Griffiths as trustee for the Griffiths HWL Practice Trust v Martinez as trustee for the Martinez HWL Practice Trust as representative of the partners trading as HWL Ebsworth Lawyers - [2019] NSWSC 664 - NSWSC 2018 case summary — Zoe

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Griffiths as trustee for the Griffiths HWL Practice Trust v Martinez as trustee for the Martinez HWL Practice Trust as representative of the partners trading as HWL Ebsworth Lawyers

[2019] NSWSC 664

Supreme Court of NSW|2018-12-14|Before: Robb J

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Source facts

Court

Supreme Court of NSW

Decision date

2018-12-14

Before

Robb J

Source

Original judgment source is linked above.

Judgment (69 paragraphs)

[1]

Background

Mr Griffiths was admitted as a solicitor in this State in December 1980, and, after working in various legal positions, he became an equity partner of the firm Abbott Tout Lawyers on 1 July 1988.
Mr Martinez was admitted as a solicitor in Victoria in 1982, and in 1989 he was made a partner of the legal partnership Home Wilkinson Lowry (HWL). Mr Martinez became managing Partner of that firm in October 1998.
The partners of HWL entered into a partnership deed dated 9 October 2005 (Partnership Deed) to govern their affairs.
The Partnership Deed distinguished between "Capital Partners", who were effectively equity partners who contributed to the capital of the partnership and were entitled to vote on resolutions binding the partnership, and "Fixed Draw Partners".
Fixed Draw Partners are "partners appointed by the Capital Partners who do not contribute capital and are ineligible to vote upon partnership resolutions and have a fixed draw of profits as determined by the Capital Partners by Extraordinary Resolution" (cl 1.1 of the Partnership Deed). As appears from cl 8.5, Fixed Draw Partners are members of the partnership entitled to a fixed proportion of the net profit of the partnership.
There is room for doubt about the true legal status of Fixed Draw Partners. Notwithstanding the definition of that term as set out above, cl 2.1 of the Partnership Deed refers to: "The partnership of the Capital Partners"; and cl 2.2(a) states: "The Capital Partners will carry on the Practice under the Firm Name". Clause 2.5 implies that only the Capital Partners are members of the partnership. Clause 7.3(c) provides for the Capital Partners to indemnify Fixed Draw Partners in respect of any losses, for which the Fixed Draw Partners shall have no liability.
The Partnership Deed contemplates the existence of an Executive, which is defined in cl 1.1 as being "the executive from time to time appointed pursuant to Clause 12.1". That provision provides that the Executive "shall be appointed, be dismissed and have a membership in accordance with a Majority Resolution of the Capital Partners from time to time".

[2]

Application to further amend defence

It will be necessary to interrupt the flow of these reasons to deal now with an application made by Mr Martinez to further amend his defence.
On 30 November 2018, the last day of the hearing, immediately before the Court reserved its judgment, Mr Martinez foreshadowed an application to further amend his defence, in response to submissions made by Mr Griffiths to the effect that some of the matters relied upon by Mr Martinez in his final submissions were outside his pleaded defence.
On 12 December 2018, Mr Martinez filed a notice of motion, by which he sought an order giving him leave to amend his existing amended defence in the manner set out in the draft further amended defence that was annexed to the notice of motion. The notice of motion was supported by an affidavit of Mr Martinez' solicitor, dated 11 December 2018.
The Court heard the notice of motion on 14 December 2018, and at the completion of the submissions the Court reserved its judgment. For practical reasons, it was necessary for the Court to deal with Mr Martinez' application for leave to amend as part of its reasons for judgment in the principal proceedings. These are the reasons of the Court dealing with the notice of motion.
Mr Griffiths consented to leave being granted by the Court to Mr Martinez making a number of the amendments that he wished to make. It is not necessary to refer further to the amendments for which consent has been given.
Mr Griffiths opposed Mr Martinez' application in respect of three subject matters, being: (1) the addition of a ground justifying Mr Martinez' summary dismissal of Mr Griffiths from the partnership, being the improper provision of legal services to Mr Griffiths' brother, and a related ground to support Mr Martinez' allegation that Mr Griffiths had breached his obligation of fidelity; (2) the introduction of a new estoppel claim by Mr Martinez; and (3) an amendment to add a defence based upon s 5 of the Partnership Act 1892 (NSW) (Partnership Act). It will be convenient to deal with these three matters in turn.

[3]

Claim concerning work done for Mr Griffiths' brother

It is appropriate to begin by setting out the relevant parts of Mr Martinez' draft further amended defence. They are set out in par 8. In setting out the relevant parts of that paragraph below, I have omitted immaterial parts, not identified amendments to which consent has been given, and underlined the parts for which leave is opposed: 8. Based on the information the Defendant had on 17 August 2015 and on the further information the Defendant has acquired after that date, a proper basis existed as the Plaintiff had: … d. improperly provided legal services to his brother between 3 August and 11 August 2015 (including by not opening a client file in his name and by recording the work in an administrative file); and e. had breached his obligation of fidelity to the Practice by engaging in the above conduct and by not being honest and candid with the Defendant in his explanations as to his improper conduct, in that when confronted about that conduct he did not disclose and/or was dishonest about: … iv. the fact that he had been improperly providing legal services to his brother.
In order to put this application to amend in context, it is appropriate to start by setting out the terms of par 8 of the defence to amended statement of claim filed on 22 December 2017, which was the defence as filed at the time of the commencement of the hearing.
Paragraph 8 of that pleading set out the grounds upon which Mr Martinez relied for effectively terminating Mr Griffiths' partnership in a summary manner. It provided: 8. A proper basis existed as the Plaintiff: a. improperly used resources of the Practice for private purposes in spite of directions not to do so and in breach of policies of the Practice with which the Plaintiff was obliged to comply; b. improperly continued to use resources of the Practice to promote the book he had written in spite of directions not to do so with which the Plaintiff was obliged to comply; c. improperly used a significant number of working hours to promote his book, being hours that were only to be used to undertake work for the Practice, in spite of directions not to do so with which the Plaintiff was obliged to comply; and d. had breached his obligation of fidelity to the Practice by engaging in such conduct.
Paragraph 8 provided little detail of the allegations. Sub-pars (b) and (c) related to the promotion of Mr Griffiths' book, but the nature of the improper use of resources for private purposes in sub-par (a) and the breach of the obligation of fidelity in sub-par (d) were not clearly explained.
The justification Mr Martinez pleaded for summarily terminating Mr Griffiths' Fixed Draw Partnership was limited to various types of conduct by Mr Griffiths, and did not include dishonesty or failing to supply candid answers to inquiries made by Mr Martinez.

[4]

Course of the hearing

Before the commencement of the hearing, Mr Martinez, in accordance with the usual order for hearing, served a written outline of submissions dated 26 October 2018.
Paragraph 4(d) of the outline set out a fact that Mr Martinez had discovered in relation to Mr Griffiths' activities, that apparently Mr Martinez would rely upon to justify his summary termination of Mr Griffiths' partnership. The sub-paragraph provided: (d) Mr Griffiths had, on the morning of 12 August 2015, sought and had printed out in Word format, four precedents being confidential and valuable work product of the defendant contrary to the defendant's well-established policy with respect to the use of precedents and enlivening legitimate concerns about his intended use of those precedents given that he was in his 'notice' period.
The outline of submissions also set out in par 5(b) the following additional fact upon which Mr Martinez relied for the purpose of summarily terminating Mr Griffiths' partnership: (b) Mr Griffiths had been performing, at the same time, but without candid disclosure, further "foreign order" work to assist a family member.
In the context of the pleadings and the manner in which the hearing was conducted, the allegation in par 4(d) related to the instruction that Mr Griffiths gave to a subordinate to email to him a number of the Firm's precedents, which Mr Griffiths subsequently instructed his personal assistant to print out.
The use of the expression "foreign order" in par 5(b) was evidently intended to refer to work done by Mr Griffiths for one of his brothers, in which Mr Griffiths prepared a draft deed to assist the brother in relation to the termination of a commercial venture in which the brother had been engaged.
For completeness, it should be mentioned that Mr Martinez' statement of issues, also served in accordance with the usual order for hearing, was couched in very general terms that did not throw any light on the specific matters the subject of the application by Mr Martinez to further amend his defence.
Following senior counsel for Mr Griffiths opening his case, senior counsel for Mr Martinez made a brief opening. The Court indicated that it wished to hear from Mr Martinez as to his claim that, by reason of Mr Griffiths' conduct, he was properly summarily dismissed (T16.41, T24.17). It will be seen to be of some moment that the Court, during the opening for Mr Martinez, indicated that the Court would decide the case on the basis of the pleadings (T23.34).
Senior counsel outlined Mr Martinez' case concerning the justification for the summary termination of Mr Griffiths' partnership primarily by reference to the four dot points in Mr Martinez' 12 August 2015 email to Mr Griffiths, whereby he purported summarily to dismiss Mr Griffiths. Relevantly, the email stated the following grounds: Performance for July $7K Performance for August to date $7K You have used staff and firm resources to work on your book activities including the launch and 90% of your activity is for your book You are requesting staff to print off precedents
In this way, it is clear that Mr Martinez' case was opened to include reliance upon Mr Griffiths having requested the Firm's staff to print out precedents.
However, nowhere in the opening do I see any reference to Mr Martinez relying upon Mr Griffiths having done unauthorised legal work for his brother.
Perhaps motivated by the warning given by the Court during the opening that the parties would be held to their pleadings, on 2 November 2018, the third day of the hearing, Mr Martinez was given leave, by consent, to file an amended defence. Relevantly, the amended defence amended sub-par 8(d) to Mr Martinez's defence as follows, with the added words underlined: 8. A proper basis existed as the Plaintiff: … d. had breached his obligation of fidelity to the Practice by engaging in such conduct and by not being honest and candid with the Defendant in his explanations as to his improper conduct regarding: i. his use of the Practice's precedents; ii. his use of the Practice's resources to promote his book.
The addition of sub-par (d)(i) introduced an allegation that the summary termination of Mr Griffiths' partnership was justified by his misuse of the Firm's precedents (augmenting the fourth dot point in Mr Martinez' 12 August 2015 email to Mr Griffiths).
The amendment did not introduce, or refer to, a justification for the summary dismissal based upon the work that Mr Griffiths did for his brother. That is so, notwithstanding that, at par 5(b) of his outline of submissions, Mr Martinez referred to Mr Griffiths as having performed "foreign order" work to assist a family member.
This is all in the context that, in his 17 August 2015 response to Mr Martinez' 12 August 2015 email, Mr Griffiths gave the following explanation concerning his use of the precedents: The Precedents The precedents were printed to see if I could assist my brother. They did not leave my room. They are still here. I told my brother I was unable to assist.
Senior counsel for Mr Martinez cross-examined Mr Griffiths about the circumstances in which Mr Griffiths caused the Firm's precedents to be printed out, and also on the issue of the work done by Mr Griffiths for his brother: see in particular T133.18 to about T153. As I saw it, this cross-examination primarily took place in relation to the use to which Mr Griffiths intended to put the precedents that he had printed out.
This issue was made relevant by par 8(e)(ii) of the further amended defence, which was an amendment to which Mr Griffiths did not object, by alleging that it was a breach of his obligation of fidelity by Mr Griffiths not being honest and candid with Mr Martinez, in that, when confronted about his conduct, he did not disclose and/or was dishonest about: ii. the real reason for printing off Practice Precedents on 12 August 2015, namely to give them to his brother for his brother's use;
In response to senior counsel for Mr Martinez' pursuit in cross-examination of Mr Griffiths of the work done for Mr Griffiths' brother, in the context of the precedents being printed out, senior counsel for Mr Griffiths made a number of objections as follows. First, at T144.4: DONALDSON: Yes, I object as to relevance, your Honour. Firstly in circumstances where my learned friend is foreshadowing some sort of application to amend to bring his application within the evidence. I'm anxious that he not expand his case further by way of cross examination but if it turns out to be relevant to the case that he's pleaded then so be it. HIS HONOUR: No, I think I will allow this question.
I took the view that the line of questions was relevant to the claim pleaded by Mr Martinez in his amended defence, whereby he specifically raised the fact that Mr Griffiths had caused the Firm's precedents to be printed out. It also appeared that the questions may have relevance to Mr Griffiths' credit, given that he had been accused of breaches of his obligation of fidelity to the Firm.
By his objection, senior counsel for Mr Griffiths made it clear that he objected to the line of questioning on the ground of relevance, if it was intended to support a claim outside Mr Martinez' existing pleading, but the objection would not be pursued if the questions went to the existing pleaded case.
Following this exchange, Mr Griffiths was shown a four-page draft deed that he had prepared for his brother, together with a printout of data from the Firm's timekeeping records (T144.23), and Mr Griffiths was asked questions concerning how he recorded the time that he spent preparing the draft deed as non-chargeable administrative time.
It is in this context that the Court is required to decide whether Mr Martinez should be given leave to further amend his defence to add par 8(d) and par 8(e)(iv) after the end of the hearing and the close of submissions by the parties.

[5]

Pleading principles

In support of his application, Mr Martinez submitted that it is well-established that a party may amend its pleadings during (or even at the end of) the trial to reflect the evidence, in order to determine the real questions in controversy. He contrasted that situation with one where a party seeks to set up, by amendment, a new case at trial.
Mr Martinez relied upon the decision of the High Court in Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666 at 668-669, (1976) 9 ALR 437 (Leotta) per Stephen, Mason and Jacobs JJ: … But the duty of the trial judge was clear. If in the cause of action upon which the plaintiff sued there had emerged at the conclusion of the evidence facts which, if accepted, established that cause of action, then it was the duty of the trial judge to leave the issue of negligence to the jury. The pleadings should have been amended in order to make the facts alleged and the particulars of negligence precisely conform to the evidence which had emerged. Part 20, r 1(2) of the New South Wales Supreme Court Rules provides that all necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings. Now, and for many years past, a plaintiff does not fail by being refused leave to amend or through failure formally to apply for amendment, where the evidence has disclosed a case in the cause of action fit to be determined by the tribunal of fact. Particularly is this so when the action finally determines the rights of the parties in the cause of action. In a case where the question arose whether an amendment ought to have been requested and allowed in order to raise breach of a different duty of care the court in Mummery v Irvings Pty Ltd (1956) 96 CLR 99 at 112; [1956] ALR 795 at 802, said: "There is, of course, no doubt that the question of extending the issues at the trial was peculiarly within the discretion of the trial judge. But, on the assumption that there was some evidence upon which the jury could have reached a conclusion on this additional issue, there was every reason why it should have been submitted to the jury. If, as the members of the Full Court appear to have thought, the present judgment precludes the appellant from bringing any further action that was an additional reason why that course should have been adopted. We find it unnecessary to express any view upon that question but our doubts on this point do not lessen our belief that, if there was evidence upon this additional issue, a refusal to extend the issues was not, in the circumstances, justifiable." These observations apply a fortiori to a case where amendment would not raise a fresh issue based on a different duty of care but would only amend the expression of the course of events so that the facts pleaded would conform with the evidence given. An amendment to allege a different duty of care, namely, that of occupier to invitee, was rightly refused by the trial judge upon the ground that there was no evidence to support an issue of breach of that different duty. It is further to be observed that there was no suggestion made at the trial on behalf of the Commissioner that the case proposed to be left to the jury required the giving of further or other evidence and no application was made for an adjournment. It was no ground of appeal to the New South Wales Court of Appeal that a case contrary to the pleadings or the particulars had gone to the jury. The grounds of appeal were that there was no evidence of negligence, that the verdict was against the evidence and the weight of evidence, that there was an error in the trial judge's direction to the jury, and that the damages were excessive. …
Mr Martinez also relied upon the following aspects of the decision in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 (Aon), per French CJ at [14] and per Gummow, Hayne, Crennan, Kiefel and Bell JJ at [82] (footnotes omitted): [14] There is a distinction between the discretion of a court to allow a party to amend its pleading on that party's motion and the requirement to make all such amendments as may be necessary to determine the real questions in controversy. That requirement engages with the authority conferred on the court to make amendments of its own motion. The point was made in 1887 by the Full Court of the Supreme Court of Victoria in Dwyer v O'Mullen in relation to O XXVIII, r 1 of the 1875 Rules. Higinbotham CJ said of the last clause of the rule that it: "makes an amendment mandatory. The judge is under the obligation of making an amendment, but only for a certain purpose and in certain cases - for the purpose of determining the real question in controversy between the parties - that being expressed in many cases to be the question which the parties had agitated between themselves, and had come to trial upon." The position is different where a party seeks to set up, by amendment, a new case at trial.
And: [82] The need for amendment will often arise because of some error or mistake having been made in the drafting of the existing pleading or in a judgment about what is to be pleaded in it. But it is not the existence of such a mistake that founds the grant of leave under rules such as r 501(a), although it may be relevant to show that the application is bona fide. What needs to be shown for leave to amend to be given, as the cases referred to above illustrate, is that the controversy or issue was in existence prior to the application for amendment being made. It is only then that it is necessary for the court to allow it properly to be raised to enable a determination upon it.
Further, Mr Martinez relied upon the terms of s 64(2) of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act), which is as follows: Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings.
Mr Martinez submitted that, in accordance with these principles, he could show that that the "controversy or issue was in existence prior to the application for amendment being made"; and that "consideration of [the] cases does not suggest that an unduly narrow approach should be taken to what are the real issues in controversy, although they are not, or are not sufficiently, expressed in the pleading": see Aon at [82] and [83].
Mr Griffiths relied upon the following passage from the joint judgment of the High Court in Dare v Pulham (1982) 148 CLR 658 (Dare v Pulham) at 664 (footnotes omitted): … Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it (Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (in liq)); they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial (Miller v Cameron); and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court. Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings (Gould and Birbeck and Bacon; Sri Mahant Govind Rao v Sita Ram Kesho). But where there is no departure during the trial from the pleaded cause of action, a disconformity between the evidence and particulars earlier furnished will not disentitle a party to a verdict based upon the evidence. Particulars may be amended after the evidence in a trial has closed (Mummery v Irvings Pty Ltd), though a failure to amend particulars to accord precisely with the facts which have emerged in the course of evidence does not necessarily preclude a plaintiff from seeking a verdict on the cause of action alleged in reliance upon the facts actually established by the evidence (Leotta v Public Transport Commission (NSW)). …
Finally, Mr Griffiths relied upon the judgment of Gleeson JA in Gunasegaram v Blue Visions Management Pty Ltd [2018] NSWCA 179; (2018) 129 ACSR 265 (Gunasegaram), as follows: … [255] The function of pleadings is "to state with sufficient clarity the case that must be met"; this reflects "the basic requirement of procedural fairness that a party should have an opportunity of meeting their case against him or her": Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286; [1990] HCA 11 (Banque Commerciale); Dare v Pulham (1982) 148 CLR 658 at 664; [1982] HCA 70. [256] A party is entitled to have the opposing party confined to that party's pleadings because parties are entitled to come to trial to meet only the issues raised on the pleadings. However, pleadings are but a means to an end and not an end in themselves: Banque Commerciale at 293 (Dawson J). Thus, a case may be decided on a basis different from that disclosed by the pleadings where the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities: Banque Commerciale at 287. [257] Here, the defendants' pleadings did not adequately put Blue Visions on notice that they were contending that Blue Visions had given informed consent to the alleged breaches of fiduciary duties. The particulars given under the estoppel defence are not fairly to be read as asserting a defence of informed consent. There is no error in the primary judge's analysis of the defendants' case as disclosed on the pleadings. [258] In Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356; [2010] FCAFC 133 at [52], the Full Court of the Federal Court referred to the remarks of Isaacs and Rich JJ in Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490 at 517: Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest. (Emphasis added) [259] Viewed in these terms, the question is whether Blue Visions knew the nature of the case it had to meet. In my view, absent an oral opening by the defendants expressly drawing attention to their reliance upon the informed consent defence (which had not been pleaded), the fleeting reference in par 38 of the defendants' written opening that mentioned informed consent was insufficient to put Blue Visions on notice that the defendants intended to depart from their pleadings and raise such a defence. Nor do I consider that it should be inferred from the way in which the trial was conducted that Blue Visions acquiesced in the defendants advancing their case at trial as including the informed consent defence. …

[6]

Application of principles

Care must be taken in the present context in how the principles relied upon by Mr Martinez are to be applied.
First, the application of s 64(2) of the Civil Procedure Act will be circumscribed by practical considerations when it is sought to be relied upon by a party at the end of the hearing. The manner in which the hearing has been conducted is likely to restrict the scope for the unimpeded application of the provision. In any event, it is expressed to be subject to s 58, which requires by sub-s (1)(a)(i) that, in deciding whether to make an order for the amendment of a document, the Court must seek to act in accordance with the dictates of justice.
Secondly, care must be taken when seeking to transpose the actual result in Leotta to the circumstances of a present day commercial claim. As the majority stated at 668: "The only question which arises on this appeal is whether there was any evidence of negligence upon which the jury might find a verdict in favour of the appellant". Barwick CJ, who dissented, said at 667 that "the case involves no question of law which must be decided in order to dispose of the case other than the question whether the evidence adduced was such as to entitle a jury to find a verdict for the plaintiff".
Barwick CJ at 667 described the claim as follows: "The cause of action was negligence on the part of the respondent in the care, control and management of the electric train". At the end of the hearing, there was no evidence before the Court to support the case set up in the pleadings and particulars, but there was evidence upon which the jury could find the respondent liable in negligence on a different basis. Thus, the majority said at 668 that "the case which the appellant at the trial sought to have submitted to the Jury was factually different from that alleged in the statement of claim and the particulars of negligence included therein." The majority found at 668 that "a plaintiff does not fail by being refused leave to amend or through failure formally to apply for amendment, where the evidence has disclosed a case in the cause of action fit to be determined by the tribunal of fact."
The discussion of the majority at 668-669 seems to allow for an amendment where the evidence supports a different duty of care, but in the case before the Court, the necessary amendment "would not raise a fresh issue based on a different duty of care but would only amend the expression of the course of events so that the facts pleaded would conform with the evidence given." Their Honours noted at 669 that: "An amendment to allege a different duty of care, namely, that of occupier to invitee, was rightly refused by the trial judge upon the ground that there was no evidence to support an issue of breach of that different duty."
It was significant to the majority, as they noted at 669, that the respondent had not suggested at the trial "that the case proposed to be left to the jury required the giving of further or other evidence and no application was made for an adjournment."
The Chief Justice also noted at 668: "It is, of course, proper to allow a plaintiff to amend pleadings during the course of the trial provided the interests of the defendant can be adequately safeguarded by adjournment and otherwise. That is one thing and a matter of common enough experience." The Chief Justice also noted at 668 that an appropriate response to an amendment being allowed might be a consideration of "what witnesses already called should be recalled."
The approach to the allowance of amendments adopted by the courts many decades ago in personal injury jury trials based on claims of negligence may not now easily translate into modern commercial claims, where the proceedings have been conducted applying up-to-date case management principles. In my perception, modern courts require the parties to take their obligations in readying the case for hearing most seriously and, indeed, one of the factors that s 58(2)(b)(ii) of the Civil Procedure Act permits the Court to have regard to in determining the dictates of justice in a particular case is "…the degree to which [the respective parties] have been timely in their interlocutory activities…" At least in the usual case, the Court will not readily grant an adjournment to enable the parties to deal with new evidence that a party seeks to introduce that is outside the claim that has been pleaded and for which particulars have been given. That observation is not put as a generalisation, as in each case the relevant rules must be observed. But, in the interests of the proper administration of justice, modern courts will often resist cases taking on a new life that is inconsistent with their proper determination in the period for which they have been set down for hearing.
The observations of the High Court in Dare v Pulham that are extracted above that: "Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings", have special force, given the modern approach of the courts to the management of cases. So too has the observation of Gleeson JA in Gunasegaram at [256]: "A party is entitled to have the opposing party confined to that party's pleadings because parties are entitled to come to trial to meet only the issues raised on the pleadings." An exception, recognised by Gleeson JA, that "a case may be decided on a basis different from that disclosed by the pleadings where the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities" demonstrates, by the use of the expression "deliberately chosen", how the circumstances in which the Court may be required to decide the case on a basis not covered by the pleadings are irregular and limited. In the particular case under consideration, Gleeson JA found at [259] that, in the absence of an oral opening by the party seeking to rely upon the defence that had not been pleaded "expressly drawing attention to their reliance upon" that defence, the plaintiff was not put "on notice that the defendants intended to depart from their pleadings and raise such a defence."
In my view, it is true to say that in the modern era the courts will be astute to ensure that, if a party seeks leave to amend its pleadings at the end of the hearing to make a claim based upon evidence that has emerged during the hearing, that party has drawn the attention of the other party clearly and early enough to give that other party an effective opportunity to contest the issue. Before the amendment will be granted, the Court will need to be satisfied that the other party, having had a proper opportunity to contest the issue, has in reality, and perhaps "deliberately", accepted the challenge to contest the new issue. It will rarely, if ever, be sufficient to justify the amendment that evidence has emerged during the hearing that is capable of supporting the new claim. That is especially so where the new evidence is admissible in any event because it is relevant to an existing issue that arises on the pleadings. The difference between the modern position, which takes support from the legislation as well as from Dare v Pulham and Gunasegaram, and the approach to procedural issues adopted by the majority in Leotta, may be seen in a consideration of the nature of the new evidence in Leotta, which was described by the Chief Justice at 668 as being "a single and, one might almost say, a chance answer of a witness called to support the case as pleaded."
The basis of the approach adopted by the Court is now one of procedural fairness, and is not dependent on the distinction between pleadings and particulars. However, in the present case it is of some moment that the claim pleaded by Mr Martinez, that Mr Griffiths breached his obligation of fidelity, by not being honest and candid regarding his use of the Firm's precedents, involves a different breach of duty to that relating to the improper provision of legal services to Mr Griffiths' brother. Had Mr Martinez been the moving party, the two claims would have raised different causes of action.

[7]

Conclusion

For the reasons that follow, it is not appropriate that the Court give Mr Martinez leave to make the amendment, after the completion of the hearing, concerning the provision of legal services by Mr Griffiths to his brother.
Mr Martinez' defence, as it stood at the commencement of the hearing, was imprecise as to the basis of his claim that Mr Griffiths had breached his obligation of fidelity. Paragraph 5(b) of Mr Martinez' written outline foreshadowed a claim based upon a "foreign order", in Mr Griffiths having done work to assist a family member. However, Mr Martinez' case was not opened in a way that expressly drew attention to his reliance upon the case now sought to be made. In response to an indication from the Court that the parties should attend to their pleadings, Mr Martinez was given leave to amend his defence to specifically plead a claim based upon the way that Mr Griffiths used the Firm's precedents. Mr Martinez did not seek to introduce a claim based upon Mr Griffiths doing work for his brother. That was consistent with his opening, which restricted the claim to the misuse of the precedents. Mr Martinez applied for leave to amend his defence on the morning of the third day of the hearing. That was effectively at the end of the cross-examination of Mr Griffiths (senior counsel for Mr Martinez was permitted to complete his cross-examination briefly after the amended defence was filed in court). Mr Griffiths was not given any fair opportunity to lead evidence in his case on the issue now sought to be raised, and he did not do so. Before the cross-examination of Mr Griffiths concerning the facts relevant to the new claim, senior counsel for Mr Griffiths made a relevance objection. As appears from the extract from the transcript set out above, senior counsel for Mr Martinez was permitted to proceed, because the questions were relevant to the case as pleaded, and were capable of going to Mr Griffiths' credit. Mr Martinez did not clearly raise the claim that he now seeks leave to make against Mr Griffiths at a time or in a manner that would make it procedurally fair for the Court to give that leave. In all of the circumstances, I am of the clear view that it would not be procedurally fair to Mr Griffiths for the Court now to permit the amendment sought by Mr Martinez, and it will therefore not do so.

[8]

Additional grounds for estoppel defence

In his original defence, Mr Martinez raised a defence of estoppel in pars 18 to 20. The apparent reason for Mr Martinez having raised an estoppel defence is that Mr Griffiths foreshadowed that he would plead that Mr Martinez did not have authority to give Mr Griffiths three months' notice to expel or otherwise terminate him as a Fixed Draw Partner from the partnership.
In par 18, Mr Martinez alleged that the Firm and Mr Griffiths entered into the December Deed on the common understanding or assumption that Mr Martinez had authority to execute, terminate and take all steps in connection with the December Deed on behalf of the Firm. He alleged in par 19 that the Firm relied on that common understanding or assumption in entering into the December Deed, and in accepting Mr Martinez' decisions to bestow benefits thereafter on Mr Griffiths pursuant to the December Deed. Then, in par 20, Mr Martinez alleged that, by reason of these matters, Mr Griffiths is estopped from denying that Mr Martinez had the authority to execute and terminate the December Deed.
Whatever might be thought about the logical structure of this estoppel claim, it clearly related only to Mr Martinez' authority to terminate the December Deed in accordance with its terms.
Mr Martinez now seeks leave to add the following additional estoppel claims to his pleaded defence: 21. From 20 July 2015, being the date on which the Plaintiff was given notice of termination, until immediately prior to the (aborted) hearing of these proceedings in the District Court on 26 September 2017, the Plaintiff did not raise any challenge to the authority of the Defendant to terminate the December Deed on notice or otherwise. 22. By reason of the Plaintiff's failure to raise the issue of authority as set out above: a. the Defendant was not put on notice that, to terminate the Plaintiff lawfully on notice, he needed to: i. have his decision to terminate the December Deed on notice ratified or authorised by a meeting of the Capital Partners; or ii. in the alternative, have the Capital Partners pass a resolution to terminate the December Deed on 3 months' notice or payment in lieu thereof; b. the Defendant thereby lost the opportunity to convene a meeting of the Capital Partners and to put a resolution to that meeting: i. to have his decision to terminate the December Deed on notice ratified or authorised; or ii. in the alternative, to terminate the December Deed on notice or by payment in lieu thereof; and iii. to have the Capital Partners pass such a resolution. 23. By reason of the matters set out in paragraphs 21 and 22 above: a. it is now unconscionable or unconscientious for the Plaintiff to assert or otherwise rely on any lack of authority to terminate the December Deed on notice in accordance with clause 3.4 of the December Deed; and b. the Plaintiff is thereby estopped from asserting or otherwise relying on any lack of authority to terminate the December Deed on notice in accordance with clause 3.4 of the December Deed.
Mr Griffiths' solicitors responded to Mr Martinez' request for Mr Griffiths' consent to leave being granted to file the proposed further amended defence, by saying in their letter of 7 December 2018: … However, provided the Defendant agrees: 1. to delete paragraphs 8(d), 8(e)(iv) and 24; and 2. to the making of the usual order that the costs associated with the amendment, which includes the cost of preparing additional submissions to address proposed paragraphs 21 to 23, the plaintiff will agree to the filing of the further amended defence on that basis.
This letter signalled that Mr Griffiths would not oppose pars 21 to 23 being included in the further amended statement of claim, provided Mr Martinez agreed to pay consequential costs.
However, Mr Martinez did not accept the offer made on behalf of Mr Griffiths, so it did not become binding on Mr Griffiths.
Nonetheless, in par 1(b) of his written submissions in support of his application for leave to amend his defence, Mr Martinez stated his understanding that the estoppel amendments were not objected to, and explained that the additional paragraphs would only raise a legal argument based solely on the evidence led in the proceedings (Mr Martinez' emphasis). Consequently, Mr Martinez did not offer any arguments in support of this aspect of his application.
In his oral submissions in support of Mr Martinez' application for leave on 14 December 2018, perhaps having some intelligence about a change of position by Mr Griffiths, senior counsel for Mr Martinez simply said about the changes to the estoppel pleading that all they "do is more fully identify the foundation for the argument" (at T2.38).
Senior counsel for Mr Griffiths then made submissions as to why the Court should reject Mr Martinez' application for leave to include the new pars 21 to 23 in his further amended defence. Senior counsel said: "It is a new case factually and it should not be permitted" (at T15.35). Senior counsel did not explain in any detail how the new estoppel defence raised new facts. His submissions seem to have addressed an argument that the new estoppel suggested was not known to the law and was misconceived in principle.
Senior counsel for Mr Martinez then responded, but he seems to have done so in a way that suggested that Mr Griffiths' conduct in raising the argument that Mr Martinez lacked authority to give Mr Griffiths a termination notice was unconscionable because Mr Griffiths had for a number of years accepted the benefits of the December Deed. Senior counsel did not appear to explain how the events pleaded in the new paragraphs could support a new and different estoppel to that which was alleged in the existing pars 18 to 20.
It is a ground for a Court to reject an application by a party for leave to amend a pleading that the claim sought to be raised is not reasonably arguable, in the sense that, had it been included in the original pleading, it could have been summarily dismissed. That is a sensible procedural rule, where the amendment is sought to be made during the course of preparation of proceedings for hearing. The Court should not allow claims to be introduced that would be summarily dismissed if originally included.
However, where the issue arises after the end of the hearing, when the Court's judgment is reserved, the practical considerations lose their force. The Court must effectively decide whether leave to amend should be given at the same instant as it decides whether the amended claim would be upheld.
As I have noted, Mr Martinez seems to have linked the new estoppel defence to the old one, and less repetition will be involved if I consider whether leave to amend should be granted at the same time as I consider the present substantive estoppel defence. Therefore, the most convenient course will be for the Court to defer ruling on this aspect of Mr Martinez' application for leave to further amend his defence until later in these reasons.

