Hudson Investments Group Ltd v Atanaskovic - [2010] NSWSC 1055 - NSWSC 2010 case summary — Zoe

NSWNSWSC

Hudson Investments Group Ltd v Atanaskovic

[2010] NSWSC 1055

Supreme Court of NSW|2010-08-26|Before: Davies J

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Court

Supreme Court of NSW

Decision date

2010-08-26

Before

Davies J

Source

Original judgment source is linked above.

Judgment (30 paragraphs)

[1]

Background 5 Hardboards owned the land. Hardboards was a wholly owned subsidiary of the Plaintiff. The Plaintiff owned 90% of the shares in Hudson Timber. Wingate was the company engaged in property development. 6 The arrangement was that the Plaintiff would sell its shares in Hardboards to Hudson Timber. The solicitors were instructed to draft a Share Purchase Agreement between the Plaintiff and Hudson Timber, and also a deed called an Entitlement Deed between the Plaintiff and Hardboards to protect the Plaintiff's interests in relation to the land and its development. The Plaintiff alleged in the original Statement of Claim, and continues to allege, that one of the requirements it made of the solicitors was that the Entitlement Deed should provide that in the event that the ultimate control over, or ultimate beneficial ownership in, the land or any part or parts of it changed in any way on or before the 5th anniversary of the date of the Entitlement Deed, Hardboards must pay to the Plaintiff the first $10,000,000 of the proceeds received by Hardboards in relation to the disposal of the land or any part or parts of it. 7 The Entitlement Deed was executed on or shortly after 8 June 2001. Thereafter, on 3 occasions between December 2001 and August 2005 Hardboards disposed of and transferred certain parts of the land to third parties for a total consideration of $9.5 million. That led to the Plaintiff seeking a payment of $9.5 million from Hardboards which was rejected by Hardboards on the basis that clause 4 of the Entitlement Deed did not require payment to the Plaintiff except in the event of the disposal of the whole of the land. Proceedings ensued and they were settled on the basis that the Plaintiff received $6.1 million from Hardboards. 8 The Plaintiff now claims against the solicitors for the balance and other costs associated with the recovery of money from Hardboards. 9 The critical clause of the Entitlement Deed is clause 4, headed "Payment". It provided as follows: The parties agree that if the ultimate control over, or ultimate beneficial ownership in, the Land changes in any way (a "Disposal") on or before the Sunset Date, Hardboards must, on the date of the Disposal, pay to [the plaintiff] the lesser of the following amounts: (a) $10,000,000 less the Deposit; and (b) the value of the aggregate consideration received by Hardboards in relation to the Disposal less the Deposit. 10 It is the Plaintiff's claim that the solicitors' failure to make clear in the Entitlement Deed that part disposals of the land would trigger a right to payment under clause 4 was negligent and a breach of their retainer and resulted in the initial refusal by Hardboards to make the payment claimed by the Plaintiff, and the subsequent compromise of the earlier proceedings.

[6]

14 Mr Restas inserted clause 5 in the Entitlement Deed as follows: 5 . Disposal Undertaking Hardboards agrees that it will not undertake a Disposal: (a) which does not involve Hardboards ceasing to have all control over, or all of its beneficial ownership in, the Land; and (b) unless it is on arms length terms and the consideration to be received is cash payable as at the date of Disposal. 15 The Plaintiff contends that the solicitors did not specifically draw to the attention of the Plaintiff this change in approach between Mr Kyriak's first draft and what finally appeared in the Entitlement Deed. In any event, the Plaintiff contends that the Entitlement Deed ought to have been drafted to make express and unambiguous provision for payment to the Plaintiff in the event of part disposal of the land. 16 The second proposed amendment involved the introduction of a claim that the solicitors breached a fiduciary duty to the Plaintiff. These amendments appear in paragraphs 12D and 31 of the proposed Further Amended Statement of Claim as follows: 12D Between early to mid May 2001 and 8 June 2001. Atanaskovic Hartnell: (a) was at all times aware that Mr Bruce McLeod was a director of HIG [the Plaintiff], Hardboards and Hudson Timber: Particulars Affidavit of Jamie Restas sworn 1 July 2009, at paragraph 161. (b) was at all times aware that Bruce McLeod owed fiduciary duties to HIG. including a duty not to cause or allow a situation of conflict, or a significant possibility of conflict, to arise as between its own, or anyone else's interests (including those of Hardboards and Hudson Timber), and the interests of HIG: (c) was at all times aware that there was an actual conflict, or alternatively a significant possibility of conflict, between the interests of each of HIG and the interests of Hardboards and Hudson Timber as to the subject matter of the Entitlement Deed and as to how those interests would be governed by its terms: and Particulars Affidavit of Jamie Restas sworn 1 July 2009, at paragraphs [6], [35] and [36]. (d) was at all times aware that:

