Another way of putting the point being made by Megaw LJ is that the claimant is entitled to the benefit, expressed in money, of the contractual rights he has lost, but not to the benefit of more valuable contractual rights than those he has lost."
59 Accordingly, Lord Scott rejected (at [32]) the owners' contention, describing it as attributing "to the assessment of damages at the date of breach rule an inflexibility which is inconsistent both with principle and with the authorities." While his Lordship accepted the date of breach rule usually put the victim of a breach of contract in the same position, so far as money could do it, as if the contract had been performed (the "compensatory principle"), his Lordship did not accept that that was universally so. In his view (at [38]) the owners' argument offended the compensatory principle, because they were seeking compensation exceeding the value of the contractual benefits of which they were deprived. This was because their case required "the assessor to speculate about what might happen over the period 17 December 2001 to 6 December 2005 regarding the occurrence of a clause 33 event and to shut his eyes to the actual happening of a clause 33 event in March 2003."
60 In equity, too, a defendant is only liable for the consequences of the legal wrong he or she has done to the plaintiff and to make good the damage caused by such wrong. Damages was not an equitable remedy for breach of purely equitable obligations, such as breach of fiduciary duty: Meagher, Gummow and Lehane, Equity Doctrines & Remedies, 4th ed (2002) Butterworth's LexisNexis (at [23-005]). In the case of a beach of fiduciary duty, the court has an inherent power to grant relief by way of monetary compensation: United States Surgical Corp v Hospital Products International Pty Ltd [1982] 1 NSWLR 766 (at 816) per McLelland J. The object of equitable compensation is to restore persons who have suffered loss to the position in which they would have been if there had been no breach of the equitable obligation: O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 (at 272) per Spigelman CJ, referring to Nocton v Lord Ashburton [1914] AC 932 (at 952) per Viscount Haldane LC. While the plaintiff is to be put in the same position as he or she would have been in if the wrong for which equitable compensation is awarded had not been sustained, the defendant is not liable to pay compensation which exceeds the loss suffered from such wrong: Target Holdings Limited v Redferns (a firm) [1996] 1 AC 421 (at 432) per Lord Browne-Wilkinson, cited with approval in O'Halloran (at 272).
61 However unlike the general rule in contract and tort, the rule in equity is that the determination of the quantum of any pecuniary remedy for breach of equitable duty falls for determination "at the time of trial, using the full benefit of hindsight": Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 (at 555) per McLachlin J, cited with approval by the Full Court in Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 (at [35]; see also at [50]); see also Target Holdings (at 439) as to the use of hindsight and common sense in determining causation in assessing equitable compensation, approved in O'Halloran (at 273).
62 Thus in Target Holdings, the plaintiff was held not to be entitled to recover damages from its solicitors who were found to have acted in breach of trust in paying out trust moneys prematurely, contrary to the plaintiff's instructions to transfer those moneys only when a commercial property had been conveyed to a mortgagor and the mortgagor had executed charges in favour of the plaintiff. Subsequently, the property was conveyed to the mortgagor and the charges executed. However, on the plaintiff's exercise of its power of sale, the mortgaged property turned out to be worth far less than the amount prematurely disbursed by the solicitors. The House of Lords rejected the plaintiff's argument that events subsequent to the solicitors' breach of trust were to be disregarded and that the defendants had to restore the entirety of the monies transferred prematurely. Lord Browne-Wilkinson observed (at 436):
" To impose such an obligation in order to enable the beneficiary solely entitled (i.e. the client) to recover from the solicitor more than the client has in fact lost flies in the face of common sense and is in direct conflict with the basic principles of equitable compensation . In my judgment, once a conveyancing transaction has been completed the client has no right to have the solicitor's client account reconstituted as a 'trust fund'." (emphasis added)
63 As noted by the Full Court in Youyang v Minter Ellison (at [47]), in approving Lord Browne-Wilkinson's reasoning, it was significant that the solicitors' breach of trust left the plaintiff in exactly the same position as if there had been no breach. If the instructions had been obeyed, the transaction would still have gone ahead and the plaintiff would have suffered a loss represented by the difference between the amount advanced on security and the amount realised from the security. That loss would have been caused by the fraud of third parties.
64 If the date of breach rule was applied to determine the loss the respondents suffered as a result of the adjournment costs order then it might be accepted that they suffered a loss of $250,000.
65 However, with respect to the primary judge, to award that sum without having regard to the fact the respondents only paid $100,000 to discharge their liability in respect of that costs order was to proceed without regard to the proper application of the compensatory principle - as applied in respect of each of the respondents' causes of action. It was not to the point that in consequence of the adjournment costs order the respondents immediately incurred a liability to Mr Beale ultimately quantified at $250,000. Applying the proposition that "fair" compensation takes into account what is fair to the defendant, as well as the plaintiff (see Narni at [29], above at [54]), and that a defendant is not liable to pay compensation which exceeds the loss suffered, the primary judge ought to have taken into consideration that the only amount the respondents actually paid to discharge the adjournment costs order was the sum of $100,000.