[9]

Reliance on s 5 of the Partnership Act

Mr Martinez seeks the leave of the Court to add the following paragraph to his amended defence: 24. Further, or in the alternative, if the Defendant did not have actual authority to execute the December Deed (because the 26 October 2007 resolution did not validly delegate that power to the Managing Partner), the Plaintiff was aware of such lack of authority and therefore cannot enforce the December Deed against the Defendant. Particulars Section 5 of the Partnership Act 1892 (NSW)
Mr Martinez submitted in his written submissions that this amendment sets out the inevitable effect of s 5 of the Partnership Act, if the Court makes a finding that Mr Martinez lacked actual authority to terminate Mr Griffiths' partnership on notice, in light of Mr Griffiths' asserted knowledge of that lack of authority.
Mr Martinez submitted that this is purely a legal point and is put forward solely on the basis of the evidence already led at the trial. He submitted that he should be given leave to make the amendment, as Mr Griffiths raised the issue of authority in his reply, Mr Griffiths has put on evidence on this point, and he was cross-examined extensively as to his understanding of Mr Martinez' authority.
Mr Griffiths objects to Mr Martinez being given leave to make this further amendment to his amended defence.
Section 5(1) of the Partnership Act provides: 5 Power of partner to bind firm (1) Every partner in a partnership other than a firm that is a limited partnership or incorporated limited partnership is an agent of the firm and of the other partners for the purpose of the business of the partnership; and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which the partner is a member, binds the firm and the other partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom the partner is dealing either knows that the partner has no authority, or does not know or believe the partner to be a partner. …
There is an argument that s 5 would not be applicable in this context, because it makes every partner an agent of the firm and of the other partners "for the purpose of the business of the partnership", and it states that the acts of every partner bind the firm and the other partners when the acts are "for carrying on in the usual way business of the kind carried on by the firm". It is doubtful that the act of one partner signing a deed under which an existing partner ceases to be a Capital Partner and becomes a Fixed Draw Partner is either part of the business of the partnership, or constitutes the carrying on in the usual way business of the kind carried on by the Firm.
It is to be noted that the proposed par 24 is a conditional pleading, based upon the assumption that Mr Martinez did not have actual authority to execute the December Deed.
Mr Griffiths has not alleged that Mr Martinez did not have authority to execute the December Deed on behalf of the Firm. Further, Mr Martinez has not himself alleged elsewhere in his proposed further amended defence that he did not have that authority.
I consider that the proposed par 24 is misconceived. Section 5 of the Partnership Act is directed at the situation where a partner purports to act on behalf of the partnership for the purpose of its business, or in the carrying on in the usual way of business of the kind carried on by the firm, in some dealing with another person. That person is then entitled to enforce the transaction against the partnership, unless it is shown that the partner so acting in fact had no authority to act for the firm, and the person with whom the partner dealt either knew that the partner had no authority, or did not know or believe the partner to be a partner. Where the exception applies, the person cannot enforce the dealing against the firm.
In an internal dispute between partners, particularly one that does not involve the usual way of business of the kind carried on by the firm, s 5 of the Partnership Act has no application. If a partner in the position of Mr Martinez lacked authority to bind the firm in dealing with another partner, the dealing will not be effective and that will be the end of the matter.
In any event, Mr Griffiths only alleges in par 2 of his Reply, filed on 6 February 2018, that Mr Martinez lacked authority to give him three months' notice of termination under the December Deed. Mr Griffiths does not attack the validity of that deed. Mr Griffiths' attack on Mr Martinez' authority to give him the termination notice does not logically involve a commensurate attack on Mr Martinez' authority to enter into the December Deed with Mr Griffiths on behalf of the Firm.
I accept Mr Griffiths' submission that, if it were properly raised on the pleadings, proof of the proposition that Mr Martinez did not have authority to enter into the December Deed on behalf of the Firm would involve a factual enquiry into the questions of whether Mr Martinez had the necessary authority, whether the Capital Partners had given him that authority, and whether, by reason of the actions of all concerned over the period since its execution, the December Deed had been ratified or become binding on some other basis.
None of those factual questions have been examined in these proceedings, in part because notice of the issue was not given by Mr Martinez before the hearing commenced.
Accordingly, I reject Mr Martinez' application for leave to further amend his defence by adding the proposed par 24.

[12]

General finding on Mr Griffiths' credibility

I make these observations because, having observed Mr Griffiths being meticulously cross-examined over about one and a half days, where close attention by the Court was required because of the constant appearance that Mr Griffiths may have been being asked questions that related more to a case being made as the matter proceeded, rather than one that had been pleaded, I formed the confident opinion that Mr Griffiths was a witness whose credibility was in the first rank of witnesses that I have observed giving evidence in my time as a litigation lawyer.
I found that, in giving his evidence, Mr Griffiths was attentive to the questions, responsive, immediate, careful, and appeared to me to be being entirely frank. That was equally true for subject matters that he would have expected and been prepared for, and subject matters that had not been raised by the pleadings. Mr Griffiths did not simply parrot his case, but gave carefully considered answers to each of the questions that were put to him. It appeared to me that, where circumstances required Mr Griffiths to adjust his evidence to concede that the manner in which he had expressed his recollection may have been flawed, he did so, even where against interest.
There was one matter for which Mr Griffiths initially gave incorrect evidence. It concerned whether he had done work for his brother, and he initially said that he had not, on a number of occasions. That was a subject-matter not raised by the pleadings, but which has been sought by Mr Martinez to be the subject of an amendment to his defence, as considered above. I will deal with this matter in more detail below, but I am satisfied from observing Mr Griffiths that, when the subject was raised unexpectedly, he genuinely did not remember that he had done the work for his brother, but as he was given an opportunity to think about the matter further, he recalled that he had, and then conceded that point to the Court.
I have analysed Mr Martinez' final written submissions with a view to identifying the evidentiary basis of Mr Martinez' claim that Mr Griffiths' conduct was almost unremittingly dishonest. As those matters are not collected in the one place, but are distributed throughout the submissions, I will refer to what I understand to be the major matters in the order in which they appear in the submissions.

[16]

Use of precedents

Then, Mr Martinez makes a long series of submissions in pars 46 to 55 (particularly in pars 46 to 48) as to why Mr Griffiths acted dishonestly in concealing that he had precedents printed out that he intended to give to his brother, without opening a file and earning revenue for the Firm. That is a complicated allegation which I will consider separately in detail below.
Although there was a basis for suspecting that Mr Griffiths may have had the precedents printed out in order to make them available to his brother, this allegation must be considered from the perspective that it was not introduced into Mr Martinez' defence until the cross-examination of Mr Griffiths was effectively complete.
So far as the matter bears upon Mr Griffiths' credibility, the gravamen of Mr Martinez' claim concerns how Mr Griffiths responded to matters raised by Mr Martinez in emails starting with the 12 August 2015 email at 12:20 PM. The fourth dot point relied upon by Mr Martinez was: "You are requesting staff to print off precedents". Part of Mr Griffiths' response on this issue was: "It is not clear what is being referred to here but the implication is I have done something wrongful. There is no basis for any such suggestion."
The thrust of Mr Martinez' claim is that, as the four precedents had been obtained for Mr Griffiths and printed out no more than one hour before Mr Martinez sent his email to Mr Griffiths, Mr Griffiths must have known which precedents were being referred to, so his response must have been disingenuous.
Mr Griffiths' response in cross-examination on this issue was - remembering that he was not given an opportunity to deal with it in chief - as follows (T 140.28-141.17): A…I mean the situation is that Mr Martinez, when you look at this email, the view I formed was that he had not even gone to the trouble to look at the precedents. He hadn't himself actually looked at the substance of them, because if he'd looked at the substance of them he would have realised there was just nothing in it. There is absolutely nothing wrong with printing off precedents. It's a standard thing that everyone does in their work as a lawyer. Absolutely nothing wrong. And when you look at those precedents, you could see there was absolutely nothing in there of any value that I would have any interest in copying or stealing from the firm. It was just rubbish and to think that that was being put forward as a reason for my termination was just sickening. Q. But you didn't decide to put in your response anything to that effect or to explain the circumstances in which you printed them off, you elected to say nothing? A. Well no, I said something all right, but what I was concerned about was what on earth is he thinking about. I mean those precedent-- Q. But… A. Excuse me, let me finish. Those precedents had been printed. With hindsight what we now know is, Martinez is looking in my emails and he sees this email and he terminates me within the hour. That's what happened and that's what we know now, and I had some awareness that he would be looking at my emails. But I mean there's just nothing in it. I was wondering what on earth is he thinking of? There must be something else that I've done somewhere in terms of precedents, and I'm just finishing my answer, that he is concerned about. Q. And… A. But those particular precedents, to me, if you look at them, they could be of no substance to back up this sort of termination. Q. There are a number of things I need to take you through in relation to this, but insofar as on the 17th when first you mentioned your brother, why didn't you just tell him that when he's raised the question of precedents with you on the 12th? A. Well because as I think what I just said in a longer fashion a moment ago, is I didn't know it wasn't clear to me, I didn't see how he could really be referring to that. I mean it was obvious because the word "precedents" clicked with my head I think, and I - but it just - I thought there must be something else.
When it comes to the issue of Mr Griffiths' honesty, this exchange demonstrates how crucial perspective is, and why circumspection is required before allegations of dishonesty are made.
I accept the evidence that Mr Griffiths gave. In the world in which Mr Griffiths lived, as a senior and experienced solicitor and partner of a number of law firms, it was not a serious breach of the duty of fidelity to his partners to print out a small number of the Firm's precedents in an area of law with which he was not familiar. I will come to Mr Griffiths' reasons for printing out the precedents when I deal with the facts concerning this issue. In Mr Griffiths' world view, the partners in a firm are treated as having some independence and freedom with the partnership's resources, albeit in a limited way. Whether or not he is right, Mr Griffiths did not appreciate that in the case of the Firm there was allegedly an iron rule that partners not print out the Firm's precedents unless that was required to service an existing client in a manner that would permit the client number to be used in conjunction with the exercise. Mr Griffiths did not appreciate that it was an understanding of all members of the Firm that to print out the Firm's precedents on one occasion was so serious a breach of the duty of fidelity that the partner responsible, if a Fixed Draw Partner, could expect to be summarily dismissed from the partnership. As it happens, the evidence did not in any event prove that the regime that Mr Martinez asserted governed the use of precedents within the Firm in fact existed. The only evidence given was that of Mr Martinez, and it was not sufficiently comprehensive to establish the regime for which he contends.
The point is that, from Mr Griffiths' perspective, he did not remotely see how Mr Martinez could have thought it proper to summarily terminate his partnership on the basis of the few precedents that were printed out. Consequently, he was bemused as much as he was devastated that he had been summarily terminated, and suspected that Mr Martinez must have been badly advised and mistaken as to what he had done regarding precedents.
Quite apart from the fact that I accept Mr Griffiths' explanation, even if he were wrong about the rigidness of the Firm's expectations about the use of its precedents, it is untenable to conclude from his use of the words "It is not clear what is being referred to here" that he was being dishonest.
In Mr Martinez' second 12 August 2015 email, at 3:15 PM, he added the explanation: "There are emails where you are instructing a grad to print off precedents for you."
Mr Griffiths' response the next day, 13 August 2015, at 11:48 AM, stated: "Your reference to precedents may be referring to a request I made of Jeffrey Chen who sent me a link to some precedents. There was nothing improper."
That evidence is consistent with the evidence given by Mr Griffiths in cross-examination, about being bemused as to what Mr Martinez was referring to in his first email. As soon as Mr Griffiths appreciated that Mr Martinez was indeed acting on the basis of the precedents printed out on 12 August 2015, he acknowledged what had happened.
Mr Martinez says that even this response was dishonest, insofar as it asserted that nothing was improper. But that was simply a statement of Mr Griffiths' belief and understanding, which I am satisfied he genuinely had.

[23]

Mr Martinez' credibility

I consider that Mr Martinez was generally a credible witness, who gave his evidence forthrightly and as accurately as his recollection permitted. In that respect, Mr Martinez was a satisfactory witness.
However, in relation to a number of important issues where the recollection of Mr Martinez was in conflict with the evidence given by Mr Griffiths, I have preferred the evidence of the latter. I will explain those findings below when I deal with the relevant issues.
It became apparent that, in a number of respects, Mr Martinez was giving evidence of matters that did not depend solely on his conduct or thinking, but was in substance an expression of the work of others within the Firm that was presented to Mr Martinez for the purpose of the preparation of his evidence.
For example, the evidence given by Mr Martinez as to the billable hours worked by Mr Griffiths in the period 20 July to 11 August 2015 was based on information extracted by others from the Firm's accounting system (T226.14), and Mr Martinez did not know how the tables included in his 14 November 2018 affidavit were produced because he did not produce them (T226.23). Mr Martinez said: "Well, I trust that they - they're finance people that run the firm and I'm not the CFO" (T226.37). Mr Martinez did not himself choose the days for which Mr Griffiths worked a low number of billable hours that were listed in par 63 of his 3 May 2017 affidavit. The selection of days was presented to Mr Martinez by somebody else, and he did not know the criteria for selection that were applied (T238.20).
I do not criticise Mr Martinez for deriving his evidence in this way, but it demonstrates that in some respects Mr Martinez was simply presenting the work of others.
Of somewhat more significance is the manner in which Mr Martinez decided that he should summarily terminate the December Deed on grounds that included that Mr Griffiths was spending 90% of his work time working on the promotion of his book. Mr Martinez appears to have started with the evidence of the billable and administrative hours recorded in the Firm's computer system as having been worked by Mr Griffiths, and extrapolated from that information that Mr Griffiths was spending the whole of the balance of his time promoting his book. I explain below why I reject that conclusion. Mr Martinez gave the following evidence in cross-examination about how he arrived at his 90% estimate (T 234.31-236.14): Q. Do you tell his Honour on your oath that you recall examining Mr Griffiths' timesheets for the purpose of arriving at your 90% estimate? A. Look, I don't recall specifically for that purpose but I would have in my mind that I would have looked over all that information, and that would have been a part of the process of arriving at that estimation. … Q. Do you tell his Honour that before you sent your 12 August email, you actually went to the firm's financial records and examined them yourself to see what proportion of Mr Griffiths' time was being spent on non-chargeable work? A. I would have - I would have looked at some information produced to me. I can't say what. I wouldn't have gone into the system myself to do that but I would have discussed it and consulted with the national manager of HR and the national manager of finance. … Q. ...Please tell his Honour what you recall doing and if you don't recall, say so. A. I - I consulted to obtain the information needed to prepare this information. Q. To prepare the affidavit? A. But I can't remember specifically what table I looked at, at what time, with whom. I would have got a general download of information from people who are employed to manage this process and to inform me about these things. Q. If you'd looked at the information that's set out in paragraph 63 of your affidavit, you couldn't possibly have come to the view that Mr Griffiths was spending 90% of his time on matters related to his book, could you? A. No, I don't think that's true. I think if you - if you assume that all you're doing here is talking about billable time and what I'm talking about is a partner - even an average partner, not a high-performing partner, just an average partner, would be doing about nine or over nine hours a day minimum. … Q. Mr Martinez, if you've had any regard to any the time that Mr Griffiths had posted as billable work, he couldn't conceivably have suggested that he was spending 90% of his time on matters to do with his book, could you? A. That was my view - that was my estimate. That's the - the view I formed. Q. It wasn't a genuine estimate either when you recorded it in your email or when you deposed to the truth of it in your affidavit, was it? A. It was genuine for me.
It does not appear that Mr Martinez took great care with the manner in which a subject as important as a ground for summarily terminating Mr Griffiths' Fixed Draw Partnership had been investigated and established.
There were other aspects of Mr Martinez' evidence where there is room for doubt that Mr Martinez attended to the detail of what was happening concerning events relevant to his summary termination of Mr Griffiths. One is whether he was aware from an attachment to an email sent to him by Mr Griffiths that Mr Griffiths had already sent out invitations to his book launch, before Mr Martinez instructed Ms Bianca Miselowski (National Human Resources Manager) to send her 13 July 2015 email to Mr Griffiths, in which she asked him not to use his HWLE email address on any advertising. This event will be considered in detail below. For present purposes, the relevant point is that Mr Martinez was cross-examined extensively on this subject between T248.3 to about T256.38. Mr Martinez' evidence was that he did not look at the invitation to the book launch that was attached to the email sent to him by Mr Griffiths, so he did not know that Mr Griffiths had already used his Firm email address to send it, and that it was too late to reverse that situation, but he nonetheless left it to Ms Miselowski to decide what instruction to give to Mr Griffiths, and later - with that state of knowledge - he decided that Mr Griffiths had so seriously breached instructions given to him that summary termination of his position as a Fixed Draw Partner was warranted.
Earlier in his cross-examination, in relation to that part of his evidence where he confirmed that he had relied upon information given to him by others concerning the amount of billable work done by Mr Griffiths on various days, the following exchange took place (T226.40-.49): Q. Did you tell us a moment ago that you swore that the information provided in the table was true? A. Yes, on that basis. Q. So do you think that's an adequate basis for coming before his Honour and swearing this to the truth of the fact - A. Yes, I do. Q. - someone told you what it was? A. It's the only way that I can function.
That may be a completely understandable response for someone who had the onerous administrative duties that Mr Martinez had as Managing Partner of the Firm, but it demonstrates that significant parts of Mr Martinez' evidence concerned matters that were passing moments in the day for Mr Martinez. Mr Griffiths' more precise recollection may be due to the fact that the same matters were of great importance to him.

[24]

Principles governing validity of summary termination

The issue is whether HWLE was entitled to terminate the December Deed and expel Mr Griffiths summarily because of the occurrence of a "cause for which HWL Ebsworth is entitled to dismiss an employee summarily at common law" (cl 3.6).
Mr Griffiths submitted that cl 3.6 did not have the effect that Mr Griffiths was to be treated as if he were an employee. The effect of the clause was that, even though he would remain a Fixed Draw Partner, with whatever rights and status that position had under the Partnership Deed, he could summarily be expelled for a cause that would entitle the Firm to dismiss him if he had been an employee. I accept that submission, and do not understand that it is challenged by Mr Martinez.
The parties accepted that the principle governing the circumstances in which an employer may summarily dismiss an employee were as simply stated by Payne JA (Gleeson and Leeming JJA agreeing) in Coope v LCM Litigation Fund Pty Ltd [2016] NSWCA 37; (2016) 333 ALR 524 at [139], where his Honour said: "…It is clear that conduct which is repugnant to the employer/employee relationship and which destroys the mutual trust and confidence between employee and employer will, generally, be a ground for summary dismissal". His Honour cited as authorities Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 at 81; and Concut Pty Ltd v Worrell [2000] HCA 64 at [51]; (2000) 176 ALR 693 (Concut) at 707.
As Mr Martinez seeks to justify the summary expulsion of Mr Griffiths partly on the basis of the claim that Mr Griffiths disobeyed lawful directions given to him on behalf of the Firm, it is also important to apply the following statement of principle by Isaacs ACJ in Adami v Maison de Luxe Ltd (1924) 35 CLR 143 at 151: …It is no doubt a correct principle that, once the relation of employer and employee is established, obedience to lawful orders is, if not expressly, then impliedly, contemplated by the contract creating the relation, and mere disobedience of such orders is a breach of the bargain. But whether disobedience in a given case is of such a character as to justify a complete dissolution of the contract by one of the parties and, as here, a forfeiture by the other of valuable accruing rights, together with some degradation - altogether a severe penalty - is, in my opinion, quite a different matter. Such a justification requires the disobedience to be as phrased "wilful disobedience of a lawful order." That is, it must be not merely a breach but a radical breach of the relation, and inconsistent with its continuance. …
Gavan Duffy and Starke JJ put the matter as follows at 155-156 (footnotes omitted): … The question is whether the company was entitled to dismiss him for that breach. Was the plaintiff's conduct such as justified the company in determining, and treating as at an end, his contract of service with it? "If there is a distinct refusal by one party to be bound by the terms of a contract in the future, the other party may…treat the contract as at an end.…Short of such refusal,…the true principle to be deduced from all the cases is that you must ascertain whether the conduct of the party who has broken the contract is such that the other party is entitled to conclude that the party breaking the contract no longer intends to be bound by its provisions. This part of the rule was laid down by Lord Blackburn" in Mersey Steel and Iron Co. v. Naylor, Benzon & Co., "where he says the rule of law is that where there is a contract beween two parties, each side having to do something, 'if you see that the failure to perform one part of it goes…to the foundation of the whole, it is a good defence to say, "I am not going to perform my part of it when that which is the root of the whole and the substantial consideration for my performance is defeated by your misconduct"'" (Rhymney Railway v. Brecon &c. Railway). Now it may well be - and the cases and the books suggest the conclusion - that where it is a condition of the contract that the servant shall obey all lawful orders of the master, then a wilful or deliberate and intentional disobedience of any of those orders is tantamount to a refusal to be bound by the terms of the contract, entitling the other party to treat it as at an end, and to dismiss the servant (Turner v. Mason; Pease and Latter's Law of Contract, 1st ed., p. 218)…
It is proper to note that these authorities emphasise the seriousness of the breach that must be established to justify summary dismissal.
Before I begin to consider the application of these principles to the circumstances of the present case, it is appropriate to note that Mr Griffiths' obligations were owed to the Firm as a whole, and not just Mr Martinez. While Mr Martinez was delegated the duties of Managing Partner, it did not follow that Mr Martinez' views and attitudes subsumed those that may have been held by the Capital Partners at large.
There is some basis in the evidence for concluding that Mr Martinez believed that the other partners in the Firm were obliged to comply with his instructions: see, for example, the following exchange from the cross-examination of Mr Martinez (T246.30-.37): Q. And you're someone who regards obedience of your instructions as being very important, aren't you? A. Obedience? I think compliance with what's expected is important. Q. That's not my question. You regard compliance with your instructions as being important - compliance by other partners of the firm of your instructions as being important, don't you? A. Correct.
At par 8 of his written outline of opening submissions, Mr Martinez described Mr Griffiths' conduct as having: "…undoubtedly robbed the defendant of the necessary trust and confidence in him (and of any desire to retain him)…" Mr Martinez then submitted in the same paragraph that: "…[Mr Griffiths] was earning virtually no money for the defendant and yet the defendant was paying him $36,000 each month…" (emphasis added). However, it was the Firm, not Mr Martinez, that permitted Mr Griffiths to share in its profits.
Mr Martinez also expressed his own strong view about the entitlement of partners in the Firm to engage in literary enterprises in their own time: see (T 241.44 - 242.8) Q. Do you really consider that your partners require your permission to - whether or not they should write a book? I'll withdraw that, it's very convoluted. Do you suggest to his Honour that your partners require your permission to write a book? A. Considering a partnership is a good-faith relationship where you've got to dedicate all your time and effort to the partnership, yes, if you want to remain a partner. Q. Yes, so your -- A. If you want to be an author, you can actually resign from the partnership and be an author. Q. So your evidence is that no partner of the firm, HWL Ebsworth, can write a book without your permission? A. Correct.
It is of some relevance to the issues that require determination that Mr Martinez appeared to have formed the view that his role as Managing Partner extended so far as to give him personal unilateral authority to require all other partners to comply with his instructions.

[25]

Original justification for summary termination

It will be appropriate to commence the examination of whether Mr Martinez had proper and adequate grounds to summarily terminate Mr Griffiths by focusing first on the grounds raised in Mr Martinez' defence. Those grounds relied upon Mr Griffiths' objective conduct, and did not involve allegations of dishonesty or lack of candour. As described above in the context of Mr Martinez' application for leave to further amend his defence, Mr Martinez first raised grounds for justifying the summary termination involving dishonesty and lack of candour on the morning of the third day of the hearing, when Mr Griffiths' evidence was all but complete. That had forensic consequences to which I will come in due course.
It may be helpful to set out again the terms of par 8 of Mr Martinez' defence: 8. A proper basis existed as the Plaintiff: a. improperly used resources of the Practice for private purposes in spite of directions not to do so and in breach of policies of the Practice with which the Plaintiff was obliged to comply; b. improperly continued to use resources of the Practice to promote the book he had written in spite of directions not to do so with which the Plaintiff was obliged to comply; c. improperly used a significant number of working hours to promote his book, being hours that were only to be used to undertake work for the Practice, in spite of directions not to do so with which the Plaintiff was obliged to comply; and d. had breached his obligation of fidelity to the Practice by engaging in such conduct.
The grounds upon which Mr Martinez originally relied were effectively set out in sub-pars (a), (b) and (c). Mr Martinez identified particular conduct in which Mr Griffiths was alleged to have engaged, and then added that the conduct was in breach of policies of the Firm or directions given to Mr Griffiths with which he was obliged to comply.
At the hearing, the parties focused their forensic contest on a number of issues, and it will be convenient for the Court to decide the contest between them by addressing those issues.

[26]

Application of the Firm's IT & T Acceptable Use policy

Mr Martinez supported his summary termination of the December Deed and Mr Griffiths' partnership by the submission that, in the period immediately before the termination, Mr Griffiths had seriously infringed the Firm's IT & T Acceptable Use Policy.
At T62.15, during the cross-examination of Mr Griffiths, his senior counsel objected to a line of questioning based upon the alleged breach of this policy on the ground that no case had been pleaded that Mr Griffiths was in breach of any written policy of the Firm in connection with internet use.
I consider this objection to be justified, even though par 8(a) of Mr Martinez' defence, as it then stood, alleged improper use by Mr Griffiths of the resources of the Firm for private purposes in breach of the Firm's policies.
Mr Martinez' written outline of submissions served before the commencement of the hearing did not mention breach of any written email policy as being one of the grounds justifying the summary termination. Paragraphs 4 and 5 of the written outline list grounds for termination that are unrelated to the misuse of any email policy.
Mr Martinez did not refer to the Firm's email policy in his primary or supplementary affidavits, and did not include the policy in any exhibit to his affidavits.
Mr Griffiths was handed a copy of the relevant policy during his cross-examination at T58.41, apparently prompted by evidence given by Mr Griffiths in his affidavit in reply that he did not recall there being any policy as to the use of the Firm's resources.
The policy (Exhibit D5) provides, in par 2.2: 2.2 Scope This policy applies to all electronic mail systems used throughout HWL Ebsworth, including electronic mail usage on the Internet. It applies to all full and part-time employees as well as temporary and contract staff or those engaged by third-party agents.
On its face, the scope of the policy concerning the use of the electronic mail systems applied to employees, contractors and third-party agents of the Firm. That appears from other parts of the policy such as pars 2.3(c) and 2.3(f). Other parts of the document show that whoever prepared it had partners in mind, as partners are referred to in par 2.5, but there is no statement that the restrictions are intended to apply to partners.
Mr Martinez primarily relied upon the terms of par 2.3(b), which provides: Electronic mail facilities are provided for business use at the HWL Ebsworth's expense. Use of the facility for personal reasons, should be kept to a 'reasonable' level which in no way affects day to day business or productivity. i.e. during lunchtime and breaks.
The argument Mr Martinez sought to put was that Mr Griffiths' use of the Firm's email system, in the period up to 12 August 2015, was not reasonable within the meaning of this policy. He submitted that the policy was applicable to partners as well as employees.
Mr Griffiths did not accept that this policy applied to partners. He said at T96.21: "No I don't recall a particular set of rules. I think common sense has got a lot to do with it."
I conclude that the case that Mr Martinez seeks to make based upon the policy is not available to him, as it was not properly raised in his defence or notified otherwise before the commencement of the hearing.
In any event, I would reject this aspect of Mr Martinez' case as Mr Martinez has not proved that the policy applied to partners of the Firm. Partners are in a different position to employees, and, as Mr Griffiths observed at T96.09, it would be expected that there would be a formal policy for employees, so that employees knew what the terms of their employment were. While partners would naturally be expected to use the Firm's email system responsibly, I would not assume, without proof, that partners would subject themselves to the same restrictions as employees. In the absence of proof of any formal policy binding partners, I would accept Mr Griffiths' observation that partners would be expected to act in a common sense manner.
I should not leave this subject without observing that I reject the following submissions made by Mr Martinez, in his final written submissions. Mr Martinez submitted at par 12: "The plaintiff faintly and inconsistently contends that because this policy expressly refers to "employees", that it did not apply to partners like himself." Mr Griffiths' position was neither faint nor inconsistent. I would not assume that partners in a law firm had resolved to ban themselves from using the Firm's email system, except during their lunch hour, without that resolution being properly proved in a conventional way. I would not infer, without more, that a policy expressed to apply to employees also applied to partners.
Mr Martinez boldly submitted, in par 12(c) of his final written submissions, that while Mr Griffiths prevaricated in his oral evidence, he in fact conceded that the policy applied to him. I do not consider that Mr Griffiths prevaricated anywhere in his evidence. I express that conclusion after having carefully considered each of the transcript references provided in Mr Martinez' submissions. Those submissions appear to equate prevarication with disagreement with propositions put by senior counsel.
This is a demonstration of the forensic inappropriateness of a vague pleading, a failure to clearly identify an issue intended to be relied upon in opening, the introduction of an entirely unexpected line of attack in the cross-examination of an honest witness, all leading to submissions of prevarication by the witness which I totally reject.

[27]

Instruction by Mr Martinez to Mr Griffiths

Mr Martinez gave the following evidence in par 68 of his principal affidavit: I recall that, after I was informed that Mr Griffiths had authored the Book, I had a conversation with Mr Griffiths about his Book to the following effect of: Me: Congratulations on your book. That is a great personal achievement. However, please be clear, you must not use Firm resources to promote the book as it is a personal matter. Do not use Firm resources to promote the book. Mr Griffiths: Thank you, I won't. Me: Also, you must not use your PA to perform work associated with the book. She is not a resource for you and your personal pursuits. Mr Griffiths: I understand. Me: Okay, in that case, it's acceptable for you to pursue the book as a personal matter. I'm going to proceed on the basis that the book and associated activities will not impinge on your business or your focus. You must continue to perform your duties during business hours. It will not be acceptable if the book impacts on your work, or proves to be a distraction.
As I understand it, this conversation is the source of one of the directions that Mr Martinez alleges in par 8 of the defence were not complied with by Mr Griffiths.
Mr Griffiths' evidence in his affidavit in reply in response to Mr Martinez' evidence of this conversation was that it occurred in around October 2014, at the end of a conversation concerning the development of Mr Griffiths' practice. Mr Griffiths said, at [52]: … Towards the end of the meeting I said: Griffiths: "I want to tell you some news of mine. I have written a book which is to be published next year by Allen & Unwin. It is an historical novel. It has nothing to do with the law or law firms so there is no need for any concern." Martinez: "What is it about?" Griffiths: "It is a novel, but it is based on the life of a famous Australian photographer called Frank Hurley. He was with Mawson and Shackleton and in the First World War. The book will be released mid next year." As I was about to leave the meeting the conversation continued: Martinez: "Well done with the book but don't let it get in the way of your work." Griffiths: "It's already written. Actually it has been a terrific diversion. I wrote it over four years."
Two aspects of these different versions of the conversation are significant. First, both versions suggest that the two participants understood that Mr Griffiths had already finished writing the book. That appears most clearly from Mr Griffiths' version, but it is also the natural way to understand Mr Martinez' evidence that the conversation took place "after I was informed that Mr Griffiths had authored the Book", where "authored" is in the past tense. Also, it would not be natural for Mr Martinez to congratulate Mr Griffiths prematurely, or to describe the book as "a great personal achievement" unless the work had been completed. Additionally, the instruction that Mr Martinez recalls that he told Mr Griffiths not to use the Firm's resources to "promote" the book suggests that Mr Martinez understood that promotion was the next step to be taken.
The second matter is that, although both witnesses agreed that Mr Martinez told Mr Griffiths that the work necessary for the promotion of the book should not interfere with Mr Griffiths' work for the Firm, Mr Griffiths denies that he was given the instruction concerning the use of the Firm's resources and his personal assistant in connection with the promotion of the book. Thus, Mr Griffiths denies that he was given the direction that is the foundation for the aspects of Mr Martinez' defence that are identified above.
I prefer the evidence of Mr Griffiths to that given by Mr Martinez as to the terms of this conversation.
First, I prefer the evidence of Mr Griffiths on matters of detail to the evidence given by Mr Martinez, for the reasons discussed generally above. A conversation on the subject of Mr Griffiths' book would naturally be more significant to Mr Griffiths than to Mr Martinez, given all of the duties and distractions of his role as Managing Partner.
As I will explain below when dealing with the significance of an instruction given to Mr Griffiths by Ms Miselowski on 13 July 2015, Mr Griffiths was quite meticulous in the steps that he took to try to obtain the Firm's approval and directions in relation to the terms of the invitation that was to be published to attend the book launch. I consider it to be likely that, if Mr Martinez had given the instruction that he claims to have given, Mr Griffiths would have been more extensive in his request for approval of the use that he made of the Firm's resources in relation to the book launch.
However, the main reason that I prefer the evidence of Mr Griffiths to that given by Mr Martinez arises out of the following aspects of the cross-examination of Mr Martinez (T239.11-243.12): Q. Now, in paragraph 68 of your affidavit at page 113 of the court book, you refer to a discussion that you said you had with Mr Griffiths about his book. A. Yes. … Q. And it's a conversation that occurred after he'd written the book? A. I've got no idea. … Q. I'm sorry, I didn't mean to interrupt. Do you tell his Honour that you might have said "congratulations on your book" even if he was only planning on writing the book? A. I don't know if it was on - proposed; a draft; done; finished; halfway. … Q. When you swore your affidavit, did you care whether the first line at paragraph 68 of your affidavit was true? A. What's the first line? Q. It says, "I recall after I was informed that Mr Griffiths"-- A. Where - where are you reading from, sorry? Q. I just told you, I'm reading from paragraph 68 of your affidavit of May 2017. It's at page 113 of the court book. A. Yes. Q. "I recall"-- A. And are you reading verbatim from somewhere? Q. Yes, from your affidavit. A. Yes. Can you take me to the line? Q. I just told you, it's the first line: "After I was informed that Mr Griffiths had authored the book, I had a conversation with Mr Griffiths about his book." Now, my question to you was, did you really care about the accuracy of that statement when you swore that your affidavit was true? A. Well, I - I cared to the extent that if it was still in process, which it suggests that it was, that it wasn't authored, because I said, "Do not use firm resources to promote the book," et cetera. I had the feeling that there were still things to be done. … Q. And that didn't happen, because the conversation occurred after he'd already written the book. A. I've got no idea. I've already answered that before. I've got no idea the status of the book, where it progressed to or what was happening with the book. All I was worried about is whatever was going on, the impact of those things impacting negatively upon the business that I'm charged with protecting its interests. So that's what I was concerned about. … Q. That wasn't my question. Do you recall one way or another, whether in the course of the conversation, Mr Griffiths told you that he'd written the book? If you don't recall one way or another, say so. A. I don't recall that he had said he had completed writing the book. … Q. Are you confident that he didn't say that? A. I'm - I'm - well, I'm confident that I can't recall it. … Q. And he also told you that it was a novel, didn't he? A. I can't recall. Q. He told that it was an historical novel that had nothing to do with the law or law firms. A. I - at that time, I can't recall. I had very little interest in what the book was about. Q. Really? Do you tell his Honour that seriously? A. What the book was about, I had no interest.
This evidence demonstrates that Mr Martinez could not remember what he had relevantly said in his affidavit, and that his current recollection of the October 2014 conversation was so imprecise that he had no idea whether at the time Mr Griffiths had already finished writing the book, or even where he was at in the process.
In his 12 August 2015 email to Mr Griffiths at 12:20 PM, Mr Martinez did not mention that the use by Mr Griffiths of staff and firm resources to work on his book activities was contrary to any direction given by Mr Martinez. However, in Mr Martinez' 3:15 PM email on the same day, he said: "…She [Mr Griffiths' personal assistant] is not a resource for you and your personal pursuits. I told you this expressly when you spoke to me about the book. I told you that I was proceeding on the basis that the book and associated activities would not impinge on this business and your focus/duties…" Although it is not entirely clear, I accept that this statement is consistent with Mr Martinez having the belief on 12 August 2015 that he had given the instruction to Mr Griffiths in October 2014 that Mr Martinez claimed in his affidavit to have given.
In his subsequent emails, Mr Griffiths did not respond to this statement in Mr Martinez' 3:15 PM email by contradicting it. Mr Griffiths was cross-examined on this issue, as follows (T112.43-114.48): Q. Can you offer any explanation to his Honour as to why the central proposition, one of a number of serious allegations was being put to you by the managing partner, why you didn't respond to it when you were given the opportunity to do so? A. Well, I responded to the email as a whole and my explanation is that I was, at this stage, particularly surprised at the grounds contained in the email of 12 August from Mr Martinez because I didn't think that had any substance to them and I thought with some explanations I could hold onto my position. I thought there must be some misunderstanding. I thought someone might have been badmouthing me but I thought rational explanation will sort this out. I won't have a meeting with him, just one to one because he's the sort of person you need to sit down with, one to one, emails are not a good way to communicate with him. … Q. So did you call him a liar face-to-face, that would be better. A. It would not be a good - I was pretty keen - I mean I've had difficulties with Juan before and I just thought this was crazy stuff. You can't summarily dismiss someone for this sort of reason set out in his email. I couldn't believe it. … Q. Yes. Well you had the opportunity, you talk about a lack of opportunity, you had the opportunity which you took in a more fulsome email on the 13th at 11.48am, to set out a lot of information denying impropriety but you didn't even advert to what he'd said about him having told you not to mix the book with the firm? A. Correct. Q. And your evidence to his Honour is that you made a conscious decision not to do so to call him a liar because that's true is it? You're telling his Honour you made a conscious decision not to do it? A. Yes that's true. … Q. So does it follow from that that if he'd agreed to a face to face meeting which you wanted that in such a face to face meeting you still wouldn't have told him that he was wrong about the directions he said he gave you? A. I might have done it in a way of if there was a way of doing it softly but I certainly wouldn't have said you didn't say that to me in the meeting, because I know that would have done no good. Q. But if you didn't answer it you were already in your managing partner's telling you "you've done something seriously wrong contrary to my direction." What you were hoping that would just disappear into the ether? A. No I wasn't sure when he was what I mean I had no idea what direction he was talking about. We had a conversation like nine months earlier, I couldn't believe that's what he was thinking about but it was the only conversation we had, but he's got this very specific thing about my PA and there's just no reason to have talked about my PA, nine months earlier. It just, it just was wrong. But I wasn't going to say to the managing partner you are a liar. That was never said. Q. But you didn't even take issue with the proposition in a polite way? A. Well I didn't, I thought I was pretty polite, frankly.
I accept Mr Griffiths' explanation. It is understandable that Mr Griffiths took the view, given the situation that he was in, that it would not be a good start to contradict Mr Martinez on every one of the points that Mr Martinez raised in the 12 August 2015 3:15 PM email with which he disagreed.