[9]

In the circumstances set out in paragraphs 12A, 12B, 12C, 12D, 13, 14, 15 and 15A Atanaskovic Hartnell breached their fiduciary duties to HIG, and specifically the Conflict Duty by: (a) reporting to and acting on instructions from Bruce McLeod as to the drafting of the Entitlement Deed when Bruce McLeod was in a position of known conflict of duty or potential conflict of duty by reason of the fact that, at all material times, he was also a director of Hardboards and Hudson Timber and was duty bound, as a director and [sic - of] Hardboards and Hudson Timber to have regard to the commercial interests of Hardboards and Hudson Timber to the exclusion of HIG: (b) drafting the Entitlement Deed in terms which preferred the commercial interests of Hardboards and Hudson Timber to the commercial interests of HIG by deleting the terms of the Draft Entitlement Deed referred to in paragraph 12B(a) above and substituting the terms referred to in paragraph 14 above: (c) failing to take any or, alternatively, any reasonably adequate or satisfactory, steps to bring to the attention of any director or officer of HIG (other than Bruce McLeod himself) the circumstance that they were receiving instructions from a director of HIG who was in a position of conflict, or potential conflict, as regards his duties to HIG and his duties to Hardboards and Hudson Timber: and (d) failing to obtain the fully informed consent of HIG to their continuing to act in relation to the drafting of the Entitlement Deed in circumstances where Atanaskovic Hartnell was receiving its instructions from a director of HIG who was in a position of conflict, or potential conflict, as regards his duties to HIG and his duties to Hardboards and Hudson Timber. 17 The Plaintiff wishes also to rely on matters arising out of Mr McLeod's position (set out in para 120) to allege negligence against the solicitors which relevantly correspond with what is contained in para 31 of the proposed Further Amended Statement of Claim - see in that regard para 30(iv), (v), (vi) and (vii). I shall return to this matter later. The Defendants' attitude to the amendments 18 The Defendants oppose the amendments for 3 reasons. The first basis is that no adequate explanation for the delay has been provided. The Defendants submit that the events occurred in May and June 2001, the present proceedings commenced on 6 June 2007 only 2 days before the limitation period was due to expire, the proceedings brought by the Plaintiff against Hardboards commenced in 2004 in which Mr Restas swore an affidavit for the Plaintiff in 2005, and the first time the proposed amendments were raised by the Plaintiff was in September 2009 after discovery had occurred, after the Defendants had served their lay and expert evidence and after the Plaintiff had in correspondence assured the Defendants and the Court that the Plaintiff's case in chief was complete. 19 The Defendants point to what was said in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 83 ALJR 951 at [102] that "invariably" the exercise of the discretion to permit an amendment requires an explanation to be given where there is delay.

[11]

