mr Meadows in relation to the issue of ulterior purpose without a finding being made against Mr Callinan on this issue and that a finding could not be made against Mr Callinan when he had not been given a fair opportunity to defend himself against any such findings and had been misled into a belief that no attack was being made against him. For the reasons to which I shall refer I am not satisfied that Mr Callinan was misled in this respect nor am I satisfied that he was not given a fair opportunity to defend himself against any such findings. Indeed I am satisfied that he was given such a fair opportunity and that he was not misled by the manner in which the case was conducted or by the cross‑examination. In the course of final submissions Mr Sofronoff responded to the proposition that a bundle of opinions and letters were tendered against Flower & Hart which plainly required an answer by saying that the obligation was not upon the witnesses to scrutinise the documents they had written and to explain them in advance of anything being put to them. He submitted that the obligation is upon the person who charges the witnesses with specific manifestations of their alleged ill purpose to put those matters to the witnesses to see what they say about them. For reasons to which I shall refer I am satisfied that Flower & Hart and its witnesses were on notice, before the commencement of the hearing, of the nature of the submissions and comments which were to be made by White in relation to the contents of a number of letters and opinions and accordingly had the opportunity, if they wished to take advantage of it, to explain, qualify or resile from statements made in these documents. I also wish to draw attention to an exchange that occurred in the course of final submissions which highlights this conclusion. In the context of Mr Sofronoff's submission that the witnesses should not be obliged to scrutinise every document they had written and explain what they had written, Mr Sofronoff's attention was drawn to the passage in Mr Callinan's opinion of 12 September 1988: "You will recall that when this action was commenced in December of 1986 the expectation was, not that the action would succeed, but that the institution of proceedings would probably defer payment, by Querist, of the money demanded by White Industries for some twelve months." It was put to counsel that Mr Callinan needed to deal with this matter in his affidavit. Counsel's response was: "No, your Honour, no. Why should he deal with that? Unless he is aware that somebody is going to read that and accuse him of expressing himself as acting in accordance with the wrong purpose. Why should he read that badly?" I consider that on its face Mr Callinan's statement was such that, having regard to the notice of appeal, the case stated and White's amended statement of facts and contentions, he and Flower & Hart were on notice that it would be used against him and Flower & Hart. That this is so, is confirmed when one turns to Mr Meadows' second affidavit sworn on 2 February 1998, in paragraph 21 of which he says: "I have read Mr Callinan's advice of 12 September 1988. Insofar as it refers to the attitude to the proceedings in late 1986 and early 1987, it does not accurately reflect what I recall the situation to have been at that time. It may reflect what Mr Callinan then thought could be achieved. The opinion refers to precisely the sort of unrealistic expectation as to the final outcome that we had in late 1986 been afraid of, and which we now had to seek to demolish. Insofar as it refers to an expectation that the action could defer payment, rather than succeed, it does not correctly reflect what I recall the situation to have been at that time." Mr Meadows in cross‑examination said he did not recollect reading this opinion until shortly before swearing his second affidavit on 2 February 1998. However I consider the probability to be that he did read it before the telephone conference with Mr Herscu on 14 September 1988 having regard to Mr Meadows' evidence that it was his general practice to read counsel's advice relating to matters concerning settlement. Mr Callinan's advice had been sought for the purpose of impressing on Mr Herscu that he should consider settling the proceeding and the purpose of the conference was to discuss that advice with Mr Herscu. It is not probable that Mr Meadows did not read the opinion before the conference called to discuss that particular advice. It is significant to note that Mr Pearce, Mr Meadows and Mr Callinan said that at the conference no one took issue with anything Mr Callinan had said in his opinion. When Mr Callinan swore his second affidavit on 11 February 1998 he referred to his opinion of 12 September 1988 in the following terms: "I provided an Opinion dated 12 September 1988 to Messrs Flower & Hart in which I urged that CP should attempt to settle the matter. I recall that before I wrote this Opinion I spoke to Mr Perry who told me what had occurred in the trial to that time. I was dependent on Mr Perry for an account of the state of the litigation with which I was not personally acquainted. On his account I had no doubt that strong recommendations to settle were appropriate and I made them in language best adopted in my belief to that end. Mr Perry had indicated to me that he was firmly of the opinion that CP should try to settle the matter rather than fighting it out to the end. In preparing that Opinion I was deliberately attempting to express in very strong terms my opinion that CP should attempt to settle the matter rather than fight it out to the end. I thought that CP would have to make a substantial payment to WI, and I wanted to impress upon Mr Herscu that this was my view and had always been my view." Mr Callinan, unlike Mr Meadows, did not attempt to explain, qualify or resile from any statement made in his opinion. But this issue was put more clearly in White's contentions of fact and law filed on or about 8 April 1998 as this exact passage from Mr Callinan's opinion of 12 September 1988 was extracted together with the passages including the references to "the realistic most that might be achieved", "a defensive action" and "to provide a 'breathing space'" (p 25) and given as an example of correspondence, as the contentions put it: "… consistent with a purpose in issuing the proceedings not to achieve the remedy therein sought but to delay the inevitable day when Caboolture Park would be required to pay White outstanding contract sums under the contract and to place White in a position where they would have to settle with Caboolture Park on favourable terms." Put shortly, Mr Callinan and Flower & Hart were made aware that White was going to read this statement and use it against them. Although the time for filing affidavits had passed by the time the contentions of fact and law were filed and served it was open to Flower & Hart, if taken by surprise by the outline, to seek to file further affidavits or adduce oral evidence. White's response to this submission is that it is entitled to submit that inferences should be drawn and findings made against Flower & Hart on the basis of the contents of the letter of 18 December 1986 and the various opinions and advices of Mr Callinan because the case it intended to put against Flower & Hart had been made clear and its witnesses had the opportunity to respond to these issues and either did not do so or did so in a limited way. In order to determine whether the rule in Browne v Dunn (supra) has been transgressed it is necessary to understand how White put its case from its inception. In its notice of appeal filed on 23 November 1992 White propounded the ground that there was fresh evidence being correspondence and memoranda passing between Caboolture Park, Flower & Hart and the counsel they had retained which contained statements that the proceeding was: "(a) commenced and maintained by the respondents [Caboolture Park and Flower & Hart] in the belief that the first respondent [Caboolture Park] had no or substantially no prospects of success; (b) commenced and maintained by the respondents for an ulterior purpose." The notice of appeal then asserted that this fresh evidence justified an order that White's costs of the proceeding be paid by Flower & Hart and an order was sought for the extension of the time for instituting the appeal. White's evidence‑in‑chief was substantially documentary and it was contained in the affidavit of Mr Travers Duncan, a director of White, sworn on 16 December 1992. In that affidavit he exhibited the letter of 18 December 1986 from Flower & Hart to Messrs Pearce and Herscu, the advice of Mr Callinan and Mr Perry dated 22 December 1986, the draft opinion of 26 February 1987 sent by Mr Morris to Mr Lockhart, the letter from HDC to Flower & Hart dated 27 February 1987, the advice of Messrs Morris and Perry dated 3 April 1987, the opinion of Mr Callinan dated 13 April 1987, the opinion of Mr Callinan and Mr Perry dated 1 March 1988, the advice of Mr Perry dated 12 August 1988 and the advice of Mr Callinan dated 12 September 1988. White's reliance upon the contents of the documents exhibited to Mr Duncan's affidavit was recognised by Flower & Hart in a number of respects. In Mr Meadow's first affidavit sworn 30 March 1993 he said that his letter of 18 December 1986 "was meant to reflect the advices given to me by Mr Callinan" and he said his diary notes indicated that the letter was dictated to him late on the evening of 17 December 1986 by Mr Callinan. His only qualification on the contents of the letter was in relation to his statement that "you could not win any litigation if put to the test". I have already referred to and considered this qualification. In his affidavit sworn 26 March 1993 Mr Callinan exhibited Mr Meadows' letter of 18 December 1986 and said that he did not settle the letter though he may have had an input into its contents. He did recall discussing with Mr Meadows that he should write a letter which did not give Mr Herscu any false basis for optimism. However, having exhibited the letter which, on its face, referred to his advice, Mr Callinan did not qualify the letter or any of its contents in any way nor did he suggest that any statement in the letter did not accurately or properly reflect his views or the advice he had given. Although Mr Callinan had sworn that he did not settle the letter but may have had an input into its contents, Mr Meadows in his affidavit sworn four days later said that the letter was meant to reflect the advice given to him by Mr Callinan and that his diary notes indicated the letter was dictated to him by Mr Callinan. One would therefore expect that Mr Callinan was alerted to how the letter might be put against him. Mr Meadows was so alerted to how the letter might be put against him because in his affidavit he qualified the statement in the letter "you could not win any litigation if put to the test". After the initial round of affidavits were sworn the appeal came on for hearing before the Full Court on 29 April 1993 and as a result of White's motion joining Flower & Hart and seeking costs against it and of Flower & Hart's motion challenging the Court's jurisdiction so to order costs a case was stated for the opinion of the Full Court which set out specifically the conclusions which White sought to draw from the evidence (pages 3 ‑ 4 of these reasons). The Full Court answered the case stated on 22 September 1993 by saying that the Court had jurisdiction. It was thereafter that directions were given for the filing of facts and contentions. Paragraph 9 of White's amended statement of facts and contentions dated 7 December 1993 (page 4 of these reasons) made it quite clear that White was alleging that Flower & Hart commenced and continued the proceeding on behalf of its client for the collateral purpose of delaying action by White to recover moneys due under the contract and putting White under pressure to compromise such claims. This allegation was denied by Flower & Hart in its statement of facts and contentions dated 22 December 1993. In his second affidavit sworn 2 February 1998 Mr Meadows said that there was no discussion in the course of his conference with Mr Callinan on the evening of 17 December 1986 "about seeking delay in the payment of any amount in fact payable under the contract" to White. He said "there was certainly no discussion with Mr Callinan about their being any incidental advantage to HDC in delaying payment" to White. In the next paragraph of the affidavit he said: "I had not been given any instructions on behalf of anyone at HDC that that company or CP had any interest in mere delay of payment of any amount in fact owing to WI and, as far as I knew, there was none. ... Certainly I did not regard mere delay as an objective of the client or of this firm in late 1986".

In paragraph 21 of his second affidavit Mr Meadows said: "I have read Mr Callinan's advice of 12 September 1988. Insofar as it refers to the attitude to the proceedings in late 1986 and early 1987, it does not accurately reflect what I recall the situation to have been at that time. It may reflect what Mr Callinan then thought could be achieved. The opinion refers to precisely the sort of unrealistic expectation as to the final outcome that we had in late 1986 been afraid of, and which we now had to seek to demolish. Insofar as it refers to an expectation that the action could defer payment, rather than succeed, it does not correctly reflect what I recall the situation to have been at that time."

In his affidavit sworn 27 January 1998 Mr Pearce said that the litigation was not commenced "solely, or in any respect, to gain a temporary bargaining stance", this latter phrase being found in the letter of 18 December 1986. He then referred to Mr Callinan's opinion of 12 September 1988, referred to the following passages in it: "You will recall that when this action was commenced in December of 1986 the expectation was, not that the action would succeed, but that the institution of proceedings would probably defer payment, by querist, of the money demanded by White Industries for some twelve months. ... In contesting White Industries claim the prime objectives have always been those which were discussed in December 1986 and repeated subsequently, to provide a 'breathing space' before payment and to reduce, where possible, the total sum payable", and said that the first statement did not reflect instructions given by HDC to Flower & Hart in December 1986 and that the second statement was not correct. In paragraph 24 of Mr Lockhart's affidavit sworn 24 February 1998, he responded to the statement in the draft joint opinion sent to him by Mr Morris on 26 February 1987 that counsels' instructions were that it was presently regarded as unlikely that the action would go to trial. In paragraph 28 of his affidavit he referred to the brief sent to counsel to draw a request for particulars of the defence and cross‑claim served on 23 March 1987. He said: "The purpose of seeking such particulars was to assist in the preparation of the case for CP. I did not seek by the delivery of a request for particulars to be obstructive, either transparently or otherwise, and did not instruct Counsel to seek to draw an obstructive request." This was obviously a response to the statement in counsel's advice of 3 April 1987 (also exhibited to Mr Duncan's affidavit) that: "We were tempted to prepare a Request which was even more searching and extensive; however, on reflection, we consider that the client's tactical objectives will be best served by adopting an attitude which is not transparently obstructive."

In his second affidavit sworn 11 February 1998 Mr Callinan specifically addressed the issue of whether the proceedings had been brought for the purpose of delaying payment to White when he said in paragraph 7: "… From my knowledge of Mr Herscu I was aware that he never liked paying money, and would always be pleased to see the time when he had to make any substantial payment postponed, but I did not in late 1986 and early 1987 understand that a desire merely to postpone the need to make a payment to WI was the motivation for these proceedings." In paragraph 10 of the affidavit he referred to his opinion of 12 September 1988 and said: "… In preparing that Opinion I was deliberately attempting to express in very strong terms my opinion that CP should attempt to settle the matter rather than fight it out to the end." However, he did not seek to qualify, explain or resile from any statement in that opinion nor did he suggest that any statement in that opinion did not accurately record or reflect his views or the instructions he had received. Directions were given in December 1997 for the filing of outlines of contentions. In its contentions of fact and law filed and delivered on or about 8 April 1998 White raised squarely the submission that the proceeding was an abuse of process and that Flower & Hart's conduct amounted to an abuse of the process of the Court. Having set out a number of authorities and the principles to be extracted from them White submitted that the proceeding was conceived, commenced, continued and conducted by Flower & Hart for an ulterior or collateral purpose, namely the deferment of an inevitable obligation to make payments to White and in a manner calculated to pressure White to settle favourably with Caboolture Park on its contractual claim and that the s 52, fraud action conceived, instituted and maintained by Flower & Hart, being hopeless from the start, must be taken to have been intended to achieve these ends. It was then submitted that the evidence supported these conclusions and the evidence relied on included: · Mr Meadow's letter of 18 December 1986 · The advice from Mr Callinan and Mr Perry dated 22 December 1986 · The draft opinion from Mr Callinan, Mr Morris and Mr Perry dated 26 February 1987 · The advice from Mr Callinan dated 13 April 1987 · The letter from Mr Lockhart of 14 October 1987 · The advice from Mr Callinan and Mr Perry dated 1 March 1988 · Mr Lockhart's letter of 2 March 1988 · the advice from Mr Callinan dated 12 September 1988. Relevant passages from each of these documents were set out in the contentions and it is from these passages that White invites the Court to draw inferences adverse to Flower & Hart. The relevant documents were also included in the agreed bundle of documents placed before the Court and tendered by White without objection. It is apparent that Flower & Hart was sensitive to the contents of the letters and opinions from which adverse inferences might be drawn against it or in respect of which adverse comments could be made. The last paragraph of Flower & Hart's contentions of fact and law filed and delivered on or about 9 April 1998 is in the following terms: "This present proceeding appears to have been based upon an over‑reaction to certain passages in letters and opinions, taken out of any fair context and in disregard of the actual facts of the case. Those passages might have justified a suspicion warranting further investigation, but the actual facts of the case do not reveal any worthwhile case against the solicitors." When senior counsel for White opened the case he referred to the various documents on which he relied and referred to those passages which he sought to use against Flower & Hart.