[28]

Ms Miselowski's 13 July 2015 email

Another direction that Mr Martinez relies upon as being one that Mr Griffiths did not comply with was contained in an email sent on 13 July 2015, by Ms Miselowski, to Mr Griffiths in which she said: Hi Tim I understand you recently published a book - congratulations! Given this is a personal matter, please do not use your 'hwle' email address on any advertising. Your 'hwle' email address should not be linked to any non-hwle matters. The firm is supportive of you putting some flyers in the kitchen areas. I hope it is a success. …
The meaning of this email is not entirely clear. The evidence was that, from the inception of Mr Griffiths having email facilities on his personal work computer following his joining the Firm, he had two possible signature blocks for his emails. One of the signature blocks had Mr Griffiths' name, Tim Griffiths, with the word "Partner" printed underneath. Under that, in significantly larger font, were the words "HWL EBSWORTH", and under that the word "LAWYERS", with that word in intermediate sized font. The address, contact details, Mr Griffiths' actual Firm email address, and the Firm's website, were printed in relatively small print to the side of the statement of the Firm's name. This was the 'official' signature block that Mr Griffiths used when he was undertaking business of the Firm, or was engaged in communications in which he considered it to be appropriate that he should represent himself as being a partner of the Firm.
Mr Griffiths' second signature block was one that he generally used when sending private emails through the use of the computer supplied by the Firm. This signature block simply stated "Tim Griffiths", and under that was the same address, contact details, statement of the email address, and the Firm's website as appeared on the 'official' signature block. The private signature block was used with the single email address supplied by the Firm, and referred to "hwle" in the email address and also "hwlebsworth" in the website.
Mr Griffiths acknowledged in his affidavit in reply that his use of the alternative signature blocks was not always precise, and that sometimes when in a hurry he might use the 'official' signature block for private emails.
The evidence did not establish any general practice adopted by the Firm about signature blocks, and when blocks of different types should be used.
Although the matter is not free from doubt, the better view on the evidence is that Ms Miselowski's instruction related to any use by Mr Griffiths of the HWLE email address supplied by the Firm.
However, the specific instruction was for Mr Griffiths not to use the Firm's "email address on any advertising". Even if a wide meaning is given to the word "advertising", the natural meaning of the instruction is that the email address should not appear "on" the advertising. That is, Mr Griffiths should ensure that any communication that could be understood as an advertisement for the book should not have the Firm's email address included in it.
It would not be natural to construe the instruction as prohibiting all communications by use of the Firm's email address, that had the book as their subject-matter, or referred to the book, but were not intended to promote its purchase.
The invitation to the book launch that was to be held on Wednesday, 29 July 2015 contained the request: "Please RSVP to email tgriffiths@hwle.com.au by 20th July". The invitation could reasonably fall within the meaning of "advertising" in Ms Miselowski's email. The Firm's email address was used on that advertising.
However, the invitation was prepared, as I understand the evidence, by the publisher, Allen & Unwin, some time before Ms Miselowski sent her email to Mr Griffiths. The invitation bears the publisher's name and logo, and I would infer that it was more likely the intellectual property of the publisher. It is true that Mr Griffiths must have authorised the publisher to include the Firm's email address for the purpose of replies, but that was something that in practical terms had become fixed before the date of Ms Miselowski's email.
Mr Griffiths sent Mr Martinez an email on 1 July 2015, in which he invited Mr Martinez to the book launch and attached a copy of the invitation. Mr Martinez claimed in cross-examination that he did not look at the attachment, because he could not go to the book launch. In attaching the invitation, Mr Griffiths openly disclosed the use that he had already made of the email address supplied to him by the Firm on the invitation.
Earlier, on 25 June 2015, Mr Griffiths had sent an email to Mr Russell Mailler, who was the Firm's National Marketing Manager, to inform Mr Mailler about the book launch. Mr Griffiths attached a copy of the invitation and said: "Draft electronic invite attached but not sent out." He also said: "Accordingly I want to check with you and Juan if you have any views on dealing with this and any associated publicity that Allen & Unwin drum up."
The email to Mr Mailler forwarded an email of 25 June 2015 from a publicist at Allen & Unwin to Mr Griffiths, which attached a PDF and jpeg of the invitation.
Both the email to Mr Mailler and the email from Allen & Unwin were forwarded with the 1 July 2015 email from Mr Griffiths to Mr Martinez.
Mr Martinez replied to Mr Griffiths on the same day, saying only the following: Thanks Tim, I wont be able to attend but hope it's a success night. Cheers Juan
Mr Griffiths gave evidence, which was not challenged, that Ms Michelle Davidge, who was the National Administration Manager for the Firm, approved the invitation being displayed in kitchens in the Sydney office of the firm.
There was no evidence of Mr Mailler responding to Mr Griffiths' email to give him any instruction to change the wording of the invitation.
Mr Griffiths gave evidence, which was also not challenged, that, when he received Ms Miselowski's email, he understood it was a belated response to the request that he had made earlier for management approval of the proposed invitation.
The invitation was sent out mostly at the end of June 2015, and replies were requested by 20 July 2015. By the time Mr Griffiths received Ms Miselowski's email, it was too late to do anything about the terms of the invitation.
I find that Mr Griffiths acted in a responsible way in seeking clearance from the relevant officers of the Firm as to the book launch and the terms of the invitation, and they did not respond promptly enough to alter the terms in which people were invited to the book launch.
There is also a question as to the meaning of that part of Ms Miselowski's email where she says that Mr Griffiths' Firm email address "should not be linked to any non-hwle matters". That appears to be a wider prohibition than not using the email address on any advertising. In context, the meaning of the word "linked" is not clear. It does not have a common or generally accepted technical meaning. Assessing the meaning of the instruction liberally, it may extend to prohibiting Mr Griffiths from suggesting a connection between the Firm and any business of Mr Griffiths' that was not business of the Firm, by attaching in some way his Firm email address to communications involving that other business.
I do not think that the natural meaning of the instruction is that Mr Griffiths was prohibited from using the Firm's email service, provided to him for day to day communications, concerning the forthcoming book launch. The fact that Mr Griffiths' Firm email address appears at the foot of emails would not naturally be considered to be the use of the email address on any advertising. Nor would it in any clear way involve the email address being linked to any non-Firm matters.
Even if there is scope for debate about the last conclusion expressed above, the meaning of the relevant statement in Ms Miselowski's email is unclear, and would be an insecure foundation for a claim that a departure by Mr Griffiths from the instruction could be so serious a breach of his duties to the Firm as to justify the summary termination of the December Deed and his partnership.
Mr Griffiths gave evidence that he was unaware if there was a relevant written policy of the Firm regarding the use of the Firm's email address. Mr Martinez has not put into evidence any such written policy.
In all of these circumstances, I do not accept that Mr Griffiths contravened any instructions given to him in Ms Miselowski's email that was sufficiently serious so as to justify the summary termination of the December Deed and Mr Griffiths' partnership.

[29]

Mr Griffiths' use of the Firm's email account during working hours

A matter that is relevant to a number of the issues concerning Mr Martinez' claim that his summary termination of the December Deed and Mr Griffiths' partnership was valid is the extent to which Mr Griffiths in fact used the Firm's email account for his own private purposes, and especially the advertising and organisation of the launch of his book on 29 July 2015.
In Exhibit JJM-1 to Mr Martinez' primary affidavit, Mr Martinez exhibited a large number of emails that were evidently stored in the Firm's computer system, which consisted of emails sent or received by Mr Griffiths over the relevant period. As I understand it, these emails are a subset of all of the emails sent and received by Mr Griffiths, as they do not include any emails that relate directly to his professional work.
In par 70 of his primary affidavit, Mr Martinez analysed emails covering the period 21 July 2015 to 12 August 2015. Mr Martinez' reference in the chapeau to the paragraph to the period ending on 11 August 2015 was an error. The pages analysed by Mr Martinez ranged between pages 61 to 879 of the exhibit. For each day during the period, Mr Martinez identified emails sent and received by Mr Griffiths that were "about his book".
Mr Martinez also included a detailed analysis of the emails in Annexure B to his final written submissions, in which he divided the emails in the relevant part of the exhibit between "personal" and "book" emails, and whether they were sent or received by Mr Griffiths.
The genesis of this aspect of Mr Martinez' claim is the third dot point in his 12 August 2015 email to Mr Griffiths, in which Mr Martinez said: You have used staff and firm resources to work on your book activities including the launch and 90% of your activity is for your book
Mr Martinez referred to his "estimate" that Mr Griffiths "was spending around 90% of his time…reading, sending and receiving emails in connection with the promotion and launch of his book and about a host of other non-work-related personal matters, as well as making and receiving phone calls in connection with the promotion and launch of his book" at par 42(c) of his final written submissions. Mr Martinez stated in footnote 14: It now appears (having regard to the date exhibit D10) that the plaintiff was, in fact, spending 80% of his time, assuming a 9 hour day, on personal matters
Exhibit D10 is a printout from the Firm's computer system that purports to record the work done by Mr Griffiths, including billable work, over the period between the beginning of March and 14 August 2015.
The process of reasoning adopted by Mr Martinez appears to be have been to calculate approximately the time recorded for the undertaking of billable and other work for the Firm, and to deduce that Mr Griffiths spent the whole of the balance of his time working on the advertising and promotion of his book, and other personal matters.
The following exchange took place in cross-examination, concerning the manner in which Mr Martinez reached his estimate that Mr Griffiths had spent 90% of his time working on personal matters (T232.29-.43): Q. You'll see that you say there that as a result of the quantity of book emails and activities referred to in the book emails and low billings, you estimated that 90% of Mr Griffiths' time at work was being spent on attending matters that related to, touched upon or that were otherwise related to his book. Do you see that? A. Yes. Q. That's something you thought about seriously before you swore that it was correct? A. That was my estimation. Q. So that was a carefully thought-out estimation, was it? A. Well, it wouldn't have been - I wouldn't have gone to excruciating analysis but I would have reviewed the information and would - would have genuinely come to the conclusion that that's about the correct estimate.
The matter was further pursued in cross-examination, and the transcript between T232.50 and T234.47 includes: Q. You say that Mr Griffiths recorded 2.8 hours of billable work on 3 August. A. That's what I said, yes. Q. Is that the sort of understanding that you had when you did this rough calculation and estimate of 90% of his time being spent on his book? A. Well, yes. Q. Did you assume that Mr Griffiths worked a 25-hour day on 3 August 2015? A. I don't know how you - I don't know how you say that. … Q. Your assumption that he spent 90% of his time on matters to do with his book wasn't based upon an examination of how much administrative time he recorded. A. I - I would have considered what was recorded in total, not just the 2.8 hours and there's - obviously you'll take me through others but there's some where 1.6 hours - I would have averaged - that comment is about the average, not about picking one day. … Q. You didn't examine information in relation to billable and non-billable time for the purpose of making the estimate at that point in time, did you? A. I probably would have. Q. You probably would have. A. Yes. Q. Do you tell his Honour on your oath that you recall examining Mr Griffiths' timesheets for the purpose of arriving at your 90% estimate? A. Look, I don't recall specifically for that purpose but I would have in my mind that I would have looked over all that information, and that would have been a part of the process of arriving at that estimation. Q. When you saw your affidavit, you got someone else to produce information in relation to recorded time in connection with billable time. A. Correct. Q. Do you tell his Honour that before you sent your 12 August email, you actually went to the firm's financial records and examined them yourself to see what proportion of Mr Griffiths' time was being spent on non-chargeable work? A. I would have - I would have looked at some information produced to me. I can't say what. I wouldn't have gone into the system myself to do that but I would have discussed it and consulted with the national manager of HR and the national manager of finance.
It must be concluded on the basis of this evidence that Mr Martinez cannot remember how he derived the 90% figure; that he reached the conclusion based upon information provided by others; and that in some way he based his estimate on the assumption that Mr Griffiths was devoting all of his time to personal matters, if his time was not recorded in the Firm's records. Mr Martinez did not personally analyse Mr Griffiths' emails.
Given that this issue was a primary basis for Mr Martinez summarily terminating a fellow partner, the process that he adopted was extraordinarily lax.
Mr Martinez made submissions on the issue of the factual extent and nature of Mr Griffiths' use of the Firm's email account at pars 58 to 60 of his final written submissions, before describing Mr Griffiths' conduct in par 65 as involving a "gross overuse of the Firm's electronic email system for unauthorised personal reasons". Mr Martinez relied upon the submission that, between 21 July and 12 August 2015, Mr Griffiths either sent or received a total of 477 book emails, and at least 180 otherwise personal emails. He submitted that, when these emails are analysed on a day by day basis, that (at par 60): "the picture becomes clear - namely that when due allowance is made for the time involved in drafting emails to send and reading emails so as to respond and the associated time of making and receiving phone calls in connection with the book (admitted by the plaintiff at T. page 183.10 to.16) and other personal matters, a significant amount of the plaintiff's working day in the said period was spent on "personal matters", rather than on billable or non-billable work for the Firm".
I have undertaken a close analysis of the pages in Exhibit JJM-1 relied upon by Mr Martinez, as being Mr Griffiths' personal and book emails in the period 21 July to 12 August 2015. As many of the emails in the exhibit are parts of chains of emails, it is a challenging exercise to identify all of the individual emails without missing some and double-counting others. For obvious reasons, there was a limited amount of time available for the analysis. Some tallying errors are possible, and there may be scope for reasonable disagreement about how individual emails should be categorised. Consequently, the results of the analysis should not be regarded as precisely accurate, although I am satisfied that the exercise I have done is a reasonably close approximation of the real position.
I have tried to identify all of the emails that appear for the first time in any chain of emails, and then to ensure that, if that email appears again, the repeat is not counted. A substantial number of emails are included more than once in the exhibit. Sometimes that may be because they were not counted when they first appeared as part of a chain, but have later been included separately. There are, however, a significant number of examples where emails have been included twice.
I initially excluded emails outside the range of times 9 AM to 5 PM, but have included all emails within that period, without any allowance for breaks. Mr Martinez' submissions assumed a nine hour day, but that should involve allowing one hour off for breaks (including for lunch).
I excluded emails that were sent or received over the weekend.
I also excluded a number of uninformative emails that consist of Microsoft Outlook messages, scans of documents to Mr Griffiths' computer, and a number of emails that are contained in email chains that fall outside the period chosen by Mr Martinez.
I found that there were roughly 460 emails in the period 21 July to 12 August 2015. From this total I removed roughly 70 emails that were outside the period 9 AM to 5 PM, roughly 30 emails that were sent or received over the weekend, roughly 60 repeated emails, roughly 10 Microsoft Outlook messages, 2 document scans, and 6 emails outside the date range. The total removed was roughly 177, leaving a balance of roughly 283.
The table below sets out sequentially the days of the working week in the top row, and the total number of emails that I have accepted were relevant and were received or sent by Mr Griffiths in the bottom row under each day. 21 22 23 24 27 28 29 30 31 3 4 5 6 7 10 11 12 15 13 17 31 25 17 38 43 20 8 9 10 9 4 5 12 7

[30]

Mr Griffiths' book launch was on 29 July 2015, and it is clear that the number of emails built up to a maximum on that and the following day, and then quickly reduced to a less significant number thereafter.
I then classified each of the emails into short (less than 10 lines); medium (up to half a page); and long (more than half a page). The result was that, of the roughly 135 emails sent by Mr Griffiths over the whole period, 127 were short, 7 were medium and 1 was long. Of the roughly 153 emails sent by others to Mr Griffiths, 134 were short, 13 were medium, and 6 were long. A substantial majority of the short emails in each case were significantly less than 10 lines long.
The result of this analysis is that it establishes that virtually all of the emails sent and received by Mr Griffiths over the relevant period were very short and would have been consistent with almost instant comprehension by Mr Griffiths of emails received, and relatively spontaneous and brief composition of emails sent. None of the emails of which Mr Griffiths was the author would have required any significant time to prepare. The only lengthy document of which Mr Griffiths was the author was a four-page draft of his speech for the book launch, which he sent at 9:21 AM on Tuesday, 21 July 2015 to a representative of his publisher. There is no reason on the evidence for the Court to find that Mr Griffiths prepared the draft in the office.
I acknowledge that, in his final written submissions, Mr Martinez relied upon the evidence given by Mr Griffiths that his work hours were usually 8 AM to 6 PM. If I were to undertake the analysis discussed above using this range of hours, I think it would be reasonable to allow for a lunch hour. In any event, I take it to be highly likely that, when partners work long hours, they try to deal with personal matters in the early morning or evening. It would be reasonable to allow for some personal emails in the period 8 AM to 9 AM and 5 PM to 6 PM. The inclusion of all emails sent and received by Mr Griffiths for the extra two hours each day would only add roughly the following numbers of emails (again with the work days in the top row and the number of emails in the bottom row): 21 22 23 24 27 28 29 30 31 3 4 5 6 7 10 11 12 1 0 3 7 1 1 3 2 9 5 5 1 1 1 0 0 1

[31]

Although it is true that Mr Griffiths accepted in cross-examination that he sometimes telephoned people to respond to emails that he received (T183.19), the evidence does not justify a finding that Mr Griffiths spent any significant portion of his time talking on the telephone to people for his own personal purposes. One gets a strong sense, from an overview of all of the emails relied upon by Mr Martinez, that Mr Griffiths was relatively meticulous in responding by email. The point is that almost invariably the responses were very simple, very short and would have been produced quickly.
Mr Griffiths did send and receive a relatively small number of emails (measured against the total number relied upon by Mr Martinez) in communication with his publisher, his publicist, Prof Ron McCallum AO who launched the book, the State Library where the book launch took place, and the restaurant where an after party was held. It is clear that Mr Griffiths had a hands-on role in organising the book launch, and during the period was involved in organising a small number of interviews with the press, and a number of gatherings at which he was invited to make a speech. However, when all of these communications are considered in their proper context, they would not have taken up a significant amount of Mr Griffiths' time.
The email evidence suggests that Mr Griffiths sent out a number of invitations to the book launch on dates at the end of June 2015, by sending single emails to many addressees at the same time (for instance, members of his sailing club). Mr Griffiths did put his Firm email address on the book launch invitation for the purpose of recipients replying. A very substantial proportion of the emails subsequently received by Mr Griffiths consisted of very short acceptances, apologies and late withdrawals from Mr Griffiths' many acquaintances to whom he had sent invitations. Also, it appears that, at various odd times over the period, it occurred to Mr Griffiths that a number of acquaintances who may value an invitation had not been invited, so Mr Griffiths sent invitations to them with short covering emails.
Mr Griffiths sent a number of invitations to partners and staff of the Firm, a number of whom appear to have accepted, and many sent short emails congratulating Mr Griffiths on his literary achievement. Even Mr Robert Gardini, who I know to be a former Chair of Partners of the Firm, exchanged kind and generous words with Mr Griffiths.
Mr Griffiths made a point of sending a number of emails to Mr Russell Mailler, the Firm's National Marketing Manager. On 21 July 2015, Mr Griffiths advised Mr Mailler that he had received a number of requests for interviews including from ABC radio and the Law Society Journal, but that he would not comment on the Firm. On 29 July 2015, Mr Griffiths forwarded to Mr Mailler the details of a forthcoming interview with the Daily Mail, and confirmed that he would not mention the Firm. On 5 August 2015, Mr Griffiths forwarded to Mr Mailler a link to the photographs that were taken at the book launch. Mr Griffiths was not acting surreptitiously in his organisation of the book launch. By a quirk of fate, it appears that the partner of the Firm who is the solicitor on the record for Mr Martinez in this case provided assistance to Mr Griffiths on the night of the book launch, by taking particular care of Prof McCallum.
A significant number of the emails relied upon by Mr Martinez involve communications between Mr Griffiths and his family, his close friends and acquaintances, and representatives of his son's school. I do not wish to reveal the contents of these communications, and would have preferred had I not been required to read them. Some general descriptions will suffice. Mr Martinez complains that Mr Griffiths forwarded a number of emails that he received to his wife without comment; he was peripherally engaged in exchanges of emails between the members of the book club to which he belonged; he was sent the minutes of the annual general meeting of his sailing club; and he received some circular emails from the parents' association of one of his children's school.
I would not accept that all of the partners of the Firm do not ever receive personal emails of this type through their Firm office account, and that they consider it a breach of their obligation to the Firm to do so, without there being direct and persuasive evidence to establish those matters. There was none.
I find that the process of reasoning adopted by Mr Martinez in assessing that, over the relevant period, Mr Griffiths spent 90% of his time (or even 80%) on personal matters, in a manner that was inconsistent with his duty of fidelity to the Firm, was irrational and wrong. It was erroneous mathematically. It is a result that could only be reached by not personally analysing the available evidence with the diligence necessary for a matter of such extreme importance, given that Mr Martinez also owed a duty of fidelity to Mr Griffiths.
Accordingly, I reject Mr Martinez' claim that Mr Griffiths' use of the Firm's email service for matters connected with his book launch and other personal matters in the period 21 July to 12 August 2015 justified the summary termination of the December Deed.
I should record that the analysis of the emails relied upon by Mr Martinez referred to above does establish, as Mr Griffiths conceded, that sometimes he mistakenly or inappropriately used the Firm's 'official' email signature block for emails sent by him that appear to relate to Mr Griffiths' personal business. Mr Griffiths, on a substantial majority of occasions, used his personal email block appropriately. Many of the emails in the exhibit do not use either of the Firm's email signature blocks. As the parties did not address the issue in detail, it is difficult to judge when it was inappropriate for Mr Griffiths to use the 'official' signature block. Mr Griffiths appeared often to use his judgment as to when it was appropriate for him to suggest that he was representing the Firm. There is room for disagreement as to what was appropriate. However, even if the occasional use by Mr Griffiths of the Firm's 'official' email signature block was inappropriate, or contrary to Ms Miselowski's instructions, Mr Griffiths' conduct was not remotely serious enough, on the evidence, to justify the summary termination of the December Deed and his expulsion from the partnership.

[33]

Revenue generated by Mr Griffiths

Although the first two dot points in Mr Martinez' 12:20 PM email to Mr Griffiths on 12 August 2015 related to inadequate performance in respect of the amount of fees that he had generated in July and August to date, Mr Martinez did not plead reliance upon inadequate performance in par 8 of his defence to justify the summary termination of Mr Griffiths.
However, in par 42 of his final written submissions, Mr Martinez submitted that the "seriousness of the plaintiff's misconduct was revealed by the following discoveries". Discovery (c) was the likelihood that Mr Griffiths was spending around 90% of his time in the period 21 July to 12 August 2015 engaged in matters connected with his book and other personal matters. Mr Martinez expanded on this submission at pars 76 to 80. There he said that Mr Griffiths was required to work 9.5 hours per day for the Firm and record at least 5.0 to 5.5 billable hours per day, with the balance of each working day to be spent on non-billable work for the Firm. Mr Martinez relied upon Exhibit D6, which was a policy document, dated March 2009, called "HWL Ebsworth Career Development Program". At page 13 of this policy there is a table that states that Fixed Draw Partners will be expected to achieve five hours per day in WIP creation and work 9.5 hours per day.
In this part of Mr Martinez' submissions, he asserts that, even though Mr Griffiths had conceded that he did not have enough matters to achieve his fee targets, "that defence is untenable because he was being paid $36,000 per month by the Firm to work "full-time" in the interests of the Firm, not on (in effect) a casual basis whilst he used his paid work time to pursue personal matters" (at par 77). Mr Martinez also submitted at par 79: "The plaintiff breached his fundamental obligation to the Firm to work 9.5 hours per day on Firm related activities and was receiving drawings of approximately $36,000 per month on the basis that he was spending his working days on matters of benefit to the Firm as constituted by its Capital Partners…"
In-so-far as these submissions do not appear to be tethered to the claim that Mr Griffiths' use of his email account for the purposes of launching his book was excessive, but are a separate submission that Mr Griffiths was in fundamental breach of the December Deed because he could not achieve 5 billable hours of work per day, or 9.5 hours of work on the Firm's business, I hold that the submission is not available to be relied upon by Mr Martinez because it was not pleaded.
In any event, notwithstanding that the policy document specified target hours for various purposes to be achieved by Fixed Draw Partners, Mr Martinez has not established that, under the Partnership Deed or the December Deed, Mr Griffiths had a contractual obligation to achieve those targets each day of his working life. Failure to achieve a target was not of itself a breach of contract giving rise to a contractual remedy. Consistent failure to achieve targets may have had consequences, such as the exercise by the Firm of its right in cl 3.4 of the December Deed to give three months' notice of termination. However, this ground, even if pleaded, would not have provided a justification for the summary termination.

[35]

Further grounds for summary termination

As I have explained above, Mr Martinez was given leave to file an amended defence on the morning of the third day of the hearing, and, as a result of the application to further amend made after the conclusion of the hearing, Mr Martinez will be given leave to make further amendments.
The effect of the first grant of leave was that Mr Martinez amended par 8(d) of his defence to read as follows (the added words being underlined): 8. A proper basis existed as the Plaintiff: … d. had breached his obligation of fidelity to the Practice by engaging in such conduct and by not being honest and candid with the Defendant in his explanations as to his improper conduct regarding: i. his use of the Practice's precedents; ii. his use of the Practice's resources to promote his book.
By this means, Mr Martinez belatedly introduced into the case a claim of dishonesty arising out of an alleged lack of candour by Mr Griffiths in his explanations concerning certain of his conduct.
When Mr Martinez' defence is further amended, par 8 will read as follows (the added words being underlined, and the deleted words ignored): 8. Based on the information the Defendant had on 17 August 2015 and on the further information the Defendant has acquired after that date, a proper basis existed as the Plaintiff had: a. improperly used resources of the Practice (being the Practice's email system and staff) for private purposes in spite of directions not to do so and in breach of policies of the Practice with which the Plaintiff was obliged to comply; b. after 13 July 2015, improperly continued to use resources of the Practice (being the email system) to advertise and promote the book he had written (the book) and its launch on 29 July 2015 in spite of a written direction, with which the Plaintiff was obliged to comply, not to link his HWLE email address to any advertising and to not link his HWLE email address to any non-HWLE matters; c. improperly used a significant number of paid working hours to advertise and promote the book and to organise its launch on 29 July 2015, being hours that were only to be used to undertake work for the Practice, in spite of directions, with which the Plaintiff was obliged to comply, not to do so; e. had breached his obligation of fidelity to the Practice by engaging in the above conduct and by not being honest and candid with the Defendant in his explanations as to his improper conduct, in that when confronted about that conduct he did not disclose and/or was dishonest about: i. the extent of his use of resources of the Practice to advertise and promote the launch of the book and the fact that he had linked the book to the Practice; ii. the real reason for printing off Practice Precedents on 12 August 2015, namely to give them to his brother for his brother's use; iii. the extent to which he had used working hours for which he was paid on personal matters, especially time spent on advertising and organising the launch of the book on 29 July 2015.
It should be noted, first, that the amendments to sub-pars (a) to (c) simply introduce a greater level of specificity into the pleading and do not change its effect. There is no allegation that Mr Griffiths infringed the Firm's IT & T Acceptable Use Policy. These amendments do not change the conclusions that I have stated above in relation to the defence as originally pleaded.
There is no sub-par (d) or (e)(iv) because, as explained above, I have rejected Mr Martinez' application for leave to amend to include those allegations.
The further amendments that have been permitted received Mr Griffiths' consent. The Court must decide the case on the basis of the further amended defence that will be filed.
However, there are consequences given the nature and timing of the further amendment that will be material to the proper determination of the issues.
The most significant effect of the further amendment is that it introduces a claim that Mr Martinez had a proper basis to terminate Mr Griffiths summarily: "Based on the information the Defendant had on 17 August 2015 and on the further information the Defendant has acquired after that date". As will be seen, this change introduces an issue as to when Mr Martinez did the act on behalf of the Firm that would constitute a repudiation of the December Deed, if not justified by Mr Griffiths' conduct. There is a question as to whether that act was done on 12 August or 17 August 2015.
Mr Martinez, by this amendment, also seeks to rely upon information acquired after the date of termination, and therefore grounds available at the date of termination that were not known to him at the time.
While sub-pars 8(e)(i) and (ii) provide an elaboration of the allegations in pars 8(d)(ii) and (i) respectively of the originally amended defence, sub-par 8(e)(iii) appears to introduce a claim that Mr Griffiths was dishonest when confronted about the extent to which he had used paid working hours on personal matters.
I propose in due course to deal with the substance of all of the defences now pleaded by Mr Martinez. However, there are a number of preliminary issues that warrant consideration.

