Gattellaro v Spencer and ors

[2011] NSWCA 415

Court of Appeal (NSW)|2011-11-17|Before: Beazley JA, Young JA, David J, Hislop J

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Source facts

Court

Court of Appeal (NSW)

Decision date

2011-11-17

Before

Beazley JA, Young JA, David J, Hislop J

Source

Original judgment source is linked above.

Judgment (20 paragraphs)

[1]

[This headnote is not to be read as part of the judgment] The appellant and her husband executed two mortgages, the first in 1977 and the second in 1986, in favour of Westpac, over their family home. Both mortgages were all monies first and third party mortgages. The 1986 mortgage was entered into for the purposes of securing the consolidated indebtedness of the appellant and her husband and their construction company, Falgat Constructions Pty Limited (Falgat). Notwithstanding the entry into the 1986 mortgage, the 1977 mortgage was never discharged. In 1985, the appellant also executed a guarantee of the debts of Falgat, in favour of Westpac. In 1989 Westpac sought repayment of the outstanding indebtedness under the loan facility provided in 1986. It subsequently commenced proceedings seeking a writ of possession of the family home and judgment for a money sum. There then followed protracted litigation, which ended unsuccessfully for the appellant and her husband in the High Court in 2004. The appellant subsequently sued her solicitors for breach of their professional duty to her, including for failing to convey to her an offer of settlement, made by Westpac, approximately five weeks prior to the hearing of the appeal in the High Court. If accepted, the offer would have resulted in the appellant retaining a portion of the value of her jointly owned home. However, that value was lost to her upon the dismissal of the appeal to the High Court. The trial judge held that the respondents owed the appellant a duty of care to convey the offer within the time that it was open for acceptance. Without formally determining breach, his Honour held that the appellant had not proved that her loss was caused by any breach of duty, as she would not have accepted the offer in any event. The appellant appealed from his Honour's verdict for the respondents. The appellant's challenge to his Honour's finding on causation was put at the forefront of her appeal. There were also challenges relating to the breach of duty and advocate's immunity. Held per Beazley JA (Young JA and Sackville AJA agreeing) dismissing the appeal: (1) The appellant did not establish that the only finding that was open to his Honour on the evidence was that she would have accepted the offer of settlement had the respondents conveyed this to her. (2) In the circumstances, it was not erroneous for his Honour to conclude that the appellant would have settled without the appellant's husband agreeing to that course. (3) His Honour's conclusion in respect of causation was correct. (4) The appellant's appeal to the High Court was not always hopeless. As the appellant's challenge relating to duty was based upon the respondent's failure to advise her that the appeal to the High Court was always hopeless, that challenge failed. (5) A consideration of the advocate's immunity issue, in circumstances where the appellant had not made out her cause of action, was unnecessary. Orders Appeal dismissed with costs.

[3]

Factual background 5Mrs Gattellaro and her husband were the joint proprietors of their home in Chiswick. They were also the directors of a company, Falgat Constructions Pty Limited (Falgat), through which Mr Gattellaro carried out his building construction business. Falgat had for many years carried out major renovation works on properties purchased in the joint names of Mrs Gattellaro and Mr Gattellaro, which were then resold at a profit. Falgat also engaged in the business of building houses and home units. 6In 1977, Mrs Gattellaro and Mr Gattellaro executed a mortgage in favour of the Commercial Bank of Australia (the CBA) over the Chiswick property to secure the personal indebtedness of Mrs Gattellaro and Mr Gattellaro to the CBA (the 1977 mortgage). The 1977 mortgage contained " an all monies clause " for past and future indebtedness and was a first and third party mortgage in the following terms: "That the Mortgagor will pay to the Bank on demand in respect of any loans advances payments or credits which are or may hereafter be made or given either to the Mortgagor (alone or jointly as aforesaid) and/or the Debtor (alone or jointly as aforesaid) or to any other person or persons for the accommodation or at the request or by the authority of the Mortgagor or the repayment of which the Mortgagor and/or the Debtor may have guaranteed or may hereafter guarantee ..." The " Mortgagor " in this clause was a reference to both Mrs Gattellaro and Mr Gattellaro. 7In 1982, pursuant to a statutory novation, Westpac was substituted for CBA as the mortgagee. 8In the mid-1980s, Mrs Gattellaro and Mr Gattellaro were unable to sell certain of the properties they had purchased for renovation and were also unable to sell some of the home units which had been built by Falgat. In 1985, Westpac sought to have Falgat's indebtedness guaranteed by Mrs Gattellaro and Mr Gattellaro (the 1985 guarantee). At the time that Westpac first brought its possession proceedings against the Gattellaros, there was an issue as to whether the 1985 guarantee had been executed by either or both of them. I will return to this question later. 9As at June 1986, Falgat was indebted to Westpac in a sum of approximately $195,000 and the Gattellaros were indebted to Westpac in the sum of approximately $187,000. The combined indebtedness of the Gattellaros was still secured by the 1977 mortgage. On 2 June 1986, the indebtedness of Falgat and the Gattellaros with Westpac was consolidated. A bill acceptance line of credit in the sum of $450,000 in favour of the Gattellaros was issued and applied to the discharge of the existing indebtedness of Falgat and the Gattellaros. As part of this rearrangement, the Gattellaros entered into a new mortgage with Westpac, securing the bill line of credit (the 1986 Mortgage). However, the 1977 mortgage remained undischarged. 10Over the succeeding years, the indebtedness under the line of credit was significantly reduced. However, in January 1989, Westpac sought repayment of the outstanding indebtedness by serving a notice pursuant to the Real Property Act 1900, s 57(2)(b) on Mrs Gattellaro and Mr Gattellaro. They refused to pay, as they claimed that in 1977, CBA had failed to credit $30,000 to their account and in 1980, had improperly debited the account with the sum of $42,873.99. They contended that this amount, together with interest, exceeded the sum claimed by Westpac. 11In February 1989, Mr Gattellaro retained the respondents on behalf of himself and Mrs Gattellaro to act for them in respect of the dispute with Westpac.