The rule in Browne v Dunn The rule in Browne v Dunn (supra) is a rule of fairness which requires a party or a witness to be put on notice that a statement made by the witness may be used against the party or witness or to be put on notice that an adverse inference may be drawn against the witness or an adverse comment made about the witness in order that the witness may respond to that issue and give an explanation: Browne v Dunn (supra) 70; Bulstrode v Trimble [1970] VR 840, 849; Karidis v General Motors‑Holdens Pty Ltd [1971] SASR 422, 425 ‑ 426; Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation (1983) 44 ALR 607, 623. The significance of the rule is that it requires notice to be given of a proposed attack on a witness or on the witness' evidence where that attack is not otherwise apparent to the witness. The rule does not require that there be put to the witness every point upon which his or her evidence might be used against him or her or against the party who calls the witness. This is demonstrable from the judgements in Browne v Dunn (supra). At 70 Lord Herschell LC said: "Now, my Lords, I cannot help saying that it seems to me to be absolutely essential to the proper conduct of a cause, where it is intended to suggest that a witness is not speaking the truth on a particular point, to direct his attention to the fact by some questions put in cross‑examination showing that that imputation is intended to be made, and not to take his evidence and pass it by as a matter altogether unchallenged, and then, when it is impossible for him to explain, as perhaps he might have been able to do if such questions had been put to him, the circumstances which it is suggested indicate that the story he tells ought not to be believed, to argue that he is a witness unworthy of credit. My Lords, I have always understood that if you intend to impeach a witness you are bound, whilst he is in the box, to give him an opportunity of making any explanation which is open to him; and, as it seems to me, that is not only a rule of professional practice in the conduct of a case, but is essential to fair dealing with witnesses." His Lordship then referred to complaints about excessive cross‑examination and continued at 71: "… but it seems to me that a cross‑examination of a witness which errs in the direction of excess may be far more fair to him than to leave him without cross‑examination, and afterwards to suggest that he is not a witness of truth, I mean upon a point on which it is not otherwise perfectly clear that he has had full notice beforehand that there is an intention to impeach the credibility of the story which he is telling. Of course I do not deny for a moment that there are cases in which that notice has been so distinctly and unmistakably given, and the point upon which he is impeached, and is to be impeached, is so manifest, that it is not necessary to waste time in putting questions to him upon it. All I am saying is that it will not do to impeach the credibility of a witness upon a matter on which he has not had any opportunity of giving an explanation by reason of there having been no suggestion whatever in the course of the case that his story is not accepted." Lord Halsbury said at 76‑ 77: "My Lords, with regard to the manner in which the evidence was given in this case, I cannot too heartily express my concurrence with the Lord Chancellor as to the mode in which a trial should be conducted. To my mind nothing would be more absolutely unjust than not to cross‑examine witnesses upon evidence which they have given, so as to give them notice, and to give them an opportunity of explanation, and an opportunity very often to defend their own character, and, not having given them such an opportunity, to ask the jury afterwards to disbelieve what they have said, although not one question has been directed either to their credit or to the accuracy of the facts they have deposed to." Lord Morris concurred with the reasons of Lord Herschell and Lord Halsbury but did not wish to lay down a hard‑and‑fast rule in relation to cross‑examining a witness "as a necessary preliminary to impeaching his credit" (79). Lord Bowen did not lay down any general principle. It is apparent, from the judgment of Lord Herschell that notice of the relevant attack need not necessarily occur in cross‑examination so long as it is otherwise clear that it will be made. This proposition was picked up by Hunt J in his extensive analysis of the rule and the cases which had considered it in Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation (supra) where he said at 623: "It has in my experience always been a rule of professional practice that, unless notice has already clearly been given of the cross‑examiner's intention to rely upon such matters, it is necessary to put to an opponent's witness in cross‑examination the nature of the case upon which it is proposed to rely in contradiction of his evidence, particularly where that case relies upon inferences to be drawn from other evidence in the proceedings. Such a rule of practice is necessary both to give the witness the opportunity to deal with that other evidence, or the inferences to be drawn from it, and to allow the other party the opportunity to call evidence either to corroborate that explanation or to contradict the inference sought to be drawn. That rule of practice follows from what I have always believed to be rules of conduct which are essential to fair play at the trial and which are generally regarded as being established by the decision of the House of Lords in Browne v Dunn (1894) 6 R 67." But as Hunt J pointed out at 630: "In many cases, of course, counsel for the party calling the witness in question will be alert to the relevance of the other material in the case to be relied upon for the challenge to the truth of the evidence given by his witness or to the credit of that witness, and in those circumstances counsel will be able to give his witness the opportunity to deal with that other material in his own evidence in chief. But sometimes quite properly he may not be aware either of the other material or of its relevance; or for quite legitimate tactical reasons he may prefer his opponent to be the first to raise the matter, and then deal with it re‑examination or (if allowed) in his case in reply. But at some stage during the course of the evidence, the witness must be given a proper opportunity to deal with the material to be relied upon for the challenge."