[36]

Later-acquired information

In his final written submissions, Mr Martinez said, at par 50, that the full extent of Mr Griffiths' dishonesty and lack of candour only became apparent when Mr Griffiths commenced these proceedings and preparation for the trial commenced. He submitted that he is entitled to rely upon such "after acquired" information to support the summary termination decision. He relied upon Concut at [27] and [29] per Gleeson CJ, Gaudron and Gummow JJ, where their Honours adopted the observations made by Dixon J (as his Honour then was) in Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 at 377; [1931] HCA 21.
In the latter case, Dixon J said at 377-378 (citations omitted): … When the respondent terminated his agency it was not aware of the contents of the telegrams and the letter which he had sent to its customer's buyer, and it acted upon other grounds. It is well established, however, that a servant's dismissal may be justified upon grounds on which his master did not act and of which he was unaware when he discharged him (Boston Deep Sea Fishing and Ice Co. v. Ansell; Spotswood v. Barrow; Willets v. Green; Mercer v. Whall; Ridgway v. Hungerford Market Co.). It is true that the agreement between the appellant and the respondent does not amount to a contract of service. But the rule is of general application in the discharge of contract by breach, and enables a party to any simple contract who fails or refuses further to observe its stipulations to rely upon a breach of conditions, committed before he so failed or so refused, by the opposite party to the contract as operating to absolve him from the contract as from the time of such breach of condition whether he was aware of it or not when he himself failed or refused to perform the stipulations of the contract. "It is a long established rule of law that a contracting party, who, after he has become entitled to refuse performance of his contractual obligations, gives a wrong reason for his refusal, does not thereby deprive himself of a justification which in fact existed, whether he was aware of it or not" (per Greer J., Taylor v. Oakes Roncoroni & Co.; see, too, per Lord Sumner in British and Beningtons Ltd. v. North Western Cachar Tea Co. and per Starke J. in Henry Dean & Sons (Sydney) Ltd. v. P. O'Day Pty. Ltd.). [Emphasis added] …
Each part of the extract from Dixon J's judgment that has been emphasised demonstrates a significant aspect of the principle stated by his Honour. That is that, under the general law of contract, when one party purports to terminate the contract for breach by the other, where the act of termination will be a repudiation if not justified, the terminating party may justify the termination by any sufficient breach by the other party, whether or not known to the terminating party, where that breach had been committed before the act that would otherwise be a repudiation.
Of the authorities relied upon by Dixon J, the speech of Lord Sumner in British and Beningtons Ltd v North Western Cachar Tea Co [1923] AC 48 at 71-72 perhaps most clearly sets out the underlying basis for the principle: … I do not think that the case, as reported, lays it down that a buyer, who has repudiated a contract for a given reason which fails him, has, therefore, no other opportunity of defence either as to the whole or as to part, but must fail utterly. If he had repudiated, giving no reason at all, I suppose all reasons and all defences in the action, partial or complete, would be open to him. His motives certainly are immaterial, and I do not see why his reasons should be crucial. What he says is of course very material upon the question whether he means to repudiate at all, and, if so, how far, and how much, and on the question in what respects he waives the performance of conditions still performable in futuro or dispenses the opposite party from performing his own obligations any further; but I do not see how the fact, that the buyers have wrongly said "we treat this contract as being at an end, owing to your unreasonable delay in the performance of it" obliges them, when that reason fails, to pay in full, if, at the very time of this repudiation, the sellers had become wholly and finally disabled from performing essential terms of the contract altogether. …
His Lordship focused on the act of repudiation, and considered what grounds will be available to that party to justify the repudiation so that it is a lawful termination of the contract. In short, the party may rely upon any justification in fact available at the time of what would otherwise be a repudiation, whether or not that was the justification relied upon, and whether or not it was known to the party at that time.
If these propositions are correct, they give rise to a theoretical problem where, as may be so in the present case, one party purports to terminate the contract on one date, and it is that act that may be a repudiation by that party, but in practical terms the relationship between the parties ends at a later date.
As a matter of contractual principle, if the initial purported termination is not justified at the time it occurs, it will be a repudiation, and will not affect the continuing existence of the contract. If, in a practical way, the relationship governed by the contract comes to an end at a later date, because the other party is obliged by circumstances to act as if the contract has come to an end, that may not by itself terminate the contract. It may only be if the other party accepts the repudiation as bringing the contract to an end that the contract then ceases to exist.
This problem appears to arise in the present case. Mr Martinez sent his email to Mr Griffiths at 12:20 PM on 12 August 2015 saying, among other things: "… I do not want you in the practice any longer. I wish to propose you leave tomorrow…" There were then some email communications, which will require analysis, but which may have been nothing more than negotiations concerning the manner in which Mr Griffiths would physically leave the Firm's premises, and the amount he would be entitled to be paid. Mr Griffiths physically left the premises on 17 August 2015, after he was told that he ought to be packing, but this was not an act of choice by Mr Griffiths, as he was effectively marched out the door. Mr Griffiths did not accept what he claims to be Mr Martinez' repudiation of the December Deed until his 28 August 2015 email to Mr Martinez.
All of the dishonest conduct and lack of candour now alleged against Mr Griffiths to justify termination of the December Deed occurred after Mr Martinez' 12 August 2015 email. If that email was the act of repudiation, then in principle it would appear to follow that Mr Griffiths' subsequent conduct could not provide any retrospective justification for the repudiation.
That result would appear to be in accordance with principle, as, if it were the case that Mr Martinez' 12 August 2015 email was an unjustified repudiation of the December Deed, then the fact of the repudiation would be likely to have infected Mr Griffiths' subsequent conduct, including the manner in which he responded to any questions put to him by Mr Martinez: see Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; [1950] HCA 35.
There is an issue between the parties in respect of the identification of the act of repudiation relied upon by Mr Griffiths.
Mr Griffiths pleaded in par 7 of his amended statement of claim that: "By email dated 12 August 2015 the defendant purported to summarily expel the plaintiff from the Firm without notice…"
Thus, on Mr Griffiths' case, Mr Martinez repudiated the December Deed by his 12 August 2015 email. If that is the correct analysis of the facts, then Mr Martinez cannot justify his repudiation by anything that Mr Griffiths subsequently did.
In par 7(c) of his defence, Mr Martinez denied par 7 of the amended statement of claim, and then alleged that he summarily terminated the December Deed, and thereby expelled Mr Griffiths from the Firm, on 17 August 2015. The particulars given of the termination were emails from Mr Martinez to Mr Griffiths dated 12 and 17 August 2015.
An analysis of the history of the proceedings and the evidence demonstrates extreme ambiguity in Mr Martinez' position as to which act on his part terminated the December Deed.
Mr Martinez's outline of submissions dated 26 October 2018, and served before the commencement of the hearing, referred in par 7 to "the notice of summary termination on 12 August 2015". The same reference is made in par 16, and it is implied in pars 4 and 5, although a specific assertion to that effect has apparently been omitted from the end of par 4, which is not complete.
It must also be noted, however, that Mr Martinez asserted in par 12 that, as a consequence of representations made by Mr Griffiths, "the "summary dismissal" did not take effect until 17 August 2015. The plaintiff was paid all entitlements up to and including that date."
Although the opening of senior counsel for Mr Martinez was not expressly clear on the subject, the better view is that, in response to my indication that I would like an explanation of the basis of Mr Martinez' justification for summary termination, senior counsel only referred to the grounds stated in Mr Martinez' 12 August 2015 email to Mr Griffiths.
Mr Martinez himself makes the matter clear in par 84 of his principal affidavit where he says: "On 12 August 2015 at 12:20 PM…I sent an email to Mr Griffiths by which I summarily terminated his Fixed Draw Partnership…"
The basis upon which Mr Martinez conducted his defence appears to be made even more clear from the following exchange in cross-examination of Mr Griffiths (at T135.24-.26): Q. So this is the notice telling you of summary termination, dated 12 August, do you see that? A. Yes I do.
The tenor of other relevant parts of the cross-examination was that Mr Griffiths was terminated on 12 August 2015, and his subsequent communications with Mr Martinez were directed at delaying briefly the time of his departure, and trying to persuade Mr Martinez to pay him more money than Mr Martinez was prepared to pay.
The heading, in Mr Martinez' final submissions, to his submissions dealing with summary termination was in the following terms: The Decision made by Mr Martinez on 12 August 2015 to Summarily Terminate the Plaintiff's Fixed Draw Agreement
In par 32 of his final written submissions, Mr Martinez submitted that he provided Mr Griffiths with a valid notice of summary termination on 12 August 2015. Mr Martinez' written submissions may be a little confused. In par 60 he appears to confirm my understanding of his case, when he refers to 11 August 2015 as being "the day before his [Mr Griffiths'] summary termination". However, in par 42(c) he refers to the time of summary termination as being 17 August 2015.
In his final oral submissions, senior counsel for Mr Martinez appears to confirm on a number of occasions that Mr Martinez accepted that the date when he terminated Mr Griffiths was 12 August 2015 (T310.48, 316.2, 316.5, 316.48, 320.34 and 321.16). Senior counsel, on the other hand, may have also suggested that the date was 17 August 2015 (T290.21 and 292.39).
Mr Martinez' final word on the subject is to be found in par 7(a) of the written speaking notes on the Assessment of Damages handed up to the Court in oral submissions where he says: "in the event the Court finds that the 12 August 2015 summary termination was not warranted…"
The confusion may have arisen because Mr Martinez' 12 August 2015 email said: "I do not want you in the practice any longer. I wish to propose you leave tomorrow…" Just possibly, this statement may leave some room for doubt about the objective intention expressed by Mr Martinez. The summary termination could not have been later than Mr Martinez' 10:26 AM email on 17 August 2015, in which he said: "I have had other things on my mind BUT you should be packing."
I consider that the best judge of what Mr Martinez intended was Mr Martinez himself. Mr Martinez, as he himself said, purported to terminate the December Deed on 12 August 2015. The better view is that the subsequent email exchanges were no more than a negotiation of the timing and manner in which Mr Griffiths would physically vacate the Firm's premises, and also the payment that he would receive. The discussion that took place concerning the reasons for Mr Martinez' actions was concerned with no more than exposing those reasons and eliciting Mr Griffiths' response. There was no question of Mr Griffiths persuading Mr Martinez to change his mind (although Mr Griffiths said that he had not given up hope), and the better view is that Mr Martinez had no intention of changing his mind. The termination of Mr Griffiths' access to the Firm's computer network on 14 August 2015 demonstrated the permanency of Mr Martinez' position, even though partial access was restored.
Given the manner in which the hearing was conducted, and the final submissions made by Mr Martinez, the proper conclusion is that the case put by Mr Martinez was that he summarily terminated Mr Griffiths on 12 August 2015. The fact that Mr Griffiths only left the premises permanently on 17 August 2015 does not displace this finding in all of the circumstances.
If that is the case, then any conduct by Mr Griffiths after his receipt of the 12:20 PM email on 12 August 2015 could not be a basis supporting the validity of the summary termination by Mr Martinez of the December Deed and Mr Griffiths' partnership.
However, given the element of confusion on this issue, it will be appropriate for the Court nonetheless to deal with Mr Martinez' claims that the summary termination was justified by Mr Griffiths' conduct after 12 August 2015. As I have noted above, the last act that could arguably have been the purported termination of the December Deed was Mr Martinez' email to Mr Griffiths at 10:26 AM on 17 August 2015.

[37]

Evolution of Mr Martinez' case

The following reasons assume, contrary to the finding that I have made above, that Mr Martinez is entitled to rely upon the defence pleaded in par 8(e) of the further amended defence, either because the statement of legal principle concerning the defences that Mr Martinez is entitled to rely upon is wrong, or because the relevant act of termination of the December Deed did not occur until the morning of 17 August 2015.
The manner in which Mr Martinez' pleading that his summary termination was justified evolved is important to the proper determination of this aspect of the dispute between the parties.
As will be seen, it appeared to me that Mr Griffiths was responding, in the way he gave his evidence, to the case that he understood had been pleaded against him, but the submissions ultimately made on behalf of Mr Martinez embraced a case that was apparently evolving during the course of the hearing.
Mr Griffiths did not learn that he was responding to an allegation that his use of the Firm's precedents, or that his alleged dishonesty in the explanations that he gave for his use of the precedents or the Firm's resources to promote his book justified the summary termination of the December Deed until right at the end of his oral cross-examination. His case was otherwise effectively although not formally closed.
Notwithstanding the reference in Mr Martinez' 12 and 17 August 2015 emails to the printing off of the precedents, the fact that Mr Martinez did not rely upon this issue in his defence would have had the positive tendency to cause Mr Griffiths to understand that it was not an issue in the case.
In my view, the level of dishonesty that was finally alleged by Mr Martinez against Mr Griffiths, being dishonesty in respect of Mr Griffiths' obligation of fidelity to his partners, was hardly less serious than fraud as described by Leeming JA, with whom Beazley P and Sackville AJA agreed, in Nadinic v Drinkwater (2017) 94 NSWLR 518; [2017] NSWCA 114 (Nadinic) at [45] as "fraud (in the strong sense of deliberate falsehood or reckless indifference to the truth)". In respect of such an allegation, Leeming JA said the following: Fraud and the civil process [45] Seventhly, an allegation of fraud (in the strong sense of deliberate falsehood or reckless indifference to the truth) is required to be pleaded specifically and particularised. The words immediately following Denning LJ's generalisation "Fraud unravels everything" in Lazarus Estates Ltd v Beasley [1956] 1 QB 702 at 712 are "The court is careful not to find fraud unless it is distinctly pleaded and proved". Those words were replaced by ellipses in the passages from Denning LJ's judgment quoted by the primary judge in the first judgment at [31] and, again, in the second judgment at [5]. But their importance is considerable. [46] In Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 573; [1995] HCA 68 the High Court observed that it has "frequently been said that fraud must be pleaded distinctly and with particularity". More recently, in Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39 at [25]-[26], French CJ, Gummow, Hayne and Kiefel JJ said: "[25] This is no pleader's quibble. It is a point that reflects fundamental requirements for the fair trial of allegations of contravention of law. It is for the party making those allegations (in this case ASIC) to identify the case which it seeks to make and to do that clearly and distinctly. The statement of claim in these matters did not do that. [26] Contrary to ASIC's submissions in this Court, a case of fraud cannot properly be seen as a 'fallback' claim to be made against the possibility that the party accused of engaging in misleading or deceptive conduct by publishing notices in relation to a financial product may seek to characterise them as statements of opinion, not fact. It is fundamental, and long established, that if a case of fraud is to be mounted, it should be pleaded specifically and with particularity. A pleading of fraud will necessarily focus attention upon what it was that the person making the statement intended to convey by its making. And the pleading must make plain that it is alleged that the person who made the statement knew it to be false or was careless as to its truth or falsity. If an alternative case of misleading or deceptive conduct is to be advanced, it is necessary to identify that claim as separate from the allegation of fraud." (Emphasis added, footnotes omitted) [47] Eighthly, a finding of fraud is a serious one attracting the strictures in s 140 of the Evidence Act 1995 (NSW). It is trite that s 140 provides for no new principle: see Bibby Financial Services Australia Pty Ltd v Sharma [2014] NSWCA 37 at [205]. As Gleeson JA there said, by reference to earlier authority, the requirement in s 140(2) that there should be clear and cogent proof of serious allegations reflects the principles stated in Briginshaw v Briginshaw. Dixon J's observations in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361 and 362; [1938] HCA 34 that proof to reasonable satisfaction "should not be produced by inexact proofs, indefinite testimony, or indirect inferences" have been applied on very many occasions. [48] Ninthly, the seriousness of a finding of dishonesty or reckless indifference to the truth will ordinarily mean that it may not be made without an opportunity being given to deal with the criticism: Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [67]; Bale v Mills (2011) 81 NSWLR 498; [2011] NSWCA 226 at [66]-[67]. [49] Tenthly, a consequence of the three preceding points was stated by Beazley P in Sgro v Australian Associated Motor Insurers Ltd (2015) 91 NSWLR 325; [2015] NSWCA 262 at [54]: "[54] The seriousness of a finding of fraud, including statutory fraud, does not permit of other than a specific finding that the fraud, or the contravening conduct, has in fact occurred."
The observations made by Leeming JA provide general guidance as to how this Court must decide the dishonesty claim now made by Mr Martinez. But they are also of great significance to the manner in which the Court should treat the forensic reality of the case. The proposition that ordinarily a finding of dishonesty "may not be made without an opportunity being given to deal with the criticism" should colour the way the Court treats evidence given by the party accused before the full nature of the allegation of dishonesty is made clear.
A further consideration established by Nadinic flows from Leeming JA's reference to the observation of Beazley P in Sgro v Australian Associated Motor Insurers Ltd (2015) 91 NSWLR 325; [2015] NSWCA 262 (Sgro) at [54]. It is that a consequence of the seriousness of a finding of fraud is that the only finding permitted is a specific one that that fraud has occurred. That means that the Court must have regard in specific terms to the way that the allegation of fraud or dishonesty has been pleaded.
Furthermore, as Leeming JA observed at [47], the Court should only find that the allegation has been proved if the evidence squarely supports that finding. In making that finding, the Court must be satisfied that there is "clear and cogent proof" of the allegation. To use the words of Dixon J in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361 and 362; [1938] HCA 34, that the necessary level of the Court's satisfaction that the allegation has been proved "should not be produced by inexact proofs, indefinite testimony, or indirect inferences".
I will deal with the case that Mr Martinez now makes against Mr Griffiths that he was not honest and candid in his explanations as to his improper conduct regarding the use of the Firm's precedents as a separate matter below. For the present, it must be recalled that Mr Martinez allowed Mr Griffiths to prepare his evidence in ignorance of this issue, and then Mr Griffiths was cross-examined in a continuing state of ignorance, before Mr Martinez first introduced the issue near the end of Mr Griffiths' cross-examination by obtaining leave to file the amended defence.
In his final written submissions, Mr Martinez submitted, at par 48(l), that Mr Griffiths "engaged in further dishonesty and a lack of candour by not telling Mr Martinez immediately on 12 August 2015 that he had been doing work for his brother since 3 August 2015 to help him get out of a failed joint venture and that he intended to give the 4 precedents to his brother with a view to helping him to finalise the dispute in a legally effective manner".
In support of this submission, Mr Martinez claimed, at par 48(n), that it was "simply ludicrous and must be rejected out of hand" that Mr Griffiths was not going to give the precedents to his brother (as asserted by Mr Griffiths in his evidence) "especially when his brother was not called to give evidence". That final submission was elaborated at par 52, by the observation that "there was no re-examination of the plaintiff at all in a bid to explain the dishonesty of the plaintiff's answers in cross-examination about this allegation, let alone any application to call further evidence in the plaintiff's case (e.g. his brother), in [an] attempt to 'shore up' the plaintiff's credibility". In the following paragraph, Mr Martinez claimed that "it was critical for the plaintiff to call his brother with a view to corroborating the plaintiff's account", and then in par 55 said that: "The fact that this did not occur only serves to confirm that his brother's evidence would not have helped the plaintiff's "defence" of these serious allegations. Indeed, the compelling inference is that it would have further damaged the plaintiff's position by revealing, in clear terms, just how dishonest the plaintiff had been both to Mr Martinez at the time and to the Court, about this matter."
The effect of this line of reasoning is to suggest that a defendant can run a dishonesty case against a plaintiff without prior notice. In this case, the defendant has, with scant regard to the principles discussed by the Court of Appeal in Sgro and Nadinic, and effectively at the end of the plaintiff's cross-examination, amended to make dishonesty an issue, and now expects the Court to determine that issue as if the plaintiff had had full opportunity to meet the dishonesty claim, with there being no adverse forensic consequences to the defendant.
I reject that line of reasoning. Mr Griffiths was required to give his evidence on the issue of what was to be done with the precedents without warning and doing the best that he could. His evidence may have been more precise and comprehensive if he had been given an opportunity to think about the issue in advance. However, once he had given his evidence, for better or for worse, that was his evidence. Any attempt by his counsel to re-examine him on the issue would have been fraught with risk for reasons that are entirely consistent with Mr Griffiths being an honest witness. It was an impermissible forensic imposition on Mr Griffiths to put him in the position where he was required entirely ex tempore to give the best evidence he could on the issue, not knowing the purpose or what was coming, and then to submit that he is to be criticised because his counsel chose not to re-examine him.
Furthermore, as Mr Martinez had deprived Mr Griffiths of the opportunity to call his brother in his case in chief, if he was so advised, Mr Martinez is not to be heard in his submission that negative inferences should be drawn against Mr Griffiths when he did not take steps to call his brother, when the dishonesty claim against him was revealed at the end of his case. Mr Griffiths was not obliged to make a decision of that nature on the run. He was not obliged to seek an adjournment for that purpose. It was, of course, a tactical decision that lay in the hands of Mr Griffiths, and in other circumstances Mr Griffiths may have decided that it was necessary to change his course and seek to call his brother. However, the reliance by Mr Martinez on the principle in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 must be considered in its full context, and I do not accept that any inference adverse to Mr Griffiths' case should be drawn by reason of his failure to call his brother.
While procedural questions that arise during the course of a hearing will always be in the discretion of the trial judge, and depend upon the individual circumstances of the case, it cannot be assumed that this Court will readily adjourn hearings to deal with the consequences of late amendments, when some other course is effective to deal with the matter. The adjournment of hearings for the asking probably ceased to be available about the same time, a little more or less, as when judges ceased to be able to adjourn cases sine die.
In this case, in the circumstances described above, the course I propose to take is to judge the weight and significance of the evidence given by Mr Griffiths, making due and fair allowance for the fact that he was taken by surprise in respect of an unpleaded issue as to his own honesty, which required him to do his best to deal with the allegation in the time allotted for the hearing.

[38]

Significance of the manner of Mr Griffiths' summary termination

Mr Martinez asked the Court to make a raft of findings of dishonesty against Mr Griffiths, based upon Mr Griffiths' responses to questions asked by Mr Martinez after he summarily terminated Mr Griffiths by his 12 August 2015 email. While it will be necessary for the Court to deal with Mr Martinez' allegations individually, it is necessary first for the Court to consider generally the position that Mr Griffiths found himself in after he was summarily dismissed, so that his various responses are seen in their proper context.
From the time when he received the three months' termination notice on 20 July 2015, Mr Griffiths understood that he was working out his notice period, and he hoped that he would succeed in receiving some significant instructions from clients that might give him a chance to persuade Mr Martinez to revoke the notice. Out of the blue, on 12 August 2015 at 12:20 PM, Mr Griffiths received Mr Martinez' email summarily dismissing him from the Firm, which included the statement: "I wish to propose you leave tomorrow". Mr Martinez requested a reply by immediate return.
Mr Griffiths replied by email at 3 PM on 12 August 2015. Mr Griffiths finished his email with the following paragraph: I would like to have a meeting with you. Am I right in thinking you may be in Sydney later this week? I would like your assurance you will not press for my departure tomorrow. That would be very distressing. I have always done my best by the firm and continue to do so.
Mr Griffiths gave evidence that he considered the terms of Mr Martinez' email to be difficult and unfair, and I accept that he did indeed feel this way.
In the further email sent by Mr Martinez at 3:15 PM on 12 August 2015, he concluded by saying: The harm, if any, is of your making not mine. Please respond to my proposal one way or another and I will decide the firm's position accordingly.
I accept Mr Griffiths' evidence that, after he received this email, he telephoned Mr Martinez and said in effect: "I will respond in an email but I would like to meet. Also it is simply impossible for me to clear my office by tomorrow." Mr Martinez responded on 12 August 2015 in an email that included: "I am out Friday. I will extend that to Monday".
Mr Martinez did not at any time agree to meet with Mr Griffiths, and no meeting between them took place.
Mr Griffiths sent a further reply to Mr Martinez at 11:48 AM on Thursday, 13 August 2015. The email responded to some of the accusations that had been made against Mr Griffiths, who said: "…I do not think there is any proper basis for the proposal in your 12 August email…" Mr Griffiths finished by saying that unless he heard otherwise, he would assume that Mr Martinez wanted him to finish on Monday, and that he had a lot to move to clear his office. Mr Griffiths said: "I could do this quietly after hours or as you wish."
Mr Martinez did not reply until prompted by a further email from Mr Griffiths the following Monday, 17 August 2015. Mr Martinez said: "Tim I had made the decision your last day was last Friday. I then reviewed that at your request until today…"
Mr Griffiths replied by email at 10:18 AM on 17 August 2015, in which he said: I am referring to my need for a response to my 13 August email. I need to know if I am to finish today and if I should be putting things in boxes and who will supervise my removal of my things and details and timing of my payment. I have client matters which require attending to. This includes a number of matters where I am arbitrator and which have hearings approaching. What arrangements are to be made to look after clients? My preference remains to stay but you gave me an interim extension to end of today. Could I please have an answer to the issues raised in my 13 August email.
Mr Martinez' only response, at 10:26 AM on 17 August 2015 was: I have had other things on my mind BUT you should be packing.
Mr Griffiths gave evidence, which I accept, that on Friday, 14 August 2015 his computer connection failed. He was told by an IT employee of the Firm that his account on the system had been terminated by management. Mr Griffiths said, in his affidavit of 28 March 2017, at par 21: "…I was mortified and very upset by this treatment. I sent texts to Mr Bowyer to ask him to speak with Mr Martinez and find out what was happening. Later that afternoon my computer was reconnected but my various contacts, shortcuts and other data was lost."
Mr Griffiths continued, in his affidavit: 25. I would have expected a proper opportunity to respond to allegations of this type especially if they were relied upon as justification for my termination. I was not given such an opportunity.
Further: 26…The termination of my services was conducted by email and despite my requests I was not afforded a single meeting to discuss the circumstances or to respond to the unpleasant allegations made.
Mr Griffiths gave evidence that, on the Monday afternoon, he packed up the possessions in his office, which after 27 years as a partner were considerable. There was no time for him to advise clients or consider arrangements for the ongoing care and conduct of his files. He said, at par 27 of his 28 March 2017 affidavit, that it was "…quite embarrassing to be packing boxes with all the solicitors and administrative staff around me…" One of his partners came to his office and went through each box of items that he had packed. Mr Griffiths telephoned his wife to bring their car into the building. She attended with two of Mr Griffiths' children and together they removed his things.
It is in this context that Mr Martinez has levelled claims of dishonesty and lack of candour on Mr Griffiths' part, in that he did not disclose and was dishonest about a number of matters "when confronted about that conduct". The basis for that claim by Mr Martinez involved the close parsing of the responses in the few emails that Mr Griffiths was able to write in response to Mr Martinez, while he was suffering the emotional trauma of his summary dismissal from the partnership, and the refusal of Mr Martinez to meet with him and give him a hearing.
I am entirely satisfied, given my view of Mr Griffiths' honesty as a witness, that, if Mr Martinez had given Mr Griffiths a proper opportunity to explain himself, Mr Griffiths would have candidly and fully given the explanations that he has in these proceedings. It cannot be known whether Mr Martinez would still have considered that Mr Griffiths' conduct warranted summary dismissal from the partnership, but it is more likely that the grounds for summary dismissal could not have included dishonesty and lack of candour when confronted with the allegations.
Mr Martinez may not have been obliged to give Mr Griffiths a hearing, but by failing to do so, he deprived Mr Griffiths of a proper opportunity to give a full explanation of his side of the story, and it is not proper, in all of the circumstances related above, that Mr Martinez should accuse Mr Griffiths of dishonesty and lack of candour based upon a close analysis of the email responses that Mr Griffiths was able to give at a time of emotional extremis.

[39]

Specific allegations of dishonesty

These allegations will now be found in par 8(e) of Mr Martinez' further amended defence. It will be convenient to repeat them: e. [that Mr Griffiths] had breached his obligation of fidelity to the Practice by engaging in the above conduct and by not being honest and candid with the Defendant in his explanations as to his improper conduct, in that when confronted about that conduct he did not disclose and/or was dishonest about: i. the extent of his use of resources of the Practice to advertise and promote the launch of the book and the fact that he had linked the book to the Practice; ii. the real reason for printing off Practice Precedents on 12 August 2015, namely to give them to his brother for his brother's use; iii. the extent to which he had used working hours for which he was paid on personal matters, especially time spent on advertising and organising the launch of the book on 29 July 2015.
I have substantially dealt with the allegations of dishonesty in sub-pars (e)(i) and (iii) already, particularly where I examined the detail of Mr Martinez' challenges to Mr Griffiths' credit. Those allegations concern an alleged failure by Mr Griffiths, when confronted, to honestly disclose his activities involving the use of the resources of the Firm to advertise and promote his book launch, the fact that he had linked the book to the Firm, and that he had used working hours for which he was paid on personal matters. I have found in favour of Mr Griffiths as to the terms of the conversation that he had with Mr Martinez in October 2014. I have found that Mr Martinez did not respond in a timely way to Mr Griffiths' notice of his intention to send out the invitation to the book launch, and that Ms Miselowski's 13 July 2015 email came too late to prevent Mr Griffiths sending out the invitation, which led to a shower of short emails being received by Mr Griffiths' Firm email account. In any event, Mr Griffiths used his personal signature block almost exclusively, and the extent that he did not was relatively trivial. While it is true that Mr Griffiths' lack of work may have meant that much of his work days was unoccupied, he did not on the evidence fill his days working on the promotion of his book. The emails sent and received, when analysed carefully, would not have absorbed a substantial amount of Mr Griffiths' time, save perhaps on the day of the book launch and the day following.
I fully accept that Mr Griffiths was shocked and bemused by Mr Martinez' peremptory termination of Mr Griffiths' partnership, given that little more than two months of his notice period remained. The responses to Mr Martinez' questions that Mr Griffiths made in the few emails that he sent before he left the Firm's premises do not bespeak dishonesty or lack of candour, but rather horror and disbelief. That is entirely understandable on Mr Griffiths' part.

[40]

Failure to disclose reason for printing off precedents

I have not yet been required to deal with the allegation made by Mr Martinez in par 8(e)(ii) of his further amended defence. I will do so now.
Mr Martinez' amended defence in par 8(d)(i) had only made the general allegation that Mr Griffiths was not "…honest and candid with the Defendant in his explanations as to his improper conduct regarding his use of the Practice's precedents".
The effect of the use of the words "in that" in par 8(e) of Mr Martinez' further amended defence is to narrow the allegation of dishonesty to a dishonest failure of Mr Griffiths to disclose his alleged intention to give the precedents to his brother, as those words identify specifically the conduct alleged to have not been honest and candid in relation to the explanation given by Mr Griffiths.
This claim apparently arises out of the fourth dot point contained in Mr Martinez' 12 August 2015 email, by which he summarily dismissed Mr Griffiths' from the partnership. That stated: "You are requesting staff to print off precedents".
In his 12 August 2015 response, Mr Griffiths said on this issue: Requesting staff to print off precedents It is not clear what is being referred to here but the implication is I have done something wrongful. There is no basis for any such suggestion.
Mr Martinez replied later on 12 August 2015, by saying: "…There are emails where you are instructing a grad to print off precedents for you."
In his further response on 13 August 2015 on this subject, Mr Griffiths said: "Your reference to precedents may be referring to a request I made of Jeffrey Chen who sent me a link to some precedents. There was nothing improper."
The last email that Mr Martinez sent to Mr Griffiths was sent at 11:35 AM on 17 August 2015. It said: Here is another on the precedents? What were they printed for? Where are they? Have you provided them to other people outside of authority or proper usual business?
This email was forwarded to Mr Griffiths with a copy of Mr Chen's 12 August 2015 email to Mr Griffiths that said: "Please find word versions of the precedents you wanted attached", and also Mr Griffiths' later email of the same date to his personal assistant in which he said: "Plse print".
Attached to Mr Martinez' email was a precedent trademark form, deed of trademark assignment, resignation of director and a share transfer form.
The final word by Mr Griffiths on this subject was contained in his email to Mr Martinez of 17 August 2015 at 12:22 PM, when he said: The Precedents The precedents were printed to see if I could assist my brother. They did not leave my room. They are still here. I told my brother I was unable to assist.
All that Mr Griffiths said on this subject in his primary affidavit was: 24. The second email asked me if I had provided precedents to "people outside of authority." I had not done so. A quick glance at the "precedents" referred to would have shown the documents were innocuous and not confidential. It was quite distressing to receive these emails from the Managing Partner."
It is not surprising that this is all that Mr Griffiths had to say on the subject, because it was not a pleaded issue in the proceedings.
Mr Martinez dealt with this subject at pars 77 to 82 of his primary affidavit. Mr Martinez explained the series of emails that I have described above, and asserted that the precedents were confidential to the Firm. He then asserted: 82. It is inconsistent with the Firm's accepted practice regarding precedents to simply print a precedent document without any reference to a matter number or client. Generally, if a precedent document is to be used, a copy of the precedent document will be saved to a matter number, or otherwise linked to a client, after which the document is amended electronically so that it becomes a document that is specific to the particular matter or client. Mr Griffiths' instruction to Mr Chen by the email dated 12 August 2015 was to print pro-forma precedent documents that had not been in any way linked to a client matter.
Mr Martinez explained, at par 91 of his principal affidavit, why, after he received Mr Griffiths' 17 August 2015 email at 12:22 PM, he was not satisfied with Mr Griffiths' further explanations. It must be remembered that these events occurred after Mr Martinez had unilaterally purported summarily to terminate the December Deed, and Mr Griffiths' partnership.
Mr Martinez said that Mr Griffiths had provided no verification that the precedents did not leave his room. He said Mr Griffiths had not provided any explanation as to why he had requested that the precedents be printed out notwithstanding that he had been on notice of Mr Martinez' concern for a period of five days.
Perhaps, if Mr Martinez had given Mr Griffiths the opportunity to make the full explanation that Mr Griffiths sought, Mr Martinez would have received the information that he wanted.
Mr Griffiths was hardly in a position to provide a lengthy email explanation, given that he had continuing computer difficulties carried over from the Friday, and he was in the process of packing up his office to be marched out the door.
By affidavit made on 6 June 2017, Mr Griffiths responded to specific aspects of the evidence in Mr Martinez' primary affidavit. As I read Mr Griffiths' response, he said little about Mr Martinez' evidence concerning the printing of the precedents, and only made the brief observation in par 46 that the precedents were generic, were not linked to Mr Griffiths' particular areas of practice, would therefore have no special value and were highly unlikely to be at risk of theft. Mr Griffiths did not seek to answer any claim that he may have been dishonest, or lacked candour, in his responses to Mr Martinez on the subject. I would infer that was because the subject was not a pleaded issue in the proceedings, so it did not call for a response.
It is necessary to give particular attention to an aspect of the hearing upon which Mr Martinez relies to establish that the real purpose why Mr Griffiths arranged for the Firm's precedents to be printed out was that he intended to give them to his brother, and would have done so were it not for the fact that his conduct was discovered, and he was summarily dismissed from the partnership within the hour.
At T153.5, during the afternoon of the second day of the hearing, after senior counsel for Mr Martinez had completed his cross-examination of Mr Griffiths on the subject of the precedents, he tendered a bundle of emails and draft deeds, which were admitted without objection as Exhibit D8.
Exhibit D8 contains a number of documents, which I infer were retrieved from the Firm's computer system.
The exhibit contains a number of versions of a draft deed between one of Mr Griffiths' brothers and a former business associate of the brother. The objective of the deed was to provide for the termination of the venture.
At 10:06 PM on 4 August 2015, Mr Griffiths' brother sent an email to Mr Griffiths which suggested changes to the draft deed.
At 11:01 AM on Tuesday, 11 August 2015, Mr Griffiths' brother sent him an email that said: I currently have a meeting with John scheduled for 4.00pm this friday If this is too soon, let me know and i will defer
Mr Griffiths responded at 11:03 AM, saying: "I should have something this arvo".
Then, at 11:43 AM, Mr Griffiths sent a further email to his brother asking for a particular company's ACN number.
At 11:53 AM, Mr Griffiths sent an email to word-processing containing handwritten amendments to the draft deed.
Later that day, at 4:56 PM, Mr Griffiths sent a further email to his brother, which included: Here is my second cut in pdf. Check it carefully. Let me know any comments or changes needed. You will need to be able to explain each point to John if he has queries. You should also take with you a share transfer and a form for director's resignation and transfer of trademark so they can be signed and handed over preferably at same time. …
That is the last communication in the exhibit. It is of some significance that Mr Griffiths did not add in the email that he would provide his brother with the additional documents that he had recommended his brother should take to the meeting. While not conclusive, it would be natural for Mr Griffiths to have told his brother that Mr Griffiths would supply the documents, if that was what he intended to do. Otherwise, he would have subjected his brother to the worry of having to find appropriate documents unnecessarily.
No explanation has been given as to why the documents in Exhibit D8 were not available to Mr Martinez well before the commencement of the hearing, and why, if Mr Martinez now seeks to make a case of dishonesty against Mr Griffiths on the basis of them, steps were not taken to amend Mr Martinez' defence well before the commencement of the hearing.
The precedents that Mr Griffiths arranged to be printed out were admitted into evidence as a confidential exhibit. As might be expected, the resignation of director and the share transfer precedents were relatively simple, although the Firm plainly had copyright in them. The precedents were accompanied by instructions as to how they could be completed electronically. The precedent deed of trademark assignment, and the application to record an assignment or transmission of a trademark, were relatively more complex documents.
Although Mr Martinez said that it was the practice of the Firm for precedents only to be printed out at the time of use for a specific client, when a file number could be saved in relation to the particular document, that practice does not appear to be recorded on the precedents, and it seems to me to be an extreme proposition that partners were not permitted to print out precedents for their general edification. No evidence was provided by Mr Martinez in support of this alleged Firm practice.
Plainly, the case theory that Mr Griffiths had the precedents printed out because he had a present intention to give them to his brother is a rational one. However, I would reject the submission made by Mr Martinez that Mr Griffiths' evidence that he asked his associate to retrieve the precedents because he wanted to inform himself of the matters dealt with in the documents is not credible (see written submissions par 48(z)).
The precedents, particularly the more complex ones, are presented in a way that is plainly intended to facilitate the preparation of final documents by making adjustments to the precedents in accordance with the instructions given on the Firm's computer system. That is, to use the precedents conveniently one would need to be able to access them on the Firm's computer system, and to make amendments in accordance with the instructions embedded in the drafts. Notwithstanding that it may be accepted that they may have been of some use in a general way to Mr Griffiths' brother, if Mr Griffiths had made copies of the documents and given them to his brother. Assuming that Mr Griffiths' brother was a layman, I strongly think that the brother would have been bemused by what to do with the documents. If he was reasonably sophisticated, he may have been able to use the precedents to type up reasonably useful draft documents. That would, however, have been quite a challenging task for a layman.
It is to be noted that Mr Martinez has not alleged that Mr Griffiths intended to use the precedents to prepare draft documents himself for use by his brother. Given that trademarks was a subject outside of Mr Griffiths' field of expertise, he may have found it challenging in any event to prepare draft documents himself.
Although the resignation of director and share transfer forms are relatively straightforward, and possibly could have been used by a layman to prepare final drafts, the trademark documents are much more complicated, and require significant input in relation to the details of the transaction. Remembering that Mr Griffiths' brother had said that he proposed to meet with his former business associate on the Friday, and the precedents were printed out on the Wednesday, it would in my view have been a challenging exercise for the trademark documents to be agreed with the other party and completed. In my judgment, if Mr Griffiths had in fact given the precedents to his brother in the form that they are in in the confidential exhibit, he would most likely have elicited the response: "What in Heaven's name do you expect me to do with these?"
Given that Mr Griffiths had suggested in his 4:56 PM email on Tuesday, 11 August 2015 that his brother take "a share transfer and a form for director's resignation and transfer of trademark so they can be signed and handed over preferably at same time" to the meeting, without Mr Griffiths volunteering to provide or prepare the documents, it being a legal matter outside his field, it is not, upon proper reflection, strange that he asked for the precedents to be printed out so that he could more properly understand what was involved.
Mr Griffiths was cross-examined at length on this subject at about T133-152.
The statement made by Mr Griffiths at T133.16 that he was not doing any work for his brother between 4 and 11 August 2015 was not correct.
However, in my view that evidence should be understood in the context that it did not relate to a pleaded issue, and would have been a subject matter that was not expected by Mr Griffiths.
Reminded of his statement in his 17 August 2015 email that: "The precedents were printed to see if I could assist my brother", Mr Griffiths said, at T133.43, that the email was accurate. He then acknowledged that he had just told the Court that he did not do any work for his brother.
Mr Griffiths then gave evidence of a conversation with his brother at the time, in which he gave his brother advice to the effect that "what you need to do is you need to get this fellow to sign a resignation as a director, he needs to sign a share transfer and there'd been a trademark which this fellow had put [in] his own name, I said you would need to get him to sign the trademark back to the company".
Mr Griffiths then said that he thought that the documents were pretty straightforward, but he decided to see what they would look like, and he asked one of his law clerks or paralegals to print out those precedents as standard documents.
The following exchange occurred during the cross-examination of Mr Griffiths (T134.23-135.17): Q. And the evidence you've just given you say that's the truth? That you did no work for your brother other than what you've just described, is that your evidence? A. That's correct. Q. Did you draft a deed for him that you recorded in the HWL system to admin recognising that you'd drafted a deed for him for business purposes? A. Well when was that? Q. On 11 august 2015? A. And what date are we talking here? Q. 17th? A. I recall yes I recall at some stage I did a simple agreement of some nature. Q. You now recall that? You told his Honour you didn't do any, your first answer when I mentioned your brother is to say I didn't do any work for him? A. Yeah well in respect of this conversation, these precedents, I didn't do any work for my brother. Q. When you had them printed off but for the fact that you were called on it and someone had identified that this had occurred, your intention was to give them to your brother was it not? A. No. Q. So you printed them off even though they weren't in your line of country or your areas of practice, you printed off these, or had these precedents printed off and you say you weren't going to give them to your brother? A. I didn't even get to see them because I think the grad sent them to me in an email form and I said to my secretary can you just print these but I never looked at them. Q. No my question wasn't that at all. My question was when you had them printed was it your intention was I suggest to you to give them to your brother? A. No it wasn't. Q. So what was the purpose of printing them? A. Just really I'd had a conversation with my brother and I think I thought, "Mm, what, it's pretty straight forward." And I thought I'd just have a look at what the documents actually comprised. Q. So you adhere to that evidence as well Mr Griffith [sic], is that what you say to his Honour on your oath? That that's the position? Is that your position on your oath? A. What I've just said is true.
It appeared to me at the time this evidence was given, and it remains my view, that Mr Griffiths genuinely had not recollected that he had assisted his brother in drafting a deed in the period immediately before his summary termination. I am satisfied that, as the underlying facts were revealed to Mr Griffiths, he remembered that, at some stage he "did a simple agreement of some nature" for his brother, and that his evidence was genuine.
I also accept Mr Griffiths' evidence, at T134.46 and T135.7, that it was not Mr Griffiths' intention to give the precedents to his brother.
In these circumstances, I reject Mr Martinez' claim that Mr Griffiths' failure to provide a more extensive explanation to Mr Martinez involved any lack of candour or dishonesty on Mr Griffiths' part.