[4]

The litigation history between the parties 12On 30 May 1990, Westpac brought proceedings against the Gattellaros seeking an order that a writ of possession issue for the Chiswick property and judgment for the outstanding amount it claimed to be due in the sum of $197,378.09 (the Westpac proceedings). 13In their filed defence, Mrs Gattellaro and Mr Gattellaro admitted the 1986 mortgage but denied they were indebted to Westpac, relying upon the errors relating to the sums of $30,000 and $42,873.99 referred to above. The Gattellaros also cross-claimed against Westpac, seeking to set off those sums against the monies claimed by Westpac. 14Mrs Gattellaro and Mr Gattellaro subsequently amended the cross-claim, seeking relief pursuant to the Contracts Review Act 1980 in respect of the 1986 mortgage, on the basis that they had been given no explanation that, as well as securing their own indebtedness, the 1986 mortgage also secured Falgat's indebtedness to Westpac, when that indebtedness had previously been unsecured. Relief was also sought under the Trade Practices Act 1974, however, no issue arises on the appeal as to that claim. 15Westpac filed a defence to the amended cross-claim in which it relied upon the 1977 mortgage and the 1985 guarantee as an answer to the Contracts Review Act claim. Its pleaded defence was in the following terms: "10. In further answer to the allegation made in the Claim to the effect that prior to 2 June 1986 the moneys advanced by the Bank to Falgat Constructions Pty Limited ('Falgat') had been unsecured, the Bank: (a) denies the allegation; (b) says that by ...('the 1977 mortgage') the cross-claimants mortgaged the [Chiswick] property to the Bank (by its predecessor the Commercial Bank of Australia Limited) to secure, among other things, all moneys that the cross-claimants, or either of them, had then guaranteed to the Bank ..or thereafter guaranteed to the Bank ... (c) says that by a guarantee made in or about November 1985 the first cross-claimant guaranteed to the Bank payment of all moneys owing to the Bank by Falgat." 16In the particulars to para (c) of the defence, Westpac stated that it was not able to produce a copy of the guarantee, but stated that its existence could be inferred from various entries made in the Bank's diary. No reply was filed to the amended defence and issue was joined on the pleadings. Westpac's position, therefore, was that Falgat's indebtedness was secured by the 1985 guarantee; that the obligations under the 1985 guarantee were secured by the 1977 mortgage; and that the 1977 mortgage made Mrs Gattellaro liable for that indebtedness. It followed from this that the 1986 mortgage was not unjust, because it did not make the Gattellaros liable for any of Falgat's indebtedness for which they were not previously liable and did not make their home security for any indebtedness for which it was not previously security. 17A number of offers of settlement were made by the parties prior to the hearing before Hulme J. None of the offers resulted in a settlement of the claim and the matter proceeded to a hearing.