The rule does not apply, in the sense that it is not transgressed, where the witness is on notice that his version is challenged or that an inference may be drawn against him and such notice may be found in the pleadings, in an opening or in the manner in which a case is conducted: Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219, 224 ‑ 225, 236; Jagelman v Federal Commissioner of Taxation (1995) 31 ATR 467, 472 ‑ 473; Raben Footwear Pty Ltd v Polygram Records Inc (1997) 145 ALR 1, 15. The issue here is not so much that there is an attack on the credit of the witnesses which could not be anticipated or that Flower & Hart and its witnesses have been ambushed. Rather the issue is that what are said to be clear statements in letters and opinions are being used against Flower & Hart either as admissions or in circumstances where inferences adverse to Flower & Hart are sought to be drawn. Mr Meadows in his affidavits qualified one of the sentences in his letter of 18 December 1986 and on that qualification he was cross‑examined. He was given the opportunity to qualify the letter further but did not do so. Mr Callinan did not seek in his affidavits to qualify, explain or resile from any statements in the letter of 18 December 1986 or in his opinions and advices yet it was known to Flower & Hart, indeed it was Mr Meadow's evidence, that Mr Callinan had either dictated the letter or had input into it and had approved its contents. In my opinion, Flower & Hart and all its witnesses were on notice that White was seeking to rely upon the letter of 18 December 1986 and the relevant contents of the particular opinions and advices of Mr Callinan for the purpose of establishing that Flower & Hart had the purpose of initiating the proceeding on behalf of its client to delay payment of the amount due to White in circumstances where it had formed the opinion that its client did not have a case that could be won. It is not unfair, in my opinion, therefore for White to invite the Court to draw inferences and make findings from the letter of 18 December 1986 and the opinions and advices of Mr Callinan adverse to him and to Flower & Hart and contrary to evidence otherwise given by its witnesses. This is not a case where it can be said that Flower & Hart has been ambushed in final submissions by White's reliance on evidence, the existence of which Flower & Hart was unaware until the evidence was completed: cf: Dolan v Australian and Overseas Telecommunications Corporation (1993) 42 FCR 206, 210. When senior counsel for White concluded his cross‑examination of Justice Callinan and before re‑examination commenced, I drew White's counsel's attention to the fact that he had not cross‑examined Justice Callinan on a number of the passages found in the letter of 18 December 1986 and in his opinions and advices upon which White now seeks to rely for the purpose of the drawing of adverse inferences and the making of adverse findings against Flower & Hart. I raised with counsel the issue whether the rule in Browne v Dunn (supra) required him to do so. I gave him the opportunity to consider whether he wanted to cross‑examine on these matters but he declined my invitation. Senior counsel for Flower & Hart was asked if he wished to say anything and he did not wish to do so. At that time I was not sure whether the result of the cross‑examination was such that the rule in Browne v Dunn (supra) might be transgressed and I had not formed a concluded view whether Justice Callinan and Flower & Hart were on notice as to how the letter of 18 December 1986 and the opinions and advices might be used adversely against them. I am now satisfied for the reasons to which I have referred that they were on notice and it was not incumbent upon counsel for White to cross‑examine further on these matters in order to be entitled to make the submissions White now wishes to make. In any event, counsel for White did cross‑examine Mr Meadows relevantly on some of these documents. Mr Karkar asked Mr Meadows whether he had read Mr Callinan's opinion of 12 September 1988 shortly after it was delivered. Mr Lockhart had said that he gave a copy of the advice to Mr Meadows. Mr Meadows said it was his general practice to read advices of this kind but that he could not recollect reading the opinion until shortly prior to swearing his second affidavit in February 1998. He was however aware that Mr Callinan had given advice in strong terms. White invites me to find that Mr Meadows read the opinion shortly after it was received and I so find. Mr Meadows was very much the contact partner in Flower & Hart for Mr Herscu and HDC and there was a telephone conference on 14 September 1988 two days after the opinion was delivered. It is highly improbable that Mr Meadows would have participated in that telephone conference in which Mr Herscu was being advised to settle very expensive litigation which had gone on for some considerable time and to pay some millions of dollars without reading, digesting and understanding the advice of senior counsel which was recommending that course. I am satisfied that he read Mr Callinan's opinion of 12 September 1988 before participating in the conference two days later. Further, Mr Karkar put to Mr Meadows and Mr Pearce that they did not at the conference on 14 September 1988 in any way contradict, cavil with or disagree with anything Mr Callinan had said in his opinion of 12 September 1988 in relation to its subject‑matter or his instructions. Each witness accepted that that was the position. According to the evidence of these witnesses no one took issue with anything that Mr Callinan had said in his advice on 14 September 1988. Mr Callinan was asked whether the advice of 12 September 1988 accurately reflected his instructions and understanding at the time and he said "Yes". He was then asked whether the advice accurately reflected his views and opinions at the time and he answered "Yes". I am satisfied that White put its case to Flower & Hart in the case stated, its pleading and by the documents exhibited to Mr Duncan's affidavit in such a way as to put it and its witnesses on notice as to what the case was and what the issues were. Further, both White and Flower & Hart filed substantial contentions of fact and law before the trial commenced in accordance with directions given. In White's contentions it addressed specifically and in detail the four heads of breach of duty alleged against Flower & Hart in paragraph 9 of its amended statement of facts and contentions. In its contentions of fact and law White referred to the letter of 18 December 1986 and the opinions and advices and sought to draw conclusions from various passages in them adverse to Flower & Hart. These included the passages from which White, in final submissions, seeks to draw inferences and have findings made adverse to Flower & Hart. Not only was there no ambush but rather White's case was put fairly and squarely upfront and in my opinion it, and the evidence on which it was based, was made known to Flower & Hart and its witnesses. After White's and Flower & Hart's contentions of fact and law were exchanged Flower & Hart did not say it was taken by surprise by the matters, issues and contentions raised by White, other than in relation to issues not presently relevant, nor did it seek to file any supplementary affidavits in relation to these issues. Accordingly I see no room for the application of the rule in Browne v Dunn (supra) against White. There are two aspects to the rule in Browne v Dunn (supra), the first being the rule of practice that it is necessary for a party to put another party on notice of the matters on which it proposes to rely in contradiction of the evidence of that other party on its witnesses. The second aspect is what are the consequences if that rule is not observed. That aspect is not inflexible (Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336 at 345) and it does not inexorably follow that if the rule is not observed the party in default is precluded from relying on evidence not put to the other party or its witnesses or from relying on inferences to be drawn from evidence which inferences have not been put to the other party or its witnesses. The trial judge can permit witnesses to be recalled so as to give them the opportunity to explain their evidence from which adverse inferences might be drawn against them either in the absence of explanation or to contradict other evidence they have given: Archer v Richard Crookes Construction Pty Limited (unreported, New South Wales Court of Appeal, Mason P, Meagher and Beazley JJA, 22 October 1997) 7; Payless Superbarn (NSW) Pty Ltd v O'Gara (1990) 19 NSWLR 551, 556; Crosthwaite v City of Elizabeth (1989) 51 SASR 105, 111. I have already found that Flower & Hart were on notice of the case proposed to be made from the documents and the inferences proposed to be drawn from them well before the commencement of the hearing. The issue certainly crystallised at the conclusion of Justice Callinan's cross‑examination when I raised the issue with counsel for White. Counsel for Flower & Hart could then, if thought appropriate or necessary, have applied for leave to recall his witnesses. Flower & Hart cannot now be heard to complain about unfairness; in my opinion there was no unfairness. Flower & Hart should be bound by the course it adopted at trial, namely to be selective about the documents its witnesses wished to explain or qualify: Rowe v Australian United Steam Navigation Co Ltd (1909) 9 CLR 1, 24; Hoyts Pty Ltd v O'Connor (1928) 40 CLR 566, 576. The second aspect of the rule relates to the manner in which, and the extent to which, the evidence or inferences said to be relied upon in breach of the rule may be used: Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation (supra) 625. This aspect of the rule relates to the weight to be given to the evidence and its cogency: Bulstrode v Trimble (supra) 846. This second aspect does not require the rejection of evidence or an inference to be drawn from it if it is sought to use it to contradict evidence not the subject of cross‑examination. Putting the matter another way a failure to observe the rule in Browne v Dunn (supra) does not mean that where evidence of a witness is not the subject of cross‑examination and where evidence is led in contradiction of that evidence, the Court is required to accept the former evidence: Bulstrode v Trimble (supra) 849. It is a matter of weight for the Court to take into account: R v McDowell [1997] 1 VR 473, 482. To the extent to which Mr Meadows' evidence conflicts with the contents of the letter of 18 December 1986 and the various opinions and advices of counsel and the inferences which White invites me to draw from them I prefer to accept the contents of the documents and those inferences as being the correct and more reliable version of the views held and expressed by the legal advisers at the time. The documents were intended to be honest, candid, and forthright accounts of the views then held by their authors. There was no pressure on the authors to be other than completely honest, candid, forthright and to the point. The evidence in the affidavits is variously five to seven years and nine to eleven years after the events they record and in the ordinary course of human experience recall after such a period is imperfect; all the more so is such recall subject to unreliability when the recall is for the purpose of rebutting allegations against the witnesses. The documentary evidence which came into existence contemporaneously with events and the reasonable inferences which may be drawn from the contents of those documents are more likely to be an accurate record of the authors' views than recall between five and eleven years later. Was there a factual basis for the allegation of fraud? The issue of the allegation of fraud is that it was made without any factual basis for making the allegation. It is not contended by White that the proceeding was instituted without Flower & Hart having instructions to issue the proceeding alleging fraud. The burden of proof lies upon White to establish that Flower & Hart delivered a statement of claim alleging fraud where there was no factual basis for the allegation. I am satisfied that the allegation of fraud, a serious allegation, was made without any factual basis existing for the allegation. It was not the client who was claiming to have been defrauded. It was raised for the first time in the letter of 18 December 1986 where Mr Meadows said that: "Fraud on the ground of recklessness may also be available to be pleaded against the builder." This was drafted after the conference with Mr Callinan who approved the terms of the letter. The letter made no mention of a cause of action based on fraud with knowledge of the falsity of the representation and the only advice in the letter was to issue proceedings alleging a breach of s 52. It was never explained to the client why fraud on the ground of recklessness or on any other ground might be available. Mr Meadows did not specifically raise with his client, or address the issue of making an allegation of fraud against White, other than by the tentative reference in the letter of 18 December 1986. Indeed the evidence, or rather absence of it, suggests that no attention was given at all to the issue of pleading fraud other than to the fact that it might be pleaded. Presumably the reference to fraud in the letter was a reference to Mr Callinan's view as it came out of the conference with Mr Callinan and had not been previously considered or adverted to by Mr Meadows. By 23 December 1986, when the application and statement of claim were filed the allegation of fraud included an allegation of fraud by reason of knowledge of falsity. Yet in cross‑examination Mr Meadows said he thought that an allegation that the representations were made fraudulently with knowledge that they were false was arguable at the time. He did not say so in his letter; rather he said to the contrary "you could not win any litigation if put to the test". It is difficult to see how Mr Meadows could regard such a fraud claim as arguable when he had been told by Mr Bennett that he was the author of the figures that made up the $13,375,000 and that he had put those figures to White and had told White he thought those figures were reasonable. Further no‑one from HDC had told him that they considered the figures put forward to make up the $13,375,000 to be unreasonable. Mr Meadows said he accepted that he had to judge the truth or falsity of the representation as at the time it was made and said he relied on three factors (which become four) supporting the view he said he had at the time he signed the statement of claim that the representations were made fraudulently with knowledge that they were false. First he referred to what he said was the first fixed lump sum tender of $14,800,000, although he had not seen it before the institution of the proceeding. Then he relied on the increase in the tender to approximately $15,000,000 which he also had not seen before the institution of the proceeding. This, notwithstanding its incorporation into the building contract with precedence over other documents which building contract he had been given on 9 December 1986. He relied on the fact that after this increased tender was submitted White was told there was no deal if the project could not be built for something like $13,500,000 and White thought about it overnight and said we believe we can build it for $13,500,000 - trust us and sign a cost‑plus contract. He also relied on what in fact occurred, namely that the work was not complete and had cost $20,000,000. This explanation is, in my view, an after‑thought and rationalisation by Mr Meadows and I reject it. There is no other evidence that he turned his mind to a pleading of fraud other than in the terms referred to in his letter of 18 December 1986. Also, this explanation is not supported by Mr Callinan. A consideration of the two tenders, in my view, would not have warranted the formulation of an opinion that a plea of fraud was arguable, especially in the circumstances in which the final figures which made up the components of the $13,375,000 came about. Mr Meadows had an inadequate basis prior to 23 December 1986 on which to consider whether fraud should be alleged. He had not taken any witness statements and although on 18 December 1986 he had called for Mr Bennett to prepare a spreadsheet showing amounts for budget, contracts let and amendments and variations, he did not receive that document until 28 January 1987. However he did not read it; had he done so he would have realised that the dispute between the parties had nothing to do with representations as to the cost of building but rather was concerned with whether items were properly classified as variations. Mr Meadows was asked in cross‑examination whether he could actually recall turning his mind at the time in December 1986 to what was the material which justified a plea of fraud with knowledge. He said he could only do so with great difficulty. The only written material he had was a copy of the contract and what he had been told by Messrs Bennett, Pearce, Perch and Poppleston. However what Mr Bennett told him was the only source of his knowledge of the pre‑contractual negotiations. Although he said he thought prior to the issue of proceedings that it was arguable that White's tender of $14,800,000 supported a conclusion that White lied, with knowledge, about its ability to construct the shopping centre for $13,375,000, he had not seen the tender and he had not expressed such a view to his client. Mr Meadows said he did not turn his mind to the issue of alleging fraud or revise the issue whether there were grounds for alleging fraud between the time of his conference with Mr Callinan and the institution of the proceeding. I am satisfied that Mr Meadows never turned his mind to whether there was sufficient or any material to justify a plea of fraud by Caboolture Park against White. It appears that the prospect of alleging fraud was raised by Mr Callinan in the conference on the evening of 17 December 1986, but the evidence does not disclose the basis or justification for raising it. Mr Meadows said in cross‑examination that a plea of fraud with knowledge had been "thrashed out" in the conference with Mr Callinan yet the letter of 18 December 1986 only said that fraud on the ground of recklessness may be available. There was no evidence given as to how a plea of fraud in any form had been thrashed out in the conference. Mr Meadows' diary note of the conference simply recites: "Conferring re position - s 52 action I.C. dictating letter from F&H to GH." Mr Callinan did not give evidence on this matter. The issue of fraud with knowledge could not have been "thrashed out" in the conference with Mr Callinan having regard to the reference to fraud on the ground only of recklessness in the letter of 18 December 1986 unless what had been thrashed out was that there was no basis for alleging fraud with knowledge. Nothing changed between the date of the letter and the filing of the statement of claim so far as further information or investigation was concerned other than the fact that Mr Callinan and Mr Perry had had discussions with Mr Poppleston and had seen some correspondence. However their references to those matters in the memorandum of 22 December 1986 make it clear that those matters did not support or warrant a plea of fraud. In his advice of 12 September 1988 Mr Callinan referred to the fact that "right at the outset" he had drawn attention to the insurmountable difficulty presented by the repeated and unquestioned payments by Caboolture Park far in excess of the target sum "unless fraud could be proved". But no evidence was led as to how, or in what circumstances, that matter had been drawn to Mr Meadows' attention or what was said about whether fraud could be proved. Mr Pearce said that HDC had not held the view in November or December 1986 that White had made misrepresentations or been guilty of fraudulent conduct. Mr Pearce said that prior to 9 December 1986 he did not suggest to Mr Meadows that there had been any misrepresentations made to HDC by White prior to entering into the contract which were false, misleading or fraudulent nor did HDC have any reason to make such a suggestion. Mr Pearce said further that when Mr Meadows came to Melbourne on 9 December 1986 to speak to Mr Pearce he did not suggest to Mr Meadows that Mr Herscu or Mr Bennett were saying that misrepresentations had been made by White to any HDC people prior to entering into the contract which were false, misleading, deceptive or fraudulent and he had no reason to do so. He did not hear Mr Bennett make any such suggestion. Neither Mr Herscu nor Mr Bennett had told Mr Pearce of any misrepresentations by White. Rather on 9 December 1986, Mr Herscu's complaint was that he had paid too much for the project and certainly did not want to pay any more. Mr Herscu's complaint related to whether the claims by White for money that had been made and were continuing to be made in relation to the project were properly payable under the contract. Mr Herscu's complaint was not about any misrepresentation or fraud that had been made to him by White prior to execution of the contract. The fact that a client does not make a specific complaint about, or couched in terms of, fraud is not conclusive of the issue that there is no factual basis for alleging fraud in a proceeding. The characterisation of a cause of action and the manner of its pleading is a function or task for a lawyer not for a client. Nevertheless it is a relevant matter for a lawyer to take into account in considering a cause or causes of action, to know what is the subject‑matter of the client's complaint. Notwithstanding the allegation in White's amended statement of facts and contentions that Flower & Hart delivered a statement of claim containing an allegation of fraud where there was no factual basis for making the allegation, neither Mr Meadows nor Mr Callinan in their affidavits sought to explain why that allegation was thought by them to be justifiable or arguable on the basis of the information and material available to them at the time. Nor did they proffer any evidence of what they had discussed in relation to the issue of fraud or of what advice Mr Callinan had given in relation to the issue of fraud. Mr Callinan in his first affidavit addressed the issue why he thought, in a qualified way, a cause of action under s 52 was arguable. He did not address in either of his affidavits how or why he formed the opinion (if indeed he had done so) that a cause of action in fraud or negligence was arguable. His only reference in his affidavit to a cause of action in negligence was to a cause of action in relation to gross overruns, not to a cause of action relating to negligent misrepresentation. Mr Meadows, in his affidavits does not address the issue as to how or why fraud came to be pleaded. Mr Sofronoff submitted that it was not for Flower & Hart to justify its conduct and that the issue of the failure of a witness to turn his mind to pleading fraud by deliberate falsehood should have been put to the witnesses. It was put specifically to Mr Meadows in cross‑examination and I have made findings in relation to that evidence. It was not put to Justice Callinan in cross‑examination but the issue was raised squarely in White's amended statement of facts and contentions and White's contentions of fact and law. Mr Sofronoff submits that the fair inference, in the absence of any controversy during cross‑examination, is that as the possibility of pleading fraud on the ground of recklessness having been raised and counsel having had the opportunity to speak with Mr Poppleston and consider such documents as they were given, counsel considered themselves justified to plead the allegations in the statement of claim they did. Justice Callinan did not give evidence to this effect. It is then submitted by Mr Sofronoff that Mr Callinan had said in his first affidavit that he thought there was an arguable case and that he could only have been referring to the case pleaded in the statement of claim including the plea of fraud. Mr Callinan did not refer in his affidavit to any cause of action based on fraud. The two references in his first affidavit to an arguable case are references to the s 52 cause of action. The first reference (paragraph 8) is made in the context of whether the fact that the target price had initially been suggested by Caboolture Park to White was fatal to a s 52 claim. The second reference (paragraph 11) is to his opinion that Caboolture Park had "a relatively weak but arguable case on the Section 52 claim". I am satisfied that Mr Callinan did not refer in his first affidavit to the fraud allegation or claim made in the statement of claim. Mr Sofronoff submitted that in the light of Mr Callinan's evidence that he thought there was an arguable case, his responsibility for drawing a pleading containing fraud and Mr Meadows' evidence of the matters he regarded as demonstrating that the representations were false to the knowledge of White, it would be an astonishing result if I reached the conclusion that nobody had addressed the issue of the justification for pleading fraud. But Flower & Hart has not led any evidence on that matter and the matter was only dealt with by Mr Meadows in cross‑examination in the manner to which I have referred. The burden of proof of establishing that fraud was pleaded without any factual basis for making the allegation lies on White. It is not for Flower & Hart to prove that there was a factual basis for alleging fraud. The documentary evidence which White tendered is such that it raises the issue that fraud was alleged without any factual basis for the allegation and it is open to me to infer from that documentation that fraud was pleaded without any factual basis for it. It is relevant to a consideration of that issue to know and understand how counsel and the solicitors saw the basis for the fraud pleading. In the absence of any evidence from them on that topic, raised squarely in White's amended statement of facts and contentions and White's contentions of fact and law, it is open for me to infer from the documentation that they did not at the time address the justification for pleading fraud. If I draw such an inference that assists me in reaching a conclusion that there was no factual basis for pleading fraud, certainly fraud with knowledge. Mr Callinan and Mr Perry in their memorandum of 22 December 1986 accompanying the application and statement of claim said that the client should be under no misapprehension that the case was "anything other than a relatively weak case." Mr Sofronoff submitted that this statement referred to the three causes of action, s 52, fraud and negligence (as it does) and that I should take this as evidence that Mr Callinan and Mr Perry had turned their minds to a consideration of whether there was a sufficient basis to plead fraud and in particular fraud with knowledge. Mr Callinan did not say so, although he did explain in his affidavit why he thought the s 52 case was arguable. Further, when one reads the memorandum as a whole it does not give any further support to the proposition that counsel had turned their minds to whether there was a factual basis for alleging fraud and had concluded that there was such a factual basis. The allegation of fraud is not referred to in the memorandum. Certainly the last paragraph of the memorandum gives no comfort for this proposition. Mr Sofronoff submitted that in the circumstances of the particular statement of claim filed on 23 December 1986 the s 52 case and the fraud allegation amounted to the same thing in that if there is a s 52 case, there must be a fraud case. There are two answers to this submission. The first is that there is no evidence that anyone held this view at the time. Indeed the letter of 18 December 1986, in its terms, drew a distinction between a s 52 claim and a fraud claim. Secondly it is not correct as a proposition of law in the circumstances of this case. The representations pleaded on in the statement of claim as filed were such that there may have been a finding that there was no reasonable basis for the representations but also a finding that the views expressed were honestly held. It is also relevant to note that the s 52 claim identified in the letter of 18 December 1986 was a claim based on a representation that the components of the target price were reasonable when they were not. This is quite a different cause of action to the fraud allegation on the ground of recklessness that may be available. I decline to draw the inference that counsel considered there was a justification and factual basis for pleading fraud on any of the bases pleaded. That is not a matter which should be the subject of a finding based on an inference. This is particularly so where the allegation has been specifically made in White's amended statement of facts and contentions that there was no factual basis for making the allegation of fraud in the statement of claim. Flower & Hart and its witnesses were on notice of that allegation as well as being on notice of the documents on which White intended to rely, particularly Mr Meadows' letter of 18 December 1986 and the memorandum accompanying the application and statement of claim from Mr Callinan and Mr Perry. It would have been simple and straight forward in those circumstances for Mr Callinan and/or Mr Perry to set out the basis for which, or the chain of reasoning by which, they pleaded fraud or at least fraud with knowledge. They did not do so. I make these observations, conscious, as I have noted earlier, that the burden of proof lies on White to prove that fraud was pleaded where there was no factual basis for the allegation. The burden is not on Flower & Hart to disprove the allegation; that is to say the burden of proof does not lie on Flower & Hart to prove that there was a factual basis for the allegation of fraud. I consider that the circumstances involved entitle me to draw in aid and apply the principles in Jones v Dunkel (1959) 101 CLR 298. Although that case was concerned with a trial arising out of a motor car collision where the driver of the defendant's car was not called to give evidence as to how the accident occurred the principles relied on and applied by Windeyer J are, in my opinion, applicable to a situation where a witness is put on notice of an issue, there is some evidence from which a conclusion can be drawn about the issue and the party calling the witness and the witness do not address the issue in their evidence‑in‑chief. In such circumstances it is then open to the Court to infer that the witness' evidence on that issue would have been unfavourable to the party calling that witness. Windeyer J said at 320 ‑ 321: "Then, I think, his Honour should, when the juryman asked his question, have given an answer in accord with the general principles as stated in Wigmore on Evidence 3rd ed. (1940) vol.2, s.285, p.162 as follows: 'The failure to bring before the tribunal some circumstance, document, or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so, and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavourable to the party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanation by circumstances which made some other hypothesis a more natural one than the party's fear of exposure. But the propriety of such an inference in general is not doubted.' This is plain commonsense. If authority be needed, two passages from R v Burdett (1820) 4 B & Ald 95 may be cited. Abbott C.J. said: 'No person is to be required to explain or contradict, until enough has been proved to warrant a reasonable and just conclusion against him, in the absence of explanation or contradiction; but when such proof has been given, and the nature of the case is such as to admit of explanation or contradiction, if the conclusion to which the proof tends be untrue, and the accused offers no explanation or contradiction; can human reason do otherwise than adopt the conclusion to which the proof tends? The premises may lead more or less strongly to the conclusion, and care must be taken not to draw the conclusion hastily; but in matters that regard the conduct of men, the certainty of mathematical demonstration cannot be required or expected.' And Best J. said: 'Nor is it necessary that the fact not proved should be established by irrefragable inference. It is enough, if its existence be highly probable, particularly if the opposite party has it in his power to rebut it by evidence, and yet offers none; for then we have something like an admission that the presumption is just.'" This approach was taken by Handley JA in Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 where the issue was whether the owner of a crane could have obtained insurance for the crane as a registered vehicle without an endorsement excluding liability for loss or damage to the crane resulting from overturning arising out of the operation of the crane. The majority of the Court, Kirby P and Handley JA found that Commercial Union would have cancelled the existing policy and would not have accepted any further risk of damage to the crane by overturning. That is to say, they declined to infer that the owner of the crane could and would have obtained insurance cover for the crane without the endorsement. Handley JA adopted and applied the principles in Jones v Dunkel (supra) in the following way (at 418‑ 419): "As I have already said the insured made no attempt to prove that it could and would have obtained cover for this mobile crane without the endorsement by pursuing the course that Mr Hughes said would alone have achieved that result. In my opinion the Court should not draw inferences favourable to the insured on these matters when no attempt was made to prove them by direct evidence and in particular when no relevant questions were asked of Mr Ferrarese. Rather it seems appropriate to apply the principles of Jones v Dunkel (1959) 101 CLR 298. There appears to be no Australian authority which extends the principles of Jones v Dunkel to a case where a party fails to ask questions of a witness in chief. However I can see no reason why those principles should not apply when a party by failing to examine a witness in chief on some topic, indicates 'as the most natural inference that the party fears to do so'. This fear is then 'some evidence' that such examination in chief 'would have exposed facts unfavourable to the party': see Jones v Dunkel (at 320‑321) per Windeyer J. Moreover in Ex parte Harper; Re Rosenfield [1964‑5] NSWR 58 at 62, Asprey J, citing Marks v Thompson 1 NYS 2d 215 (1937) at 218, held that inferences could not be drawn in favour of a party that called a witness who could have given direct evidence when that party refrained from asking the crucial questions. There is in fact extensive case law in the United States on this question although it is not referred to in Wigmore, Evidence, 3rd ed (1940). It may be found summarised in 5 ALR 2d, par 25 at 949‑951. One of the leading cases is Milliman v Rochester Ry Co 3 App Div 109; 39 NYS 274 (1896), a decision of the Appellate Division of the Supreme Court of New York. The judgment of the Court was give by Follett J who said (at 276): 'In case a litigant fails to produce a person known to be friendly to him and to his cause, who is so situated that he must have knowledge of the facts in issue, the jury is permitted to presume that the testimony of that person would have been favourable to the party ... The existence of this rule is not disputed but it is urged that it is not applicable to this case because the daughter was produced as a witness, and that no presumption arises from the plaintiff's failure to interrogate her, that her testimony would have been unfavourable to him. I think the rule is as applicable to a case in which a party fails to interrogate a friendly witness, so situated as to be presumed to have knowledge of the existence or non‑existence of the vital facts in issue, as it is to the case of a failure to produce such a witness. Indeed I think the omission to interrogate a friendly witness in respect to facts presumably within his knowledge is more significant than the failure to call such a person as a witness, and that the presumption that the testimony would not have been favourable to the party's case is stronger than the one which arises from the failure to produce such a person as a witness.' The insured had no realistic option of leaving the crane unregistered. Mr Stenner, the driver, gave evidence that from about a week after the crane returned from Canberra he drove it 'approximately every day' from the insured's yard to a building site to do work. The insured would not have wished to lose the opportunities for the profitable hiring of the crane as a registered vehicle. Moreover Mr Ferrarese did not say in evidence that he would have de‑registered the mobile crane if the appellant had refused to withdraw the endorsement. There is a further difficulty. The trial judge said (at 75,812): '... Cover against loss or damage through overturning is clearly a vital aspect of the cover required for a crane, and I decline to conclude the [sic] Ferrcom would have done nothing.' In my opinion the trial judge fell into error in drawing the inference that the endorsement would not have been acceptable to the insured. Counsel for the injured did not ask Mr Ferrarese about this matter either in chief or in reply and did not cross‑examine Mr Green on the matter either. Moreover the insured did not call any representative of the broker to establish what the view the broker would have taken and what advice it would have given Mr Ferrarese. In these circumstances I do not consider that inferences should be drawn favourable to a party whose counsel refrained from asking any question on this topic. Again it appears to me that the principles earlier referred to derived from Jones v Dunkel and the decision of the Appellate Division of the Supreme Court of New York in Milliman v Rochester Ry Co are applicable, and indeed the proper inference is to the opposite effect of that drawn by the trial judge." (The decision of the Court of Appeal was upheld by the High Court: Ferrcom Pty Limited v Commercial Union Assurance Company of Australia Limited (1993) 176 CLR 332. The issue of the manner in which inferences may be drawn was not specifically addressed by the High Court but the inferences drawn by Handley JA were not disturbed.) I approach the issue before me in the same way and decline to infer that counsel and Mr Meadows considered there was a justification and factual basis for alleging fraud. The allegation was squarely raised and the documentation upon which White relies was exhibited before Mr Callinan and Mr Meadows each swore their second affidavit. They did not respond or refer to the allegation. Accordingly I do not consider that any inference favourable to those witnesses should be drawn when they either ignored or failed to deal with the issue. Consistently with the approach taken in Jones v Dunkel (supra) and taken by Handley JA in Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (supra), I consider that the appropriate inference to draw is that counsel and solicitors did not address the issue of the justification for pleading fraud and did not form a view that there was a factual basis for pleading fraud. It is a serious conclusion to reach that a solicitor or a counsel either settled, or approved and facilitated the issue of, a proceeding with an allegation of fraud, and in particular fraud with knowledge, without giving proper consideration to the justification for the pleading. This is particularly so when I am entitled to assume that the practitioners involved were well aware of their professional obligations when settling and instituting a claim for fraud. However I am satisfied on the evidence before me that that is what occurred between 17 and 23 December 1986. In the circumstances to which I have referred it is not unfair to draw that inference against Mr Meadows and Mr Callinan. In this context the rule in Browne v Dunn has not been breached. Mr Meadows was substantially reliant on counsel for the content of the statement of claim but that did not absolve him as a solicitor from an independent consideration of the justification for pleading fraud. The obligation cast on practitioners when considering an allegation of fraud is cast as much on solicitors as it is on counsel. Mr Meadows acknowledged this obligation when he said he would not make an allegation of fraudulent representation with knowledge of falsity without very careful consideration and taking very careful advice. However in the circumstances which existed between 17 and 23 December 1986 Mr Meadows did not give careful consideration to this issue and I am not satisfied that he took careful advice on the issue of pleading fraud, at least not in relation to pleading fraud with knowledge. I am satisfied that at the time the proceeding was instituted Mr Meadows did not turn his mind to the fact or significance of issuing a proceeding containing an allegation of fraud. He had only been told by Mr Callinan that fraud on the ground of recklessness may be available to be pleaded and he had passed this on to his client. There the matter rested. When the application and statement of claim were delivered by counsel I am satisfied that Mr Meadows did not turn his mind to the allegation of fraud, which had been raised and pleaded in the statement of claim. In short, Flower & Hart instituted a proceeding on behalf of its client alleging fraud when there was no factual basis for that allegation and in respect of a cause of action which it believed could not be won. Jurisdiction to award costs The Court's primary jurisdiction to award costs is found in s 43 of the Federal Court of Australia Act 1976 (Cth) which provides in subs (1): "Subject to subsection (1A), the Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded". This section confers jurisdiction on the Court to award costs not only against parties to proceedings but also against persons who are not parties to proceedings: Caboolture Park Shopping Centre Pty Ltd (In liquidation) v White Industries (Qld) Pty Ltd (supra), 229. Cf: Knight v FP Special Assets Limited (1992) 174 CLR 178, 185, 190, 192, 202; Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965, 979. In particular the Court has jurisdiction to order costs against solicitors representing parties in proceedings before it. This jurisdiction is based upon the ability of the Court to enforce duties owed by practitioners to the Court: Caboolture Park Shopping Centre Pty Ltd (In liquidation) v White Industries (Qld) Pty Ltd (supra), 231 ‑ 234; Myers v Elman (supra) 318 ‑ 319; Grassby v The Queen (1989) 168 CLR 1, 16 ‑ 17; Knight v FP Special Assets Limited (supra), 188. This jurisdiction is available notwithstanding the fact that the Federal Court does not maintain a roll of practitioners and does not have any strike off jurisdiction in relation to practitioners; it is available when practitioners appearing before the Court have acted with impropriety: Caboolture Park Shopping Centre Pty Ltd (In liquidation) v White Industries (Qld) Pty Ltd (supra), 233 ‑ 234. The primary object of the jurisdiction is to reimburse to a party to proceedings costs which that party has incurred because of the default of the practitioner, that is to say it is a jurisdiction which is compensatory rather than punitive or disciplinary: Myers v Elman (supra), 289, 319 (cf 303 per Lord Atkin at 303 who said that the jurisdiction was punitive); Davy‑Chiesman v Davy‑Chiesman [1984] Fam 48, 59, 60; Edwards v Edwards [1958] P 235, 248; Orchard v South Eastern Electricity Board [1987] 1 QB 565, 571; Michael v Freehill Hollingdale & Page (1990) 3 WAR 223, 233; Monitronix Ltd v Michael (1992) 7 WAR 195, 201. The judgments in Myers v Elman (supra) are not consistent particularly in relation to whether the relevant jurisdiction is compensatory or punitive but subsequent cases have proceeded on the basis that the jurisdiction is compensatory: Mauroux v Soc Com Abel Pereira da Fonseca SARL [1972] 1 WLR 962, 970; Currie & Co v The Law Society (supra) 997; Orchard v South Eastern Electricity Board (supra). There have been a number of formulations of the circumstances in which the jurisdiction is exercisable and enlivened. In Myers v Elman (supra) 319, Lord Wright said it is enlivened where a practitioner has conducted himself or herself in such a manner that the conduct involves: "… a failure on the part of a solicitor to fulfil his duty to the Court and to realise his duty to aid in promoting in his own sphere the cause of justice." (See also Currie & Co v The Law Society [1977] 1 QB 990, 997; Davy‑Chiesman v Davy‑Chiesman (supra) 66). Lord Wright had earlier said that: "A mere mistake or error of judgment is not generally sufficient, but a gross neglect or inaccuracy in a matter which it is a solicitor's duty to ascertain with accuracy may suffice."