[41]

Arranging meetings with clients without consultation

Mr Martinez introduced into the case a claim to the effect that Mr Griffiths had failed to comply with the Firm's procedures concerning how he should approach clients of the Firm, for the purpose of trying to increase his practice.
There is not a word pleaded in any of the iterations of Mr Martinez' defence on this subject.
Yet, Mr Martinez submitted, in par 27 of his final written submissions, that Mr Griffiths' response to the three-months' termination notice that he received on 20 July 2015 was "disingenuous", and in par 29 that Mr Griffiths engaged in "misconduct and dishonesty" with respect to an incident in July 2015, when he arranged a meeting with a representative of IAG, a substantial insurer, for whom, it appears, the Firm did some work.
When Mr Martinez' final submissions are considered closely, it is revealed that this allegation of misconduct and dishonesty is not put as one of the grounds justifying Mr Martinez' summary dismissal of Mr Griffiths from the Firm. It appears, from par 28, that the allegation is put in support of a submission that, if Mr Griffiths had raised his claim that Mr Martinez acted without authority in purporting to give him the three months' notice of termination, Mr Martinez would have called an immediate meeting of the Capital Partners, who would have accepted a recommendation from Mr Martinez that the Capital Partners resolve to give the termination notice. That is a subject that must be considered, if it comes to assessing the amount of damages to which Mr Griffiths is entitled for repudiation of the December Deed by Mr Martinez.
It is therefore not strictly necessary for the Court to make a determination on this aspect of Mr Martinez' claim that Mr Griffiths acted dishonestly. However, it would be unfair for the Court not to state its conclusion, given the circumstances in which the dishonesty claim has belatedly been made by Mr Martinez.
Whether or not the Capital Partners would have taken the view that Mr Griffiths' conduct was inappropriate, given the policies adopted by the Firm, I entirely reject the allegation that Mr Griffiths acted dishonestly.
There is a forensic problem in dealing with this matter, because it was not an issue raised by the pleadings and therefore was not adequately addressed in the evidence.
During the opening of the case by Mr Martinez' senior counsel, I explored with him the possibility that Mr Griffiths' partners may have given him some time to re-establish his practice. Senior counsel's response (at T19.8) was "in partnerships in modern practice now it's catch and kill your own…you are responsible for providing a proper base for your own practice." However, albeit obliquely, the evidence suggests that there was an arrangement within the Firm that one partner should not seek work from a client for whom the Firm acted in any way, without the consent of the relationship partner for that client. It may be accepted that some such arrangement was a sensible one.
The problem seems to have arisen because Mr Griffiths had made an arrangement to have a meeting with Mr Dion Gooderham, who was an in-house IAG lawyer. Mr Griffiths was on the National Committee of the Australian Professional Indemnity Group (APIG), which in mid-2015 celebrated its 20 year anniversary with an invitation only dinner in Melbourne. Mr Griffiths was invited, and he directed the organisers to send invitations to a number of his partners.
On 16 July 2015, Mr Griffiths sent an email to Mr Michael Bowyer and Mr Philip Battye, who I understand were heads of the Firm's insurance group. The email was copied to Mr Russell Mailler, who was the Firm's National Marketing Manager.
Mr Griffiths sought approval for reimbursement of travel expenses to Melbourne to attend the 20th Anniversary Dinner of the APIG. Mr Griffiths then said: I also have a meeting with Dion Gooderham Corporate Counsel IAG for 8:30 AM Friday 31 July. The meeting is to follow-up my meeting earlier this year in the context of IAG shortly reviewing its panel. I expect to be given an informal update as to how that process is going. I will liaise with the IAG relationship partners on this process. Subject to approval I plan to arrange appointments with other clients in Melbourne including Resource Underwriting.
Mr Mailler responded to Mr Griffiths' email on 16 July 2015, with copies to Mr Bowyer and Mr Battye. Mr Mailler said: Unfortunately I am struggling to see the business case here. I don't think that there is enough in the APIG dinner and the proposed IAG meeting to warrant a stand alone trip to Melbourne. I understand that you are also proposing to meet with other Melbourne based clients, but the proposal isn't sufficiently detailed for me to approve. …
In relation to the proposed meeting with Mr Gooderham, Mr Mailler said "…it sounds like you have already been in touch with Dion to arrange the meeting", and asked whether that meant that Mr Griffiths had not spoken with the relationship partners. Mr Mailler added: "That would be concerning as it goes against the strategy that you and I have been discussing…IAG have already provided us with an update on their tender process, and it would be embarrassing to ask them to repeat the information. Perhaps I misunderstood your email though and that those discussions with the relationship partners have already occurred. Would you please confirm?"
Mr Griffiths did not reply until 21 July 2015, when he sent an email to Mr Mailler, with copies to Mr Bowyer and Mr Battye, in the following terms: I do communicate with the relationship partners to ensure marketing is coordinated. Dion Gooderham and Melinda Mulroney are good connections of mine, (Melinda is a friend), and I have been liaising with them regarding the forthcoming tender for over a year (and have advised Practice Group Leaders in emails) … I have liaised with Richard Garnett who does IAG work. In April/May this year I telephoned and emailed Craig Down about a young solicitor working part-time at CGU that Dion asked if we would consider for a full-time role. Craig replied by email. Before recently getting in touch with Dion I telephoned and spoke with Richard Smith (who has the most CGU/IAG work) and I believe I mentioned Melinda and Dion in that call but I don't think I mentioned I was actually proposing to go to Melbourne at the end of July. I don't wish to suggest I sought his "approval" as I did not believe that was required. After Dion confirmed he was available (at the same time as the APIG Anniversary Dinner date) I telephoned Craig Down but did not hear back. Next day or so I followed up with an email to Craig. Having the rudiments of the planned trip I prepared my email to the group heads and yourself (copy below). … Of course my interest in IAG is not just corporate work but the CGU professional indemnity work, which Melinda appreciates and is why she has encouraged me to keep in contact with Dion (who has a CGU background). In any case I accept your decision…
In the result, on 28 July 2015, Mr Battye advised Mr Griffiths by email that he had notified Mr Gooderham that Mr Griffiths was unable to attend the meeting with him on 31 July 2015; and that instead Mr Battye and Mr Down would meet Mr Gooderham later that morning.
In cross-examination concerning the terms of his 16 July 2015 letter, Mr Griffiths gave the following evidence, which I accept (T167.30-168.07): Q. Then you say this, "Dion Gooderham AIG meeting. I also have a meeting with Dion Gooderham, corporate counsel at IAG for 8.30 on Friday" which is the morning after the dinner. A. Yes. Q. "The meeting is to follow up my earlier meeting earlier this year in the context of IAG shortly reviewing its panel." A. Yes. … Q. Was that a matter that you also were seeking to discuss, about the forthcoming tender, about who should be on the panel? A. Discuss with who? Q. Dion Gooderham? A. Yes, it was - yes, I'd been told to meet with Dion Gooderham by Melinda Mulroney of IAG. She was like a number 1 in-house lawyer and Dion was the number 2 in-house lawyer in the group. Q. What was her name again? A. Melinda Mulroney.
I have set out this evidence in some detail, because in my view it is entirely at odds with an allegation that Mr Griffiths acted dishonestly in relation to his proposed meeting with Mr Gooderham. Mr Martinez did not call Mr Mailler, Mr Battye or Mr Bowyer as witnesses to give any evidence that might support an allegation of dishonesty against Mr Griffiths. No attempt was made to disprove anything said by Mr Griffiths in his 21 July 2015 email to Mr Mailler. It is possible that there was some misunderstanding between the interested parties, but that all falls far short of a proper basis for alleging dishonesty against Mr Griffiths.
It is to be noted that Mr Battye's 28 July 2015 instruction to Mr Griffiths was also copied to Mr Martinez. It is reasonable to infer that, by this time, the issue of Mr Griffiths' approach to IAG (which on the evidence was welcomed by Ms Mulroney, who was described as the "number 1 in-house lawyer") had become enmeshed in the process being undertaken by Mr Martinez that led to the summary dismissal of Mr Griffiths.
Given that the whole issue was not raised in Mr Martinez' defence, and given that there is no evidentiary basis at all for the Court to find that Mr Griffiths acted dishonestly, there is no proper basis for the allegation to have been made.

[45]

Power of Capital Partners to delegate authority

Clause 3.4 of the December Deed (which is set out above at par 31) provided: "Either party may terminate this Deed…" That meant, relevantly, that the three months' notice of termination had to be given to Mr Griffiths by the Firm. That notice might validly be given by a delegate of the Capital Partners, but the effect of cl 3.4 was to give Mr Griffiths a right to insist that any purported delegation was a valid one.
The effect of cl 10.1(a) of the Partnership Deed was that the "Capital Partners may by Majority Resolution from time to time delegate the powers and authorities referred to in this Deed as they see fit". As the contrary was not argued by Mr Griffiths, I will proceed on the basis that cl 12.2 of the Partnership Deed did not entrench the authorities and responsibilities set out in Schedule 3 in the Executive. Powers and authorities that were not delegated in this manner were required to be exercised by the Capital Partners in accordance with cl 10. As noted above, by cl 10.1(b), the Capital Partners delegated to the Executive the power and authority, as set out in Schedule 3 par 1, in respect of: "Employment and termination of all Fixed Draw Capital Partners." Mr Martinez, as the Managing Partner, was not given that power and authority.
It is common ground between the parties that the three months' notice of termination given on 20 July 2015 was given solely by Mr Martinez. The Capital Partners did not resolve to give the notice. Nor did the Executive, as the Executive had become practically defunct in the manner that I will shortly describe.
The prima facie position is therefore that the three months' notice of termination was not effectively given in accordance with the December Deed.
Mr Martinez sought to counter that argument by submitting that the evidence justifies a conclusion that, on 26 October 2007, the Capital Partners resolved to delegate the power in Schedule 3 par 1 of the Partnership Deed (and indeed all other powers in that schedule) to the Managing Partner of the Firm for the time being.
Although Mr Griffiths has the burden of proving that the three months' notice of termination that was given to him by Mr Martinez on 20 July 2015 was invalid, in my view the terms of the Partnership Deed and the December Deed that have been considered above have the effect that Mr Griffiths will succeed in satisfying that burden, unless Mr Martinez succeeds in establishing, on the balance of probabilities, that he was delegated the power by the Capital Partners to issue the notice, notwithstanding the inconsistency of that position with the express terms of the Partnership Deed.

[46]

Timing of Mr Griffiths' reliance on lack of authority

Mr Griffiths originally filed his statement of claim in the District Court of New South Wales on 23 December 2016. The proceedings were set down for hearing in that Court on 26 September 2017. Mr Griffiths had not apparently appreciated the possibility that Mr Martinez did not have the Firm's authority to issue the three months' notice of termination until shortly before the commencement of the hearing, as the point was first raised by him in his outline of submissions. It is sufficient to note that the District Court hearing was vacated. The matter was transferred to the Supreme Court for reasons that need not be recorded. Mr Griffiths' amended statement of claim was then filed in this Court on 16 October 2017. The issue of Mr Martinez' authority to give the three months' notice of termination on behalf of the Firm was raised in Mr Griffiths' reply filed on 6 February 2018.
The authority issue was therefore not expressly raised by Mr Griffiths until 26 September 2017 or thereabouts, which was more than two years after the notice was given.
In pars 84 to 87 of his final written submissions, Mr Martinez put a number of submissions, the thrust of which was the assertion that Mr Griffiths' conduct in taking the point that Mr Martinez did not have authority to give him the three months' notice of termination was inconsistent with other conduct on his part. In essence, Mr Martinez submitted that, if the October 2007 resolution did not delegate to the Managing Partner all of the Executive's powers, including the power to hire, manage and terminate Fixed Draw Partners, then Mr Martinez would also not have had power to enter into the December Deed, and make agreements from time to time to increase Mr Griffiths' entitlement to share in the Firm's profits. Further, Mr Martinez would not have had the Firm's authority to summarily terminate the December Deed in August 2017. Mr Martinez submitted that Mr Griffiths had acted inconsistently, by taking the lack of authority point in relation to the three months' notice of termination, while taking the benefit of the December Deed, and by challenging the validity of the notice of termination while accepting the effectiveness of the later repudiation. Mr Martinez also submitted that, in the years 2007 to August 2015, Mr Griffiths had not challenged the Managing Partner's authority to give directions about compliance with policies and evaluate his performance. Mr Griffiths had also taken specific actions listed in par 86(b) of the final written submissions, which recognised Mr Martinez's authority as Managing Partner.
The significance that Mr Martinez seeks to attribute to this supposedly inconsistent conduct on the part of Mr Griffiths is not clear to me. The conduct may have some relevance to the estoppel claims raised by Mr Martinez in pars 108 to 115 of his final written submissions, to which I will come in due course. Mr Martinez did not otherwise plead that the conduct referred to constituted a form of approbation and reprobation, or an election of some sort, which prevented him from now taking the point that Mr Martinez did not have authority to issue the three months' termination notice.
Except where the law attributes significance to conduct that involves approbation and reprobation in respect of a particular matter, or inconsistent conduct attracts the operation of some estoppel, people are generally entitled to act inconsistently without legal consequence.
It must be remembered, as I have already noted at pars 123 to 125 above, that the only issue in the case concerning Mr Martinez' authority that was properly contested was whether Mr Martinez had authority to issue the three months' notice of termination on 20 July 2015. Superficially, it might appear that if Mr Martinez did not have authority to issue the termination notice, he did not have authority to enter into the December Deed, to take any of the other steps concerning the terms of Mr Griffiths' Fixed Draw Partnership particularised by Mr Martinez, or to exercise the power in cl 3.6 of the December Deed to terminate it for serious breach. Without there being evidence of all of the relevant circumstances, it cannot be assumed that Mr Martinez completely lacked authority in relation to these matters, just because it is shown that he lacked authority in respect of one of them.
In any event, the supposed inconsistencies in Mr Griffiths' conduct are substantially explicable in the present case. Mr Griffiths' bargaining power was greatly inferior to that of Mr Martinez, as the Managing Partner. Mr Griffiths had reason to act as if Mr Martinez had power to act unilaterally on behalf of the Firm. Mr Griffiths may well not have even considered the matter, but accepted it because of the practical reality of his position. Matters of that nature were not explored at the hearing. Unless Mr Griffiths' conduct gave rise to a relevant estoppel, and the assertion that Mr Martinez lacked authority to issue the three months' termination notice would cause the Firm or Mr Martinez to suffer a relevant detriment, the superficially apparent inconsistencies in Mr Griffiths' conduct will not be material.
The December Deed did not simply involve Mr Griffiths being appointed as a Fixed Draw Partner. Mr Griffiths was already a Capital Partner, and the practical effect of the December Deed was to demote him. Mr Martinez led considerable evidence to justify his decision that Mr Griffiths had ceased to satisfy the criteria necessary for the continuation of his status as a Capital Partner. That issue was not given great significance at the hearing because it was largely irrelevant. The evidence disclosed that, on 25 November 2009, Mr Martinez sent an email to Mr Griffiths on the subject of Mr Griffiths' future with the Firm, which included the following: … 2. The memo referred to in 1 above states that there would only be support [from the Capital Partners in the Insurance Group] for you to move into the Insurance Group as a fixed draw partner. I support this position. 3. As to your position generally, I do not believe you qualify to continue to be a Capital Partner of this firm and this will be a position that I will put to the partnership if agreement is not otherwise reached as to the basis of your continued involvement with the firm moving forward - if any. 4. If the terms set out on the attached memo are not acceptable to you I will proceed as indicated in 3 above without delay. To avoid doubt my recommendation to the Partnership will be that you be offered a consultant role and cease to be a partner of the firm, at best. At worst there may be a resolution for your expulsion without any alternate position being offered. 5. I have authority to deal with the recommended position as a fixed draw without reference to the partnership so this can be implemented forthwith. If you do not agree to this transition I am compelled to put resolutions to the partnership. …
Mr Griffiths made a judgment that, in all of the circumstances, the best course of action available to him was to accept Mr Martinez' offer. It is true that Mr Martinez claimed in par 5 of his email that he had authority to deal with the appointment of Mr Griffiths as a Fixed Draw Partner without reference to the partnership, but the tenor of the email as a whole was that it was an offer that could not be refused. Furthermore, the email made plain that Mr Martinez had been consulting with some of the Capital Partners.
Mr Griffiths' continuing position with the Firm depended largely on his compliance with the terms of the December Deed. Realistically, Mr Griffiths was not in a position to take any point that Mr Martinez did not have the Firm's authority to enter into the December Deed, even if he had appreciated the potential availability of that point. The real consequence, if the December Deed was not valid, would have been that Mr Griffiths would have remained a Capital Partner of the Firm. It was hardly available to Mr Griffiths to chance the consequences of making that assertion.
As to Mr Griffiths' acceptance that Mr Martinez' conduct, in summarily terminating the December Deed in August 2015, was a repudiation that bound the Firm, Mr Griffiths hardly had any choice in the matter. He had been required to leave the Firm's premises on 17 August 2015; his payments had been terminated; he had been advised that he could not take boxes out of the building without them being inspected by a partner; nominated partners would decide what would be done with Mr Griffiths' clients; and on 18 August 2015 Mr Martinez circulated an email addressed to "National - All" advising: "Tim is no longer a partner of the firm".
It is difficult to conceive that, if Mr Griffiths had taken the point that the purported summary termination by Mr Martinez of the December Deed was invalid for want of authority by Mr Martinez, the practical consequence would have been that Mr Griffiths would have been reinstalled into his position as Fixed Draw Partner of the Firm without any damaging consequences.
I do not see how Mr Griffiths can be criticised for acting inconsistently, when in each case the choices available to him were constrained by practical considerations, and in-so-far as he made a choice, he acted reasonably in his own interests in circumstances where the alternative was not practicably open.
I add, for completeness, that I do not see how the individual instances of Mr Griffiths dealing with Mr Martinez that the latter relies upon are material, as Mr Martinez was in fact the Managing Partner, and had to be dealt with on a day-to-day basis by a person in Mr Griffiths' position, who was only a Fixed Draw Partner.
It is therefore necessary to address the question of whether it has been adequately established that, notwithstanding the terms of the Partnership Deed, Mr Martinez had delegated authority from the Capital Partners to give the three months' termination notice to Mr Griffiths.

[48]

Procedural requirements for meetings

As stated above, cl 10.1(a) of the Partnership Deed empowered the Capital Partners, by Majority Resolution from time to time, to delegate the powers and authorities referred to in the Partnership Deed as they saw fit. Clause 10.2, relevantly, authorised the Capital Partners by Extraordinary Resolution to make and vary the Rules for the conduct of meetings. By cl 1.1, the Rules "means the rules in the form of Schedule 1 or such other rules as may be adopted by the Capital Partners by Extraordinary Resolution from time to time." Clause 1.1 also defines "Extraordinary Resolution" as meaning "a resolution of the Capital Partners passed by not less than 80% of the Capital Partners voting in person or by proxy and in a manner and with the amount of notice as stipulated by the Rules from time to time." Rule 1.3 requires that oral or written notice of a meeting of the Capital Partners must be given "at least 7 days (or such other period as may be unanimously agreed on by the Capital Partners) before the time appointed for the holding of the meeting." Rule 1.4 provides: 1.4 Notice of a meeting given under rule 1.3 must: - (a) specify the general nature of the business to be transacted at the meeting; and (b) unless otherwise resolved by Majority Resolution have delivered with it at least three days prior to the proposed date of meeting relevant background papers for the agenda items listed for such meeting.
As is apparent from the heading to item 8.1 of the minutes of the 26 October 2007 meeting, the subject matter initially discussed was whether meetings of the Executive would be held bi-monthly or monthly, or as combined Capital Partner meetings. The evidence does not disclose in a positive way whether the requirements of Rules 1.3 and 1.4 were complied with in relation to this subject. The better view on the evidence is that the notice requirements in the Rules were not satisfied. If any notice was given, it was probably limited to a consideration of the timing and circumstances of meetings of the Executive.
This conclusion is supported by the evidence given by Mr Griffiths, which I accept, that the matters ultimately covered by the discussion developed spontaneously and unexpectedly out of the initial subject matter. That appears to be reflected in what is said in the first paragraph of item 8.1.
There is a good argument that the 2007 resolution did not comply with the requirements of the Partnership Deed that were necessary for its validity. However, Mr Griffiths did not seek to make a case on that ground, and it was not dealt with at the hearing. I will proceed on the basis that the 2007 resolution was not constitutionally invalid.

[49]

Operations meetings

It is recorded in the first paragraph of item 8.1 of the 2007 resolution that two members of the Executive expressed "the opinion that the Executive was perhaps redundant because the majority of issues being discussed were all ready [sic] being canvassed in Operations meetings".
The term "Operations Meetings" is not formally defined in the Partnership Deed. Rule 1.1 requires that the Capital Partners meet at least three times per year, but Rule 1.2 permits the Capital Partners to convene additional meetings. The Rules do not appear to require any particular formalities that would usually be required at annual general meetings of companies or associations.
The evidence was not entirely clear concerning the meaning of the term "Operations Meetings". In part, this was due to a significant portion of Mr Martinez' 3 April 2018 affidavit being ruled inadmissible because in it he sought to give evidence of many matters of fact concerning how the Firm operated, and his role as Managing Partner, by making general, broad assertions concerning the particular subjects.
Mr Martinez said in par 10 of his affidavit: After the 2007 Retreat, I continued to hold quarterly Operations Meetings of the partners to report on status and direction and to advise them of decisions that I had taken or was proposing to take about matters of general importance.
Mr Griffiths, in pars 4 and 8 of his 24 July 2018 affidavit in response to Mr Martinez' affidavit, referred to quarterly partnership meetings being often described as "Operations Meetings".
Mr Griffiths was cross-examined about the Operations Meetings to the following effect (T68.40-69.8): Q. And the operations meetings were like this I suggest to you that Mr Martinez would travel around the country to the various offices of the firm and have meetings with the capital and fixed-draw partners to tell him what was happening in the business and what directions things were going in correct? A. I don't think at that time it was really just Sydney Melbourne and Brisbane I think at that time. Q. All right well he went to those branches? A. Yeah. Q. And you attended those operations meetings when they were in Sydney? A. Yes I did. Q. So the suggestion here from two of the executive members at the time saying look what Mr Martinez does at those regular operations meetings at the various offices seems to suffice so we're really what meeting the executive meeting is perhaps redundant. You see that? A. I see that.
It was thus put positively to Mr Griffiths that Mr Martinez was peripatetic and conducted meetings with the Capital and Fixed Draw partners in the various offices of the Firm on matters that I would consider to fall within the rubric of operational matters. It is not clear on the evidence whether these meetings were treated as formal meetings as required by Rule 1.1, or whether they were less formal meetings in which the Managing Partner and the Partners who were present dealt with the operational concerns of the Firm.
I will return to a consideration of the significance of the Operational Meetings when I deal with the effect of the 2007 resolution.

[51]

Principles governing construction of 2007 resolution

Mr Martinez submitted that the construction of the Partnership Deed is to be approached on the same basis as other commercial contracts, and relied upon the principles of construction adopted by the High Court in Woodside Energy Ltd v Electricity Generation Corporation (2014) 251 CLR 640; [2014] HCA 7 at [35]. He also submitted that context and surrounding circumstances are also relevant, whether or not the 2007 resolution is ambiguous: Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 at [78]-[80].
In particular, Mr Martinez relied upon the following observations of Beach J in Aveo Group Ltd v State Street Australia Ltd [2015] FCA 1019 at [59] (subsequently affirmed on appeal Aveo Group Ltd v State Street Australia Ltd [2016] FCAFC 81; (2016) 113 ACSR 615). I would add his Honour's paragraphs [59], [60] and [61]: [59] As I said in Donaldson v Natural Springs Australia Limited [2015] FCA 498 at [148], there is little doubt (Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1 (Lion Nathan) at [28], [29], [46] to [59], [97] to [102], [122] to [124], [232], [233], [238], [244], [251] to [257] and Oil Basins Ltd v Bass Strait Oil Company (2012) 297 ALR 261; [2012] FCA 1122 at [32]) that: a constitution should be read and construed as a whole; general principles of construction of commercial contracts (see generally Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]) are applicable to a constitution; more particularly, the commerciality of a particular construction may tip the balance in its favour where it is implausible that the parties could be taken to have intended otherwise; a constitution should not be construed narrowly or pedantically; words used should usually be given their natural and ordinary meaning; a construction of a provision which gives a congruent operation of the various applicable provisions of a constitution should be preferred to another construction which does not; and extrinsic evidence may be adduced as an aid to construction, subject to a qualification that I will address in a moment, but only in the limited manner envisaged in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22] and Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [35] to [41]. [60] Moreover, a purposive interpretation, rather than a creative interpretation, of a constitution should be given, so long as it is understood that this is an objective exercise bounded by such principles. [61] Notwithstanding the generality of the principles just expressed, in construing a constitution "ordinarily primacy must be given to the objective intention discernible from the language in which the constitution is expressed rather than to other features of the surrounding matrix of fact in which its provisions may have been made" (HNA Irish Nominee Ltd v Kinghorn (2010) 78 ACSR 553; [2010] FCAFC 57 at [42]). This is because the range of surrounding circumstances available as aids to construction is a more unstable (or at least changeable) foundation than that available for construing contracts generally. Constitutions and replaceable rules can be amended at different times and in different circumstances. Further, the members are likely to change. Further, and more generally, a constitution serves a public purpose; it is not merely an embodiment of a private bargain. Surrounding circumstances can be taken into account in construing the provisions of a constitution, but restraint needs to be exercised (Lion Nathan at [55], [56], [59], [63], [102], [124], [226], [236], [254], [255] and [259]).
It is important to bear in mind the qualification referred to by Beach J in the last dot point in [59], which his Honour elaborated in [61].
In Dr Robert Austin and Professor Ian Ramsay, Ford, Austin and Ramsay's Principles of Corporations Law (17th ed, 2018, LexisNexis Butterworths Australia) at [6.080.3], the learned editors explain why, in construing the constitutions of corporations, "the use of surrounding circumstances needs to be undertaken with caution and with more constraint than is the case with other business contracts", relying upon Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1; [2006] FCAFC 144 at [56] and [102]. Those reasons also included, at [58], that "a corporate constitution is by its nature more likely to be read and relied upon by a third party than an ordinary contract".
Mr Martinez also relied upon the following statement of principle by Santow JA in National Roads and Motorists' Association Ltd v Parkin (2004) 60 NSWLR 224; [2004] NSWCA 153, at [3]: In concluding that the declarations sought should not be made, I agree that the proper approach to be adopted in considering whether the relevant objects sought to be introduced are void for uncertainty is that enunciated by Barwick CJ in Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 437; that is, one which is neither narrow nor pedantic.
Mr Griffiths has not, however, argued that the 2007 resolution is void because it is uncertain. He has instead argued that, upon its proper construction, it did not delegate to Mr Martinez, as the Managing Partner, unilateral authority from the Capital Partners to issue the three months' termination notice.
I accept that the principles governing the interpretation of commercial contracts are likely to be of utility in construing the constituent documents of a professional partnership.
The primary issue before the Court is not, however, the proper construction of the Partnership Deed. The relevant aspects of the Partnership Deed are relatively straightforward, and I do not understand that there is any contest between the parties as to the proper construction of the deed. The Court instead is concerned with the proper construction and effect of the 2007 resolution.
The real question in these circumstances is therefore what principles govern the construction of the 2007 resolution made by the Capital Partners.
I accept that the general principles governing the construction of contracts may assist in the interpretation of resolutions of members of an organisation, including a partnership. However, the general principles, in my view, must be adapted to recognise the relative informality and brevity of the 2007 resolution, while recognising its significance as a de facto variation of the Partnership Deed, in the context of its capacity to affect in significant ways the rights of the Capital Partners (including absent and future ones), and also third parties in respect of the validity of their dealings with the Firm.
The first rule should be that the words of the resolution mean what they say, so that if the meaning of the wording of the resolution is clear, it should be given that meaning. The problem here is that it cannot be said that the meaning of the wording of the 2007 resolution is clear.
I acknowledge the view that, as stated in A.D. Lang, Horsley's Meetings Procedure Law and Practice (7th ed, 2015, LexisNexis Butterworths Australia) at [11.3]: … Resolutions are for the most part (as their wording often evidences) formulated on the spur of the moment; it is essential therefore to look at the circumstances in which the resolution or proposition was made if it is to be given its fair and natural meaning. It would, accordingly, be misleading to rely only on the bare words of a resolution disengaged from the events that led to, and result from, its being passed, and to look for unreason rather than for reason: Myer Queenstown Garden Plaza Pty Ltd v Port Adelaide City Corp (1975) 11 SASR 504; 33 LGRA 70.
The difficulty in the present case is that the Court must rely almost entirely on the wording of the 2007 resolution to glean the historical context of the resolution.
It will be important to construe the resolution in context. But, in the absence of proper notice and the explanatory papers required by the Partnership Deed, what is the proper context may be debatable, and vary from the different perspectives of the members of the organisation with an interest in the matter. Put another way, while the resolution should be construed in a manner that gives effect to its purpose, in the absence of explanatory papers it may be unsafe to derive the purpose from any source other than the words used.
The proposition that, in a real way, the 2007 resolution was capable of significantly affecting the rights of third parties emerges from a consideration of the consequences of the responsibilities in Schedule 3 to the Partnership Deed being delegated to the Managing Partner. Lack of certainty on that subject could have serious consequences, at least in respect of some of the authorities the subject of the delegation.
For instance, par 11 of Schedule 3 to the Partnership Deed vested in the Executive the authority to execute loan and finance contracts and leases of premises, and required such agreements to be executed by members of the Executive. Some formality and precision was required in the specification of who had authority to bind the Firm on such matters for the protection of both the Firm and third parties who needed to know how they could safely deal with the Firm.
I conclude that the Court should attempt to discern a positive meaning from the terms of the 2007 resolution. The Court should have regard to the context that appears from the wording of the resolution, and any other aspects of the context that may be obvious. But it should also interpret the wording with some strictness, so that the resolution is only given an effect that appears with reasonable clarity from its terms, in a manner that is consistent with the likelihood that all parties with an interest in the matter would agree as to the single meaning and effect of the resolution.