[6]

Appeal to the Court of Appeal 21The Gattellaros appealed: Gattellaro & Anor v Westpac Banking Corporation [2001] NSWCA 76 . On the appeal, the Gattellaros conceded that if there was a guarantee of Falgat's debts unlimited as to amount, and if their obligations under the terms of that guarantee were secured on their home by the 1977 mortgage, then the 1986 mortgage was not unjust, as it did not increase their existing obligations in respect of Falgat's indebtedness. 22Giles JA (with whom Handley JA agreed) concluded that the 1985 guarantee had been given at least by Mr Gattellaro, unlimited as to amount and secured by the 1977 mortgage. His Honour found it unnecessary to decide whether Mrs Gattellaro had given the guarantee. 23Giles JA considered that judicial notice could be taken of the fact that institutions such as Westpac used a standard form of guarantee. There was in evidence a form of guarantee, bearing a print date of 1 October 1984 that had been given at about the same time as the 1985 guarantee, by Mrs Gattellaro's brother, Mr Falcomata (the Falcomata guarantee). That form of guarantee provided, in cl 20, that the guarantee was binding on each signatory notwithstanding that one or more of the persons named as guarantor had not executed it. 24His Honour concluded that the 1985 guarantee thereby contained a clause in the same terms as cl 20 in the Falcomata guarantee. Accordingly, his Honour rejected the argument that the guarantee given by Mr Gattellaro might not have become operative in the absence of Mrs Gattellaro's signature. For that reason, it was not necessary for his Honour to consider the claim that the 1986 mortgage was unjust. 25Priestley JA, dissenting, considered that judicial notice could not be taken of the terms of the guarantee. His Honour was also of the view that Mrs Gattellaro had made out a case for relief under the Contracts Review Act , that the 1986 mortgage was unjust as against her, notwithstanding the adverse credit finding that Hulme J had made in respect of her evidence. However, his Honour considered that the adverse factual findings in relation to Mr Gattellaro's claim for relief in respect of the 1986 mortgage were supportable and should stand. 26On 6 April 2001, the appeal was dismissed.

[8]

The appeal to the High Court 31The appeal to the High Court was heard on 19 June 2003. 32On 11 February 2004 the High Court dismissed the appeal: Gattellaro v Westpac Banking Corporation [2004] HCA 6; (2004) 204 ALR 258. The arguments on the appeal and the circumstances in which the appeal was dismissed call for consideration as they are relevant to the issues raised on the present appeal. 33In its notice of contention, filed on 17 March 2003, Westpac contended that no question of judicial notice arose and the decision of the Court of Appeal could be defended on other grounds. However, in its written submissions filed on 12 June 2003, Westpac abandoned any attempt to support the Court of Appeal's reasoning that judicial notice could be taken of Westpac's standard form of guarantee. Had that been the only legal position taken by Westpac, the Gattellaros were virtually assured of success on the appeal. 34However, on the day before the hearing of the appeal, Westpac filed an amended notice of contention in which it raised an additional two matters. The first was that there was sufficient evidence, " albeit barely sufficient " evidence, to warrant a finding that the form of guarantee executed by Mr Gattellaro would have included a provision such as cl 20 of the Falcomata guarantee. That argument had been hinted at in the special leave application and to that extent was not entirely new. The plurality, at [28], rejected that argument. 35The second additional matter raised in the amended notice of contention was that the Gattellaros bore the onus of establishing that Mr Gattellaro was relieved of his obligation under the guarantee (the onus issue). As will become apparent, the onus issue turned out to be fatal to Mrs Gattellaro's appeal. 36Notwithstanding that the onus issue had not previously been raised by Westpac, the High Court allowed Westpac to raise it on the appeal: it involved a pure question of law and was responsive to the Gattellaros' reliance upon the principle in Marston v Charles H Griffith that Mr Gattellaro was not bound by the 1985 guarantee in circumstances where Mrs Gattellaro was also an intended guarantor (the Marston contention). 37The plurality held, at [39], that the Gattellaros bore the onus of establishing that Mrs Gattellaro was not an intended party to the 1985 guarantee. This was the first step in the eventual failure of the Gattellaros resistance to Westpac's claims against it. The next step occurred when the High Court decided that it would determine for itself the factual matters relating to that question and held that the Gattellaros had not adduced evidence, at trial, that Mrs Gattellaro was an intended co-surety of the 1985 guarantee. 38The consequence was that the argument, that Mr Gattellaro was not bound by the 1985 guarantee, failed and the appeal was dismissed. 39As the 1985 guarantee obliged Mr Gattellaro to pay the Westpac debts owed by Falgot, the 1977 mortgage applied, so that Mrs Gattellaro was personally liable under that mortgage for all monies for which Mr Gattellaro might be liable to Westpac. That liability was secured over the Gattellaros' home and Westpac maintained the orders that had been made in its favour by the trial judge. 40In dismissing the appeal, the plurality observed that it was taking an unusual course. The Court noted, at [55], that special leave had been granted to test the correctness of the Court of Appeal's ruling that it could take judicial notice that banks, such as Westpac, used a standard form of guarantee and it could be inferred that Mrs Gattellaro had signed Westpac's standard form. The High Court said that that was a far-reaching proposition of great practical importance in the conduct of commercial litigation. The plurality noted, at [56], that Westpac did not, on the special leave application, expressly concede that the Court of Appeal had erred in its reliance on the judicial notice point. 41The plurality commented, at [57], that, given the concession on this point on the appeal, the better course would have been to have allowed the appeal and to have remitted the notice of contention to the Court of Appeal for its determination. Their Honours also observed, at [58], that had Westpac conceded the judicial notice point on the special leave application, the Court could have allowed the appeal instanter and remitted the matter to the Court of Appeal. Had that occurred, their Honours commented that it was debatable whether the Court of Appeal would have allowed the onus point to have been raised. 42However, their Honours expressed concern as to the expense and delay in the matter, the proceedings having commenced some 14 years earlier. They considered that the interests of justice were best served by the High Court itself determining the factual and procedural questions that arose in the matter, a course which it would not ordinarily take, but which it proceeded to take on this occasion. 43Kirby J dissented. His Honour considered that Westpac bore the onus on the Marston contention. His Honour also observed that the onus point had been raised extremely belatedly. He considered that had the matter been remitted to the Court of Appeal, it was unlikely that the Court of Appeal would have allowed the question to be raised. His Honour also commented, at [76], that the course proposed by the plurality, of determining all of the factual and procedural issues in the case would alter the character and course of the case and, accordingly, was inappropriate. Kirby J, at [96], was also of the opinion that the Gattellaros, or Mrs Gattellaro at least, had an arguable defence under the Contracts Review Act .