In Myers v Elman (supra) at 292 Viscount Maugham agreed with the contention that the jurisdiction ought only to be exercised when there has been a "serious dereliction of duty". Lord Atkin at 302 referred to a duty to conduct litigation "with due propriety" (see also Re Bendeich (No 2) (supra) 427; Orchard v South Eastern Electricity Board (supra); Edwards v Edwards (supra) 247). However, what amounts to a serious dereliction of duty will vary from case to case and there are many variations on this theme. In Re Bendeich (No 2) (supra) at 427, Drummond J said: "Lawyers should know that, so long as they are not guilty of either professional misconduct or gross, as opposed to mere, negligence in the way they conduct their client's case, they will not be exposed to any personal liability to pay either the costs of their own client or those of the opposing litigant." His Honour relied on Myers v Elman (supra) as "a sound guide to the circumstances in which it will be proper under s 43 of the Federal Court of Australia Act and under s 32 of the Bankruptcy Act to make an order against a solicitor". In Davy‑Chiesman v Davy‑Chiesman (supra) at 67 Dillon LJ (with whom Sir John Donaldson MR agreed) said that what had to be shown was that the solicitor had been guilty of a serious dereliction of duty or serious misconduct and that unreasonably to initiate or continue an action when it has no or substantially no chance of success might constitute conduct attracting the exercise of the jurisdiction (see also Orchard v South Eastern Electricity Board (supra) 572; De Sousa v Minister for Immigration, Local Government and Ethnic Affairs (1993) 41 FCR 544, 548; Monitronix Ltd v Michael (supra) 200). However in order to make out a serious dereliction of duty it is likely that gross negligence or misconduct will need to be established: Myers v Elman (supra) 304, 319; Re Bendeich (No 2) (supra) 427. More recently in De Sousa v Minister for Immigration, Local Government and Ethnic Affairs (supra) at 548, French J regarded a "serious failure to give reasonable attention to the relevant law and facts" as amounting to a serious dereliction of duty. Commencing or continuing proceedings with no or substantially no prospects of success There have been dicta in a number of cases which have suggested that commencing or maintaining proceedings with no or no substantial prospects of success enlivens the jurisdiction to order a solicitor to pay the costs of a party. However, a proposition expressed so broadly must be treated with considerable caution as it exposes a tension with the important right of a person to have a case conducted in the courts irrespective of the view which his or her legal adviser has formed about the case and its prospects of success. The courts must be open to any party who claims that he or she has been wronged and seeks to vindicate a right or to compel the enforcement of an obligation. In such circumstances clients should be entitled to expect that the practitioners acting for them will conduct their litigation without any conflict of interest and with a view, consistently with their duty to the court, to putting the client's case as instructed. A practitioner should not be looking over his or her shoulder wondering whether what the practitioner proposes to do as part of the strategy, tactics and conduct of the litigation may result in the practitioner being visited with a costs order (cf Ridehalgh v Horsefield [1994] Ch 205, 226). Ordinarily, such a situation would be quite oppressive and unacceptable in the court system as we presently know it. Nevertheless, practitioners have a duty to the court to ensure that the court's process is not abused and used for improper or ulterior purposes. I consider there are limitations on the proposition that commencing or maintaining proceedings which have no or substantially no prospects of success may result in a costs order being made against a practitioner. Something more must be added to the equation such as, for example, an ulterior purpose, abuse of process or a serious dereliction of duty. However, before turning to these issues it is necessary to analyse those cases from which it is said that this proposition is derived. In Edwards v Edwards (supra) a wife, legally aided, commenced proceedings for maintenance against her husband on the basis that there had been a wilful neglect to maintain her. Discovery was ordered and inspection carried out. The documents discovered showed that the wife's case would fail. The husband's solicitor wrote to the legal aid area committee and submitted there was no basis for the proceedings to continue. The wife's solicitor appeared before the committee and the legal aid certificate remained in force. The wife's claim was dismissed on the basis that on the facts it was hopeless to argue that prior to the issue of the proceedings there was any wilful neglect to maintain the wife. The husband applied for an order that the wife's solicitors should pay all the husband's costs or alternatively those incurred after discovery. Sachs J observed that the jurisdiction invoked was that discussed in Myers v Elman (supra) and said at 248: "It is, of course, axiomatic, but none the less something which in the present case should be mentioned, that the mere fact that the litigation fails is no reason for invoking the jurisdiction: nor is an error of judgment: nor even is the mere fact that an error is of an order which constitutes or is equivalent to negligence. There must be something that amounts, in the words of Lord Maugham, to 'a serious dereliction of duty,' something which justifies, according to other speeches in that case, the use of the word 'gross.' It is not, however, normally necessary to establish mala fides or other obliquity on the part of the solicitors; though it may be that if mala fides is established that might turn the scale in a particular case: and it is right at this stage to make it clear that no imputation whatever is made against the solicitor's honesty. No definition or list of the classes of improper acts which attract the jurisdiction can, of course, be made; but they certainly include anything which can be termed an abuse of the process of the court and oppressive conduct generally. It is also from the authorities clear, and no submission to the contrary has been here made, that unreasonably to initiate or continue an action when it has no or substantially no chance of success may constitute conduct attracting an exercise of the above jurisdiction." I draw attention to, and emphasise, the term "unreasonably" in this passage as Sachs J required something more than the initiation of an action when it has no chance of success. Of course, he said that those circumstances "may" constitute conduct attracting the exercise of the jurisdiction. Sachs J was not prepared to hold that the solicitor's action in commencing the proceedings was such as to require the solicitor to pay the costs ab initio but his Lordship then asked the question whether at some stage during the proceedings "it became plain, on the material available, that it had no prospects of success which would justify its continuance". Sachs J concluded that the case before him was "a classic one of a change in position on discovery". He noted at 253 that the position: "… cried aloud for careful appraisement in the light of proper and sufficient analysis of the documents disclosed on discovery". Sachs J said that the solicitor went to the Legal Aid area committee to continue the assistance "whilst in an angry mood" and without having made the analyses required by the discovery. He continued at 254: "He chose to form in an incensed frame of mind a strong opinion that there remained a good case and that he would proceed: no careful and considered appraisement with properly examined figures was ever made. Unfortunately the opinion thus formed by the solicitor was wrong. But it was worse than that. It was an opinion that a solicitor, examining the matter with the aid of proper use of the material I have mentioned, could not reasonably have reached once he had been into the situation with appropriate care. The opinion indeed turned out, when the facts were analysed sufficiently, to be grossly wrong; chances of success did not really then exist at all." Sachs J required the solicitor to pay the costs incurred after discovery because he concluded that the solicitor had acted unreasonably. The plaintiff wife in the proceedings was legally aided and relevant Legal Aid regulations required solicitors to cease acting in litigation when it became apparent that there were no longer reasonable grounds for taking the proceedings. It is implicit in Sachs J's reasoning that the solicitor had acted wilfully in failing to recognise the hopelessness of the case. Although the issue arose in the context of a legally aided plaintiff I do not consider that Sachs J's statement of principle is to be limited to cases involving legal aid. Nor is the principle to be limited, as Mr Sofronoff submitted, to situations where the litigation is being conducted at the instigation of the solicitor. In Edwards v Edwards (supra), the solicitor being very angry, wanted to push the case on. But he did not suffer the costs order for that reason but rather because he acted unreasonably in failing to give careful consideration to the documents obtained on discovery and what those documents disclosed. The fact that what the solicitor did was done for the lay client did not justify what Sachs J called "oppressive procedure running the husband into ever‑increasing costs" (258). In Currie & Co v The Law Society (supra) the Court was concerned whether there could be a set off in relation to orders for costs where an order was made personally against a solicitor pursuant to a County Court rule which predicates an order for costs against a solicitor on the costs having been incurred "improperly or without reasonable cause or wasted by undue delay or by any other misconduct or default". May J identified the jurisdiction over solicitors in this context in the following terms (997): "The jurisdiction is in my opinion both punitive and compensatory in this sense: where the costs of litigation are unnecessarily increased by the substantial failure on the part of a solicitor to fulfil this duty to the court to promote in his particular sphere the cause and proper administration of justice, then the court will require him to compensate those who have incurred costs which they would not otherwise have incurred but for such failure by that solicitor, or whose costs have been similarly increased thereby; and as those costs have to be paid by the solicitor personally, and not by the party to the litigation who would otherwise have to pay them, the order is in that sense and to that extent punitive."