Delay 22 Whilst it is true that a great deal of time has elapsed since the events sued upon and even since the commencement of the proceedings, the Plaintiff puts forward an explanation for what would otherwise be regarded as a late amendment. The explanation is that the Affidavit of Jamie Restas sworn 1 July 2009 contained what amounted to admissions or concessions in relation to the work he performed on the Entitlement Deed that enabled the case in negligence and breach of retainer to be widened. They point in particular to what appears in paragraphs 55, 67 and 76 of that Affidavit. The substance of what appears in those paragraphs has been set out in para [13] above. Mr Restas went on to say that he believed the Entitlement Deed accorded with the instructions he received. 23 The Defendants say that nothing that appears in those paragraphs is new. They say that what is contained in paragraph 55 of the Restas 2009 Affidavit was to be found in paragraph 19 of the Affidavit he swore in the proceedings against Hardboards particularly when taken in conjunction with an email forwarded by Mr Restas to Mr McLeod on 7 June 2009 at 2:07pm. 24 I do not consider that the material in the earlier Restas Affidavit, with or without the email of 7 June, provides the same information as is contained in a number of paragraphs of the Restas 2009 Affidavit including paragraphs 46, 50, 52-56, 59, 61, 67-70 and 75-76. That is no surprise because the issues between the Plaintiff and Hardboards were not the same as the issue in the present case which concerns the manner in which the Entitlement Deed was drafted and finalised. That is why Mr Restas in his 2009 Affidavit provides an explanation of his reasoning when he came to settle the earlier draft of the Entitlement Deed. That explanation would not ordinarily have been admissible in the proceedings against Hardboards. 25 Giving due weight to what was said in Aon, it does not seem to me that the proposed first amendment should be disallowed for any of the reasons given in Aon. No hearing date has been set for the proceedings. The amendment is more in the nature of a party moulding its particulars to take advantage of evidence given during a trial: Leotta v Public Transport Commission of NSW (1976) 50 ALJR 666 at 668; Dare v Pulham (1982) 148 CLR 658 at 664. 26 Although the proposed first amendment involves adding some fresh paragraphs to the Statement of Claim, in substance the amendments amount to further particulars of the causes of action pleaded being negligence and breach of retainer. So much appears from sub-paragraphs (i), (ii) and (iii) of the particulars of negligence set out in paragraph 30 as follows: 30. In the circumstances set out in paragraphs 12A, 12B, 12C, 12D, 13, 14, 15 and 15A Atanaskovic Hartnell acted negligently and breached that duty of care. Particulars of Negligence (i) Atanaskovic Hartnell did not: (A) use reasonable skill, care and diligence in executing their instructions and drafting the documentation; (B) give careful, accurate and competent advice and representation in relation to the terms and entry of the Entitlement Deed; and (C) ensure that the Entitlement Deed entered into clearly and unambiguously embodied the instructions and intentions of HIG; (ii) Atanaskovic Hartnell drafted clauses 4 and 5 of the Entitlement Deed in terms which were ambiguous. (iii) HIG repeats paragraphs 12A, 12B, 12C, 12D, 13, 14, 15 and 15A above.

[12]