[10]

Some further background to Westpac's offer of settlement 47Before considering the issues on the appeal, it is necessary to understand the circumstances surrounding Westpac's offer of settlement prior to the hearing of the High Court appeal in the Westpac proceedings. As I have already indicated, there were a number of offers of settlement made both by Westpac and the Gattellaros prior to the hearing before Hulme J. The first of those offers was made by Mr Gattellaro in terms that there be a verdict for him in the sum of $50,000. Westpac responded with an offer that the Gattellaros pay to Westpac $288,000 inclusive of costs. There were further offers, the details of which are not presently relevant, other than to note that no offers of settlement were made following the judgment at first instance and the dismissal of the appeal by the Court of Appeal on 6 April 2001. 48On 5 June 2001, two months after the Court of Appeal decision, Mrs Gattellaro and Mr Gattellaro were advised in conference with counsel and Mr Spencer, who was the respondent with the carriage of the matter, that the only person with any hope of success in the High Court was Mrs Gattellaro and that the best she could do was to save half the house. The Gattellaros were advised at that time that Mrs Gattellaro's prospects of success were " fair at best ". Mr Spencer's file note recorded that Mr Gattellaro left halfway through the conference. The file note also recorded: "No money saved. [Mrs Gattellaro] will borrow the money to buy out [Mr Gattellaro's] share." 49On 6 June 2001, the respondents wrote to Westpac suggesting a settlement whereby the Gattellaros would pay Westpac an amount equal to one half of the value of their house, representing payment to Westpac of Mr Gattellaro's interest. The letter sought Westpac's advice as to whether they would agree to that proposal. The following day, the respondents wrote to the Gattellaros confirming that Westpac had applied for a writ of possession to issue and also confirming that they had submitted the offer to Westpac. 50On 2 July 2001, the respondents wrote to the Gattellaros following lengthy conferences with Mr Gattellaro on 27 and 28 June 2001. It is apparent from the file notes of the conferences that Mr Gattellaro was dissatisfied with the advice received in conference. In the letter of 2 July, the respondents explained that following the Court of Appeal decision, the only avenue available was an appeal to the High Court. The respondents reiterated counsel's advice given in conference that Mr Gattellaro had " zero prospects " on an appeal to the High Court. They confirmed that the best the Gattellaros could hope to achieve was to save Mrs Gattellaro's interest in the house. They pointed out that any application to stay execution of the orders of the Court of Appeal would not be successful because even if Mrs Gattellaro's appeal to the High Court was successful, the house would have to be sold unless the Gattellaros were in a position to buy out Mr Gattellaro's interest from Westpac. 51In a letter dated 13 August 2001, the respondents informed the Gattellaros that even if Mrs Gattellaro was successful on the appeal to the High Court, it was impossible to predict what orders the Court would make other than the likelihood that she would recover her costs on a party/party basis. 52The advice that Mr Gattellaro had no prospects of success was repeated in correspondence to him on 15 January 2002. In that letter, the respondents also referred to counsel's advice that Mrs Gattellaro's prospects of success in the High Court were in the vicinity of 50/50. This was again confirmed in correspondence of 5 February 2002 and in conference with counsel on 13 February 2002. 53Between 22 April 2002 and the hearing of the appeal, offers of settlement were made variously by Westpac and Mrs Gattellaro as follows: (1) On 29 April 2002 Westpac offered to accept a payment of $550,000 in settlement of the appeal. (2) On 21 May 2002 the respondents wrote to Mrs Gattellaro and Mr Gattellaro providing a written advice concerning the offer of $550,000 and recommending acceptance and advising that her counsel agreed and warning her against making a counter-offer. (3) It is conceded that such recommendation and advice as to settlement at $550,000 was correct. (4) On 22 May 2002 Mrs Gattellaro rejected that advice and instructed the respondents to put a counter-offer of $400,000, which was rejected. No counter-offer was made. (5) On 11 February 2003 Mrs Gattellaro offered to settle with Westpac by payment of $600,000. (6) On 11 February 2003 Westpac rejected that offer. (7) On 11 February 2003 Mrs Gattellaro offered $650,000. (8) On 12 February 2003 this offer was rejected by Westpac. 54The Gattellaro's offer of 11 February 2003 in the sum of $650,000 was the last offer before the hearing of the special leave application. 55On 14 February 2003 the High Court granted special leave and the hearing was fixed for 19 June 2003. 56On 15 May 2003, five weeks from the date fixed for hearing of the appeal to the High Court, Westpac offered to settle for $650,000. The offer was stated to be open until 5pm on 20 May 2003. 57On 19 May 2003, the respondents sought counsel's advice concerning the offer. Counsel requested a break down of the figure and that was sought. In replying to the respondents' request, Westpac's solicitors advised that there were a number of ways of viewing their offer. However, an underlying assumption had been made that the value of the property was in the vicinity of $950,000 which, notionally, gave Mrs Gattellaro an equity in the value of $475,000. The letter continued: "The offer of $650,000 therefore allows for liability on her part in the vicinity of 35%. Our client regards her prospects as somewhat less than that." 58Westpac's solicitors also indicated that on their assessment, Westpac was only likely to recover about $650,000 if the property was sold, having regard to costs, interest and the like. Time for acceptance of the offer was extended to 12 noon, 21 May 2003. 59The evidence established that the first occasion that the respondents endeavoured to contact either Mrs Gattellaro or Mr Gattellaro in respect of Westpac's offer made on 15 May 2003 was on 20 May 2003, after they had received the break down from Westpac's solicitor and further discussed the offer with counsel. However, Mr Spencer received no response to the telephone call he made to the Gattellaros' home on that day. 60His Honour found that it was more likely than not that the offer was not in fact conveyed until after it had expired and that the communication was with the Gattellaros' son, Anthony.