In Davy‑Chiesman v Davy‑Chiesman (supra) a proceeding by a bankrupt husband, granted legal aid, seeking financial provision from his former wife was dismissed. Legal aid had been granted on the basis that although any lump sum paid direct to the husband would be appropriated by his trustee in bankruptcy for the benefit of his creditors, an application that money be settled on trustees for the purpose of purchasing a home for himself and the child of the marriage could succeed. Legal aid was granted accordingly. Counsel advised that the application should be for a lump sum payable direct to the husband and informed the judge that that was what he was pursuing. The husband in the course of evidence said that he was not asking for a lump sum for himself but for money to enable him to purchase a home in which he could live and have for access to his child. The judge informed counsel that the only application before the Court was for a lump sum payment to the husband direct and that all other claims for financial provision had been expressly abandoned and he adjourned the proceeding to enable counsel to reconsider the matter with the husband and the solicitor. Although the husband was willing to abandon the application, counsel insisted on continuing with the claim and the solicitor did not inform the Law Society of the situation. The judge concluded that the application was without merit, should not have been made or pursued to a conclusion and he dismissed it whereupon the unassisted wife asked for her costs to paid out of the Legal Aid fund. The Law Society issued an application under RSC O 62 r8 for the husband's and wife's costs to be paid personally by the husband's solicitor. Order 62 r8 empowered the Court to order a solicitor to pay costs where they were incurred improperly or without reasonable cause or were wasted by undue delay or by any other misconduct or default of the solicitor. The trial judge held that the solicitor was entitled to rely on counsel's advice and was under no duty to report the matter to the Law Society unless so advised by counsel. He dismissed the application. On appeal, the Court of Appeal found that the solicitor had a duty to inform the Law Society of any change of circumstances which could affect the assisted husband's prospects of success which was independent of the duty owed by counsel to advise that the Law Society be informed and that in the circumstances the solicitor's failure to notify the Law Society was a serious dereliction of duty and that the Court should exercise its jurisdiction under O 62 r8. May LJ, with whom Sir John Donaldson MR agreed, said at 66: "I cannot avoid the conclusion, differing respectfully from the judge, that this solicitor did abdicate responsibility for his proper part and role in the relevant litigation. I think that he relied blindly and with no mind of his own on counsel's views upon which, it must or ought to have been apparent to him, some question should have been raised. In my judgment this failure by the solicitor to question counsel's advice, let alone to report the situation on his own to the legal aid committee, as in any event I think that he should have done, was a substantial failure on his part to fulfil his duty to the court to promote in his particular sphere the cause of and proper administration of justice." His Lordship's reasoning was very much influenced by the Legal Aid context in which the issues had arisen but his statements of principle are not to be so limited. At 62 his Lordship said: "Just as in a case where the client will be paying for any litigation himself, solicitor or counsel instructed on behalf of the client seeking legal aid should only advise litigation where there is a reasonable chance of success. They have to balance on the one side the extent of the chance of success and the amount that will be recovered if litigation in fact succeeds, against the extent of the chance of failure on the other side and what the client would have to pay by way of costs, of both parties, if the litigation should so fail."

Dillon LJ (with whom Sir John Donaldson MR also agreed) in the course of considering the jurisdiction of the Court to order the solicitor for a party to pay the costs of the parties to the proceedings said: "Unreasonably to initiate or to continue an action when it has no or substantially no chance of success may constitute conduct attracting an exercise of the above jurisdiction". His Lordship held that the solicitor was not exonerated by acting in accordance with the advice of counsel and that the solicitor's failure to report the matter to the Law Society was a serious dereliction of duty or serious misconduct. Dillon LJ held the solicitor liable to pay the costs because the husband's case was fundamentally flawed. He said (68 ‑ 69): "In the present case, however, it must have been glaringly apparent to any reasonable solicitor, at or shortly after the conference of 19 April 1982, and it was, I think fully understood by this solicitor, that the form of relief for which alone counsel was going to ask fell foul of the fundamental requirement that because of the bankruptcy any capital sum would not go direct to the husband, and was indeed the one form of relief which counsel had in the clearest terms rejected in his opinion of 2 March 1982. In these circumstances the solicitor was at that stage guilty of 'a serious dereliction of duty' or 'serious misconduct' and I am unable to agree with the judge that it is sufficient to absolve the solicitor that he acted in accordance with the advice of counsel. I would accordingly hold that a case for exercising the court's jurisdiction over solicitors in respect of costs is made out at this stage. A fortiori is such a case made out at the later stage when on the second day of the trial and whilst the husband was giving evidence the judge adjourned for a short time in order that counsel, the solicitor and the husband could take stock of the position. It was then plain to the husband that the application was going to fail. It must have been equally plain to the solicitor. The husband was willing to abandon the application. Yet it was unreasonably continued for a further two days' contested hearing, and the legal aid committee was never informed of what was happening. The continuation was at the insistence of counsel, but since, on the evidence before us, counsel offered no rational explanation of how he was going to get over the difficulty to which the judge had drawn attention - that a capital sum paid to the husband, which was all that was being asked for, would be seized by the trustee in bankruptcy - I cannot see that it can in the circumstances exonerate the solicitor that he acted on the advice of counsel."

The circumstances in Davy‑Chiesman v Davy‑Chiesman (supra) were quite extreme as the application persisted in by counsel was absolutely hopeless. However, the solicitor did not bring his own independent mind to the issue or consider the matter himself and thereby failed to fulfil his duty to the court. It followed that he had unreasonably continued the litigation when it had no chance of success. In Orchard v South Eastern Electricity Board (supra) the decisions in Edwards v Edwards (supra) and Davy‑Chiesman v Davy‑Chiesman (supra) were applied. A legally aided plaintiff brought an action for damages against the Electricity Board alleging defects in the electricity supply to his house which was causing a number of bizarre physical phenomena. On the plaintiff's instructions there was a case and it was supported by independent expert evidence. In fact the claim was bogus and contrived, the bizarre physical phenomena being caused by the plaintiff and his family. The claim was dismissed. The defendant applied for an order under RSC O 62 r8 that the plaintiff's solicitors pay their costs, which application was dismissed by the trial judge. The Court of Appeal dismissed the defendant's appeal on the ground that legal aid had been properly granted and that the solicitors and counsel had acted properly. In substance the Court of Appeal held that it was not the duty of a solicitor to assess the result of a conflict of evidence or to impose a pre‑trial screen on a litigant's claim or defence. Sir John Donaldson MR referred to Edwards v Edwards (supra) and Davy‑Chiesman v Davy‑Chiesman (supra) and observed (at 572) that: "The jurisdiction could only be invoked in the case of serious misconduct and the initiation or continuance of an action when it has no or substantially no chance of success might constitute such misconduct: per Dillon L.J. at p. 67." To the extent that his Lordship was purporting to quote from Dillon LJ's judgment in Davy‑Chiesman v Davy‑Chiesman (supra) he omitted to use the word "unreasonable" when he referred to "the initiation or continuance of an action". Dillon LJ had referred to the unreasonable initiation or continuation of an action when it had no or substantially no chance of success. Sir John Donaldson MR continued (572): "That said, this is a jurisdiction which falls to be exercised with care and discretion and only in clear cases. In the context of a complaint that litigation was initiated or continued in circumstances in which to do so constituted serious misconduct, it must never be forgotten that it is not for solicitors or counsel to impose a pre‑trial screen through which a litigant must pass before he can put his complaint or defence before the court. On the other hand, no solicitor or counsel should lend his assistance to a litigant if he is satisfied that the initiation or further prosecution of a claim is mala fide or for an ulterior purpose or, to put it more broadly, if the proceedings would be, or have become, an abuse of the process of the court or unjustifiably oppressive."

Sir John Donaldson MR rejected the proposition that the plaintiff's solicitors owed a duty so to act as to protect the defendant from the expenses of defending a hopeless claim but did accept that: "… the plaintiff's solicitors had a duty not to further a claim which could be characterised as an abuse of the process of the court …" (575)

Dillon LJ noted the limitations on the obligations of solicitors and counsel in these terms, at 579: "It may well be the duty of counsel primarily, but also of the solicitor with due regard to the views expressed by experienced counsel, to weigh the evidence available to his client, if a plaintiff, to see whether the plaintiff's claim raises a triable issue. It is not the duty of the solicitor to endeavour to assess the result where there is a likelihood of a conflict of evidence between his client's witnesses and those of the other side."

Dillon LJ restated his formulation in Davy‑Chiesman v Davy‑Chiesman (supra) saying that: "The power of the court to order a solicitor to pay the costs personally where litigation has been initiated or continued unreasonably when it had no or substantially no chance of success is, in an appropriate case, a very salutary power." (p580)

Although it was a bizarre case there was no evidence that the solicitors were aware that the phenomena were contrived nor was there any evidence that they had not investigated or prepared the case properly. In De Sousa v Minister for Immigration, Local Government and Ethnic Affairs (supra) French J ordered the applicant's solicitor to pay three‑quarters of the costs of the respondent on the basis that the application lodged by the solicitor on behalf of the applicant for a temporary entry permit: "… reflected a serious failure to give reasonable attention to the relevant law and facts as did the proceedings instituted in this Court". (548) His Honour referred to Edwards v Edwards (supra) and Orchard v South Eastern Electricity Board (supra) and held that the mere fact that litigation fails is no ground for the exercise of the jurisdiction to order costs against a solicitor and that there has to be something which amounts to a serious dereliction of duty. His Honour referred to Edwards v Edwards (supra) at 248 which I take to be a reference to the passage which I have cited on page 92 of these reasons. His Honour therefore, appeared to have adopted the proposition that unreasonably to initiate or continue an action when it has no or substantially no chance of success constituted conduct attracting the exercise of the jurisdiction. The authorities do not support the proposition that simply instituting or maintaining a proceeding on behalf of a client which has no or substantially no prospect of success will invoke the jurisdiction. There must be something more namely, carrying on that conduct unreasonably. It is not clear what is encompassed by "unreasonably" initiating or continuing proceedings if they have no or substantially no chance of success. It seems to me that it involves some deliberate or conscious decision taken by reference to circumstances unrelated to the prospects of success with either a recognition that there is no chance of success but an intention to use the proceeding for an ulterior purpose or with a disregard of any proper consideration of the prospects of success. Expressing the principle this way accommodates the competing principle that a party is entitled to have a practitioner act for him or her even in an unmeritorious case. This principle was expressed succinctly in Ridehalgh v Horsefield (supra) at 233 ‑ 234: "A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he acts for a party who pursues a claim or defence which is plainly doomed to fail. ... Legal representatives will, of course, whether barristers or solicitors, advise clients of the perceived weakness of their case and of the risk of failure. But clients are free to reject advice and insist that cases be litigated. It is rarely if ever safe for a court to assume that a hopeless case is being litigated on the advice of the lawyers involved. They are there to present the case; it is (as Samuel Johnson unforgettably pointed out) for the judge and not the lawyers to judge it. It is, however, one thing for a legal representative to present, on instructions, a case which he regards as bound to fail; it is quite another to lend his assistance to proceedings which are an abuse of the process of the Court. Whether instructed or not, a legal representative is not entitled to use litigious procedures for purposes for which they were not intended, as by issuing or pursuing proceedings a case known to be dishonest, nor is he entitled to evade rules intended to safeguard the interests of justice, as by knowingly failing to make full disclosure on ex parte application or knowingly conniving at incomplete disclosure of documents. It is not entirely easy to distinguish by definition between the hopeless case and the case which amounts to an abuse of the process, but in practice it is not hard to say which is which and if there is doubt the legal representative is entitled to the benefit of it."

