McFee v Reilly

McFee v Reilly - [2018] NSWCA 322 - NSWCA 2018 case summary — Zoe

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SUCCESSION - wills - rectification - professionally drafted will - obvious error in failing to specify beneficiary of testator's main asset - whether error by primary judge in rectifying will - challenge to rectification of will rejected Legislation Cited: Civil Liability Act 2002 (NSW), ss 5B, 5D, 35 Conveyancing Act 1919 (NSW), s 163B Real Property Act 1900 (NSW), s 42 Succession Act 2007 (NSW), s 27 Cases Cited: Baden v Société Générale pour Favoriser le Dévelopment du Commerce et de l'Industrie en France SA [1993] 1 WLR 509 Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18 Barnes v Addy (1874) LR 9 Ch App 244 Bird v Bird [2013] NSWCA 262; 11 ASTLR 225 Bunnings Group Ltd v Borg [2014] NSWCA 240 Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649; [2009] NSWCA 258 Cassegrain v Gerard Cassegrain & Co Pty Ltd (2015) 254 CLR 425; [2015] HCA 2 Clarke v Bruce Lance & Co [1988] 1 All ER 364; [1988] 1 WLR 881 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 Gibbons v Nelson (a firm) [2000] PNLR 734 Graham v Bonnycastle (2004) 243 DLR (4th) 617 Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 Hasler v Singtel Optus Pty Ltd; Curtis v Singtel Optus Pty Ltd; Singtel Optus Pty Ltd v Almad Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 Hawkins v Clayton (1988) 164 CLR 539; [1988] HCA 15 Hendriks v McGeoch [2008] NSWCA 53 Hill v Van Erp (1997) 188 CLR 159; [1997] HCA 9 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Lim v Cho [2018] NSWCA 145 Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 Reilly v Reilly [2017] NSWSC 1419 Robinson v Chief Constable of West Yorkshire Police [2018] AC 736; [2018] UKSC 4 Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121; [2000] HCA 18 Taheri v Vitek (2014) 87 NSWLR 403; [2014] NSWCA 209 Vagg v McPhee (2013) 85 NSWLR 154; [2013] NSWCA 29 White v Jones [1995] 2 AC 207; [1995] UKHL 5 Texts Cited: M Davies, Solicitors' Negligence and Liability (Oxford University Press, 2008) F M B Reynolds, Bowstead and Reynolds on Agency (18th ed, 2006; 21st ed, 2018, Sweet & Maxwell) S Walmsley et al, Professional Liability in Australia (3rd ed, Lawbook Co, 2016) Category: Principal judgment Parties: Margaret Frances McFee (first appellant, and a respondent to both cross-appeals) Carmel Anne Farrell (second appellant, and a respondent to both cross-appeals) Genevieve Claire Wallace (third appellant, and a respondent to both cross-appeals) Patricia Gai Reilly (fourth appellant, and a respondent to both cross-appeals) Dennis John McGroder (cross-appellant on first cross-appeal, and a respondent to the appeal and the second cross-appeal) Joseph Thomas Reilly (cross-appellant on second cross-appeal, and a respondent to the appeal and first cross-appeal) Margaret Lillian Reilly (second respondent to appeal, second cross-respondent on first cross-appeal, first cross-respondent on second cross-appeal), submitting Representation: Counsel: M Condon SC, P Sharp (appellants) R Sheldon SC, W McManus (Mr McGroder) G Curtin SC, M Pringle (Mr Reilly)