[11]

The trial judge's reasons on causation 61His Honour concluded that Mrs Gattellaro had not established that she would have accepted the Westpac offer, even if it had been conveyed in time for it to have been accepted. His Honour's finding was based upon her evidence in cross-examination, his assessment of her forensic position at the time the offer was made and Mrs Gattellaro's conduct in the period leading up to the appeal to the High Court. In addition, there was a file note which reflected Mr Gattellaro's attitude to the question of settlement at about this time. Each of these aspects of his Honour's reasoning needs to be considered. 62The cross-examination which his Honour, at [108], considered was critical to his finding against Mrs Gattellaro on causation, was as follows: "Q. You don't say 'we want to try again and settle now that we've won the special leave application.'? A. No, we didn't want - we want to go to the end then. We thought we've come this far, we might as well go to the High Court. ... Q. So they offer you $650,000? A. Yes. Q. You wanted to go on with the hearing? A. Yes Q. And you didn't want to pay them $650,000? A. Yes." (His Honour, at this point, observed that in re-examination, Mrs Gattellaro alleged confusion in giving this answer, but did not accept that this was the case.) "Q. You've already told us you've got the message about this offer of 650. A. Yes. Q. And you've already told us you weren't interested in it. A. At this point, yes. Q. And you weren't interested in paying the bank $650,000 a month before the hearing? A. No, he was prepared to pay the offer before. Q. You told us that you had decided to let the court decide because-- A. At that stage, yes. Q. This is four weeks before the hearing? A. Yes. Q. At that stage you just weren't interested in settling by paying $650,000? A. Yes." 63His Honour also observed, at [108], that Mrs Gattellaro made a number of counter-offers in response to Westpac's offers over the course of the litigation, before ultimately offering $650,000 in February 2003. His Honour considered that in making those offers she was in a position of perceived weakness, whereas, at the time that Westpac made its offer of $650,000 on 15 May 2003, her forensic position was much stronger, as she had obtained a grant of special leave. 64His Honour considered that if Mrs Gattellaro had been interested in further pursuing the question of settlement, she would have contacted the respondents for advice or would have given instructions to make an offer during the period between the grant of special leave and the ultimate decision of the High Court. His Honour observed that Mrs Gattellaro did not make an offer or inquire about the making of a further offer during this period. 65Finally, his Honour referred to Mr Gattellaro's attitude to settlement, evidenced in a file note made by Mr Spencer, dated 30 May 2003, which recorded: "Sol other side offered $650,000 inclusive He not interested 'No way'. They pay me. I have proof 11/2 M. Found docs on Petersham." 66Having rejected Mrs Gattellaro's claim, his Honour also considered that the respondents' conduct was protected by the principle of advocate's immunity: see D'Orta-Ekenaike v Victoria Legal Aid .