Ridehalgh v Horsefield (supra) involved a consideration of six different cases in which orders had been made in favour of parties that the opposing party's solicitors personally pay "wasted costs" pursuant to s 51(6) of the Supreme Court Act 1981 (as substituted by Courts and Legal Services Act 1990 s 4) on the ground that the costs had been incurred as a result of improper, unreasonable or negligent acts or omissions on the part of the solicitors and that the Court should consider it unreasonable to expect that party pay those costs. The Court had been told that the number and value of wasted costs orders applied for and the costs of litigating them had risen sharply and the Court of Appeal was concerned to lay down general principles applicable to the jurisdiction. Notwithstanding the statutory basis of the jurisdiction which exists in England there are statements of principle in the decision which are relevant to the Australian jurisdiction. The Court of Appeal cited, without disapproval, Edwards v Edwards (supra), Davy‑Chiesman v Davy‑Chiesman (supra) and Orchard v South Eastern Electricity Board (supra). There is nothing in the decision which detracts from the principles in these cases. Those principles are, put shortly, that a solicitor does not act improperly or in breach of his or her duty to the Court by acting for a party with a hopeless case. In order to affix liability for costs to a solicitor there must be something further added in the nature of acting unreasonably or for reasons unconnected with success in the litigation or for an otherwise ulterior purpose resulting in an abuse of process or in circumstances resulting in a serious dereliction of duty or serious misconduct in promoting the cause of and the proper administration of justice. I do not accept the submission advanced by White that the law is that because a solicitor's duty is to the Court he or she should refuse to pursue, on behalf of a client, a case which he or she knows to be hopeless, nor do I accept that Myers v Elman (supra), Edwards v Edwards (supra) and Currie & Co v The Law Society (supra) support this submission; something further is required. It is likely that the fact that a client insists on pursuing a hopeless case will raise an issue or enquiry as to whether the reason for pursuing the case is the pursuit of an ulterior purpose. However, an ulterior purpose or an abuse of process cannot, in my opinion, be assumed simply because of the fact that the case is hopeless. A more recent example of a costs order being made in favour of a defendant against the plaintiff's solicitors is Tolstoy‑Miloslavsky v Aldington [1996] 1 WLR 736. Although the order ultimately made was pursuant to the wasted costs provisions of s 51(6) and (7) of the Supreme Court Act 1981 (as substituted by Courts and Legal Services Act 1990 s 4(1)) the reasoning of the Court of Appeal is of assistance in determining the content of an "unreasonable" issue or continuation of proceedings. The defendant had recovered substantial damages in a libel action against the plaintiff but the plaintiff was impecunious. The plaintiff issued a subsequent writ seeking an order that the judgment be set aside on the ground of fraud. The claim was held to be hopeless and was struck out as an abuse of process and the defendant applied for an order that the plaintiff's solicitors pay his costs. For relevant purposes the Court of Appeal held that the solicitors' conduct was unreasonable within the terms of s 51(6) of the Supreme Court Act 1981. Rose LJ reached his conclusion not on the basis alone that the case was hopeless but because of the background circumstances to the case which led him to the conclusion that there was an abuse of process. He said at 747: "In my judgment, no solicitor in the position of the appellants, taking these factors into account, could, notwithstanding that counsel had put their names to the statement of claim, reasonably have instituted these proceedings." The factors included that because it was the second if not the third occasion on which Count Tolstoy had sought by litigation to defeat Lord Aldington in relation to the same matter, it was to that extent at least potentially vexatious; Count Tolstoy had bought the cause of action from his trustee in bankruptcy and had not paid any of the damages awarded in the initial libel action; the proceeding was prima facie an abuse because it was a collateral attack on the judgment of a court of competent jurisdiction; the allegation of perjury and fraud was made on a manifestly insubstantial basis. Roch LJ said at 749: "Considering the evidence and material that was placed before the deputy judge on that occasion, in my judgment it must have been glaringly obvious to any competent legal representative that there was no basis for this second action and that the second action had no prospects of success; that to commence these proceedings would be a clear case of an unjustifiable conduct of litigation. This claim ... was 'wholly without merit and amounted to an abuse of process.'" Ward LJ concluded that not only was the case hopeless but that it was vexatious and was an abuse of the procedure of the Court. In Cahill v Eckstein (unreported, New South Wales Supreme Court, Smart J, 5 June 1998) solicitors instituted proceedings on behalf of the plaintiff in the District Court against the local council in respect of injuries caused to the plaintiff when he slipped on the footpath outside his home. The plaintiff changed solicitors in 1993 and the proceedings were resolved by consent in favour of the council. The plaintiff sued his former solicitors for negligence in the Supreme Court and that proceeding was dismissed. The defendant solicitors applied for an order that the plaintiff's solicitors pay their costs personally. Smart J found that after certain documents were disclosed to the plaintiff's solicitor, the plaintiff and his solicitor realised that the case could not be won. His Honour concluded that after a reasonable time had elapsed thereafter to enable the plaintiff to settle the matter it was wrong for the solicitor to continue to act for the plaintiff. His Honour said at 11: "In my opinion it was seriously wrong for Mr Firth to continue to act in the prosecution of the action against the defendants as from the beginning of 1996. He should have declined to act further. The plaintiff should pay the costs of the defendants up to and including 31 December 1995 and Mr Firth should pay them as from 1 January 1996." His Honour cited passages from Edwards v Edwards (supra) at 248 and Orchard v South Eastern Electricity Board (supra) at 572 (per Sir John Donaldson) and 579 (per Dillon LJ) and agreed with them. However it is not clear on what principle he found that the solicitor was liable to pay the defendants' costs. Because of the applicable Rule of Court his Honour had power to award costs against the solicitor if "incurred improperly or without reasonable cause or are wasted by undue delay or by any other misconduct or default." His Honour concluded that it did not matter whether he proceeded under the Rules or the Court's supervisory jurisdiction over its officers. It would appear that his Honour proceeded on the basis that it was simply wrong for the proceeding to continue and for the solicitor to conduct it when it became apparent that the case could not be won. However I would suggest that the cases and the jurisdiction require more than just a hopeless case before the jurisdiction is invoked, that is to say it is necessary to establish an ulterior purpose, an abuse of process or an unreasonable continuation of proceedings which have little or no prospects of success. This analysis of the cases makes it clear that the jurisdiction to order costs against an unsuccessful party's solicitors is enlivened when they have unreasonably initiated or continued an action when it had no or substantially no prospects of success but such unreasonableness must relate to reasons unconnected with success in the litigation or to an otherwise ulterior purpose or to a serious dereliction of duty or serious misconduct in promoting the cause of and the proper administration of justice. Further, the cases establish the proposition that it is a relevant serious dereliction of duty or misconduct not to give reasonable or proper attention to the relevant law and facts in circumstances where if such attention had been given it would have been apparent that there were no worthwhile prospects of success. Abuse of process A number of the authorities to which I have referred also make it clear that a solicitor may be liable to a costs order where his or her conduct amounts to an abuse of process of the Court: Edwards v Edwards (supra), 248; Ridehalgh v Horsefield (supra), 234; Orchard v South Eastern Electricity Board (supra) 572; Tolstoy‑Miloslavsky v Aldington (supra) 750. The concept of "abuse of process" in this context involves a party using court proceedings and procedures for a purpose unrelated to the objectives which the Court process is designed to achieve. The concept of "abuse of process" was considered extensively by the High Court in Williams v Spautz (1992) 174 CLR 509. The decision makes it clear that: "central to the tort of abuse of process is the requirement that the party who has instituted the proceeding has done so for a purpose or to effect an object beyond that which the legal process offers." (per Mason CJ, Dawson, Toohey and McHugh JJ at 523). It is the predominant purpose of the litigation which is the relevant criterion and it is not necessary for the improper purpose to be the sole purpose of the litigation before abuse of process can be established: Metall & Rohstoff v Donaldson Inc [1990] 1QB 391, 469; Williams v Spautz (supra) 529. It is important to distinguish between the motive for a proceeding and the purpose of the proceeding because it is the purpose of the proceeding rather than the motivation for it which establishes the abuse where that purpose is to obtain relief not within the scope of the remedy available within the proceedings: Williams v Spautz (supra) at 529, 534 - 535. The essence of the tort of abuse of process being the use of legal process in order to accomplish an extraneous purpose was recently restated by the Full Court of the Federal Court in Emanuele v Hedley & Ors (unreported, Wilcox, Miles and RD Nicholson JJ, 19 June 1998,) at 16. A similar approach has been taken in the United Kingdom. In Goldsmith v Sperrings Ltd [1977] 1 WLR 478 the majority of the Court of Appeal held that the plaintiff's purpose in pursuing actions against a number of secondary distributors of the "Private Eye" magazine was to vindicate and to protect his reputation by the use of all remedies afforded him by the law which purpose could not be an abuse of the Court's process. The Court relied upon the following passage from the judgment of Lord Evershed MR in In Re Majory [1955] Ch 600 at 623: "… court proceedings may not be used or threatened for the purpose of obtaining for the person so using or threatening them some collateral advantage to himself, and not for the purpose for which such proceedings are properly designed and exist …" Bridge LJ understood "collateral advantage" as follows (503): "The phrase manifestly cannot embrace every advantage sought or obtained by a litigant which it is beyond the court's power to grant him. Actions are settled quite properly every day on terms which a court could not itself impose upon an unwilling defendant. An apology in libel, an agreement to adhere to a contract of which the court could not order specific performance, an agreement after obstruction of an existing right of way to grant an alternative right of way over the defendant's land - these are a few obvious examples of such proper settlement. In my judgment, one can certainly go so far as to say that when a litigant sues to redress a grievance no object which he may seek to obtain can be condemned as a collateral advantage if it is reasonably related to the provision of some form of redress for that grievance. On the other hand, if it can be shown that a litigant is pursuing an ulterior purpose unrelated to the subject matter of the litigation and that, but for his ulterior purpose, he would not have commenced proceedings at all, that is an abuse of process."

It was submitted by Flower & Hart relying on Williams v Spautz (supra) at 533 per Brennan J and 543 per Deane J, that conducting litigation with the ultimate aim of settling the case advantageously does not constitute the proceeding an abuse of process. However that proposition is predicated upon the fact and assumes, that the applicant or plaintiff is instituting the proceeding to vindicate a right asserted by it. The passage relied upon in the judgment of Brennan J assumes that seeking the compromise of a claim made in the proceeding is a legitimate means to achieve the purpose of the protection or vindication of particular legal rights and immunities and the other legitimate purposes to which his Honour refers. In my opinion instituting a proceeding not for the purpose of vindicating a right but for the purpose of delaying or deferring the time for payment of an obligation where the proceeding has no or little prospect of success is not the same as instituting a proceeding to vindicate a right but with aim of settling or compromising the claim before trial. It was submitted by Mr Sofronoff that it could not be an abuse of process to institute proceeding when one had a hopeless case for the purpose of deferring the payment of a debt due to the defendant. Mr Sofronoff submitted that such a proposition could be distilled from Williams v Spautz (supra) but I do not find anything in Williams v Spautz (supra) to support this proposition. Mr Sofronoff submitted that if that proposition was not valid then it would not be open to any defendant to a proceeding to say to his or her solicitor - I have no defence but put the plaintiff to its proof. However, there is a significant distinction between the plaintiff and a defendant in this context. A defendant does not invoke the structure and procedure of a court proceeding; rather it is imposed upon the defendant. By contrast, a plaintiff or applicant actively invokes the jurisdiction and process of a Court and uses its structure within which to impose a framework upon the actions of the defendant against a defendant's will. Williams v Spautz (supra) and the other cases to which I have referred are concerned with the tort of abuse of process. But it seems to me that there is a process of abuse of process independently of the tort of abuse of process strictly so‑called which occurs when a party conceives or implements a purpose for misusing or manipulating the court process for purposes other than those for which the court process is intended. Allegation of fraud White submits that Flower & Hart should pay its costs because it delivered a statement of claim alleging fraud in circumstances where there was no factual basis for making the allegation. The principle of law upon which this allegation is based is rooted in the serious consequences of an allegation of fraud which should not be made lightly. The relevant obligation cast upon legal practitioners in pleading fraud was identified by the New South Wales Court of Appeal in Minister Administering the Crown Lands (Consolidation) Act and Western Lands Act v Tweed Byron Aboriginal Land Council (1990) 71 LGRA 201 in the following terms at 203 ‑ 204: "In the pleading of fraud, some requirements of the law are clear beyond argument. These requirements are not only rules of pleading and practice established by decisions of the courts. They are rules of ethical conduct binding on members of the legal profession. It is a serious matter to allege fraud against a party in pleadings to which attach the privileges incidental to court proceedings. Reports of such allegations may be recounted in the community and through the public media. They may do great harm to a party before a word of evidence has been offered and submitted to the searching scrutiny of cross‑examination or to rebuttal. It is for this reason, amongst others, that legal practitioners must take care to have specific instructions and an appropriate evidentiary foundation, direct or inferred, for alleging and pleading fraud. We say inferred, because it will sometimes be impossible to prove fraud by direct evidence. The tribunal of fact may be invited to draw an irresistible inference of fraud from the facts proved. Of its nature, fraud is often perpetrated covertly. The perpetrators of fraud will often take pains to cover their tracks." The Court went on to say: "Professional discipline may follow if allegations of fraud are made where the foregoing conditions are not satisfied. By such means, courts protect their process from the abuse which would follow from the too ready assertion of fraud against a party, in circumstances where it could not be proved to the high standard required of such allegations: cf Briginshaw v Briginshaw (1938) 60 CLR 336 at 362 and Panama and South Pacific Telegraph Co v India Rubber, Gutta Percha and Telegraph Works Co (1875) 10 Ch App 515 at 530." The Court also observed that behind the principle relating to the need to plead fraud specifically and not as a general allegation was the policy relating to the protection against the risk of abuse of Court process. These passages were cited by Mahoney JA (with whom Clarke JA agreed) in Ghazal v Government Insurance Office of New South Wales (supra) at 348 to support his observation that: "In relation to allegations of this kind [of fraud], obligations are placed upon lawyers who seek to raise them", His Honour then cited these passages and continued: "It is important that the substance of these principles be adhered to." As a matter of principle an unwarranted allegation of fraud by a solicitor or, putting the matter more precisely, an allegation of fraud when there is no factual basis for it is sufficient, in my view to constitute a serious dereliction of duty or serious misconduct by a solicitor which will enliven the jurisdiction to order costs against the solicitor. The significance and seriousness attached by the law to the making of the allegation of fraud was identified by the Supreme Court of New South Wales in Oldfield v Keogh [1941] 41 SR (NSW) 206. In the course of a defamation hearing an allegation was made that a document had been forged. The Court found it difficult to understand what could have led to the making of the charge as there was no evidence to support it. The Court said at 211: "In this connection it is useful to repeat some observations by Lord Macmillan with respect to attacks on character. His Lordship points out that when such an attack is suggested, 'counsel ... must insist upon being supplied with all the information which is thought by his client to justify the attack, and then he must decide for himself whether the charges made are such as can be justifiably made. In exercising his judgment in such a matter the advocate is fulfilling one of the most delicate duties to society which his profession casts upon him. It is no small responsibility which the State throws upon the lawyer in thus confiding to his discretion the reputation of the citizen. No enthusiasm for his client's case, no specious assurance from his client that the insertion of some strong allegations will coerce a favourable settlement, no desire to fortify the relevance of his client's case, entitles the advocate to trespass, in matters involving reputation, a hair's breadth beyond what the facts as laid before him and duly vouched and tested will justify. It will not do to say lightly that it is for the Court to decide the matter. It is for counsel to see that no man's good name is wantonly attacked': 'The Ethics of Advocacy' in 'Law and other Things,' pp 191‑2." Although Lord Macmillan refers to counsel in this passage the principles are equally applicable, in my view, to solicitors particularly where the solicitors sign the pleading containing the allegation. Retention of counsel Flower & Hart make much of the fact that they had retained senior counsel and junior counsel to advise on the proceeding and to settle the application and the statement of claim. However the retainer of counsel and reliance on counsel's advice, of itself, does not absolve Flower & Hart from responsibility in relation to the institution and conduct of the proceeding nor does it provide it with a defence to the allegations made against it. Nevertheless the retention of, and reliance upon, counsel is a significant matter to be taken into account in determining whether Flower & Hart has breached its duty to the Court. The relevant principles have been stated in a number of ways. In Edwards v Edwards (supra) Sachs J said at 258: "For a number of generations solicitors have been given special and indeed generous cover when they obtain the advice of properly instructed counsel. It is in my view neither necessary from the professional angle nor permissible in principle to provide a proliferation of further umbrellas".

