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".