Sub-paragraphs (iv) to (vii) are in substance the same as what appears in para 31(a) to (d) (set out in [16] above). 27 It is difficult to see any actual prejudice that could be, or is even claimed to be, suffered by the Defendants as a result of these amendments, apart from the possibility of a small amount of delay and expense in responding to the further pleading. Recognising that matter, allowing the amendment and ordering costs thrown away by reason of it does not seem to me to offend what the plurality judgment said in Aon at [96]-[99]. Fiduciary duty 28 The basis of this claim is that the solicitors took instructions from Bruce McLeod who was not only a director of the Plaintiff but also a Director of Hardboards and Hudson Timber. It is alleged that Mr McLeod was in a position of conflict or a significant possibility of conflict as regards his Director's duties to those 3 companies. It is then alleged that the solicitors owed a duty to the Plaintiff not to cause or allow a situation of conflict or a significant possibility of conflict. Further, it is said, the solicitors at no time sought or obtained the fully informed consent of the Plaintiff to their continuing to take instructions from Mr McLeod. 29 The Plaintiff's principal point was that a solicitor owed an undoubted fiduciary duty to a client but what was always to be determined was the scope of that duty and its breach. The Plaintiff says it cannot be determined as a pure question of law or on an application to amend whether the precise duty asserted was owed. Rather, that turns on questions of fact which will determine the scope of the duty and any breach. For those reasons, it is said, a determination cannot be made on an application to amend. 30 It is important to note with care what the Plaintiff seeks to allege in relation to the claim based on a breach of fiduciary duty. First, paragraph 3 alleges a retainer of the solicitors only by the Plaintiff. In that regard the position is markedly different from the situation in Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1, a decision relied upon by the Plaintiff - see particularly at [119]. Although in its written submissions in reply the Plaintiff alleged that evidence showed that the solicitors were not only acting for the Plaintiff but also for Hardboards and Hudson Timber, such other retainers are not pleaded. 31 The matters identified in the Plaintiff's submissions in reply pointing to a retainer by other than the Plaintiff concern only the drafting of Notices for the meetings of the companies and the inclusion in one or more of those Notices of matters concerned with the need for shareholder approval to the giving of financial assistance by Hardboards. Even if those matters had been pleaded they are only matters that fall well and truly within the description of "clerical acts" referred to in Beach at [283]. They could not be regarded as having relevance for any issue of conflict arising out of Mr McLeod's dual or multiple roles. The absence of any pleading concerning these matters makes it unnecessary to consider the matter beyond this. 32 Secondly, although para 12D(e) alleges that the solicitors at all times owed fiduciary duties to the Plaintiff, the only duties specified are (1) a duty not to cause or allow a situation of conflict or a significant possibility of conflict to arise between the solicitors' interests and the interests of the Plaintiff and, (2) a duty not to cause or allow a situation of conflict or a significant possibility of conflict to arise as between any other person's interests and the interests of the Plaintiff. 33 It is apparent from an examination of the remainder of para 12D and also para 31, which contains the breaches alleged, that no facts are pleaded concerning any conflict between the solicitors' interests and the Plaintiff's interests. 34 Despite this, the Plaintiff in its submissions in reply, and repeated in the further submissions made with leave concerning the High Court's decision in Spencer v Commonwealth of Australia [2010] HCA 28, asserted that there was a conflict in this regard because the solicitors had an interest in the continued flow of work from the Plaintiff and, therefore, had an interest in remaining in the good graces of Mr McLeod. This conflict was said to arise at the time the solicitors became aware that the person in whose good graces they wished to remain was himself in a position of conflict. 35 The short answer to this submission is that nothing to this effect is pleaded or particularised in the proposed Further Amended Statement of Claim. Since the submission only says that the solicitors had an interest "in the continued flow of work from the Plaintiff" and not from the other companies that Mr McLeod represented, it may reasonably be inferred that any facts that might have been pleaded would have supported that proposition. Self evidently, in those circumstances, the solicitors would not be in a position of conflict because their concern would be only to do the best for their client, the Plaintiff. 36 All that paragraphs 12D and 31 disclose is that there was a conflict between the Plaintiff's interests and the interests of both Hardboards and Hudson Timber. Because it is said the solicitors were aware of that conflict (particularly by reason of the fact that Mr McLeod owed fiduciary duties to the Plaintiff as a Director) the solicitors are said to be under a fiduciary duty to do the things set out in sub-paras (f), (g) and (h) of para 12D. 37 In its submissions in reply the Plaintiff appears to assert that the duty alleged is derived from the second limb of Barnes v Addy (1874) LR 9 Ch App 244, and it drew attention to what was said by the High Court about the second limb in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [159]-[163]. However, nothing in the pleading suggests that the second limb of Barnes v Addy is the basis for the duty alleged. 38 The question is, therefore, whether the solicitors owed a fiduciary duty to the Plaintiff not to cause or allow a situation of conflict or a significant possibility of conflict to arise between the interests of the Plaintiff and the interests of the other 2 companies.

[13]