66 It is equally not to point if, as Mr McClintock submitted, the two costs orders could not be set off as a matter of law, when that, in fact, is what happened. As is apparent from the foregoing discussion, the Court must take material facts into account when assessing damages. The fact the respondents paid only $100,000 to discharge their liability under the adjournment costs order was a material fact the primary judge ought to have taken into account.
67 Accordingly, in my view, the primary judge erred in awarding the respondents $250,000 in respect of the adjournment costs claim.
68 The same reasoning applies to the claim for party-party costs. That was really an aspect of the respondents' pursuit of the trial costs order they secured against Mr Beale. If, as the evidence revealed, at the time of the trial in this Court, it was apparent the respondents could not recover the benefit of that order from the impecunious Mr Beale (which was the logic of his Honour's rejection (at [142]) of the respondents' claim to recover damages for their lost opportunity to recover the trial costs), then they have suffered no loss in the reduction in the amount sought in converting the bill proposed to give effect to that order into Queensland format. Or, to put it another way, the loss they suffered in this respect was not caused by the appellants' breaches of duty, but by Mr Beale's impecuniosity. Accordingly, in my view, the primary judge erred in awarding the respondents $22,694 in respect of the party-party costs claim.
69 On that basis the appellants should succeed on both grounds of appeal. It is not necessary to deal with the appellants' alternative submission in relation to ground 2 regarding whether Brisbane based solicitors would have charged on a time cost basis.
Cross-appeal - submissions
70 At the core of Mr McClintock's submissions on the cross-appeal as originally framed, was his reliance on the primary judge's finding (at [162]) that "there may well be solicitor/client costs paid by the plaintiffs to MBP which would be recoverable", and his criticism of his Honour's conclusion that, nevertheless, "the evidence does not enable me to quantify the amount which is payable." He contended that, as the first statement amounted to a finding that the respondents had suffered loss as a result of the non-disclosure, the primary judge erred in making the latter finding and, in any event, in not assessing damages "as best as he could".
71 Mr McClintock first submitted that the evidence supported the proposition that the appellants' failure to give full disclosure of the costs consequences of using Sydney solicitors "caused the [respondents'] loss". He pointed to Mr Garrett's evidence that translating the respondents' New South Wales formatted party-party costs bill into Queensland format led to a reduction in the claimable amount of $22,694. He contended that MAG2 was evidence to which the primary judge could refer in quantifying the respondents' loss. He argued that the differences between the assumptions on which MAG2 was based and the facts as found by the primary judge, were not sufficient to justify his Honour's complete failure to award any damages.
72 Secondly, Mr McClintock contended that the primary judge's statements to the effect that the respondents may "possibly" (at [125]) or "could well have" (at [160]) engaged Brisbane solicitors fell short of a definite finding that the respondents failed to establish one of the factual premises of MAG2.
73 Thirdly, Mr McClintock argued that as the only criticism the primary judge made of the preparation of MAG2 was that Mr Garrett erroneously included items unrelated to the litigation such as the FIRB and migration issues, damages could have been quantified by "the simple task" of extracting from Mr Garrett's assessment the items that could not be claimed. While Mr McClintock accepted that it would have been difficult for the primary judge to have excluded items from MAG2 which did not relate to the Queensland proceedings, he argued that it was incumbent upon his Honour to undertake that exercise.
74 Finally, Mr McClintock submitted that as the primary judge did not find his clients were "not worse off" by reason of the appellants' breach of retainer, his Honour ought to have taken a "broad rule of thumb approach" to the assessment of damages. On that basis he contended his Honour should either have awarded $117,823.16 (the bottom line of MAG2) or a significant proportion of that sum, "say $100,000".
75 Mr Kerr contended that the primary judge found that the respondents had not established the factual foundation for MAG2 and, accordingly, there was no evidence which could enable him to quantify the loss, if any, the respondents had suffered. He submitted that the primary judge's statements (at [125], [160]) were supported by the evidence and meant one of the factual assumptions for MAG2 had been rejected.
76 Secondly, Mr Kerr argued that the primary judge also properly rejected MAG2 because it was based on the unproven assumption that any Queensland solicitor the respondents might have engaged would charge on a task costed basis. He pointed to evidence he contended supported the primary judge's finding that it was more probable that Queensland solicitors would have charged on a time costed basis.
77 Finally, Mr Kerr submitted that there was no basis on which the Court could award the respondents either the amount set out in MAG2 or their alternative figure of $100,000. He contended the latter figure had been "merely plucked from thin air" and that "[a]ny other figure would be drawn from the same space."
78 Mr Kerr also relied on the appellants' notice of contention in the following two respects. First, he submitted that the primary judge's conclusion that the respondents had failed to establish any quantifiable loss flowing from the non-disclosure was also open on the basis the respondents failed to adduce evidence that, properly advised, they would have used Queensland rather than New South Wales solicitors. Secondly, he contended the primary judge ought to have found Mr Garrett could have prepared MAG2 on the basis of what Mackay solicitors would have charged on a time costed basis.