[52]

Analysis of the wording of the 2007 resolution

Mr Martinez submits that the 2007 resolution had the legal effect of varying clause 12.2 and Schedule 3 of the Partnership Deed, and delegating all of the authority and responsibilities in Schedule 3 to Mr Martinez alone as the Managing Partner, to be exercised by him unilaterally.
In my view, the 2007 resolution did not have that effect as a matter of the ordinary meaning of the words used in it. The wording of the 2007 resolution simply does not in any direct or clear way delegate any authority to the Managing Partner that he or she did not already have under the Partnership Deed.
The basis for that conclusion is reinforced by the need to construe resolutions that affect legal rights, including the legal rights of parties who were not privy to the circumstances in which the resolution was made, with some strictness. Parties who deal with the Managing Partner purporting to act on behalf of the Firm must have a reasonably clear manner of being able to determine whether or not the Managing Partner has the authority claimed.
In positive terms, the 2007 resolution did four things. First, it removed the current members of the Executive. Secondly, it resolved that no additional meetings of Capital Partners be held. Thirdly, it cancelled the November 2007 Executive Meeting. Finally, Mr Martinez and another partner were requested to prepare a paper on the concept of an "ad hoc Executive" that could assist the Managing Partner with difficult strategic issues.
Should it be concluded that the 2007 resolution by implication operated as a delegation to the Managing Partner of all of the authority and responsibilities set out in Schedule 3?
If it was intended to have that effect, it was a maladroit effort by all of the experienced lawyers who participated in the 26 October 2007 meeting.
It is most improbable that, if such a delegation was intended by the lawyers present at the meeting, it would not have occurred to any of them to voice that intention, so that it would have been recorded by the person who prepared the minutes.
The Court should infer that no such statement was made, because it was not recorded in the minutes.
What was said at the meeting after the discussion about the timing of meetings of the Executive that is set out at the beginning of the 2007 resolution?
First, two members of the Executive expressed the opinion that the Executive was perhaps redundant because the majority of issues being discussed were already being canvassed in operations meetings.
There was no evidence of the context in which this statement was made, or in any precise way what the actual function of operational meetings was. All that the Court knows is what is set out above. There was no evidence that would give content to the meaning of "operational" in this context, or how operations meetings functioned.
The statement in the minutes about the involvement of operations meetings clearly conveyed the meaning that, notwithstanding the delegation in Schedule 3 of authority and responsibilities to the Executive, matters the subject of that delegation were being canvassed in operational meetings. In my view, to give the 2007 resolution the precise and confined meaning suggested by Mr Martinez would be to wrongly ignore the effect of this statement, which was the first part of the discussion that was recorded.
Secondly, following the word "Further", which suggests that what followed was an additional consideration, not the only or the main one, the 2007 resolution recorded the view that the Executive did not have any more power than the Managing Partner and as such was not necessary to make operational decisions.
If one relies only on the terms of Schedules 2 and 3 to the Partnership Deed, that statement is obviously wrong, most significantly in relation to par 11 of Schedule 3 that delegated to the Executive authority to execute loan and finance contracts and leases on behalf of the Firm. If Mr Martinez' submission were correct, the 2007 resolution had the effect that the Managing Partner could unilaterally have decided to bind the Firm to loan and finance contracts and leases.
But it must be accepted that someone at the meeting believed that the Executive did not have any more authority than the Managing Partner, and the note taker thought that the statement was sufficiently important to record it. It is not clear whether this was based on a mistaken understanding of the Executive's powers, the Managing Partner's powers, or some combination of both. It is at least possible that the makers of the statement mistakenly thought that the Executive had no more power than the Managing Partner because they thought that the Schedule 3 powers, or some of them, already fell within the exclusive province of the Capital Partners. Regardless, it may be inferred that no one present corrected the statement as being plainly wrong.
There was no evidence to explain the arrangements adopted for the management of the Firm, which could explain why the apparently erroneous statement as to the delegated powers of the Managing Partner could have been accepted without demur.
One real possibility is that the Firm had come to operate in practice in a flexible way that did not strictly adhere to the constitutional requirements in the Partnership Deed.
It is also to be noted that the Managing Partner was, by clause 12.4 of the Partnership Deed, the chairman of meetings of the Executive, and it may have been that the way in which the Executive operated evolved away from the delineation of authority and responsibilities as between Schedule 2 and Schedule 3, so that the Managing Partner in fact exercised some of the functions listed in Schedule 3.
Nothing in the evidence gives meaning to the word "operational", when used in the phrase "operational decisions", as found in the 2007 resolution. In particular, it is not clear from the terms of the resolution whether or not the employment and termination of Fixed Draw Partners was an operational matter. Nor is there any evidence that illuminates the reference in the 2007 resolution to the possibility that an ad hoc Executive might be created to assist the Managing Partner with difficult strategic issues. It is not clear what issues were considered to be strategic, or whether the Managing Partner was thought to have unilateral power to act on strategic issues, or only to formulate proposals for the Capital Partners. Strategic issues, given the ordinary meaning of the expression, were likely to fall outside both Schedule 2 and Schedule 3.
The key to discovering the intended effect of the 2007 resolution lies, in my view, in two matters. The first is that the meaning to be given to the words used must give effect to both observations concerning the canvassing of issues in operations meetings and the de facto exercise of at least some of the Executive's powers by the Managing Partner.
The second is that the 2007 resolution is a synopsis of a discussion by experienced lawyers, and the Court should hesitate to construe it in a way that would require a conclusion that the partners present were incompetent or irrational.
The conclusion that the 2007 resolution may have been incompetent or irrational is only suggested if the making of the resolution is treated as an attempt to make a formal resolution amending the delegation in clause 12.2 and Schedule 3 to the Partnership Deed.
The 2007 resolution does not purport to have that effect, so why should the Court treat it as such?
According to the terms of the minutes of the 26 October 2007 meeting, the Firm had about 31 partners (noting that Nicholas Matkovich was recorded as being both present and absent), who practised in relatively small numbers from a number of different offices.
It is reasonable to suppose that the Firm was a relatively intimate partnership, where the use of the word "intimate" is intended to convey that the number of Capital Partners was small enough for all partners to have some close awareness of the Firm's business, and to be able to form a consensus or otherwise reach agreement on matters of importance to the Firm.
Experience shows that some firms, as well as, for example, many floors of barristers, operate in practice (whatever their constituent documents might say) in an informal, collaborative and consensual manner. Notwithstanding a possible deficit in legal precision and potential risks to enforceability, such arrangements can be preferred, based upon the experience that, if cooperation and consensus is the only way for the organisation to operate successfully, then there will be a natural incentive for all participants to act positively in the individual and collective interest.
The Court has no means of knowing whether in 2007 the Firm operated in this manner, but one thing that can be said is that the 2007 resolution looks exactly like a statement of general approach that would be adopted in that context.
The 2007 resolution ceases to look like an incompetent exercise in drafting, if it is seen as a flexible statement of general approach in which operational matters are to be determined by the Managing Partner in conjunction with operations meetings of the Capital Partners.
It is by no means unknown that partnerships may forego, abandon or dilute formal legal structures because they may be perceived to restrict flexibility and efficiency, so that business may be conducted in a more informal ad hoc and consensual manner. Lindley & Banks observed at [10-01]: "…Yet, it is surprising that so many firms, particularly in the professions, are not governed by a written agreement, whether because the partners thought it unnecessary or "never got around to it", or because they allowed their existing agreement to lapse following the administration of a new partner…" The 2007 resolution is intelligible if it is viewed as intended to recognise a less structured reality in the conduct of the business of the Firm than was established in a formal way by the Partnership Deed.
That leaves the question of what was intended in respect of the future employment and termination of Fixed Draw Partners. That intention is not clear. The Court cannot know whether that function was considered to be an operational matter or not. There was no direct evidence on that subject. The Court cannot safely determine the extent to which it was intended that the Managing Partner could make unilateral decisions binding the Firm, or whether this was an issue that at the time of the 2007 resolution was contemplated as being a matter that needed to be canvassed in operational meetings.
In the absence of persuasive evidence to the contrary, I would not infer that the Capital Partners intended that the Managing Partner could make unilateral decisions employing and terminating Fixed Draw Partners. I would not readily infer that the arrangements for the governance of a partnership in the nature of the Firm in 2007 were such that the Managing Partner could simply employ a lawyer in the capacity of Fixed Draw Partner on the basis that the lawyer would commence work with other lawyers in the Firm without the prior consent of either all of the Capital Partners, or at least those Capital Partners with a direct interest in the decision. The position is at least as true in respect of the termination of Fixed Draw Partners.
Finally, I note that the evidence allows the possibility that, over the period since 26 October 2007, in which the number of Capital Partners in the Firm has grown substantially, Mr Martinez and perhaps some of the Capital Partners have acted as if Mr Martinez had the unilateral authority that he now claims was given to him by the 2007 resolution. The evidence on that subject was meagre and did not explain the full circumstances in which actions were taken by Mr Martinez. It is quite possible that the way in which decisions were in fact made on behalf of the Firm on a day-to-day basis evolved after 26 October 2007. Whether the effect of the Partnership Deed was varied by a course of dealing involving all of the Capital Partners is a subject that will be considered below. However, the manner in which Mr Martinez, and perhaps others, may have come to interpret the 2007 resolution does not, in my view, control the objective legal effect that it should be found to have had.

[53]

Effect of s 19 of the Partnership Act

Mr Martinez then submitted, in pars 100 to 106 of his final written submissions, that if the 2007 resolution was not effective to delegate to him the power and authority to issue the three months' termination notice to Mr Griffiths, he had gained that power by 20 July 2015 by operation of s 19 of the Partnership Act. That section provides: 19 Variation by consent of terms of partnership The mutual rights and duties of partners, whether ascertained by agreement or defined by this Act, may be varied by the consent of all the partners, and such consent may be either expressed or inferred from a course of dealing.
Mr Martinez relied upon the submission that the consent of all of the Capital Partners should be inferred in the present case from a course of dealing.
By its terms, s 19 empowers the mutual rights and duties of the partners to be varied by consent of all the partners. That requires unanimity. That unanimity may be expressed by all of the partners by some means, or it may be inferred from a course of dealing. Evidence of a course of dealing that is merely consistent with all of the partners consenting to a variation of their mutual rights and duties may not be sufficient to establish that those mutual rights and duties have been varied by consent of all the partners. The evidence must support a finding that all of the partners were aware of the dealings and that by positive action or passive assent they have all accepted that the effect of the dealings is to vary their mutual rights and duties. The Court must be able to infer from the evidence of the course of dealing that the partners have all consented as between themselves to a change in the legal relationship between them.
This expression of the applicable principles is supported by the observation made by the learned editor of Roderick I'Anson Banks, Lindley & Banks on Partnership (20th ed, 2017, Sweet & Maxwell) (Lindley & Banks) at [10-15] that the English equivalent to s 19 of the Partnership Act gave statutory force to a common law principle that applied equally to written and oral agreements that "…any term of a partnership agreement…could be abandoned with the consent of all the partners, and that such consent might be given expressly or impliedly, i.e. by conduct." See also K L Fletcher, The Law of Partnership in Australia (9th ed, 2007, Thomson Reuters Lawbook Co. Australia) at [3.180]. As is stressed in Lindley & Banks at [10-15]: "…It goes without saying that no variation will be effective if the consent of all the partners is not forthcoming" (emphasis in original); and at [10-19]: "It is, of course, essential to determine that all partners have impliedly accepted the variation…It goes without saying that if none of the partners have actually turned their minds to the significance of what they are doing, a variation is unlikely to be inferred…"
The observation made in Lindley & Banks at [10-19] that it may be more difficult to demonstrate that all partners have impliedly accepted a variation of the partnership agreement in a large firm is borne out by observations made by the Court of Appeal in In re Frank Mills Mining Company (1883) 23 Ch D 52. There Jessel MR at 56 observed: "…It must be remembered that the effect of a course of practice in a large company is very different from that of a course of practice in a common partnership, where every partner attends to the business and is privy to all that is done. The inference to be deduced from the mode in which the accounts have been made out is not nearly so strong in the former case is in the latter…" Lindley LJ said at 58: "…If the Appellant could prove an agreement between the shareholders inconsistent with this rule, the agreement would prevail, but it would require clear evidence, and I do not think that such an agreement can properly be inferred from the fact that the accounts were made out by the purser in a particular way upon the retirement of shareholders, without its being shewn that this mode of making the accounts was known to and approved by the body of shareholders." Finally, Bowen LJ said at 59: "…A person taking shares does not thereby undertake to adopt everything the company has done, but only to adopt so much of the practice as the shareholders have agreed to…Universal practice does not necessarily imply a contract by the shareholders to adopt…The past practice of a firm of two or three partners, each of whom knows everything that is done, stands on a very different footing from a course of practice adopted by an officer of a large company without communication with the shareholders."
The presence of unanimous consent must, however, in accordance with established principles of contract, be determined objectively. In essence, the determination should be comparable to the circumstances where the question is whether parties have entered into a contract, but the evidence does not establish offer and acceptance in the conventional sense. If the Court is required to look at the party's conduct to determine whether they have nonetheless acted in a manner that establishes that they have mutually agreed to be bound by the terms of the apparent contract, the question is whether the reasonable observer, having the objective knowledge of the parties, would conclude that they had agreed to be bound by the terms of the contract: see Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 535; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [80]-[85]; and Kriketos v Livschitz [2009] NSWCA 96; (2009) 14 BPR 26,717 at [118].

[54]

Evidence concerning course of dealing

As I have mentioned above, much of Mr Martinez' 3 April 2018 affidavit dealing with the 2007 resolution and its effect was rejected because of the form in which the evidence was given. The Court did, however, receive evidence that, after the 2007 resolution was made, there were no further meetings of the Executive, and there were no further joint meetings of the Capital Partners and the Executive. Mr Martinez continued to hold quarterly Operations Meetings of the partners to report on status and direction and to advise them of decisions that he had taken or was proposing to take about matters of general importance. Mr Martinez said that, after the 2007 resolution was made, the only authorities and responsibilities under Schedule 3 to the Partnership Deed not exercised exclusively by him as Managing Partner were the powers under item 11 of Schedule 3, relating predominantly to the countersigning of key financial documents. Following the 2007 resolution, up to 21 March 2012, the term Executive Partners continued to be used to describe the small group of Capital Partners who would assist Mr Martinez as Managing Partner by verifying and counter-signing key financial documents. According to Mr Martinez, the Executive Partners did not make or participate in decisions about the hiring and firing of staff, including Fixed Draw Partners, and about adopting appropriate policies and giving necessary directions that Mr Martinez considered were in the best interests of the Firm.
As much of Mr Martinez's affidavit was rejected on the ground of form, he was permitted to lead further evidence, which he did by means of his affidavit dated 14 November 2018.
Mr Martinez annexed to his affidavit a schedule setting out the number, names and dates of appointment of all Fixed Draw Partners in the period 2007 to 2018, being a total of 110 persons. The schedule also contained a statement that Mr Martinez determined the terms upon which the Fixed Draw Partners were appointed. Mr Martinez also carried out a total of 649 salary and performance reviews, and terminated the employment of 11 Fixed Draw Partners, in the period. Mr Martinez also gave evidence that he was the only person at the Firm who had approved these steps, and that no "Capital Partner, Fixed Draw Partner or otherwise, has ever challenged my authority to make the decisions or take the actions described above".
Leave was granted to Mr Martinez, at a short hearing on 19 November 2018, to file his affidavit sworn on 14 November 2018. The hearing continued on 29 November 2018, and Mr Martinez was cross-examined on that day. He was not in any significant respect challenged on the contents of his 14 November 2018 affidavit. The issue that arises under s 19 of the Partnership Act must be decided on the basis that the evidence given by Mr Martinez stands.
It should be recorded that, initially, Mr Martinez sought to rely upon affidavits sworn by Mr Robert Charles Gardini on 23 March 2018, and Mr Peter Gerald Van Rompaey on 4 April 2018. Both were Capital Partners of the Firm at relevant times. Mr Gardini's affidavit took the form of agreeing with the accuracy of identified paragraphs of a further affidavit of Mr Martinez to be sworn on or about 23 March 2018. Mr Van Rompaey's affidavit also took the form of agreeing with the accuracy of differently numbered paragraphs of an affidavit of Mr Martinez to be sworn on 3 April 2018. There was some preliminary argument about whether these affidavits were in proper form to be received into evidence. In my view, evidence given by one witness in the form that the witness agrees with identified paragraphs in the affidavit of another witness can carry only little weight, even if it is admitted. Such evidence contains an implicit statement of opinion as to what the effect of the words used by the other witness is. My understanding is that, after the preliminary argument, Mr Martinez elected not to read the two affidavits, but relied upon his new affidavit sworn on 14 November 2018. I did not in fact record that the affidavits had been read by Mr Martinez, or formally rule on their admissibility. Consequently, although Mr Martinez initially sought to corroborate his evidence by the evidence of two of his partners, he ultimately relied solely on his own evidence as to what had happened, or not happened, as the case may be, over the period since 2007.
Mr Griffiths made the submission that there was no evidence of any positive delegation by the Capital Partners of their power to terminate Fixed Draw Partners to Mr Martinez, and that the evidence that other Fixed Draw Partners were expelled from the Firm by Mr Martinez, without complaint from other members of the Firm, fell well short of demonstrating the unanimous agreement of the other partners "including the plaintiff and other Fixed Draw Partners" (see Mr Griffiths' final submissions par 70). Mr Griffiths continued with the submission that there was no evidence to indicate that the partners had knowledge of any such proposed action, or that they assented to it in any way. Nor was there evidence of how and when the partners were subsequently advised of Mr Martinez' actions, or how they are said to have ratified them, expressly or impliedly.

[56]

Other evidence concerning course of dealing

Mr Martinez relied upon a number of specific aspects of the evidence, in addition to that contained in his 14 November 2018 affidavit that is discussed above, to support his submission that the Partnership Deed had been varied by the consent of all of the Capital Partners (written submissions par 106-107).
First, Mr Martinez relied upon the fact that, at the October 2007 meeting at which the October 2007 resolution that is discussed above was made, the Executive meeting set for November 2007 was cancelled, and no later meetings of the Executive were set.
Then, Mr Martinez sent an email to all partners on 31 October 2007 (Exhibit D3), wherein he announced that "as part of management restructure Human Resources now has a direct reporting line to me", and admonished all partners "to show clear leadership and commitment to the policies surrounding this critical aspect of our business". Mr Martinez did not explain how this email had a bearing on the issue of whether the Capital Partners had delegated to him the authority to terminate Fixed Draw Partners, and I cannot see what its relevance in that respect is.
Mr Martinez submitted that, on 22 August 2008, the Capital Partners resolved to remove from the Partnership Deed the reference to two members of "the Executive" being required to sign bank documents, substituting instead the words "two Capital Partners". This appears to be a reference to par 11 of Schedule 3 of the Partnership Deed. As a practical matter, this step had become necessary, because the Firm had ceased to appoint members of the Executive (whether or not that conformed to the requirements of the Partnership Deed). The relevant minutes of a meeting of the Capital Partners, held on 22 August 2008, recorded that the partners agreed in principle with this change, and requested that a variation be drafted and presented as a resolution for the November 2008 Capital Partners Meeting. The minutes of the Capital Partners meeting held on 20 November 2008 recorded, in item 1.2(c), that the proposed amendments to the Partnership Deed would not be presented at the meeting. While it is true that this suggested amendment to the Partnership Deed shows that the Capital Partners turned their minds to a practical consequence of not appointing members to the Executive (without resolving the issue), that is not relevant to the issue of whether the authority to terminate Fixed Draw Partners was delegated to Mr Martinez.
The March 2009 version of the Firm's Career Development Program policy document deleted all references to "the Executive", compared to the earlier 2005 version of the policy (the changes being set out in Annexure C to Mr Martinez' final written submissions). Broadly speaking, the policy dealt with nominations and the assessment of nominations for practitioners taking steps in their career paths to Associate, Senior Associate, Fixed Draw Partner and Capital Partner. Some references to the Executive in the prior version of the policy were changed to references to the Managing Partner alone, or to the National Human Resources Manager as well. Some references to the Executive were simply deleted. References in cl 3.3 and 3.4 to nominations for Fixed Draw Partners and Capital Partners and their approval or non-approval by "the Executive/Partnership" were changed to references to the "Partnership" alone.
The following aspects of the policy dealing with nominations and unsuccessful nominations for Fixed Draw Partners are instructive (Exhibit D6): 3.2 Nominations for Fixed Draw Partners and Capital Partners The practitioner may initiate nominations for Fixed Draw Partners…at any time through a submission to all Capital Partners. Nominations may be submitted for presentation to the Partnership when it meets on a quarterly basis throughout the year. The nominations must have the endorsement of all Fixed Draw Partners and Capital Partners in the National Practice Group. … 3.3 Unsuccessful nominations Should the Partnership not approve a nomination, the practitioner will be provided with clear and specific feedback as to the reasons behind the decision…
Clause 6 of the policy sets out the criteria required for appointment as a Fixed Draw Partner, and includes the statement: "…When determining a practitioner's suitability for Fixed Draw Partnership, the following key criteria will be considered by the Partnership…"
These aspects of the policy strongly suggest that at least appointment as a Fixed Draw Partner is a matter for determination by the Capital Partners at a formal meeting, and are inconsistent with the proposition that Mr Martinez was delegated sole responsibility for appointing Fixed Draw Partners. This conclusion is reinforced by the fact, noted above, that following the de facto abolition of the Executive, the policy distinguished between circumstances where reference should be made to the Managing Director instead of the Executive, and where the reference should be to the Partnership.
This evidence tends to undermine Mr Martinez's submission that, by a course of dealing, the Capital Partners unanimously delegated to Mr Martinez all of the powers in par 1 of Schedule 3 to the Partnership Deed.
On 25 November 2009, Mr Martinez sent an email to Mr Griffiths (which was copied to seven other Capital Partners) in which he gave his reasons why he required Mr Griffiths to accept a position as a Fixed Draw Partner, and in which he said in par 5: "I have authority to deal with the recommended position as a fixed draw without reference to the partnership so this can be implemented forthwith…" Apart from the fact that this observation was only shared with seven Capital Partners, Mr Martinez said in the first paragraph: "…I now confirm the outcome of my consultation with the Capital Partners in the Insurance Group and my recommendations…" This last statement is important for reasons to which I will return below.
Mr Martinez also relied upon the fact that he had drafted and approved for publication on the Firm's intranet, without recourse to or complaint from the Capital Partners regarding his authority to do so, a number of policies of the Firm.

[57]

Conclusion as to effect of course of dealing

I consider that these additional matters relied upon by Mr Martinez are not conclusive. The contents of cll 3 and 6 of the Career Development Program policy, which I have discussed above, appear to be inconsistent with Mr Martinez' claim that he had sole authority to appoint Fixed Draw Partners to the Firm. If there is some explanation for this anomaly, it was not given in the evidence.
As I have explained above, I have concluded that the effect of the 2007 resolution was to remove the members of the Executive, so that thereafter the Executive became defunct. There was no attempt to amend the Partnership Deed to remove the requirement for the Executive or to make consequential changes. The Capital Partners present at the relevant meeting do not appear to have turned their minds to any constitutional questions that arose under the Partnership Deed.
Further, the ambiguous terms of the 2007 resolution strongly implied that at least some of the functions previously exercised by the Executive would thereafter be exercised by the Managing Partner in conjunction with Operations Meetings. Less clearly, the 2007 resolution may have implied that some functions would be exercised solely by the Managing Partner, but it did not identify any such functions.
After the 2007 resolution was made, the practical reality was that there was no Executive. The functions of the Executive still had to be exercised, irrespective of whether any change in practice was in accordance with the Partnership Deed.
There is no evidence that suggests the Capital Partners addressed this practical problem in any comprehensive way, or even that they addressed it at all, except in an occasional, piecemeal way.
In this regard it must be borne in mind that, although the minutes to the 26 October 2007 combined meeting appear to suggest that, at the time the Firm comprised about 31 Capital Partners in four offices, by email dated 26 June 2015, Mr Martinez announced to the Firm nationally that there were then 196 partners (although it is not clear how many of them were Capital Partners).
Mr Martinez's 14 November 2018 affidavit contains statements that Mr Martinez hired Fixed Draw Partners on terms negotiated by him, and terminated other Fixed Draw Partners "without recourse to Capital Partners or any later complaints from Capital Partners". There is no evidence as to what these statements really mean.
The practical effect of the Executive becoming defunct was that the Executive's functions had to be exercised in some appropriate way, but it is difficult for the Court to accept, without any direct or clear evidence at all, that Mr Martinez came to exercise all of the functions in Schedule 3 to the Partnership Deed unilaterally, and without reference to or the consent or acquiescence of at least those Capital Partners who were directly concerned with the segment of the Firm's business relevant to the exercise of the function. Mr Martinez' claim is that, if he thought it appropriate, he could, say, hire a Fixed Draw Partner, who would then turn up the next day in the Firm's Brisbane office and commence practice, without there being any prior approval of the Capital Partners who were concerned.
In fact, there is no direct evidence that all of the Capital Partners knew about all of the decisions referred to in Mr Martinez' last affidavit, or that the absence of responses from all of the Capital Partners justifies a positive finding that they consented to the amendment of the Partnership Deed, with the effect that some of the functions in Schedule 3 were delegated to Mr Martinez. Some, if not many of the Capital Partners may simply have been disinterested, or may have assumed that Mr Martinez was acting with the approval of those other Capital Partners who had a direct interest in the particular actions that were taken. The actions that were established by Mr Martinez' last affidavit are consistent with him having the delegated authority to take those actions unilaterally in a manner that bound the Firm, but when all of the evidence is considered carefully, there is insufficient evidence that all of the partners consented to Mr Martinez having the unilateral authority to act, without the consent or approval of any of the other Capital Partners to what he proposed to do in the individual cases. After the Capital Partners at the 26 October 2007 meeting abolished the practical existence of the Executive, without abolishing the requirement in the Partnership Deed that it exercise important functions, or attending to any other relevant requirement of the Partnership Deed, all of the subsequent events relied upon by Mr Martinez are equally consistent with the Firm being content to proceed with an ad hoc approach to the relevant decision-making in a manner whereby Mr Martinez acted with the approval of those Capital Partners whose opinions were reasonably considered to be material.
I consider that the following statement of principle by Hodgson JA in Ho v Powell (2001) 51 NSWLR 572; [2001] NSWCA 168 (Beazley JA, as her Honour then was, agreeing; and Davies AJA dissenting in the result) is applicable in these circumstances, referring as it does to the well-known case of Blatch v Archer (1774) 1 Cowp 63 at 65; 98 ER 969 (Blatch v Archer) at 970: … [14] There is a long-standing controversy whether the civil standard of proof requires a numerical probability in excess of 50 per cent (see Davies v Taylor [1974] AC 207 at 219), or belief amounting to reasonable satisfaction (see Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362). My own opinion is that the resolution of the controversy involves recognition that, in deciding facts according to the civil standard of proof, the court is dealing with two questions: not just what are the probabilities on the limited material which the court has, but also whether that limited material is an appropriate basis on which to reach a reasonable decision. I discussed this in some detail in an article published at (1995) 69 ALJ 731 (D H Hodgson, "The Scales of Justice: Probability and Proof in Legal Fact-finding"). [15] In considering the second question, it is important to have regard to the ability of parties, particularly parties bearing the onus of proof, to lead evidence on a particular matter, and the extent to which they have in fact done so: cf 69 ALJ at 732-733, 736, 740. As stated by Lord Mansfield in Blatch v Archer (1774) 1 Cowp 63 at 65; 98 ER 969 at 970: "… [A]ll evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted". See also Azzopardi v The Queen (2000) 75 ALJR 931 at 935 [10]; 179 ALR 349 at 353 [10]. …
A unanimous Court of Appeal (Spigelman CJ, Beazley and Giles JJA) accepted the principle in Blatch v Archer in Morley v Australian Securities and Investments Commission [2010] NSWCA 331; (2010) 274 ALR 205 at [730].
I find, in circumstances where Mr Martinez' 14 November 2018 affidavit was brought forward at the end of the hearing to cure apparent shortcomings in his evidence; where it was primarily in Mr Martinez' power to tender full evidence of the circumstances in which he claimed to have employed and terminated Fixed Draw Partners, and determined their terms of appointment; and where no evidence has been led as to what was actually done by or what was known to all of the Capital Partners, that Mr Martinez has not sufficiently persuaded me, on the balance of probabilities, that the Partnership Deed was varied in the manner suggested by Mr Martinez by the conduct of all of the Capital Partners in the Firm demonstrating their consent to the variation.

[58]

Estoppel

Mr Martinez submitted that, even if he was not given authority by the 2007 resolution to terminate Fixed Draw Partners, and even if he could not demonstrate the later unanimous consent of the Capital Partners to give him that authority, Mr Griffiths is estopped by conventional or promissory estoppel, or both, from denying his authority.
In his defence to the amended statement of claim, Mr Martinez pleaded, in par 18, that Mr Griffiths and the Firm entered into the December Deed on the common understanding or assumption that Mr Martinez had authority to execute the December Deed, to terminate it in accordance with its terms, and to take all steps in connection with, or contemplated by, the December Deed on behalf of the Firm.
The particulars of this allegation were that the December Deed provides that it was executed by Mr Martinez "for and on behalf of HWL Ebsworth by authority of the Capital Partners"; Mr Griffiths did not dispute the authority of Mr Martinez before or after the December Deed was entered into; and Mr Griffiths attended the meeting of the Capital Partners on 26 October 2007, when the 2007 resolution was passed, "which abolished the Executive of the Practice and bestowed the authority of the Executive on the Defendant and the Plaintiff voted on that resolution".
Mr Martinez then pleaded, in par 19, that the Firm relied upon the common understanding or assumption in entering into the December Deed, and by the Firm's decisions to bestow benefits on Mr Griffiths pursuant to the December Deed.
Finally, Mr Martinez pleaded, in par 20, that Mr Griffiths was therefore estopped from denying that Mr Martinez had authority to execute the December Deed and terminate it on behalf of the Firm.
This is a claim based upon the principles of conventional estoppel, and seems to have nothing to do with promissory estoppel. No promise by Mr Griffiths is identified.
In Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65, Tobias JA, with whom Mason P and Campbell JA agreed, set out the following principles concerning the application of conventional estoppel: [199] Recently the principles were restated by Brereton J in Moratic Pty Ltd v Gordon (2007) Aust Contract Reports 90-225 (89,904); NSW Conv R 56-172 (56,205), where his Honour observed (at 89,913 [30]; 56,215 [30]) that the doctrine of conventional estoppel precluded either party to a contract from denying an assumption which has formed the conventional basis of the relationship between them. Accordingly, it is necessary to determine whether the parties have in fact adopted such an assumption as the conventional basis of their relationship. [200] His Honour then stated the matters necessary to establish conventional estoppel (at 89,914 [32]; 56,215 [32]) as being that: (a) the plaintiff has adopted an assumption as to the terms of its legal relationship with the defendant; (b) the defendant has adopted the same assumption; (c) both parties have conducted their relationship on the basis of that mutual assumption; (d) each party knew or intended that the other act on that basis; and (e) departure from the assumption will occasion detriment to the plaintiff. [201] In noting the differences between promissory estoppel and conventional estoppel his Honour then observed with respect to the latter (at 89,914 [33]; 56,216 [33]) that it: "[33]…is focussed on the consensual basis of the parties' relationship: it operates when both parties have adopted the same assumption as the basis of their relationship, often without appreciating that any departure from the strict legal position is involved, so as to hold both parties to their common understanding." [202] Before dealing with the factual material, two other legal aspects of conventional estoppel need to be noted. The first is whether the parol evidence rule operates to exclude evidence of an alleged estoppel by convention arising from pre-contract negotiations. This is relevant in the present case given that Ryledar relies upon the correspondence between the parties containing their negotiations which led up to the 1999 Variation. The second concerns whether it is necessary for Ryledar to establish reliance and detriment before it can establish the relevant estoppel. This question has been answered by this Court in the affirmative in MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39, where Hodgson JA, with whom Beazley JA and Ipp JA agreed, held (at [72]) that reliance and detriment were essential for the existence of conventional estoppel.
It is conceivable that a convention may have arisen concerning Mr Martinez' authority to sign the December Deed on behalf of the Firm, given the statement to that effect in the execution clause, although that conclusion is by no means clear, and further evidence would be required to justify a finding to that effect.
There is, however, no evidence to support a finding of reliance by Mr Martinez on any convention arising out of the circumstances in which Mr Griffiths executed the December Deed, and did not dispute Mr Martinez' authority to execute it on behalf of the Firm, or that Mr Martinez relied upon that convention to believe that he had authority to terminate Mr Griffiths. There is no evidence at all about what any member of the Firm, other than Mr Martinez, thought about the matter. It is clear from the case that Mr Martinez has put that the true reason that he thought he had authority was because that was the effect of the 2007 resolution as he understood it, or that he otherwise must have had the authority as he in fact behaved in this manner all the time.
In any event, I accept Mr Griffiths' case that he executed the December Deed because he considered that he did not realistically have any choice, and consequently, I do not accept that any convention could have come to exist other than in respect of the deed itself. The evidence does not support a finding that Mr Griffiths adopted the assumption, or that Mr Griffiths knew or intended that Mr Martinez would act on the basis that he had authority to terminate Mr Griffiths on behalf of the Firm.
While it is true that Mr Griffiths did not demur from Mr Martinez informing him, by means of the 20 July 2015 email, that he had been given three months' notice of termination, that conduct is consistent with Mr Griffiths having the belief that he had no practical choice in the matter, rather than the existence of a conventional understanding between himself and Mr Martinez that Mr Martinez had full authority to act on behalf of the Firm.
There is no, or insufficient, evidence to establish the allegation that the Capital Partners accepted Mr Martinez' decisions concerning the arrangements between the Firm and Mr Griffiths, by relying on any convention flowing out of the circumstances in which the December Deed was executed.
Further, Mr Martinez seems not to have appreciated the distinction between Mr Griffiths' alleged acceptance of his authority to enter into the December Deed on the Firm's behalf, and Mr Griffiths' alleged acceptance that Mr Martinez could unilaterally and without consultation exercise all of the Firm's powers under it. Given that the deed explicitly states that Mr Martinez enters into it for and on behalf of the Firm, but the termination clause provides only for the Firm itself to have a right to terminate on notice, and given the multiple definitions of "HWL Ebsworth" in the deed, I would not accept that Mr Martinez' power to enter into the deed necessitated a power to unilaterally exercise all of the Firm's powers under it.
Finally, the fact that Mr Griffiths attended the meeting of Capital Partners that passed the 2007 resolution is not material, as I accept Mr Griffiths' evidence that he spoke against the resolution, because the manner in which it was put did not conform to good governance principles, and he did not support it. He was unable to recall whether he voted against it or whether he abstained. This aspect of Mr Griffiths' conduct is not capable of giving rise to the conventional understanding alleged by Mr Martinez.
I do not accept that the conventional estoppel defence pleaded by Mr Martinez in his defence to the amended statement of claim is entitled to succeed.