39 In Pilmer v The Duke Group Ltd (In Liq) (2001) 207 CLR 165 at [74] the plurality judgment approved what Gaudron and McHugh JJ said in Breen v Williams (1996) 186 CLR 71 at 113 as follows: In this country, fiduciary obligations arise because a person has come under an obligation to act in another's interests. As a result, equity imposes on the fiduciary proscriptive obligations - not to obtain any unauthorised benefit from the relationship and not to be in a position of conflict. If these obligations are breached, the fiduciary must account for any profits and make good any losses arising from the breach. But the law of this country does not otherwise impose positive legal duties on the fiduciary to act in the interests of the person to whom the duty is owed. 40 Reference in that passage to not being "in a position of conflict" must be a reference to the fiduciary and not to third parties. The solicitors were never in a position of conflict. There was no conflict between their own interests and that of the Plaintiff. Indeed, although the allegation is broadly made in para 12D(e) the remainder of the pleading, as noted above, does not support that allegation. They were never in a position of conflict in the sense that they owed duties inconsistent with their duties to the Plaintiff to another party. As I have noted, it is nowhere alleged in the pleading that they were retained by any other party or acted for them. 41 Moreover, no facts are pleaded in support of the allegation that the solicitors caused the situation of conflict identified as Mr McLeod's holding directorships of the 3 relevant companies. 42 That leaves for consideration only the allegation that, presumably by doing and failing to do the matters set out in sub-paras (f), (g) and (h) of para 12D, the solicitors allowed a situation of conflict or a significant possibility of conflict. If there was such a duty it could only form part of a common law duty of care but not part of a fiduciary duty which is limited in the manner set out in the passage from Breen v Williams. In particular, no positive legal duty is imposed on the solicitors to act in the interests of the Plaintiff as part of the solicitors' fiduciary obligations by doing and refraining from doing those matters identified. 43 Although, as I have noted, there is no pleading which suggests that the second limb of Barnes v Addy can be invoked, it was raised in submissions and I should say something about it. 44 If it is intended to rely on the second limb of Barnes v Addy what the High Court said in Farah is significant: [160] As conventionally understood in Australia, the second limb makes a defendant liable if that defendant assists a trustee or fiduciary with knowledge of a dishonest and fraudulent design on the part of the trustee or fiduciary.

[14]

[163] … [T]here is a distinction between rendering liable a defendant participating with knowledge in a dishonest and fraudulent design, and rendering liable a defendant who dishonestly procures or assists in a breach of trust or fiduciary obligation where the trustee or fiduciary need not have engaged in a dishonest or fraudulent design. The decision in Royal Brunei has been referred to in this Court several times but not in terms foreclosing further consideration of the subject in this Court, in particular, further consideration of the apparent necessity to displace the acceptance in Consul Development Pty Ltd v DPC Estates Pty Ltd of the formulation of the second limb of Barnes v Addy were Royal Brunei to be adopted in this country. Until such an occasion arises in this Court, Australian courts should continue to observe the distinction mentioned above and, in particular, apply the formulation in the second limb of Barnes v Addy . (emphasis added) 45 The Plaintiff submits that the knowledge of the solicitors (about Mr McLeod's conflict) may be sufficient to fulfil the requirement of the second limb in Barnes v Addy by pointing to what is said in Farah at [177]. Since, however, the High Court has directed that until it reconsiders the matter lower courts must apply the formulation in the second limb of Barnes v Addy as identified by the High Court, it must be noted that no dishonest or fraudulent design on the part of Mr McLeod is alleged. For that reason, the issue of what constitutes knowledge is irrelevant. No fiduciary duty exists by resort to the second limb of Barnes v Addy. 46 The Plaintiff emphasised that it was not appropriate to decide complex issues associated with fiduciary duty on this application to amend because what was really being dealt with was the scope of the duty and breaches of it. It was said that those were factual matters that must go to trial. 47 It can be accepted that the solicitors were classically fiduciaries to the Plaintiff and as such had certain duties in each particular case: Maguire v Makaronis (1997) 188 CLR 449 at 463. However, as the Court of Appeal said in Beach Petroleum at [188] the duty is not derived from the status of being the solicitor but is derived from what the solicitor undertakes to do in the particular circumstances. Not every aspect of a solicitor client relationship is fiduciary. 48 The present debate is not about scope of duty or breach. It concerns whether a duty of the type alleged is a fiduciary duty known to the law. In my opinion, it is not. According to the pleading the solicitors neither obtained an unauthorised benefit from their relationship with the Plaintiff nor were they in conflict with the interests of the Plaintiff: Breen v Williams at 113. For that reason the pleading concerning a breach of fiduciary duty is futile and the amendment should not be allowed. 49 After judgment was reserved the parties became aware of the High Court's judgment in Spencer v Commonwealth of Australia which had been delivered the day preceding the hearing. They sought and were granted leave to make further submissions as to the relevance of that decision to the matters I had to decide. 50 Spencer concerned the proper construction of s 31A Federal Court of Australia Act 1976 (Cth) which relevantly provided: (2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is defending the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. (3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be: (a) hopeless; or (b) bound to fail; for it to have no reasonable prospect of success. (4) This section does not limit any powers that the Court has apart from this section.