[12]

The causation finding 67On the appeal in relation to his Honour's causation finding, Mrs Gattellaro's argument focused upon the following specific matters: that the respondents had been negligent in failing to advise her as to her prospects on the appeal to the High Court and " thereby fuelled her false hopes "; failing to challenge the 1977 mortgage by filing a reply to Westpac's defence to the cross-claim; failing to raise the Marston contention at trial; failing to inform her that an offer of settlement had been made by Westpac; and failing to obtain her instructions in response to the offer of settlement. 68It should be noted that these allegations were made in the wider context of Mrs Gattellaro's pleaded case in which she contended that the respondents had failed to obtain instructions from her directly at any time during the course of acting for her in the period 1989-1999; and that during that period, the respondents, without her express authority, acted on instructions from Mr Gattellaro in respect of matters that solely related to her interests. 69Notwithstanding the focus of the argument on the matters referred to above, the appellant's written submissions were confined to a challenge to his Honour's causation finding. 70Mrs Gattellaro submitted that a proper understanding of the causation issue involved a consideration of the advice that had been given to her in relation to the prospects of success in the High Court, as opposed to what a realistic assessment of those prospects were, as well as a consideration of the various offers that had been made during the course of the litigation. 71Mrs Gattellaro submitted that given that in practical terms the prospects of success in the High Court were nil, Westpac's final offer of settlement was particularly significant. Mrs Gattellaro also submitted that there was further significance in the offer as it was the first time that she and Westpac had reached the same position on an offer of settlement, that is, a payment of $650,000 to buy out Mr Gattellaro's interest in the Chiswick property.

[14]