In Davy‑Chiesman v Davy‑Chiesman (supra) May LJ said at 63 ‑ 64: "[The ordinary rule is] that save in exceptional circumstances a solicitor cannot be criticised where he acts on the advice of properly instructed counsel. ... I also agree that a solicitor is in general entitled to rely on the advice of counsel properly instructed. However, this does not operate so as to give a solicitor an immunity in every such case. A solicitor is highly trained and rightly expected to be experienced in his particular legal fields. He is under a duty at all times to exercise that degree of care, to both client and the court, that can be expected of a reasonably prudent solicitor. He is not entitled to rely blindly and with no mind of his own on counsel's views." Dillon LJ said at 67: "Undoubtedly, however, and rightly, the solicitor is in very many circumstances protected from personal liability if he has acted on the advice of experienced counsel properly instructed. This is inherent in the division of the profession into two branches, a division which in my experience is normally highly beneficial to the litigant and to the community at large. But the protection to the solicitor is not automatically total. The solicitor is highly trained and expected to be experienced in his particular fields of law and he does not abdicate all responsibility whatever by instructing counsel." In Ridehalgh v Horsefield (supra) the Court of Appeal said at 228 that Davy‑Chiesman v Davy‑Chiesman (supra) was authority for the proposition that: "Although a solicitor is in general entitled to rely on the advice of counsel properly instructed, he is not entitled to follow such advice blindly but is in the ordinary way obliged to apply his own expert professional mind to the substance of the advice received," and said at 237: "We endorse the guidance given on this subject in Locke v Camberwell Health Authority [1991] 2 Med. L.R. 249. A solicitor does not abdicate his professional responsibility when he seeks the advice of counsel. He must apply his mind to the advice received. But the more specialist the nature of the advice, the more reasonable is it likely to be for a solicitor to accept it and act on it."

In Locke v Camberwell Health Authority [1991] 2 Med LR 249 the Court of Appeal derived the following principles from a number of authorities: "(1) In general, a solicitor is entitled to rely upon the advice of counsel properly instructed. (2) For a solicitor without specialist experience in a particular field to rely on counsel's advice is to make normal and proper use of the Bar. (3) However, he must not do so blindly but must exercise his own independent judgment. If he reasonably thinks counsel's advice is obviously or glaringly wrong, it is his duty to reject it. (4) Although a solicitor should not assist a litigant where prosecution of a claim amounts to an abuse of process, it is not his duty to attempt to assess the result of a conflict of evidence or to impose a pre‑trial screen on a litigant's claim. (5) The jurisdiction to order costs against a solicitor personally is one which falls to be exercised with care and discretion and only in clear cases."

In Tolstoy‑Miloslavsky v Aldington (supra), Rose LJ, having noted that the statement of claim settled by counsel was struck out as "utterly hopeless" continued at 747: "Counsel's role, however, did not exonerate the solicitors from their obligation to exercise their own independent judgment to consider whether the claim could properly be pursued; they were not entitled to follow counsel blindly: see Davy‑Chiesman v Davy‑Chiesman and Locke v Camberwell Health Authority [1991] 2 Med LR 249, 254. They had to apply their 'own expert professional mind to the substance of the advice received:' Ridehalgh v Horsefield [1994] Ch 205, 228F." Rose LJ then identified the facts which showed a lack of due propriety in the conduct of the litigation and an abuse of process of the Court and the circumstances showing that the conduct of the litigation was unreasonable and said at 747: "In my judgment, no solicitor in the position of the appellants, taking these factors into account, could, notwithstanding that counsel had put their names to the statement of claim, reasonably have instituted these proceedings." Ward LJ inquired whether there was a reasonable explanation for the solicitors' conduct, noted the explanation that they had relied on fully instructed and very experienced respected leading counsel who signed the statement of claim and said at 751: "[T]his does not absolve the solicitors exercising their independent judgment, nor allow them to close their eyes to the blindingly obvious. Their eyes ought to have been opened by the judgment of the Court of Appeal when they were put fully on their guard and were made alive to the difficulties in reopening this case, whatever the fresh evidence might be." More recently in Regina v Camden London Borough Council; Ex parte Martin [1997] 1 WLR 359 at 363 Sedley J said: "Part of a solicitor's duty is to exercise at least a measure of independent judgment in relation to advice received from counsel: Davy‑Chiesman v Davy‑Chiesman [1984] Fam. 48."