[16]

Negligence/breach of retainer 53 That leaves for consideration whether the proposed amendments, to the extent that they add aspects to the claims for breach of retainer and negligence (para 30) should be allowed. There seem to be 2 categories of amendments to be considered. The first category embraces what is contained in particulars of negligence under para 30 being particulars (ii) and (iii) excluding the reference to para 12D. The second category encompasses particulars (iv) to (vii) which reproduce the alleged breach of fiduciary duty appearing in para 30. 54 Because of the view I have reached with regard to delay and prejudice to the solicitors I do not consider that there is any basis upon which leave to amend to add the first category of particulars should not be allowed, subject to preserving any limitation rights of the solicitors. It is not immediately apparent why limitation issues arise when what is sought to be added are only further particulars of causes of action already pleaded. Nevertheless, the solicitors' rights in that regard will be reserved. 55 In relation to the second category of particulars it seems to me that particulars (vi) and (vii) can amount, in substance, to particulars of negligence. The solicitors' common law duty was owed to the Plaintiff and not to Mr McLeod. If the solicitors were receiving instructions from a person who was effectively the Plaintiff's agent, and the solicitors had some concerns about the instructions from the agent, it would form part of their duty of care to bring those concerns to the attention of the Plaintiff. If the concern, as here alleged, was that the agent may not be acting completely in the interests of the Plaintiff, they may have an obligation (all other things being equal) to ensure that the Plaintiff was fully informed of that matter. 56 Difficulties obviously arise where the client is a company, and those difficulties are magnified where the agent is a director of that company. It is arguable that the solicitors had a duty to communicate with some person in authority in the company who was independent of the other interests that the agent also represented. In contradistinction to what was required of the solicitors by reason of the fiduciary role they occupied, it seems to me that they had a common law duty to ensure that the instructions they were receiving were truly the instructions of their client the Plaintiff. It then needs to be determined whether by reason of the accepted and admitted facts, an allegation of breach is clearly untenable. 57 The solicitors point to a number of matters in that regard. Those matters are these:

[22]