[59]

Application for leave to add additional estoppel defences

When I considered Mr Martinez' application to further amend his defence to add additional estoppel defences, I stated at par 112 that I would defer finally ruling on the application in that respect until I dealt with the submissions made by Mr Martinez concerning estoppel.
In pars 21 to 23 of his draft further amended defence (set out above at par 102), Mr Martinez sought to introduce a defence that, because Mr Griffiths did not raise the point that Mr Martinez lacked authority to terminate him until the hearing of the proceedings in the District Court on 26 September 2017, Mr Martinez lost the opportunity to cause the Capital Partners to rectify the problem by ratifying his action or resolving to terminate Mr Griffiths themselves.
Mr Martinez seeks leave to be able to argue, first, that it would now be unconscionable or unconscientious for Mr Griffiths to rely upon any lack of authority on the part of Mr Martinez to terminate Mr Griffiths; or secondly, that Mr Griffiths is estopped from asserting that lack of authority.
It is unclear why Mr Martinez claims that it would now be unconscionable or unconscientious for Mr Griffiths to rely upon any legal argument that he realised belatedly was available to him.
As Brereton J (as his Honour then was) said in Moratic Pty Ltd v Gordon [2007] NSWSC 5; (2007) 13 BPR 24,713 at [21], in a somewhat different context: "…a party to a contract does not lose its contractual rights by omitting immediately, or even promptly, to demand strict performance - unless there has been some event which amounts to a repudiation or waiver or founds an estoppel [Amherst v James Walker Ltd [1983] 1 Ch 305 at 315 Oliver LJ)]…" A party in Mr Griffiths' position does not necessarily lose his or her right to rely upon a legal argument, because the other party has so far conducted the proceedings in ignorance of that claim.
Mr Martinez has not identified the nature of the estoppel that he asserts. In any event, it is clear that Mr Martinez did not seek ratification from the Capital Partners or recommend that they resolve to give Mr Griffiths three months' notice of termination in the period between 20 July 2015 and 12 August 2015 (some 23 days), because he believed that the 2007 resolution gave him adequate authority to issue the termination notice himself. There is insufficient evidence to establish that Mr Martinez relied upon the failure of Mr Griffiths to take the point that he did not have that authority. After Mr Griffiths accepted Mr Martinez' repudiation and terminated the December Deed, the issue became moot.
In these circumstances, nothing will be served by the Court giving Mr Martinez leave to further amend his defence by adding pars 21 to 23.

[61]

Mr Griffiths' first submission as to damages

As to the first basis for assessing damages, Mr Griffiths submitted that, as his entitlement under the December Deed would not effectively have been terminated, but for his acceptance of Mr Martinez' wrongful repudiation, the December Deed would have continued indefinitely until Mr Griffiths reached the age of 65 years.
In this respect, Mr Griffiths submitted that, on the evidence, the Court should not find that, if Mr Martinez recommended to the Capital Partners that they should authorise the issue of a new three months' termination notice (or payment in lieu), the Capital Partners would have voted in favour of that resolution.
On that basis, Mr Griffiths submitted that the starting point of the assessment was to determine the difference between the share of the Firm's profits to which he would have become entitled under the December Deed, calculated at $36,250 per month for the nine months between 17 August 2015 and the date in May 2016 when Mr Griffiths started alternative employment, being $326,250. As that alternative employment yielded Mr Griffiths $11,250 per month less than he was being paid under the December Deed, Mr Griffiths submitted that a further 30 months' loss to the date of hearing should be added, being $337,500. Finally, Mr Griffiths submitted that his future loss should be 39 months to age 65, being $438,750. The total is $1,102,500.
Mr Griffiths immediately conceded that this amount must be subject to significant discounts, to take account of the uncertainties and contingencies associated with the hypothetical benefits of continued partnership. One of those contingencies was that, but for the repudiation, the Capital Partners may have resolved to exercise the Firm's right to terminate the December Deed on three months' notice. Mr Griffiths also acknowledged that, even if the Capital Partners decided not to resolve to issue a termination notice to him, they may have resolved to reduce his share of the profit, given the substantial diminution in the fees that Mr Griffiths had been able to bring into the Firm since February 2015. Mr Griffiths also conceded that there should be a discount to the calculation of future loss to allow for inevitable contingencies.
Ultimately, Mr Griffiths submitted that the appropriate discount for losses to date was 30% and 40% for future losses. If the Court were to accept that approach as being a proper one, Mr Griffiths' loss to date would be $464,625 plus interest, and the future loss would be $263,250. The total amount claimed by Mr Griffiths on this basis was $727,875. Mr Griffiths did not address the issue of whether the discounted future loss should be further discounted to ensure that the damages awarded did not exceed the net present value of the future income stream that has been lost by Mr Griffiths.
The effect of this submission is to ask the Court to accept the premise that it was most likely that the Capital Partners would not have resolved to terminate Mr Griffiths' Fixed Draw Partnership, to calculate Mr Griffiths' loss of his continuing share of profits of the Firm on that basis, and then to adjust the damages downwards by making allowances for uncertainties and contingencies. As will be seen below, I do not accept that this is the most realistic way to approach the assessment of Mr Griffiths' damages.

[62]

Mr Griffiths' alternative submission as to damages

Mr Griffiths made clear in his written outline of submissions, before the commencement of the hearing, that he made an alternative claim for damages on the assumption that Mr Martinez had issued an effective three months' notice of termination on 20 July 2015: see pars 61 and 62. Mr Griffiths conceded that, on this assumption, the payment to him of his profit share would have ceased on 20 October 2015, so that component of his damages would be limited to roughly $73,000. Mr Griffiths also submitted that, in that event, he "is also entitled to loss representing the value of the opportunity of which he was deprived through the wrongful summary termination on 12 August 2015, that is, the opportunity to seek an alternative position while still practising as a partner at [the Firm]".
This aspect of Mr Griffiths' claim is contained in par 10(c) of the amended statement of claim. This claim was expressed to be further and in the alternative, so that, if Mr Griffiths' claim based upon a lost entitlement to be paid a share of profits under the December Deed is reduced, either because the Court finds that the notice of termination was valid, or that the Capital Partners would have resolved to authorise the issue of a new notice, Mr Griffiths still claims damages on this basis.
This aspect of Mr Griffiths' claim, as I understand it, is the loss that Mr Griffiths warned Mr Martinez he would suffer in Mr Griffiths' 12 August 2015 email, where he said: "Your proposal will cause me irreparable harm. Having received your 3 month notice I have been looking for a new position. I am advised that to do this from an unemployed perspective will make the task very difficult. I will be unable to find a suitable position…" Mr Griffiths added in his 13 August 2015 email: "…I have engaged a recruitment firm but I am 58 and the advice received is it would be far easier and quicker to find a suitable position if I could do so whilst at HWLE…"

[63]

Mr Martinez' submission as to damages

Mr Martinez' primary response to Mr Griffiths' claim for damages was to submit that the termination notice was valid, so that Mr Griffiths is only entitled to the lost profit share between 17 August 2015 and 20 October 2015, which is the roughly $73,000 that has already been mentioned. Mr Martinez has failed on this submission.
The alternative approach to the assessment of damages advocated by Mr Martinez is based upon the submission that, if Mr Martinez had known that the 20 July 2015 termination notice was invalid, and if he had realised that he was not entitled to summarily terminate the December Deed, Mr Martinez would have immediately recommended to the Capital Partners that they exercise their authority to give Mr Griffiths a valid three months' termination notice, and that the facts justify a conclusion by the Court that a majority of Capital Partners would assuredly have made that resolution. As I understand it, Mr Martinez did not in his submissions on damages seek to make a case that the Capital Partners would have ratified Mr Martinez' original attempt to terminate Mr Griffiths' Fixed Draw Partnership.
If this argument succeeds, it would have the result that Mr Griffiths' damages for lost share of profit would be three times $36,250, being $108,750.
Mr Martinez does not appear to have made an elaborate response to that part of Mr Griffiths' claim that is based upon the consequences of his being denied the opportunity to seek an alternative position within another firm while continuing to be a Fixed Draw Partner at the Firm.
Mr Martinez submitted, in par 142 of his final written submissions, about "the separate issue of "loss of opportunity" to seek other employment (from a position of employment)", that Mr Griffiths did not have a right to work out the notice period, as Mr Martinez could under cl 3.5 of the December Deed have terminated the deed immediately by making a payment in lieu of notice.
I will deal with this submission more fully below, but it may be noted that my finding that Mr Martinez was not authorised to issue the termination notice would extend to the termination of the December Deed by making a distribution of profit in lieu of notice.
Mr Martinez then submitted, relying upon Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 (Sellars v Adelaide Petroleum), that Mr Griffiths had led no evidence (including any expert evidence) concerning what real opportunity he did lose, or the value of such opportunity, or the percentage probability or possibility of him converting any such opportunity into gainful employment. Mr Martinez submitted that the Court was being asked to "engage in an exercise which is entirely conjectural and hence this claim for additional damages should be rejected".

[65]

Relevant legal principles concerning the assessment of damages

A plaintiff is only entitled to damages for loss caused by the defendant's breach of contract. As stated in NC Seddon and RA Bigwood, Cheshire & Fifoot Law of Contract (11th ed (Australian), 2017, LexisNexis Butterworths) (Cheshire & Fifoot) at [23.35]: "…In contract law (as in the law of negligence) it is firmly established that the question of whether a particular loss was caused by a particular breach is determined by applying the criteria of common sense, rather than those of logic, philosophy or science": see the authorities cited by the learned editors at footnote 277.
For a loss to be recoverable as damages for breach of contract, it should not be too remote: see the discussion in Cheshire & Fifoot at [23.39]. The modern formulation of the rule in Hadley v Baxendale (1854) 9 Exch 341 at 354; 156 ER 145 at 151 is as summarised by Ipp JA, with whom Tobias JA agreed in Stuart Pty Ltd v Condor Commercial Insulation Pty Ltd [2006] NSWCA 334: … [115] This test was explained in C Czarnikow Limited v Koufos [1969] 1 AC 350. Czarnikow is regarded as representing the law in Australia: Wenham v Ella (1972) 127 CLR 454 at 471; Burns v M.A.N. Automotive (Aust) Pty Limited (1986) 161 CLR 653 at 667; The Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64 at 92 and 99. See also Alexander v Cambridge Credit Corporation Limited (1987) 9 NSWLR 310 where McHugh JA remarked at 363 to 364 that the High Court appears to have accepted Lord Reid's speech in Czarnikow as correctly stating the law. [116] In Baltic Shipping Company v Dillon (1993) 176 CLR 344 Brennan J said at 368 that the rules in Hadley v Baxendale had been merged in a single principle expressed by Lord Reid in Czarnikow "and [had been] adopted in this Court". The merged principle stated by Lord Reid at 385 is: The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation. [117] The phrase "make it proper" in the passage quoted is to be understood in the light of the criteria expressed by Walsh J in Wenham v Ella at 466 when he said that the object is "to achieve a result which provides reasonable compensation for a breach of contract without imposing a liability upon the other party exceeding that which he could fairly be regarded as having contemplated and been willing to accept". [118] In Czarnikow, Lord Reid emphasised that being within the contemplation of the parties is not the same as being reasonably foreseeable. It is a far more restrictive test. His Lordship pointed out at 389 that: A great many extremely unlikely results are reasonably foreseeable… And at 390 that: It has never been held to be sufficient in contract that the loss was foreseeable as 'a serious possibility' or a 'real danger' or as being 'on the cards'. …
Beazley JA (as her Honour then was, and with whom Tobias JA also agreed) undertook a more extensive examination of the authorities, but to similar effect at [32]-[61].
As Sackar J said in Fishlock v Campaign Palace Pty Ltd [2013] NSWSC 531; (2013) 234 IR 1, at [273]: The plaintiff seeks damages for repudiation. The applicable principles are non-controversial. The plaintiff is to be put in the position, so far as money can do so, that he would have been in had the contract of employment been performed (Robinson v Harman (1848) 1 Ex 850 at 855 per Parke B; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 80 per Mason CJ and Dawson J, at 98 per Brennan J, at 117 per Deane J, at 134 per Toohey J at 148 per Gaudron J and at 161 per McHugh J).
The parties were in agreement that the principles governing the assessment of loss, where what has been lost is a chance or opportunity, are as stated by Mason CJ and Dawson, Toohey and Gaudron JJ in Sellars v Adelaide Petroleum at 349-350 (footnotes omitted): …And there can be no doubt that a contract to provide a commercial advantage or opportunity, if breached, enables the innocent party to bring an action for damages for the loss of that advantage or opportunity. So, in The Commonwealth v Amann Aviation Pty. Ltd., Mason C.J. and Dawson J., Brennan J. and Deane J. concluded that a lost commercial advantage or opportunity was a compensable loss, even though there was a less than 50 per cent likelihood that the commercial advantage would be realized. Damages for breach of contract were assessed by reference to the probabilities or possibilities of what would have happened. Damages in tort have also been assessed by reference to the probabilities or possibilities of what will happen or what would have happened. That approach has been frequently adopted in the assessment of damages for personal injuries where a court has been called upon to assess future possibilities and past hypothetical situations. In Malec v. J. C. Hutton Pty. Ltd. , this Court drew a distinction between, on the one hand, proof of historical facts - what has happened - and, on the other hand, proof of future possibilities and past hypothetical situations. The civil standard of proof applies to the first category but not to the second, particularly when it is necessary to determine future possibilities and past hypothetical situations for the purpose of assessing damages. In Malec, Deane, Gaudron and McHugh JJ. explained the way in which the matter is to be approached in these terms: "If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. … But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability." The same approach has been adopted in England and Canada. Neither in logic nor in the nature of things is there any reason for confining the approach taken in Malec concerning the proof of future possibilities and past hypothetical situations to the assessment of damages for personal injuries. The reasons which commended the adoption of that approach in assessments of that kind apply with equal force to the assessment of damages for loss of a commercial opportunity, as the judgments in Amann acknowledge. …
Further, their Honours said at 355: … On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable. …
In the present case, a factor relevant to the assessment of the probabilities is whether the Capital Partners would have exercised their right to resolve to issue Mr Griffiths with a valid three months' notice of termination. I consider the principles that govern this situation to be as set out by Macfarlan JA (with whom Ward JA, as her Honour then was, agreed) in Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381 (Willis v Mitchell-Innes), as follows: … Legal principles [117] In TCN Channel Nine Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 the question arose as to whether the damages payable by a party to a contract for its repudiation of the contract should automatically be restricted by that party's lawful right to terminate. In other words, if a party had a right to terminate a contract without cause on, for example, six months' notice but wrongfully purported to terminate the contract immediately, should the damages payable by it be limited to the six month period for which the party was contractually obliged to keep the contract on foot? In that case, Hope JA (with whom Priestley and Meagher JJA relevantly agreed) held that there was no such automatic restriction, that the court was not obliged to assess damages by reference to "an improbable factual hypothesis" and that regard therefore needed to be had to the facts of each case to determine whether the repudiating party, if it had not repudiated, would have exercised its lawful right of termination (at 154). His Honour continued: In some cases, the evidence may be silent as to whether the defendant would have exercised the option apparently favourable to himself; in other cases, although not silent, the evidence may not justify a finding that the defendant would not have exercised it. In these cases it can be said that it is a natural inference from the terms of the contract that the defendant would have exercised that option which in terms benefits him: cf Evans Marshall & Co Ltd v Bertola SA [1975] 2 Lloyd's Rep 373 at 390 per Buckley LJ. It is not a natural inference when the facts point to the opposite conclusion. In my opinion, consistently with the many authorities which establish that regard can be had to evidence of facts between the time when a cause of action arises and the time of trial in order to produce certainty where there would otherwise be uncertainty, the general preference of the law for fact rather than hypothesis is applicable to the principle under consideration. That principle does not require the assessment of damages to be based on a fiction in disregard of the actual facts (at 156). [118] Mason CJ and Dawson J approved this approach in the Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; 174 CLR 64 where their Honours said: Where compensation is sought in respect of the deprivation of a possible benefit which is dependent upon the unrestricted volition of another it may be impossible to say that any assessable loss results from the breach. However, this statement must be understood in the light of the principle that the mere existence of a contractual right in a party to terminate does not operate automatically to restrict the damages that can be awarded. The court does not reach a conclusion by reference to an improbable factual hypothesis. The court must have regard to the facts and evaluate the possible exercise of the right in all the relevant circumstances of the case. Moreover, in determining what is or would be beneficial for the defendant, the court does not confine its attention to the relationship between the plaintiff and the defendant; it would be wrong to reduce the defendant's legal obligations to the plaintiff on the footing that he or she would incur greater loss in other respects (at 93, citations omitted; see also Brennan J at 114). [119] As authority for the proposition stated in the fourth sentence of this passage their Honours cited Hope JA's judgment in TCN Channel Nine v Hayden Enterprises at 154. [120] Subsequent cases in which this approach has been adopted include Tasmania Development & Resources v Martin [2000] FCA 414; 97 IR 66 at [37]; Walker v Citigroup Global Markets Australia Pty Ltd [2006] FCAFC 101; 233 ALR 687 at [84] and McDonald v Parnell Laboratories (Aust) Pty Ltd [2007] FCA 1903; 168 IR 375 at [79]-[80]. [121] A different approach was taken in New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68 at 80-81 and Murray Irrigation Ltd v Balsdon [2006] NSWCA 253; 67 NSWLR 73 at [52]-[58]. This court applied a different principle but did not refer to its earlier decision in TCN Channel Nine v Hayden Enterprises or to the High Court's approval of that decision in Commonwealth v Amann Aviation. In NSW Cancer Council v Sarfaty and Murray Irrigation v Baldson, the court treated the legal entitlements of the parties, rather than the practical reality of what would have happened if repudiation had not occurred, as relevant. This was inconsistent with the authority and, in my view, sound reasoning of TCN Channel Nine v Hayden Enterprises and in Commonwealth v Amann Aviation, and should not be applied. …
It is to be noted that, while Leeming JA generally agreed with the reasons of Macfarlan JA, his Honour observed, at [139], that it was not necessary to express a view about the cogency of the reasoning of Gleeson CJ and Handley JA in New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68.
The result is that this Court must have regard to the facts, and evaluate the likelihood that any right in the December Deed that could be exercised in a manner that would reduce the damages to which Mr Griffiths would otherwise be entitled would in fact have been exercised. The Court is not to assume that Mr Griffiths would have been given another three months' notice of termination, without making a judgment on the evidence as to the likelihood of that occurring.
This is a significant consideration in this case, where the right to implement cl 3.4 or cl 3.5 lies in the Firm and not in Mr Martinez alone. If Mr Martinez had been able unilaterally to exercise either of these rights, the evidence of the circumstances that caused him to attempt to summarily terminate the December Deed might readily support a positive finding that, if he had not done so, he would have given Mr Griffiths a three months' termination notice or payment in lieu: cf Willis v Mitchell-Innes and Bartlett v Australia & New Zealand Banking Group Ltd (2016) 92 NSWLR 639; [2016] NSWCA 30 (Bartlett v ANZ), where such findings were made, where the person responsible for the ineffective summary termination had the right to terminate on notice.

[66]

Significance of Mr Martinez failing to appreciate his lack of authority

An unusual problem arises in this case, because of the fact that Mr Martinez unilaterally issued a three month termination notice to Mr Griffiths, before he then purported to summarily terminate Mr Griffiths. I have found that the first act was invalid, because Mr Martinez did not have authority to act on behalf of the Firm. I have found that the second act was for practical reasons a repudiation of the December Deed, even if Mr Martinez did not have authority to summarily terminate Mr Griffiths on behalf of the Firm. Neither party argued that, if the summary termination was not justified, there was no repudiation because Mr Martinez lacked authority. The thrust of Mr Martinez' submission was that Mr Griffiths had, by his conduct, accepted that Mr Martinez had all of the authority set out in Schedule 3 to the Partnership Deed, and Mr Martinez did not make a submission based upon the premise that he lacked any of that authority.
If the question is whether, had Mr Martinez understood that he did not have grounds for summarily terminating Mr Griffiths, he would have issued a three months' termination notice instead, the answer must almost certainly be yes, because he had already issued such a notice, albeit invalidly. As long as Mr Martinez wrongly understood that he could act unilaterally on behalf of the Firm, it is likely that, into the indefinite future, he would have attempted to terminate Mr Griffiths, by taking a step that he did not have authority to undertake.
As I understand it, this is one basis of Mr Griffiths' argument that his damages should be calculated on the premise that Mr Martinez would never have validly terminated his Fixed Draw Partnership.
In Bartlett v ANZ, Macfarlan JA considered a case that was similar to the present one, except that the employer had not already purported to terminate the employee on notice. In dealing with the likelihood that the employer would have issued a termination notice, if it had not wrongly terminated summarily, his Honour said: … [83]...The hypothetical circumstance to be considered is one in which the bank did not purport to dismiss Mr Bartlett summarily. No other fact or circumstance should be assumed to be changed. Accordingly, the relevant hypothetical situation was one in which the bank investigation occurred and Mr Corbally received and considered the investigation report but realised, or was advised, that cl 14.3(b) did not in the circumstances authorise summary termination. In particular, there is no warrant for assuming, contrary to the facts, that the investigation did not occur. For a variety of reasons, but principally the doctored email issue, Mr Corbally wanted the bank to terminate Mr Bartlett's employment. The court should not assume, contrary to his actual opinion, that Mr Corbally did not believe that Mr Bartlett was guilty of serious misconduct. The fact that the bank has subsequently failed to prove that he was guilty of serious misconduct does not change the fact that Mr Corbally believed he was. [84] In these circumstances, Mr Bartlett's history with the bank is not of significance as it can be assumed to have been known to Mr Corbally, yet it did not cause him to stay his hand on Mr Bartlett's summary dismissal. Further, the fact that Mr Corbally may have been wrong in the adverse views he took of Mr Bartlett's answers to him concerning the training course investigation and his contact with the Commonwealth Bank of Australia (see [19] above) does not matter. For better or for worse, Mr Corbally held those opinions. [85] Unless the bank was obliged to act reasonably (a question to which I will come shortly), it is to my mind clear that the evidence justified the primary judge's conclusion that, if the bank had not purported to dismiss Mr Bartlett summarily, it would have terminated his employment immediately by giving him four months' pay. Once it is accepted that the only difference between the actual and hypothetical circumstances is the absence of a purported summary dismissal in the latter (presumably because the bank realised or was advised that it had no contractual power to effect such a dismissal), the conclusion is inevitable. …
It is instructive that his Honour identified that the only fact or circumstance that should be assumed to be changed was that the bank did not purport to dismiss the appellant, because the relevant bank officer "realised, or was advised" that the term upon which he wished to rely did not authorise summary termination in the circumstances.
As I understand Mr Griffiths' argument, it is that, if the only hypothetical change that is permitted is to assume Mr Griffiths had realised, or been advised that the available grounds were not adequate to justify the summary termination of Mr Griffiths, then the Court is precluded from assuming, in addition, that Mr Martinez would have appreciated that he lacked authority to issue a new three months' termination notice to Mr Griffiths. If, so the argument went, the Court had to assume that Mr Martinez would have continued to believe that he had the authority to terminate on notice, then even if the fact of the earlier issue of the notice compelled a finding that Mr Martinez would have issued a three months' notice instead of terminating Mr Griffiths summarily, the inescapable conclusion is that Mr Martinez would have issued the notice himself rather than asking the Capital Partners to do so. That state of affairs would have continued until such time as Mr Martinez was persuaded that he may not have authority, so that he could correct the flaw in his actions by causing the Capital Partners to issue the termination notice.
The submission put by Mr Griffiths would, if accepted, have the effect of increasing Mr Griffiths' damages, by reason of his own initial acceptance of Mr Martinez' authority, and his failure to challenge that authority until shortly before the date fixed for the hearing in the District Court. If Mr Griffiths had immediately challenged Mr Martinez' authority, it is likely that Mr Martinez would have approached the Capital Partners for a resolution authorising the issue of a three months' notice of termination to Mr Griffiths, as a matter of prudence, even if Mr Martinez continued to believe that he had the authority himself.
Furthermore, the situation would have been, in this counterfactual universe, that Mr Griffiths would have had a right to damages from Mr Martinez for repudiating the December Deed, when on Mr Griffiths' present case Mr Martinez did not have authority to exercise the Firm's right to terminate that deed. The repudiation may have been effective for practical reasons, but it does not seem just that Mr Griffiths should win the argument concerning the effectiveness of the 20 July 2015 notice of termination (on the ground that Mr Martinez lacked authority); that Mr Griffiths should succeed in proving the act of repudiation on 12 August 2015 (even though the act was also not authorised); and then be entitled to damages calculated on the basis that the December Deed would not have been validly terminated, because any new three months' notice of termination would also have been issued without authority, because of a delay on Mr Griffiths' part in challenging Mr Martinez' authority.
Although I have found the resolution of this issue to be conceptually difficult, I have concluded that Mr Griffiths is not entitled to his damages being calculated on the premise that Mr Martinez would never have caused a valid three months' notice of termination to be given on behalf of the Firm, because Mr Martinez would have indefinitely, but ineffectively, purported to issue notices himself.
It may sometimes be difficult for a Court to explain in clear and straightforward language what loss is, and what loss is not, caused by a breach of contract, where the choice is based upon common sense. Where common sense contributes in a substantial manner to the basis of the determination, it is likely to be difficult to explain in ordinary language the dividing line between the consequences of that breach that the law will accept as having been caused by the breach, and the consequences that will not be so accepted. The surrender to common sense contains an implicit acceptance that a value judgment is involved, and the consequences of that value judgment may have to be stated somewhat baldly. In the present case, Mr Griffiths claims that his damages should be calculated on the basis that, if Mr Martinez had not purported to terminate the December Deed for serious breach on 12 August 2015, because he had appreciated or been advised that Mr Griffiths' conduct did not justify summary termination, Mr Griffiths' Fixed Draw Partnership would have continued until the age of retirement, subject to acknowledged contingencies. Mr Griffiths then also says that one of those contingencies should not be taken to be the issue of a further three months' notice of termination, except for the unlikely possibility that the Capital Partners as a body would have initiated the process. Mr Griffiths says that the Court should ignore the possibility that Mr Martinez would have initiated that outcome, because in fact he would have unilaterally issued one or more new three months' notices of termination because of his erroneous belief that he had authority to do so. The effect of this second part of Mr Griffiths' argument is that his continuing Fixed Draw Partnership would not have been prematurely terminated by that means. Thus, according to Mr Griffiths' argument, the Court should assess damages on the basis that the repudiation caused him to lose his share of profits until retirement age, subject to contingencies, but ignore the likelihood that Mr Martinez would have caused that continuing entitlement to be truncated by taking steps to terminate the December Deed on three months' notice.
The problem of determining the loss caused by the repudiation in these circumstances does not involve a consideration of whether the breach had two separate effects, and the question is whether as a matter of common sense only one, or both, of those effects should be found to have been caused by the breach. It is instead whether common sense requires the Court to ignore the probability that an event would have occurred, unrelated to the repudiation, which would in fact have reduced the loss caused by the repudiation.
The proper response of the Court to this problem, in my view, is to conclude that, as a matter of common sense, if the question is what loss did Mr Griffiths suffer as a result of the repudiation of the December Deed, the Court should not treat Mr Martinez' extraneous mistake as to the nature of his delegated authority as being a factor that increases the entitlement of Mr Griffiths to damages for loss caused by the repudiation.
The argument made by Mr Griffiths concerning the assumed effect of Mr Martinez' continuing ignorance as to the limitation on his authority should also be rejected on the ground that the relevant component of Mr Griffiths' claim for damages is too remote.
At the date of the December Deed, which is the relevant date, the Firm should have realised, or reasonable persons in the position of the members of the Firm would have realised, that if the Firm repudiated the December Deed by wrongfully terminating it, Mr Griffiths was likely to suffer, as a natural consequence of the breach, an inability to obtain an alternative position in circumstances that were as conducive as would have been the case if Mr Griffiths continued to enjoy his position as a Fixed Draw Partner for a period, and did not have to disclose that he had been summarily dismissed. Conversely, the members of the Firm would not reasonably have had to contemplate that Mr Griffiths was likely to suffer any additional actual or notional loss that arose out of any mistake by Mr Martinez concerning the extent of his authority to act on behalf of the Firm.