As to (a): the cross-examination issue 74Mrs Gattellaro pointed out that the respondents had not cross-examined her to the effect that she would not have accepted the offer, had it been conveyed to her. She contended that in that circumstance, his Honour could not, and should not, have found that she would not have accepted the offer. 75The substratum of this submission was that the appeal to the High Court was always futile and that her prospects were nil. That was also the underpinning of the submissions relating to the special leave issue and is appropriately dealt with in that context. 76The cross-examination of Mrs Gattellaro upon which his Honour based his decision has to be considered in the context of the evidence as a whole and needs to be understood in the context of what Mrs Gattellaro had to establish in order to prove that her loss was caused by the respondents' breach of duty. 77In his affidavit sworn 30 July 2008, Mr Spencer referred to the letter of offer dated 15 May 2003 and to the steps he took in contacting counsel and obtaining a break down of the offered sum from Westpac. He also referred to his attempt to contact the Gattellaros by phone and to the file note he made of his a conversation with Anthony Gattellaro, which recorded the following: "To Gattellaro N/a Anthony Dad's in hospital again. Got to have a balloon put in. SB Bank had made an offer of $650,000 but not open for long - ran past [Mr McVay] but then couldn't get answer to your place. Didn't think parents would be interested at that figure.' 'No, that's right.'" 78Mr Spencer said that he believed the conversation occurred on 20 May 2003. However, his Honour found that it was made after that date and probably after the offer had expired, because there was no evidence that that Mr Gattellaro was in hospital on either of those dates. 79Mrs Gattellaro responded to this evidence in her affidavit dated 9 October 2008, in which she said: "88. ... I have never been personally informed of this offer or its expiry. I was unaware that Mr Spencer spoke with Anthony about this offer after it had expired or at any time. I do not understand why this offer was not put to me by Mr Spencer when my last instructions to Mr Spencer was to offer the same amount to the bank. Given my instructions to offer $650,000.00, Mr Spencer was incorrect in assuming that the offer would not be accepted. Mr Spencer should have contacted me personally about this offer to ensure that I was fully aware of it and was able to instruct him regarding it." 80Mrs Gattellaro did not say in this affidavit, or at any time in her evidence, that she would have accepted the offer had it been conveyed to her. Rather, as is apparent from the evidence to which his Honour referred: see above at [62], her evidence was that at the time the offer was made, she was not interested in paying $650,000 to Westpac. 81Mrs Gattellaro sought to counter this evidentiary omission by contending that the respondents should have cross-examined her as to whether she would have accepted the offer had it been conveyed to her. She submitted that the respondents bore the onus of establishing that she would not have accepted the offer as she had directly challenged Mr Spencer's affidavit evidence to which reference has just been made. The submission has no validity. If it was Mrs Gattellaro's case that she would have accepted the offer, she bore the onus of proving that matter. 82Mrs Gattellaro also submitted that his Honour should have drawn an inference that she would have accepted the offer. Mrs Gattellaro submitted that as the evidence revealed, she had listened to advice during the course of the proceedings and had acted accordingly. She relied in particular on the evidence that had listened to advice and made the offer of $650,000 in February 2003. 83This submission is correct, so far as it goes. However, it does not take account of Mrs Gattellaro's evidence that in May 2003, she was not interested in settlement. Her evidence in this regard was that " he was prepared to pay the offer before ", but at that stage she was prepared to let the court decide. 84It is not apparent whether the statement recorded in the transcript: " he was prepared to pay the offer before " is an error of transcription. If it is an accurate record of what Mrs Gattellaro said, it is evidence that her intentions were affected and possibly dominated by Mr Gattellaro's wishes. That was certainly the understanding of the trial judge. If it is not an accurate record, and her evidence was, " I was prepared to pay the offer before ", but at that stage, four weeks before the hearing, she " just wasn't interested in settling ", it is a clear refutation of the submission now put on her behalf. 85Should there be any doubt as to Mrs Gattellaro's intentions as at May/June 2003, she had made it crystal clear in the following cross-examination that immediately preceded that upon which his Honour relied. (The reference to the date 14 February is the date on which special leave was granted.) "Q. So that really, that 14 February was a big winning day for you and for [Mr Gattellaro], a cause for celebration. A. We thought it was. ... Q. You see, you win the special leave application and then you and [Mr Gattellaro] don't say anything about settlement to the solicitors. You don't say 'we want to settle'. You don't say 'we want to not take the risk of going to the High Court.' A. No, no. Q. You don't say 'we want to try again and settle now that we've won the special leave application.' A. No, we didn't want - we want to go to the end then. We thought we've come this far, we might as well go to the High Court." 86In my opinion, Mrs Gattellaro has not established that the only finding that was open to his Honour on the evidence was that she would have accepted the offer of settlement. However, that conclusion is conditional, as Mrs Gattellaro contended that the evidence she gave in respect of settlement was given in circumstances where she had not been advised that the appeal to the High Court was hopeless and therefore futile. On her argument, the grant of special leave did not enhance her forensic position at all.

[15]