The parties' submissions White submits that Flower & Hart commenced and continued the proceeding when it knew there were no or substantially no prospects of success. Alternatively it is submitted that Flower & Hart failed to give reasonable attention to the relevant law and facts in circumstances where had it done so it would have been clear that the proceeding had no or substantially no prospects of success. What must be established is not that the case was hopeless or was lost but rather that it was unreasonably commenced or continued in circumstances where the case had no or substantially no prospects of success. White submits further in the alternative that Flower & Hart's actions in the circumstances constituted an abuse of process, that the pleading of fraud in the circumstances warrants an award of costs against Flower & Hart and that so does the obstructionist manner in which Flower & Hart conducted the litigation. Flower & Hart submit that the case from Flower & Hart's point of view was always arguable and that this proposition is demonstrated by the manner in which the proceeding was conducted particularly in relation to the dismissal application made by White on 8 June 1988 and ruled on by Ryan J on 22 July 1988 and to the principles applicable to strike‑out applications. Mr Sofronoff submitted that it was not incumbent upon a solicitor to undertake a detailed analysis of a client's case to determine its prospects of success before commencing it in court. The solicitor's obligation, he submitted, was satisfied if he determined that the case was arguable. He relied by analogy on the approach taken by Courts to striking out proceedings on the ground that they do not disclose a reasonable cause of action. He referred to the decision of the Full Federal Court in Australian Building Industries Pty Ltd v Stramit Corporation Limited (unreported, Northrop, Lindgren, Lehane JJ, 1 December 1997) where the Court ordered that summary judgment be set aside on the ground that the trial judge had determined the issue on the evidence before him on the basis of a high degree of improbability of the applicant succeeding. The Full Court concluded that it was not inevitable that the applicant would fail on the final hearing and set aside the summary judgment. A fortiori, said Mr Sofronoff, the reasoning applies to the task of a solicitor when determining whether the solicitor should institute or continue proceedings on behalf of a client. All the solicitor was obliged to do was to determine whether the claim was arguable. Mr Sofronoff referred to Ha v New South Wales (1996) 70 ALJR 609 as an example of what might have been thought to have been a hopeless case on the law was allowed to proceed to trial ultimately in favour of the plaintiff: (1997) 71 ALJR 1080. The plaintiffs claimed that certain provisions of the Business Franchise Licences (Tobacco) Act 1987 (NSW) were unconstitutional and invalid as imposing duties of excise. On an application to strike out the statement of claim on the basis that it was bound to fail because of a series of decisions of the High Court, the application was dismissed because Kirby J found that the plaintiffs' argument was not so manifestly hopeless or so clearly bound to fail that it should be terminated without a hearing on the merits. I do not think that much assistance can be gained from these principles in the present case or from the fact that Ryan J refused to dismiss the proceeding summarily on 22 July 1988. The point is not so much that an unmeritorious or apparently hopeless case is allowed by the Courts to proceed to trial but rather the manner in which the solicitor conducts and manages the proceeding and the purpose for which he does so. The relevant question is - has the solicitor unreasonably initiated or continued the proceeding which had no or substantially no prospects of success? Putting the matter another way there is a factor to be considered, namely the solicitor's action or inaction which is additional to the normal considerations on a summary dismissal application. Mr Sofronoff submitted that in determining whether a finding should be made that the proceeding was commenced to delay or reduce payment under the building contract it was significant that White did not recover the full amount it had claimed in its cross‑claim. But that result was not brought about by Caboolture Park's proceeding but rather, as a result of a determination of the amount due under the cross‑claim. That result occurred quite independently of Caboolture Park's s 52, fraud and negligence claims. Mr Sofronoff also submitted that there was a distinction to be drawn between the purpose of instituting and continuing a proceeding and an expectation as to what will be the outcome of a proceeding. This is relevant when considering a client's purpose separately from its solicitor's purpose. Mr Sofronoff accepted that as a matter of principle a client could have one purpose in commencing a proceeding and its solicitor could have another purpose but said that frequently lawyers had expectations different from the purposes clients were seeking to achieve. Mr Sofronoff submitted that Caboolture Park's purpose in bringing the proceeding was not simply to defer payment as it did not consider, according to Mr Pearce, that it would have to "cough up" a substantial amount of money. However it had been told and it understood that it had no prospects of success in its claim and that it would lose the case. Indeed Caboolture Park was never told that it was likely to win its case for fraud and misleading or deceptive conduct and negligence or that its case was fairly arguable. What then was Flower & Hart's purpose in initiating the proceeding? Mr Sofronoff says - to serve its client in bringing the proceeding and to win it but with the expectation that the client would lose. This submission is not borne out by the evidence to which I have referred, and in particular the documentary evidence. Having formed the view that the s 52 case would fail Mr Meadows was not instituting the proceeding for the purpose of winning the case - he had formed the view it could not be won, as had Mr Callinan. Is it sufficient then simply to say - he was doing what his client wanted? That is an insufficient and incomplete answer because Mr Meadows had a particular purpose, an ulterior purpose in seeking to achieve an outcome for his client - to give it time before the inevitable payment would be ordered and made. This was his purpose in instituting the proceeding. So much is clear from the documentation to which I have referred. Although Mr Meadows disavowed this purpose for the reasons to which I have referred I do not accept his denial, in particular because it is inconsistent with the terms of his letter of 18 December 1986 and subsequent memoranda and opinions from counsel and with the inferences which I consider it appropriate to draw from the letter and those documents. I am satisfied that the letter of 18 December 1986 and the memoranda and opinions from counsel to which I have referred accurately record and reflect the views, intentions and purpose of Flower & Hart and the counsel who wrote the memoranda and the opinions at the time they were written. At the time there was no incentive, nor any reason to do otherwise than to express and record the views, intentions and purposes then honestly held and sought to be achieved. More particularly was this so in respect of a client to whom Flower & Hart had to communicate bluntly and clearly lest there be any misunderstanding as to what it was saying or the advice it was giving. The position is different when the witnesses came to swear their affidavits and give their evidence in 1993 and 1998. By this time between six and eleven years had elapsed since relevant events and conversations had occurred, a claim had been made against the solicitors personally and they and Mr Callinan were, in effect, being charged with breaching the duty they owed to the Court - a charge not lightly made and one which any professional person would wish to disavow. When therefore I am faced with a conflict between a witness' affidavit or oral evidence and a document written by the witness or which records views, intentions or purposes attributed to the witness at the time I consider it more probable than not that the written word is the more accurate repository of the subject‑matter of the evidence. Conducting the litigation in a manner designed to obstruct and delay the hearing of White's claim White relies on a number of circumstances and incidents which occurred during the trial in support of the submission that Flower & Hart accepted instructions to conduct, and in fact conducted, its client's case in a manner designed to obstruct and delay the hearing of White's cross‑claim. Flower & Hart submit that these incidents are no more than examples of a case being fought hard on the client's instructions not to make life easy for the opponent. There is not a real dispute about the fact that Flower & Hart was conducting the proceeding in a manner which was unhelpful to White. Mr Lockhart said that the general strategy adopted was to fight everything, that being Mr Herscu's instructions. From time to time Mr Lockhart either made, or sought to make, life difficult for White and its legal advisers but that fact of itself is insufficient to warrant a costs order against Flower & Hart (cf Ridehalgh v Horsefield (supra) 263 ‑ 264). However I do not view these incidents otherwise than in the overall context in which they occurred, that is to say as part of litigation which could not succeed and which was instituted for the purpose of delaying and deferring White's recovery of monies due under the building contract. I do not consider these incidents to have an independent life or significance of their own otherwise than in implementation of a purpose to delay and defer the date for payment to White. White has particularised a number of respects in which it says obstructionist and delaying action was taken. The delivery of an amended statement of claim designed to withstand attack during the course of interlocutory steps is not of itself obstructionist. Rather it is a recognition of the tenuousness and vulnerability of the claim as pleaded having regard to the views formed previously as to the prospects of success. It does not follow that there was a deliberate attempt or strategy not to plead Caboolture Park's true case; rather there was a strategy to make the claim look as good as possible. The delivery of a request for particulars in April 1987 which was searching and extensive was part of the general strategy to take every point on Mr Herscu's instructions. That of itself would not warrant a costs order against the solicitors but when viewed against the background of the events around 17 to 23 December 1986 it demonstrates an implementation of the purpose for which Flower & Hart instituted the proceeding on behalf of its client. Counsel's reference to adopting an attitude "which is not transparently obstructive" supports the proposition that there was a strategy of putting obstructions in the way of White achieving an expeditious determination of its claim for monies due under the building contract. I take the same view of the delivery of the draft interrogatories having regard to Mr Callinan's advice on 13 April 1987 that "the most promising way" of achieving the objective of making the matter as difficult generally for White as could be achieved was to deliver "an extremely comprehensive set of Interrogatories". The approach taken to the subcontractors' claims is of less significance because White joined in the application to transfer those claims to the Federal Court. I do not consider this approach obstructionist but Mr Lockhart's desire to ensure that the issues involved in the s 52 claim became so interwoven with White's cross‑claim so that it would be impossible to split the issues is another example of an attempt to implement the purpose of delaying White's entitlement to recover the monies due to it under the building contract. The implementation of this purpose is also demonstrated by Mr Lockhart's letter to his client on 18 February 1988 that Mr Callinan's advice was that the subcontractors should be joined in the Federal Court proceeding and that such joinder "should delay the action considerably". The delivery of the amended reply and answer on 19 May 1987 alleging negligence by White in the administration of the building contract was a further implementation of the purpose to delay the hearing of White's cross‑claim. So much, in my view, was acknowledged by Mr Lockhart when he wrote to Mr Pearce on 26 May 1987 reminding him that the amendment was made to make it impossible for a separate trial of individual issues to occur. The general allegation is made that Flower & Hart appealed interlocutory orders on behalf of Caboolture Park, their primary aim being to delay the progress of the proceeding and not to vindicate Caboolture Park's legal rights. The general allegation cannot be accepted in relation to all interlocutory appeals as on some occasions Caboolture Park was successful. However Mr Lockhart saw delay as an advantage to be obtained from an appeal when he wrote to Mr Pearce on 2 November 1987 although he recognised that an appeal against the appointment of an expert was important in itself. Nevertheless appealing interlocutory orders on the basis of Mr Herscu's instructions, of itself, is not a matter I take into account adversely to Flower & Hart. The deliberate decision by Mr Lockhart on 9 November 1987 in conjunction with Mr Callinan not to have Mr Callinan attend a hearing before Pincus J the next day was taken for the purpose of delaying the trial of the proceeding as it was considered, according to Mr Lockhart's letter to Mr Pearce of 10 November 1987, that the presence of Mr Callinan might hasten a trial date. The objection taken in March 1988 to inspection of documents by an accountant on behalf of White is not of itself an example of obstruction and delay as counsel's advice that the objection taken could not be sustained was only given the previous day. Flower & Hart complained that the case of obstructive behaviour was never put to its witnesses and that it was not opened by White's senior counsel. However Mr Karkar made it clear in the course of Mr Sofronoff's response to Mr Karkar's opening, before any witnesses were called for cross‑examination, that White was relying on its allegation that Flower & Hart conducted the proceeding in a manner designed to obstruct and delay the hearing and that it was relying on the documents contained in the agreed bundle of documents. I am satisfied that the documents relied upon by White in support of its allegation of conducting the proceeding so as to obstruct and delay the hearing, to the extent to which I have referred to them in this section of my reasons, show that Flower & Hart was implementing the original purpose for which it instituted the proceeding on behalf of its client, namely to delay and defer White's recovery of the monies due to it under the building contract. Conclusion As at 23 December 1986 Mr Meadows had decided to institute and had instituted the proceeding on behalf of Caboolture Park in circumstances where: (a) he held the view and had told his client that it could not succeed in the proceeding; (b) his purpose in instituting the proceeding was to give his client a temporary bargaining stance and a bargaining position so as to delay and defer action by White to recover monies due under the building contract; (c) he had signed a statement of claim pleading fraud, and in particular fraud with knowledge without considering whether there was a factual basis for the allegation and in circumstances where there was no factual basis for making the allegation. Further the proceeding was conducted thereafter by Flower & Hart in circumstances which, from time to time, were designed to delay and defer the hearing of the proceeding and the cross‑claim in the implementation of the purpose for which it had instituted the proceeding. I am satisfied, consistently with the authorities to which I have referred, that Flower & Hart unreasonably initiated the proceeding when there were no prospects or substantially no prospects of success of the proceeding succeeding. What Mr Meadows did was unreasonable because he had an ulterior purpose in instituting the proceeding which was to effect an object beyond what the legal process offers. Simply put that purpose was to postpone and delay an inevitable outcome and to achieve a breathing space. To the extent to which the proceeding was instituted for the purpose of reducing the amount which Caboolture Park would have to pay White under the building contract or for the purpose of compromising or settling White's anticipated claim that purpose was subsumed under and was subordinate to the principal or predominant purpose for which the proceeding was instituted - to delay and defer payment. However, as I have found, Mr Meadows' purpose in instituting the proceeding was not to vindicate a right of his client. The consequence is that Flower & Hart breached the duty it owed to the Court to conduct proceedings before the Court with propriety, not to be a party to an abuse of process and not to obstruct or defeat the administration of justice. I do not consider that it is a proper use of Court process and procedures to institute a proceeding to delay a respondent or defendant in asserting and enforcing a right, and obtaining recovery in respect of it, when the applicant or plaintiff and its legal advisers believe that there is no basis for the institution of the proceeding and that it cannot succeed. It was also unreasonable because Mr Meadows had insufficient information on which to form a view that the proposed proceeding had any realistic prospects of success. He had not given careful consideration to whether the proceeding should be instituted because he had no time to do so and, in any event, the purpose of the proceeding was for a different purpose, that is different from the purpose of seeking to vindicate a right. It was also unreasonable because the proceeding propounded a cause of action pleading fraud when not only was there was no factual basis for the allegation but he had given no consideration to whether there was a factual basis for pleading fraud and he had given no consideration to the issue of whether fraud should be pleaded. I have not addressed separately the cause of action in negligence pleaded in the initial statement of claim as subsequently amended. Little attention was paid to this cause of action in the course of the hearing and no attention was directed to it in any significant way in the documentation. So far as the documentation from December 1986 to September 1988 is concerned the views expressed by Flower & Hart and counsel in relation to the prospects of success were couched in terms, referable only to the s 52 cause of action but I am satisfied that those views were equally applicable to the negligence cause of action. My findings in relation to the s 52 cause of action are equally applicable to the negligence cause of action - it had no prospects of success. It was unreasonable for Mr Meadows to institute the proceeding for the reasons to which I have referred notwithstanding the fact that he had sought and relied upon the advice of experienced senior counsel. The issues were such that Mr Meadows, consistently with the authorities to which I have referred, was obliged to apply his own mind to a consideration of whether or not to institute the proceeding. He did not do so. Although he obtained senior counsel's advice he did so on the basis of information and material which was inadequate upon which to form a view or opinion whether the proceeding should be instituted in respect of the causes of action pleaded. But in any event, as is enshrined in counsel's opinions, the purpose or "prime objective" of the proceeding was, as Mr Callinan put it on 12 September 1988, "to provide a 'breathing space' before payment". In the circumstances which were present on, and in the two weeks leading up to, 23 December 1986 Mr Meadows cannot shelter behind the advice obtained from Mr Callinan. He was obliged to exercise his own mind as to whether the proceeding, as instituted, should be instituted. Insofar as he did so he adopted or acquiesced in what counsel had proposed without exercising his own mind independently of counsel's views. He was bound to turn his own mind to the prospects of success and to the purpose of the proceeding and to the nature of the causes of action proposed to be pleaded and to the extent to which he did so he determined upon and implemented an improper purpose resulting in an unreasonable institution of the proceeding. The proceeding which Flower & Hart instituted and the purpose for which it was instituted was an abuse of process and oppressive conduct on its part within the principles set out in the authorities to which I have referred and resulted in Flower & Hart breaching the duty it owed to the court. Independently of the finding that it was unreasonable to initiate the proceeding I am of the opinion that pleading fraud when there was no factual basis for the pleading and where no consideration was given to whether there was such a factual basis are circumstances which, of themselves, are sufficient to enliven the jurisdiction to order that Flower & Hart should pay White's costs of the proceeding. That is to say, I am satisfied that the jurisdiction to order solicitors to pay the opposing party's costs is enlivened where the solicitors institute proceedings relying on a cause of action in fraud where there is no factual basis for that allegation and where no consideration is given before the institution of the proceeding to whether there is such a factual basis. I do not consider that it is a legitimate or appropriate purpose for the institution of a proceeding in this Court that the purpose of the proceeding is to postpone, delay or put a barrier in front of a claim of another party and the payment of an amount due in respect of that claim. The purpose of proceedings in a court of law is to vindicate a claimed right whether, for example, that right be a right to positive relief such as a claim for money due or specific performance of an agreement or whether the right be one to be free from unauthorised governmental interference. It is not part of the legal process in this Court that its process and procedures be used as an instrument of oppression so as to frustrate the bringing, and expeditious disposition, of a legitimate claim. The predominant, if not only purpose which Flower & Hart had in mind when the proceeding was instituted by Caboolture Park was to delay and defer White in bringing its undoubted claim for monies due under the building contract to a conclusion. There was no legitimate basis for bringing the s 52 and negligence claims and absolutely no basis for bringing the fraud claim. I say no "legitimate" basis because Flower & Hart saw a basis for bringing the claims but that basis was an abuse of process - frustrate and delay White's imminent claim to recover the monies due under the building contract. The fact that Mr Herscu had a robust approach to litigation, did not believe anything was impossible and was unconcerned about entering into litigation with limited prospects made it all the more important for Flower & Hart to have regard to the manner in which it instituted and conducted proceedings on his behalf and on behalf of his companies and to be conscious of its duty to the Court. As I have noted earlier, it is no answer to say - but we reduced White's claim under its building contract brought by the cross‑claim. That reduction occurred as a result of a legitimate and appropriate response to White's cross‑claim - challenging the variations. It did not occur as a result of any of the s 52, fraud or negligence claims. The proper approach to White's claims under the building contract, consistently with the use which should be made of the Court's process was either await any claim and file an appropriate defence and/or cross‑claim or, if being a moving party was thought to be a tactical advantage, seeking a declaration that the amount claimed by White in correspondence was not due and owing. What was not appropriate, and what was an abuse of process, was to institute a proceeding in respect of a cause or causes of action which could not succeed for the purpose of securing delay in the ultimate determination of White's claim for money under the building contract. It is also no answer to say that the s 52 claim or the negligence claim was arguable although weak because the proceeding was not instituted for the purpose of vindicating those claims. It is even more strongly no answer to say that the fraud claim was arguable, although, weak because Flower & Hart was required to give much more consideration to the fraud claim before instituting it on behalf of its client. The institution of the proceeding by Flower & Hart on behalf of its client was flawed and an abuse of process from its inception because of the illegitimate purpose for which the proceeding was instituted. That abuse of process was exacerbated by the manner in which Flower & Hart conducted the proceeding and the obstructionist and delaying tactics in which it indulged. In the circumstances which I have described I am satisfied that Flower & Hart's institution and continuation of the proceeding falls within the principles and the authorities to which I have referred and warrants an order that Flower & Hart pay White's costs of the proceeding on an indemnity basis. The institution and continuation of the proceeding was a serious breach of Flower & Hart's duty to the Court, it was an abuse of process, it was an unreasonable institution of a proceeding with no prospects of success, it was not brought to vindicate a right claimed by the client and it was brought for an ulterior purpose. Not only was the institution of the proceeding unreasonable, so was its continuation. All the more so was its continuation at the time Caboolture Park's affidavits were filed and served in late May/early June 1988. At that time the affidavits did not deal with what Mr Callinan had called on 13 April 1987 "the great underlying question" and "the great unanswered question" namely, how could Caboolture Park have paid out many millions more than the target price up to the end of September 1986 with the work unfinished and more to be paid? That question remained unanswered in June 1988. Even if the proceeding was not hopeless before June 1988 it became hopeless in June 1988. And this position was again even more so after 14 September 1988. The impetus for the institution of the proceeding came from the lawyers. It was their suggestion that the proceeding be instituted immediately. Had the advice and recommendation in the letter of 18 December 1986 not been given the proceeding would not have been instituted. It was only because Mr Callinan and Mr Meadows came up with an "avenue of relief" (the terms of the letter of 16 December 1986) that the proceeding was instituted. The client was not pushing for a proceeding to be instituted claiming particular relief; rather the client was saying - is there anything we can do? Flower & Hart was HDC's regular firm of solicitors and I am satisfied that if Mr Meadows had not given the advice and recommendation he gave on 18 December 1986, which was accepted by the client, the proceeding would not have been instituted claiming damages for breach of s 52, fraud and negligence. The proceeding was instituted as a consequence of Mr Meadows' advice. I also consider it is more probable than not if Flower & Hart had told its client in early June 1988 (after its affidavits were filed and served) or in mid‑September 1988 (after the receipt of Mr Callinan's advice of 12 September 1988 and the telephone conference on 14 September 1988) that the proceeding (but not the defence to the cross‑claim) should not be continued and that it could no longer act for the client in the proceeding, if the claims for breach of s 52, fraud and negligence were continued, that these claims would have not been continued by Caboolture Park. It is highly improbable that Caboolture Park would have continued the proceeding on its own without legal assistance and it is highly improbable that it would have retained new solicitors to act for it having regard to its long standing relationship with Flower & Hart and the significance of that firm telling it that the proceeding (but not the defence to cross‑claim) should not be continued. The pleading of the fraud cause of action in the circumstances highlights and emphasises these conclusions. Even if there was no evidence and finding of the illegitimate purpose I have found I would conclude that the institution of a proceeding with a plea of fraud in the circumstances, or rather absence of circumstances, in which the plea of fraud came about is such as to fall within the principles and the authorities to which I have referred and warrants a costs order against Flower & Hart. The time has passed when obstructionist and delaying tactics on the part of parties to proceedings in the Court can be countenanced by the Court. It is perfectly proper for a party and its legal advisers to fight a case and to put an opposing party to the proof of its case, although I question whether it is appropriate to put an opposing party to the proof of an issue, which is not disputed, which will not be a critical issue at trial and which will have the effect of running up costs unnecessarily. Nevertheless it is not proper, in my view, to adopt a positive or assertive obstructionist or delaying strategy which is not in the interests of justice and inhibits the Court from achieving an expeditious and timely resolution of a dispute. Court resources are finite and so are the resources of most litigants and the Court should not countenance a deliberate strategy of obstruction and delay. If a party instructs its legal advisers to adopt such a strategy the legal adviser should inform the party that it is not proper for it to do so and if the party insists, then the legal adviser should withdraw from acting for that party. It is most regrettable that a legal adviser should make a conscious decision not to have the senior counsel representing a party appear on a directions hearing (such as occurred on 10 November 1987) for fear that the judge will be better informed. It is also most regrettable that a legal adviser should make a conscious decision to adopt a particular approach or procedure because it will have the effect of "side tracking" the opposition, and achieving delay in the resolution of the proceeding (letter 14 October 1987). In these circumstances I consider that I should exercise the jurisdiction to order Flower & Hart to pay White's costs of the proceeding on the basis sought. I also consider that it follows from my findings, and it is implicit in them, that those costs should be paid on an indemnity basis. Indemnity costs are appropriate to be awarded against Flower & Hart having regard to the circumstances which I have found attended its institution and conduct of the proceeding. They are appropriate for a number of reasons, each of which is found in the circumstances identified by Sheppard J in Colgate‑Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 at 233 ‑ 234 in his fifth principle or guideline which is in the following terms: "Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J‑Corp (supra); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V‑C in EMI Records (supra). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis." In essence the grounds upon which I have found that Flower & Hart should be ordered to pay White's costs are the same grounds, and are co‑extensive with the grounds, which justify an order for costs on an indemnity basis. The circumstances to which I have referred are such as to warrant and justify costs being ordered on an indemnity basis: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, 401; Colgate‑Palmolive Company v Cussons Pty Limited (supra) 232 ‑ 234. The order of the Court will be that Flower & Hart pay White's costs of the proceeding brought by Caboolture Park on an indemnity basis. Flower & Hart must also pay White's costs of the motion on a party and party basis. There is nothing in the conduct of the motion which warrants the costs of the motion being paid on an indemnity basis. I will give the parties the opportunity to address the issue whether the payment of interest should be ordered in any form. I certify that this and the preceding one hundred and twenty (120) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg

Associate: Dated: 14 July 1998 Counsel for the Applicant: Mr J H Karkar QC and Mr PJ Dunning

Counsel for the Respondent: Mr W Sofronoff QC and Mr G Newton

Solicitor for the Respondent: McCullough Robertson

Date of Hearing: 20, 21, 22, 23, 24, 27, 29, 30 April, 1 May 1998