(e) On 6 August 2001 the shareholders in general meeting approved the sale. 58 The solicitors say that 3 things flow from those matters which are not disputed by the Plaintiff. First, the Plaintiff was aware that Mr McLeod was a director of the other 2 companies. Secondly, knowing that matter, he was instructed to retain and negotiate with the solicitors in relation to the sale agreement including the Entitlement Deed. Thirdly, an independent director of Hudson Timber and another person would be reviewing the Share Purchase Agreement on behalf of Hudson Timber and, despite advice to this effect, Hudson Timber was not engaging independent lawyers. 59 Despite the strength of that evidence, it does not seem to me that it can be said to be unarguable that the solicitors observed their common law obligations to provide appropriate advice to the Plaintiff to deal with Mr McLeod's position. The Plaintiff submits, in particular, that the solicitors had a responsibility to ensure that the Director of the Plaintiff who was not also a Director of the other companies should have been expressly made aware of Mr McLeod's position and potential conflict. Precisely what that Director knew and was told and, in that sense, what the Plaintiff was aware of before it agreed (through Mr McLeod) to the form of the Entitlement Deed ultimately executed, seem to me to be issues of fact which must be determined at a trial. 60 The solicitors point to what Bryson J said in Maronis Holdings Ltd v Nippon Credit Australia Ltd [2001] NSWSC 448; (2001) 38 ACSR 404 at [359]: [359] The allegation in para 35 that Clayton Utz knew or ought to have known that the interests of Girvan Australia and of Maronis were in actual or potential conflict such that Clayton Utz could not act for both and properly discharge their duties as solicitors to each directs attention to what would have been required for the proper discharge of duties as solicitor to each, and this in turn directs attention to what were or should be supposed to have been the terms of any retainer or the scope of the work which it was the solicitor's duty to do, and whether it was a duty of the solicitor to advise on whether the transaction should be entered into at all. It was plain that the interests of Maronis and the interests of Girvan Australia in the transaction were different, and this was so obviously so that I cannot understand that it would occur to a solicitor that this needed to be pointed out to company directors, especially to persons such as Mr Ambler and Mr Duncan who were directors of a public company with a very large business and who were working as executives in that business. There are clients, no doubt, who suffer from some social, intellectual or other personal disadvantage which would prompt a solicitor to explain so primary a matter, but only in the strangest of circumstances would directors of public companies and their subsidiaries be in that position. If Maronis wished for advice about whether it should enter into the transaction and retained a solicitor to give that advice the solicitor would be in a position where his duties to different clients conflicted if he also acted for Girvan Australia. If Maronis made its own decision about entering into the transaction, a solicitor who acted for Maronis in accordance with that decision, as well as acting for Girvan Australia would not, in my opinion, be in a position where there was a conflict in his duties to different clients, unless and until the clients fell into dispute. 61 Whilst what is said there is no doubt of considerable assistance to the solicitors, that does not alter the fact that matters raised there such as the knowledge and experience of the Directors, are matters of fact which need to be determined at the trial. It can be accepted that the Directors of the Plaintiff were Directors of a public company and they may fall into the category of directors described by Bryson J and with what they were likely to have understood and appreciated. Nevertheless, the determination of that matter is a question of fact which is inappropriate for decision on an application to amend in the same way as it would be inappropriate to determine it on an application for summary relief. 62 It seems to me, therefore, that particulars (vi) and (vii) of para 30 should be permitted to be relied on as particulars of negligence. Since the necessary material facts to justify the inclusion of those particulars are to be found, in substance, in para 12D it is not inappropriate that that paragraph, appropriately altered, should be allowed also. In the light of my conclusions I would not allow the amendment contained in para 12D(e). 63 It does not seem to me that the evidence which is not disputed permits particular (iv) of para 30 to go to trial. It cannot have been a breach of duty per se to accept instructions from Mr McLeod. It may have been negligent to do so without taking the steps set out in particulars (vi) and (vii). 64 In relation to particular (v) of para 30 the Plaintiff submits that it can be inferred from the changes Mr Restas made to the draft Entitlement Deed that these changes were done to prefer the commercial interests of Hardboards and Hudson Timber. Whilst I have considerable doubt about that matter, I do not think the Plaintiff should be precluded from being able to test the matter by cross-examination of Mr Restas or other means. To disallow that particular may preclude that matter from being tested at the trial.

[23]

Prejudice 65 Apart from the general prejudice associated with the delay (with which I have dealt already) the Defendants say that they are specifically prejudiced in relation to the claim for breach of fiduciary duty if the amendment is allowed. Although I have determined that it should not be allowed I should say something briefly about the matter of the prejudice claimed in the event that I am wrong in that determination. 66 The Defendants point to 2 particular matters that they say constitute actual prejudice. First, they point to a copy of a Discussion Paper referred to in the Minutes of both the Plaintiff and Hudson Timber dated 17 May 2001 about the payment of the Deposit of $3.5m. The Defendants say that the Discussion Paper may well throw light on the knowledge and consent of the Board of Directors of the Plaintiff to Mr McLeod providing the instructions. 67 It has not been shown that this document was destroyed after the proceedings commenced and before the amendment was sought to be made. Indeed, the solicitors for the Plaintiff are not able to say if the document ever existed, let alone when it may have been destroyed. If the Defendants cannot show that they are prejudiced by reason of the fact that the document was destroyed after the proceedings commenced but before the amendment was made they cannot show that they are in a worse position by reason of the absence of that document if the amendment is allowed. 68 It does not seem to me appropriate to import the special rule associated with seeking an extension of time after the limitation period has expired which does not permit a comparison of the position before and after that date: Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 and particularly at 554-555 where McHugh J explains the rationale for the rule. 69 Secondly, the Defendants say that the Plaintiff has indicated it intends to serve a further expert report by Mr Neville Moses as a solicitor expert. The Defendants say that they do not know what Mr Moses will say and therefore the case they will have to meet. 70 This does not seem to me to be prejudice at all. They will not be denied the opportunity to respond to Mr Moses' report. His report would, of necessity, have to be confined within the pleading that is governing the conduct of the case. This does not seem to me to be any more than the usual prejudice that arises when a case is expanded as the present one is permitted to be expanded in relation to the claims in negligence and breach of retainer.

Hudson Investments Group Ltd v Atanaskovic

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