As to (b): the futility issue 87Mrs Gattellaro submitted that her prospects of success in the High Court were nil, for the following reasons: "a. Whatever the outcome in respect to the challenge to the 1986 Mortgage, if Mr Gattellaro was found liable under the 1985 Guarantee, as he had in fact been found at trial, and on each appeal, both he and Mrs Gattellaro were caught by the 1977 Mortgage 'all monies' clause. b. Given that the Marston contention had not been formally pleaded below, and in the absence of any affidavit evidence as to its ventilation in proceedings, it was inevitable that, as found by Hulme J and confirmed by the NSWCA, Mr Gattellaro was liable under the 1985 Guarantee, and Mrs Gattellaro under the 1977 and/or 1986 mortgages. c. Even if the Marston defence had been made out, Mrs Gattellaro would still be liable under the 1986 Mortgage and/or the unchallenged 1977 mortgage." 88Mrs Gattellaro complained that the trial judge had failed to deal with that issue and invited this Court to make that finding. In advancing this submission, Mrs Gattellaro relied upon the matters which, in the result, led to the dismissal of her appeal to the High Court. 89The circumstances surrounding the grant of leave and the High Court's reasons for dismissing the appeal have already been dealt with. In summary: Westpac conceded on the special leave application that the appeal was not futile if leave was granted; Westpac changed its case the day before the hearing of the appeal and, somewhat unusually, the High Court allowed it to do so. 90The plurality in the High Court stated, at [57], that given Westpac's abandonment of the judicial notice point, the " better course would have been to allow the appeal and remit the Notice of Contention to the Court of Appeal ". Again, somewhat unusually, the High Court did not follow that course. 91Had the matter been remitted to the Court of Appeal, there was a real question as to whether the onus point would have been allowed to have been raised. The plurality considered that it was debatable whether the onus issue would be allowed to be raised on remitter to the Court of Appeal and Kirby J doubted that it would be allowed to be raised. 92It also needs to be noted that, to the extent that there had been any appellate comment upon Mrs Gattellaro's Contract Review Act claim, it was indicative of a prospect of success on that claim. Priestley JA considered that Mrs Gattellaro had made out a case that the 1986 mortgage was unenforceable against her in so far as it secured Falgat's indebtedness. In the High Court, Kirby J, at [97], considered that there was an arguable defence under the Contracts Review Act and, at the least, Mrs Gattellaro had suffered an arguable disadvantage. 93Having regard to those matters, it could not be said that the appeal to the High Court was always hopeless. It is also to be kept in mind that the decision in Marston stood for a previously untested principle and one which was in conflict with leading texts of the day. The decision in Marston did not itself deal with the question of onus and the onus issue was not raised until the eve of the appeal. Although the onus issue was decided against the Gattellaros, that was by no means a certain outcome. 94In my opinion, Mrs Gattellaro was appropriately advised that her prospects of success in the High Court were no more that 50/50. She had been consistently advised to settle because her prospects were not higher than that. 95There is a further problem. It would appear from his Honour's judgment that Mrs Gattellaro did not rely on the hopelessness of the appeal in the court below. Although para (13) of the further amended statement of claim alleged that: " ... [the respondents] failed to provide proper advice in relation to the result of [the appellant's] Appeal in the High Court of Australia" his Honour did not identify that as an issue argued before him. This is apparent from the primary judgment, where his Honour said: "53 Counsel for the plaintiff identified the issues which were ultimately pressed on behalf of the plaintiff. They were: (a) the defendants negligently failed to differentiate and identify the plaintiff's instructions and to act on those instructions; (b) the defendants were negligent in not advising the plaintiff that she should have met the bank's claim and stood over or set to one side for later development the claim by Mr Gattellaro for failure to properly debit his accounts and the like; (c) the defendants were negligent in that a Marston defence and/or an Amadio defence (in respect of the 1977 mortgage) was not pleaded, was not developed in the evidence and there was no explanation to the plaintiff about it; (d) the defendants were negligent in failing to advise in respect of the bank's offer of $650,000, and other offers on the way through." 96Mrs Gattellaro did not submit to the Court that his Honour failed, in his identification of the issues, to include the issue relating to the hopelessness of the appeal. In my opinion, the Court should assume that that question in the way it is presently articulated was not agitated before the trial judge. This leads me to make two further observations. First, the pleaded case at para (13) does not allege the appeal was hopeless. Secondly, there was no cross-examination of the respondents on the question whether they knew, or ought to have known, that the appeal was hopeless. 97In any event, in my opinion, the transcript of the special leave application and the High Court's judgment is sufficient to refute the submission.

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Conclusion on the causation issue 101A finding of negligence requires a factual underpinning. Mrs Gattellaro never gave evidence that she would have accepted the offer of settlement. It may be inferred, for the reasons I have explained, that Mr Gattellaro would not have given instructions to settle. 102If the question of the hopelessness of the appeal was in issue in the proceedings, there was an obligation on Mrs Gattellaro to give the respondents an opportunity to deal with it by way of cross-examination. She did not do so. In any event, for the reasons I have given, I do not consider that as at May 1993 when the offer was made, it could be said that the appeal to the High Court was, and always had been, hopeless. 103Finally, in the circumstances, it was not erroneous for his Honour to conclude that Mrs Gattellaro would not have settled without Mr Gattellaro agreeing to that course. The evidence is clear that she would not have done so. 104In my opinion, the appeal represented no more than a retrospective attempt to reconstruct a case of causal loss. That attempt failed. 105Insofar as Mrs Gattellaro's challenge to duty and breach was concerned, the written submissions confined the challenge to a failure to find that there was a duty to advise her of the utility of her appeal to the High Court and a failure to find that that duty was breached. The only written submission advanced in support of these grounds was as follows: "An ordinarily skilled solicitor would have realized, on the above analysis, that the entire Appeal process was pointless in the absence of a challenge to the 1977 mortgage and a challenge to the 1985 guarantee and Hislop J should have found in negligence against the Respondents for failing to advise acceptance." 106The oral argument did not expose any additional matter that needs separate consideration. As the question of the utility of the appeal was one of the central arguments advanced on the causation issue and has been fully dealt with in that context, it is unnecessary to repeat what I have said there. The conclusion I reached as to the utility of the appeal equally applies to Mrs Gattellaro's challenge as to duty and breach.