[67]

Calculation of amount of damages payable

In the light of the matters considered above, it is now necessary to assess the amount of money required to put Mr Griffiths in the same financial position as he would have been in had Mr Martinez not repudiated the December Deed on 12 August 2015.
On the findings made above, this must be done on the basis that the 20 July 2015 notice of termination was invalid, and that it was for the Capital Partners to exercise the rights in cll 3.4 and 3.5 of the December Deed. I also consider that it is necessary to assume that Mr Martinez would have acted in accordance with the requirements of the Partnership Deed and the December Deed, if he had decided to take steps designed to bring Mr Griffiths' rights under the December Deed to an end. I will make that assumption to be consistent with the reasoning immediately above as to what loss should be accepted as having been caused by the repudiation.
As a preliminary issue, it is necessary to consider how the Court should take into account the fact that Mr Martinez had issued the three months' notice of termination on 20 July 2015 and, even though it was not validly issued, both Mr Martinez and Mr Griffiths initially believed that the notice was effective. Had nothing more occurred, Mr Griffiths may have simply left the Firm on 20 October 2015. That gives rise to the possibility that, if Mr Martinez had realised that he did not have grounds validly to summarily dismiss Mr Griffiths in August 2015, he may have thought that the simplest expedient was to allow the remaining two months of the notice period to expire, rather than to go to the trouble of convening a meeting of the Capital Partners to resolve to issue a new termination notice.
Neither Mr Griffiths nor Mr Martinez made submissions to the effect that the Court should assume that Mr Martinez would have acted in this way, had he appreciated that he did not have grounds validly to summarily dismiss Mr Griffiths. Accordingly, I propose to proceed upon the basis that this possibility is not to be considered in the counterfactual exercise of determining what Mr Martinez was likely to have done. It is not necessary to justify this approach in detail, but it is likely that, once it is realised that Mr Martinez' mistake concerning the extent of his authority to issue the termination notices on behalf of the Firm must not be taken as being material in determining the loss caused by the repudiation of the December Deed, the consequences of Mr Martinez issuing a notice of termination on behalf of the Firm should be ignored completely. In any event, this is what the parties appear to have done.
A feature of Mr Martinez' final written submissions is that, in par 126, Mr Martinez considered the possibility that the December Deed was repudiated when Mr Martinez gave Mr Griffiths the three months' notice of termination on 20 July 2015. On that basis, Mr Martinez submitted that he would immediately have called a teleconference meeting under the Firm's Rules, and recommended that the Capital Partners resolve to issue Mr Griffiths with a three months' notice of termination. In that event, Mr Griffiths would have had the opportunity to work out his three months' notice. Mr Martinez submitted in par 132 that, on that basis, the Court should find that the notice period would have elapsed on 27 October 2015, being three months after the holding of an assumed meeting of Capital Partners on 27 July 2015.
Then, in pars 134 to 136, Mr Martinez made an alternative submission, on the basis that the Court finds that his purported summary termination of the December Deed on 12 August 2015 was a repudiation of the deed. In that case, Mr Martinez submitted, he would have promptly convened a teleconference meeting of the Capital Partners, and recommended to the partners that they resolve to terminate Mr Griffiths' Fixed Draw Partnership, but instead of giving him three months' notice, they would have given Mr Griffiths three months' profit in lieu of notice.
As I understand Mr Griffiths' case, the first of Mr Martinez' alternatives is based upon a misconception. Mr Griffiths does not claim that the notice of termination given to him on 20 July 2015 involved a repudiation of the December Deed. All that he claims is that the notice was ineffective to terminate his partnership. That was because Mr Martinez did not have authority to issue the notice on behalf of the Capital Partners. That being so, his conduct did not involve a repudiation of the December Deed by the Capital Partners.
The consequence is that the relevant submission made by Mr Martinez is that, on about 24 August 2015, being seven days after Mr Griffiths left the Firm's premises on 17 August 2015, at his instigation the Capital Partners would have resolved to terminate Mr Griffiths' Fixed Draw Partnership forthwith, and distribute to him three months' profit in lieu of notice.
As Mr Griffiths' entitlement to distributions of profit was then fixed at $36,250 per month, the amount of the profits Mr Griffiths would have received would have been $108,750, plus roughly $8,365 for the week following 17 August 2015, giving a total of $117,115. On the findings that I have made, that is the least value of the damages to which Mr Griffiths could be entitled.
It should be noted, from a review of Mr Martinez' final written submissions, that he does not claim that at any meeting of the Capital Partners they would have resolved to ratify Mr Martinez' action in purporting to give a notice terminating the December Deed on 20 July 2015.
It must be remembered that, in what follows regarding Mr Griffiths' loss of a chance argument, the Court's task is to evaluate the chance that Mr Griffiths would have achieved a better alternative position than he in fact achieved following his summary dismissal. That involves an assessment of the chances that perhaps a substantial number of alternative series of events would have occurred. The engagement in that task may appear to be little more than educated guesswork by the Court. In order to proceed judicially, the Court should try to give as much logical structure to the process of evaluation as it can. I propose to proceed by making judgments about what I consider to be the most likely course of events. This process should not be taken as involving an attempt to determine in fact what more probably than not would have happened. The process of considering the most probable course of events is only intended to guide the process of evaluating the chance lost by Mr Griffiths. It is recognised that the actual outcome could have been considerably less, or more, favourable to Mr Griffiths. To some degree, the possibility of less, and more, favourable outcomes may tend to cancel out in the result of the evaluation process.
As a first step in determining the damages payable to Mr Griffiths, the decision of the Court of Appeal in Bartlett v ANZ requires, in my view, that the Court find that Mr Martinez would most likely have taken steps following 12 August 2015 to procure the termination of Mr Griffiths' Fixed Draw Partnership, if he had not attempted to summarily achieve that result. That conclusion follows necessarily from the fact that Mr Martinez had already attempted to give notice terminating the December Deed on 20 July 2015, and on any view of the significance of Mr Griffiths' conduct in August 2015, Mr Martinez would in his own mind have had greater reason to take the steps necessary to terminate Mr Griffiths' Fixed Draw Partnership.
If Mr Martinez had been the sole decision-maker, it seems clear that in fact Mr Griffiths' Fixed Draw Partnership would have been terminated as quickly as that result could lawfully have been achieved. However, as noted above, the present case is materially different to the circumstances considered in Bartlett v ANZ, because the Capital Partners had the power to resolve to terminate Mr Griffiths, not Mr Martinez alone.
It is therefore necessary for the Court not only to assess what Mr Martinez would have done, but also what steps the Capital Partners may have taken in response to a recommendation by Mr Martinez that they resolve to terminate Mr Griffiths.
As a matter of fact, it is improbable on the evidence that Mr Martinez would have taken any steps until after the series of communications that he in fact engaged in with Mr Griffiths, that led to Mr Griffiths being required to vacate the Firm's premises on 17 August 2015. Mr Martinez' case was that he would then have immediately convened a teleconference meeting of the Capital Partners, and recommended that they resolve to terminate the December Deed forthwith, and distribute to Mr Griffiths three months' of his Fixed Draw entitlement in lieu of notice. Mr Martinez submitted that, as he only required the support of 51% of the Capital Partners, it is almost certain that they would have resolved in accordance with his recommendation.
Clause 10.1 of the Partnership Deed would authorise the Capital Partners by Majority Resolution to exercise the powers in cll 3.4 and 3.5 of the December Deed. The Rules permit meetings of the Capital Partners to be convened on at least 7 days' notice (rule 1.3), and rule 1.4 requires that the notice specify the general nature of the business to be transacted at the meeting, and unless otherwise resolved by Majority Resolution, relevant background papers are required to be delivered at least three days prior to the proposed date of the meeting. Rule 3 provides for teleconference meetings. All of the provisions of the Rules as to meetings of the Capital Partners apply. All of the Capital Partners taking part in the teleconference meeting are required to be linked by instantaneous audio or visual communication throughout the meeting, and various steps are required concerning participation and Capital Partners not leaving the meeting by disconnection, without prior permission.
Mr Martinez did not lead any evidence concerning the Firm's practices in respect of holding teleconference meetings, or indeed whether they had ever been held. Mr Martinez simply submitted that the Court should find that, because it was possible for him to convene a teleconference meeting of the Capital Partners on seven days' notice, that is what he in fact would have done. I am not prepared to make an absolute finding to that effect as a matter of fact. It is likely that there would have been practical difficulties in scheduling a teleconference meeting at a time convenient to all Capital Partners, and in a way that would give reasonable assurance of achieving a quorum. Mr Martinez' submission implies that the termination of Mr Griffiths' Fixed Draw Partnership would have been the sole item on the agenda. While I recognise that the course suggested by Mr Martinez would have been physically possible, and it is also possible that Mr Martinez' authority within the Firm may have in fact permitted him unilaterally to summon a teleconference meeting of the Capital Partners on his whim, I am not prepared to assume that that is what would have happened, in the complete absence of evidence that would assist the Court to judge its likelihood.
I base my conclusion in part upon a judgment that it would be a relatively extreme and potentially disruptive step to circulate to Capital Partners, out of the blue so to speak, a notice requiring them to organise their affairs to ensure that they could participate in a teleconference meeting in seven days, for the sole purpose of resolving whether or not to terminate a Fixed Draw Partner. I do not consider that to be an inherently probable event.
As mentioned, Rule 1.4(b) would require Mr Martinez to provide a relevant background paper for the meeting. While it is true that, by Majority Resolution, the Capital Partners present at the meeting could resolve to waive the need for a background paper, it would not have been prudent for Mr Martinez to have assumed in advance that he could dispense with the need for a background paper.
Although there was no contractual obligation for the Capital Partners to give Mr Griffiths a right to put his side of the case to the meeting of Capital Partners in writing along with Mr Martinez' background paper, I find it difficult to assume, in the absence of any evidence, that the Firm would not have been prepared to let Mr Griffiths defend himself.
It is implicit in Mr Martinez' case that at least a majority of Capital Partners would have supported the resolution proposed by him, and that may well be true. However, in the absence of evidence that establishes that the Capital Partners would have acted in a peremptory and unreasonable way in relation to a long-standing partner in Mr Griffiths' position, I am unwilling to find that they would have done so.
As I have explained above, when dealing with the significance of Mr Griffiths' responses to Mr Martinez' emails starting on 12 August 2015, Mr Martinez declined to give Mr Griffiths the benefit of an interview, notwithstanding Mr Griffiths' repeated requests that he have the opportunity to explain his actions to Mr Martinez. Mr Martinez' responses to the information that came to his attention were therefore influenced by the fact that Mr Griffiths did not have a proper opportunity to explain his side of the story. As the Court must consider the counterfactual of what was likely to have happened if Mr Martinez had not repudiated the December Deed, logically the Court must allow for the chance that Mr Martinez would have relented, at least to some extent, if Mr Griffiths had been given an opportunity to explain his actions. As a matter of fact, if Mr Martinez had put in train the process of convening a meeting of the Capital Partners, whether as a teleconference meeting or a meeting in person, there is a substantial likelihood that Mr Griffiths would have been able to put before Mr Martinez and the Capital Partners at least a substantial part of the explanation that he has been able to give to the Court. While it is true that Mr Martinez already had reason to recommend to the Capital Partners that they give Mr Griffiths three months' notice (because that is what he had already ineffectively tried to achieve), it remains possible that Mr Martinez may not have taken more extreme action if he had listened to Mr Griffiths' explanation. The Court should make some allowance for the possibility that, upon proper information and explanation being given to him, Mr Martinez may have revised some of his conclusions, at least to the extent of leading him to take a more measured and cautious approach to dealing with Mr Griffiths than the immediate convening of an extraordinary teleconference meeting of the Capital Partners.
While it remains a possibility that Mr Martinez would have convened an immediate teleconference meeting of the Capital Partners, as his submissions ask the Court to assume, I consider that it is more likely that Mr Martinez would have investigated the issue more thoroughly, and put his resolution on the agenda for the next meeting of the Capital Partners.
That conclusion introduces a difficulty, in that there is no evidence as to when the next meeting of Capital Partners in fact occurred. Rule 1.1 required the Capital Partners to meet at least three times per year, but they could have met more frequently. As I have discussed above, there was some evidence that Operations Meetings took place, but it is not entirely clear whether these meetings were different to the formal meetings of Capital Partners required by the Rules.
There was, however, evidence from both Mr Martinez and Mr Griffiths that Operations Meetings happened quarterly. It is reasonable for the Court to assume, in the absence of better evidence, that a physical meeting of the Capital Partners would have been convened every three months.
There was evidence of a meeting of Capital Partners held in Sydney on 18 March 2015. The Court does not know when the next meeting took place. If the Court were to assume that meetings of the Capital Partners took place every three months, then a meeting held three months after the 18 March 2015 meeting would have taken place on 18 June 2015, which is before the date that Mr Martinez repudiated the December Deed. It may be that all the Court can infer is that the next meeting of the Capital Partners that took place after 12 August 2015 will have happened three months after 18 June 2015, being 18 September 2015.
In my view, the evidence justifies a finding that it is substantially more probable than not that Mr Martinez would have included on the agenda for the next meeting of Capital Partners a resolution to terminate the December Deed under clause 3.4, and that a majority of the Capital Partners would have voted in favour of the resolution.
I make that finding primarily because I am prepared to infer on the evidence that Mr Martinez, as the Managing Partner, would have been able to garner sufficient support from the Capital Partners for a simple majority to vote in favour of the resolution recommended by him.
It is likely that a majority of the Capital Partners would have been persuaded to support the resolution, because of the collapse in Mr Griffiths' fee earning capacity from February 2015, and the fact that he had been unsuccessful in finding substitute sources of fees. Mr Griffiths had also been unable to persuade other partners in the Firm to include him in their teams. By the time the meeting of the Capital Partners occurred, it would have been apparent to all of them that Mr Griffiths' share of profits was significantly higher than the amount of fees that he was bringing in, and that the position was unlikely to change. Consequently, the Capital Partners could have formed the opinion that the continuation of Mr Griffiths' Fixed Draw Partnership was not viable, even without taking into account the events of August 2015.
I consider that there is some force in Mr Martinez' submission that, in November 2009, before Mr Griffiths entered into the December Deed and transitioned from Capital to Fixed Draw Partner, he was not confident of securing the support of the Capital Partners in a situation where an 80% majority was required to expel him from the Firm. That being so, given the collapse of Mr Griffiths' fee earning capacity, and the doubt that must have existed concerning the significance of his conduct in August 2015, there must have been a substantial likelihood that 50% of the Capital Partners would have supported Mr Martinez' recommendation.
There are two other issues that require comment in relation to the likelihood that the Capital Partners would have supported the resolution to terminate Mr Griffiths.
First, Mr Martinez submitted that the likelihood that the Capital Partners would have resolved to terminate Mr Griffiths is increased by reason of his conduct in arranging the meeting with Mr Gooderham that I have considered above. Mr Martinez submitted that this conduct "clearly infuriated a significant number of the Firm's Capital Partners" (par 127j), and that Mr Griffiths had "gone behind the backs" of the Firm's client relationship managers to arrange the meeting in Melbourne with Mr Gooderham of IAG "with a view to drumming up some work for himself". I have not given significant weight to this submission. I have set out my findings and reasons on this issue above. Mr Martinez did not call any of the relevant Capital Partners to give evidence. The suggestion that Mr Griffiths arranged the meeting with Mr Gooderham with a view to drumming up work for himself behind the backs of the relationship partners is entirely false. I accept Mr Griffiths' evidence that he arranged the meeting following a request by Ms Melinda Mulroney, who I take to be the corporate counsel for IAG. In any event, Mr Griffiths disclosed the steps that he had taken to Mr Mailler.
In these circumstances, I do not feel able to proceed upon the basis that the Capital Partners would act irrationally and vindictively as a result of Mr Griffiths' disclosed involvement with IAG, at its request, and for what he believed was the benefit of the Firm.
The second matter that requires consideration is the evidence of what were called "comparison reports" produced by a firm called Revelian, upon which Mr Martinez relied to support his submission that the Capital Partners would have resolved to terminate Mr Griffiths and pay him his share of the profits in lieu of notice.
The Revelian report collated responses to surveys by Mr Griffiths himself, the employees of the Firm who reported to him (called "direct reports"), and his peers, who were partners who worked in association with Mr Griffiths. Comparisons were given for the years 2012 to 2014. The surveys investigated such matters as leadership qualities, whether Mr Griffiths inspired motivation and respect, whether he developed successful relationships and whether he developed and retained talent. The surveys appear to have been useful to the Firm, but their objective significance is not readily apparent.
The Revelian surveys appear to show that Mr Griffiths' peer response was below that of his direct reports (the latter being so high, at 5 out of 5, that Mr Martinez was prompted to observe in a 31 May 2015 email to Mr Griffiths: "The scores from reports seem unrealistic at 5 in each element").
The primary difficulty in the Court understanding the significance of the Revelian reports lies in the lack of explanation given as to the significance of Mr Griffiths' results. Although it is clear that Mr Griffiths' peers gave him lower scores across the board than his reports, the Court cannot assess on the evidence whether that reflects a low regard for Mr Griffiths on the part of the Capital Partners, or whether they tended to be generally more sceptical of each other than their reports.
It is of some significance that the Revelian report's description of Mr Griffiths' overall score shows that it increased by 5% from 83% in 2012 to 88% in 2014. In 2014, the survey average score was 85%, some 3% less than Mr Griffiths' score of 88%. The Court can only think that, if the sight of Mr Griffiths' Revelian report for 2014, which was above average, was likely to prompt a majority of the Capital Partners to vote to terminate him, there must be a lot of nervous Capital Partners in the Firm.
The next issue for consideration is the likelihood that the Capital Partners would have resolved to pay Mr Griffiths his share of profits in lieu of notice.
Mr Martinez apparently submits that the Capital Partners would have taken that course as, if the Capital Partners terminated Mr Griffiths' Fixed Draw Partnership immediately and without notice, Mr Griffiths would have been denied the opportunity to seek an alternative position with the benefit of incumbency as a Fixed Draw Partner of the Firm.
That submission is put in aid of Mr Martinez' claim that Mr Griffiths should not be awarded, as a component of his damages, an amount for the loss of opportunity to seek an alternative position with the benefit of having existing employment.
The likelihood that the Capital Partners would have resolved to pay Mr Griffiths his share of profits in lieu of notice depends, in my view, on the attitude that the Capital Partners would have taken to the significance of Mr Griffiths' conduct in August 2015, which prompted Mr Martinez to attempt to dismiss him summarily.
If a majority of the Capital Partners took the view that Mr Griffiths' conduct demonstrated that he was untrustworthy or unreliable, they may have voted to pay him his share of profits in lieu of notice.
For the reasons that I have given above, I have found that the evidence does not remotely justify a conclusion that Mr Griffiths' conduct entitled the Firm to dismiss him summarily.
Those findings are not, however, determinative of the issue, because the real question is how the Capital Partners would have viewed Mr Griffiths' conduct, in the light of representations made to them by Mr Martinez, and also likely in my opinion, by Mr Griffiths.
It is a relatively extreme step to deny a Fixed Draw Partner in Mr Griffiths' position the right to work out his notice period, and it would be to some degree disruptive to the business of the Firm, and potentially injurious to its reputation.
It is not possible for the Court to make a specific or reliable assessment of the likelihood that the Capital Partners would have resolved to pay Mr Griffiths his share of profits in lieu of notice. In my assessment, it is more probable than not that the Capital Partners would have been persuaded to be reasonable and allow Mr Griffiths, as long term partner of the Firm, to work out his notice, if only to act decently and give him the best opportunity of obtaining a satisfactory alternative position. It is more probable than not that the Capital Partners would have learnt enough about the reality of Mr Griffiths' conduct to have caused them to extend sufficient sympathy to Mr Griffiths to avoid inflicting gratuitous harm upon him, had they been given the opportunity.
In the light of all of these considerations, evaluating the possibilities, I conclude that the most likely course of events, if Mr Martinez had not repudiated the December Deed on 12 August 2015, would have involved Mr Martinez putting a resolution to terminate the December Deed under clause 3.4 on the agenda for the next meeting of the Capital Partners. Given the probability that such a meeting needed to occur in the second half of 2015, I will adopt a date of 18 September 2015, for the reasons explained above. In the meantime, Mr Martinez would most likely have prepared a background paper to support the resolution. Mr Griffiths would probably have lobbied support from the Capital Partners, and probably sought to put his own response in writing to those partners. If the Capital Partners had voted on the resolution, it is probable that they would have resolved to terminate the December Deed. In the absence of a compelling reason to find that the Capital Partners would also have resolved to pay Mr Griffiths his share of profits in lieu of notice, I conclude that the most likely outcome would have been that they would have given him notice.
However, there is also a very real possibility, which on balance I consider to be the most likely outcome, that Mr Griffiths would have come to realise that his position with the Firm was not tenable, and that, as a consequence, at some time before the meeting, an agreement would have been reached, whereby Mr Griffiths accepted the termination of the December Deed on three months' notice. Achieving the longest notice period possible would probably have been Mr Griffiths' primary objective.
As I have explained above, the observations made in the preceding paragraphs do not involve the Court in making a finding, on the balance of probabilities, as to what would in fact have happened. I do not intend to depart from the course commanded by the High Court in Sellars v Adelaide Petroleum. Given the essentially unstructured exercise of attempting to evaluate the chance lost by Mr Griffiths, I have tried to start by identifying what I consider to be the most likely outcome on the evidence presented and the positions as argued before me. However, it must be recognised that, on the one hand, Mr Martinez may in fact have successfully immediately convened a teleconference meeting of the Capital Partners on seven days' notice, and persuaded the majority to terminate the December Deed, and pay Mr Griffiths his share of profits in lieu of notice. On the other hand, the resolutions may have been put to a meeting of the Capital Partners that was convened in the ordinary course, and Mr Griffiths may have been able to persuade the Capital Partners to be more lenient than was called for by Mr Martinez. This latter possibility should not be dismissed, as none of the other Capital Partners have given evidence, and the Court cannot assume that the Capital Partners would have taken what I consider to be the extreme view taken by Mr Martinez.
If the course of the counterfactual had occurred in the manner that I have concluded was most likely, then, on about 18 September 2015, Mr Griffiths would have accepted the termination of his Fixed Draw Partnership on the basis that he received, and was allowed to work out, a three month notice period. On the basis that he was entitled to receive $36,250 per month for about four months, that would have entitled him to receive $145,000. It will then be necessary for the Court to assess whether any additional amount of damages should be allowed on the basis that the effect of the wrongful summary dismissal of Mr Griffiths prevented him from seeking a satisfactory alternative position with the benefit of incumbency as a Fixed Draw Partner, and required him to do so in circumstances where he had been summarily dismissed during the course of a three months' notice period.
Mr Griffiths gave evidence of the efforts that he undertook to find an alternative position in pars 33 to 38 of his primary affidavit made on 28 March 2017, and par 73 of his 6 June 2017 affidavit. He explained that he retained the services of two job search firms, and made numerous inquiries of his own. Mr Griffiths gave evidence, which I accept, that it would be a lot harder to get a similar senior role if he was not currently working. He was told that it would be necessary to explain to prospective firms who might appoint Mr Griffiths as to why he was no longer at the Firm. Mr Griffiths gave evidence of the steps that he took to obtain an alternative position, and the process that he followed.
That process led to Mr Griffiths receiving an offer in February 2016 from his present employer of a role of special counsel in its Papua New Guinea office for a salary of $300,000 per annum. The offer was conditional on Mr Griffiths obtaining a work permit and work visa, which was a protracted process, and Mr Griffiths did not commence in the role until 23 May 2016.
Mr Griffiths was not able to give any direct evidence that his ability to find a satisfactory new position was impeded after 17 August 2015 by the fact that he no longer had a position with the Firm, or otherwise because of the circumstances in which his Fixed Draw Partnership had been terminated.
Apart from his submission that Mr Griffiths had no right to expect that his position as Fixed Draw Partner would continue, because the Firm had the right to pay Mr Griffiths his share of profits in lieu of notice, Mr Martinez submitted, in par 144 of his written submissions, that "whilst recognising that the difficulty in proving damage for a lost opportunity should not deter the Court from attempting to undertake that task, the plaintiff has led no evidence (including any expert evidence)" as to what real opportunity he did lose, or may have lost, the value of any such lost opportunity, or the likelihood of Mr Griffiths converting any such opportunity into gainful employment. Mr Martinez submitted that proof of the relevant likelihood required evidence of the percentage probability or possibility. Mr Martinez concluded, at par 145, by submitting that there was no evidentiary basis on which the Court could assess Mr Griffiths' prospects of success and that Mr Griffiths' claim for additional damages should be rejected as it was entirely conjectural.
Mr Martinez did not submit that, as a matter of legal principle, this head of damages claimed by Mr Griffiths was not available to him. The submission was that the available evidence was so deficient that the Court should evaluate the chance of better employment that Mr Griffiths claimed he lost at nil value.
I do not accept that Mr Martinez' submission justifies the Court in concluding that Mr Griffiths has not established any entitlement to damages in respect of his loss of the chance to obtain alternative employment at an earlier time, and for a greater remuneration, than circumstances permitted him to achieve. This is a matter, in my view, covered by the reference in Malec v JC Hutton Pty Ltd (1990) 169 CLR 638, in the extract quoted by the plurality in Sellers v Adelaide Petroleum, set out above at par 618, to the situation where "proof is necessarily unattainable". It would be unrealistic for the Court to expect that Mr Griffiths would be able to identify potential employers approached by himself, or his employment consultants, who openly explained their rejection of the application made by or on behalf of Mr Griffiths on the ground that he was not then employed or that, having been given three months' notice of termination, the Firm had summarily terminated him before the notice period had expired. It is improbable that sufficient employers would have identified their reasons for not offering a position to Mr Griffiths for him to be able to put before the Court any significant amount of positive evidence that linked Mr Martinez' conduct to the outcome of Mr Griffiths' quest for a satisfactory alternative position.
I do not consider this to be a case where the consequences of Mr Martinez' conduct were only likely to cause, say, less than a 1% reduction in Mr Griffiths' opportunity to obtain a satisfactory alternative position, and so be regarded as speculative in the requisite sense.
Consequently, the Court must engage in the process of evaluating Mr Griffiths' loss, which involves the Court making an assessment of the value of the probability that Mr Griffiths would have achieved a better outcome than he in fact achieved, if Mr Martinez had not repudiated the December Deed on 12 August 2015 and forced Mr Griffiths to vacate the Firm's premises on 17 August 2015, in the circumstances where Mr Martinez had asserted that Mr Griffiths had engaged in conduct that justified Mr Martinez in summarily dismissing him.
This is an evaluative exercise, which is not entirely capable of rational description or justification. The Court must do the best it can to make an assessment that is fair and conceptually as sound as possible.
I have acted upon the following considerations, which I consider to be material to the valuation of the chance lost by Mr Griffiths, as a result of the repudiation of the December Deed.
Mr Griffiths was a senior, experienced and generally successful solicitor, who in 2006 had been a member of the Abbott Tout Management Committee and Practice Group Leader in the Commercial Dispute Resolution Group. Mr Griffiths apparently did not fare particularly well following the merger between Abbott Tout and HWL, and later with Ebsworth & Ebsworth Lawyers. He was demoted to a Fixed Draw Partner in 2009. He was then able to build up his practice so that his share of profits increased, but he suffered a substantial loss of fee revenue, because of the withdrawal of work by a single client in February 2015.
I would conclude that Mr Griffiths continued to be an experienced and competent lawyer, but he did not have the advantage of a substantial clientele that he could take with him to any new firm.
I am prepared to infer that it is probably an advantage when seeking new employment to be able to do so having the benefit of existing employment, as that would tend to comfort and be viewed favourably by prospective employers.
In my view, it is self-evident that the summary termination of Mr Griffiths' Fixed Draw Partnership, for an alleged breach warranting summary dismissal, would be likely to have a damaging effect on Mr Griffiths' prospects of obtaining a satisfactory alternative position. The damage to Mr Griffiths' prospects would necessarily be enhanced as a result of the summary dismissal occurring only one month after the issue to Mr Griffiths of a three months' termination notice, as prospective employers could only wonder about the seriousness of Mr Griffiths' conduct, if the Firm was not prepared to wait a further two months for Mr Griffiths' notice period to expire. While it is a matter for judgment, I consider that the damage done by the repudiation to Mr Griffiths' prospects of securing a satisfactory alternative position was relatively extreme. How could Mr Griffiths have explained to prospective new employers why he no longer had a position without disclosing that he had been summarily terminated with only two months remaining of his notice period? Mr Griffiths was not even in a position to explain or attempt to defend himself, because the grounds given by Mr Martinez for the summary termination were cursory and inexplicable, apart from being unsupportable. Furthermore, the effect of the repudiation on Mr Griffiths' prospects of obtaining a better position than he was in fact able to obtain has not abated. It may abate to some degree when these reasons for judgment are published.
Mr Griffiths' prospects of obtaining satisfactory alternative employment in the absence of the repudiation of the December Deed by Mr Martinez must be judged against the background that, notwithstanding the repudiation, Mr Griffiths was able to obtain alternative employment, albeit at lesser remuneration, and only in February 2016 in circumstances where he had to relocate to Port Moresby, and could only take up employment on 23 May 2016. The alternative employment that Mr Griffiths was able to secure essentially places a floor under the possibilities of what Mr Griffiths could have achieved in the absence of the repudiation. The natural and logical conclusion is that Mr Griffiths would have had a significant chance of doing better than what he actually achieved if the repudiation had not taken place.
Notwithstanding that consideration, the fact remains that Mr Griffiths has not been able to obtain any evidence of the attitudes actually adopted by the potential employers from whom he sought employment, that may have justified the Court in arriving at a positive conclusion that Mr Griffiths had a high chance of achieving much better than he actually achieved. Although Mr Griffiths' prospects were in my view much higher than speculative, circumstances require that the Court evaluate those chances in a conservative way. This is especially so given that Mr Griffiths' practice had dropped off significantly since February 2015.
The evaluation exercise should in my view be addressed first for the period up to 23 May 2016, when Mr Griffiths took up his position in Port Moresby. This period must be taken to start on about 18 December 2015, as I have already separately assessed Mr Griffiths' loss of income up to that time. The period is therefore about five months.
If Mr Griffiths had been able to secure an identical opportunity in Australia to the one that he did obtain in Papua and New Guinea, he would have been able to start in February 2016, and he would have enjoyed approximately an additional three months of salary at $300,000 per annum. That fact tends to show that Mr Griffiths' experience and reputation was valuable in the employment marketplace. The additional amount Mr Griffiths would have received would have been about $75,000 for the period. That may reasonably be considered as a measure of his loss for the period, because the only difference would have been that, absent the repudiation, he could have obtained the same position as he did obtain, but in Australia.
Having regard to the effect of the delay in Mr Griffiths being able to begin his employment in Port Moresby, I consider that it is reasonable to assess the value of the chance lost by Mr Griffiths of obtaining more satisfactory employment in Australia during the first period at 40% of the value of his share of profits from the Firm. That relatively low percentage is intended to reflect, among other things, the inherent uncertainty in Mr Griffiths' level of remuneration, but accepts that he had a significant prospect of achieving better than the $300,000 per annum that he actually achieved, and obtaining employment in Australia at an earlier time than he did.
On that basis, for the period up to 23 May 2016, Mr Griffiths' damages would be calculated as $435,000 × 40% × 5 months equals $72,500.
The next issue is the evaluation of Mr Griffiths' loss for the period after he commenced employment in Port Moresby on 23 May 2016. This requires an evaluation of the likelihood that Mr Griffiths would have secured alternative appointment at a remuneration greater than the $300,000 per annum that he has enjoyed since 23 May 2016, and maintained that additional remuneration until he retired at age 65.
I have taken the view that it would have been difficult for Mr Griffiths, at his then age, to secure partnership. However, there is also the consideration that, as time goes by, particularly after it is established that Mr Griffiths ought not to have been summarily dismissed by Mr Martinez, Mr Griffiths should be free to apply for more remunerative employment than he presently has. It is reasonable to proceed upon the basis that it will have been difficult for Mr Griffiths to obtain an equivalent position in Australia from his base in Port Moresby. Furthermore, although in theory there has been nothing stopping Mr Griffiths from obtaining better employment than his present position, the Court should not ignore that the effect of the repudiation of the December Deed is likely to have continued, and, as I have explained above, will do so until the publication of these reasons for judgment.
In these circumstances, I have concluded that the Court should take a relatively conservative approach, and I have allowed that Mr Griffiths has lost a 30% chance of securing the same remuneration as he enjoyed as a Fixed Draw Partner of the Firm over the period of 69 months from May 2016 to his assumed retirement at age 65. In formulating the possibility in this way, I do not mean to make a positive finding that a position at a salary of $435,000 was available, and Mr Griffiths had a 30% chance of obtaining it. My statement of the probability is intended to cover the full gamut of possibilities between a much higher chance of securing remuneration closer to the $300,000 that was secured, and a much lower possibility of securing remuneration close to, or above, $435,000. It can be no more than a broad allowance that seems appropriate in all of the circumstances. I note that these statements of principle also apply to my formulation of the loss of chance for the period between December 2015 and May 2016 above.
The calculation of Mr Griffiths' damages for this period is ($435,000 - $300,000) × 69/12 x 30% equals $232,875. That is about $40,000 more per year than Mr Griffiths actually earned, and does not appear to me to be an excessive estimate of the value of the chance that he lost for the period after 23 May 2016.
I will not discount this amount further for contingencies, as I have adopted the 30% figure to take into account that factor. Further, a reduction for unknown contingencies is likely to be balanced out to some degree by the fact that I have not allowed for any escalation of remuneration in accordance with inflation.
Given the broad nature of the assessment of the value of the chance lost by Mr Griffiths, I do not think that it is appropriate to allow interest on past losses, or to further discount the future losses to assess the present value of those losses.
Accepting the inexact nature of the assessment exercise, I conclude that it will be appropriate to assess Mr Griffiths' damages at $450,375, say $450,000.

Parties

Applicant/Plaintiff:

Griffiths as trustee for the Griffiths HWL Practice Trust

Respondent/Defendant:

Martinez as trustee for the Martinez HWL Practice Trust as representative of the partners trading as HWL Ebsworth Lawyers

Legislation Cited (3)

Partnership Act 1892(NSW)

Civil Procedure Act 2005(NSW)

Evidence Act 1995(NSW)

Cases Cited (93)

and Beningtons Ltd v North Western Cachar Tea Co [1923] AC 48 Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 176 ALR 693 Coope v LCM Litigation Fund Pty Ltd [2016] NSWCA 37; (2016) 333 ALR 524 Dare v Pulham (1982) 148 CLR 658 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Fishlock v Campaign Palace Pty Ltd [2013] NSWSC 531; (2013) 234 IR 1 Gunasegaram v Blue Visions Management Pty Ltd [2018] NSWCA 179; (2018) 129 ACSR 265 Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 Ho v Powell (2001) 51 NSWLR 572; [2001] NSWCA 168 In re Frank Mills Mining Company (1883) 23 Ch D 52 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Kriketos v Livschitz [2009] NSWCA 96; (2009) 14 BPR 26,717 Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666; (1976) 9 ALR 437 Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1; [2006] FCAFC 144 Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 Moratic Pty Ltd v Gordon [2007] NSWSC 5; (2007) 13 BPR 24,713 Morley v Australian Securities and Investments Commission [2010] NSWCA 331; (2010) 274 ALR 205 Nadinic v Drinkwater (2017) 94 NSWLR 518; [2017] NSWCA 114 National Roads and Motorists' Association Ltd v Parkin (2004) 60 NSWLR 224; [2004] NSWCA 153 New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68 Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 Sgro v Australian Associated Motor Insurers Ltd (2015) 91 NSWLR 325; [2015] NSWCA 262 Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359; [1931] HCA 21 Stuart Pty Ltd v Condor Commercial Insulation Pty Ltd [2006] NSWCA 334 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; [1950] HCA 35 Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381 Woodside Energy Ltd v Electricity Generation Corporation (2014) 251 CLR 640; [2014] HCA 7 Texts Cited: Dr R. Austin and Professor I. Ramsay, Ford, Austin and Ramsay's Principles of Corporations Law (17th ed, 2018, LexisNexis Butterworths Australia) R.I. Banks, Lindley & Banks on Partnership (20th ed, 2017, Sweet & Maxwell) K.L. Fletcher, The Law of Partnership in Australia (9th ed, 2007, Thomson Reuters Lawbook Co. Australia) A.D. Lang, Horsley's Meetings Procedure Law and Practice (7th ed, 2015, LexisNexis Butterworths Australia) N.C. Seddon and R.A. Bigwood, Cheshire & Fifoot Law of Contract (11th ed (Australian), 2017, LexisNexis Butterworths) Category: Principal judgment Parties: Timothy Martin Griffiths as trustee for the Griffiths HWL Practice Trust (Plaintiff) Juan Jose Martinez as trustee for the Martinez HWL Practice Trust as representative of the partners trading as HWL Ebsworth Lawyers (Defendant) Representation: Counsel: S Donaldson SC and J Williams (Plaintiff) M Kimber SC and G Fredericks (Defendant)

[1994] HCA 4

(1924) 35 CLR 143

(2009) 239 CLR 175

(2016) 92 NSWLR 639

(1933) 49 CLR 66

(2001) 53 NSWLR 153

(1938) 60 CLR 336

(2000) 176 ALR 693

(2016) 333 ALR 524

(1982) 148 CLR 658

(1988) 14 NSWLR 523

(2013) 234 IR 1