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[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] HEADNOTE [This headnote is not to be read as part of the judgment] Frank Reilly was a farmer conducting grazing activities on two properties near Forbes in central New South Wales: "Malaya" and "Boronga". With his wife Peg, he had five adult children: Margaret, Carmel, Genevieve, Tish and Joseph. In 2003, Frank engaged a solicitor (Mr Buckley) to prepare a will. The will gave all of his real and personal property, save for Boronga, to his four daughters as joint tenants. A separate clause purported to devise Boronga, but failed to nominate a devisee. In about 2008, and certainly from 2009 onwards, Frank became mentally incapable of managing his own affairs. Frank had given an enduring power of attorney exercisable jointly and severally by Peg and Joseph in 2000. Acting pursuant to the power of attorney, in 2009 Peg caused Boronga to be transferred to the four daughters as joint tenants for a stated consideration of $1, though its value at that time was assessed at $815,000. The daughters obtained title by registration. Peg took this course with the involvement of a solicitor, Mr Maccallum; no separate solicitor was engaged to represent the interests of the daughters or Frank. Mr Maccallum's retainer extended to estate planning, and prior to effecting the transfer of Boronga he requested and read Frank's 2003 will. Frank died in December 2012. In 2014, Joseph lodged caveats affecting Boronga, and commenced proceedings against his mother, his sisters and Mr Maccallum. The primary judge relevantly made orders: rectifying Frank's will to make Joseph the devisee of Boronga; upholding Joseph's claim that Boronga was held on trust for Frank's estate, requiring his sisters to transfer title to him; and reserving for future determination the quantum of any damages at common law to which Joseph might be entitled for his successful claim in negligence against Mr Maccallum. The sisters appealed, and Joseph and Mr Maccallum both cross-appealed. Peg entered a submitting appearance for the appeal. Held, by the Court, allowing the appeal in part and dismissing the cross-appeals:

There was no error in the primary judge's conclusion on rectification of Frank's will. The failure to nominate a devisee for Boronga was an obvious clerical error, and the facts amply supported the inference that Frank meant to leave Boronga to Joseph: at [1], [20], [190].
The primary judge did not err in failing to find that there was an agreement between Frank and Peg that Boronga would be transferred to their daughters when Frank could no longer farm the land: at [1], [40]-[44], [190].
Peg's transfer of Boronga to her daughters was in breach of her fiduciary duty to Frank. Mr Maccallum, who acted for both Peg and her daughters on the transfer, had knowledge of Peg's breach of duty, which knowledge was to be imputed to the daughters. The primary judge erred in holding, in the absence of a finding of "actual fraud, moral turpitude", that the daughters' indefeasible title was held on trust for Frank's estate. However, the daughters are still liable to account to Frank's estate for the value of the property obtained in breach of fiduciary duty to their knowledge: at [1], [104]-[109], [190]. Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22; Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6; Hasler v Singtel Optus Pty Ltd; Curtis v Singtel Optus Pty Ltd; Singtel Optus Pty Ltd v Almad Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266, applied.
The primary judge did not err in finding that Mr Maccallum owed a common law duty to Joseph to take reasonable care to see that Frank's testamentary wishes, as expressed in his 2003 will, were not frustrated by his attorney's breach of fiduciary duty: at [1], [134], [145], [149], [195]-[197]. Hill v Van Erp (1997) 188 CLR 159; [1997] HCA 9; Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18; Clarke v Bruce Lance & Co [1988] 1 All ER 364; [1988] 1 WLR 881; Vagg v McPhee (2013) 85 NSWLR 154; [2013] NSWCA 29; Graham v Bonnycastle (2004) 243 DLR (4th) 617, considered.
The primary judge did not err in finding that, by failing to critically examine Frank's testamentary intentions and their consistency with Peg's instructions, Mr Maccallum breached his duty of care owed to Joseph, and that that breach was causative of Joseph's loss, being the transfer to his sisters of Boronga, which he otherwise would have received under Frank's will: at [1], [161], [176], [178], [199], [203].

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Judgment

McCOLL JA: I have had the privilege of reading Leeming JA's reasons in draft. I agree with his Honour's reasons and the orders he proposes.
LEEMING JA: The parties to this litigation fall into four camps: the mother, her four daughters, her son, and a solicitor. It will be convenient, without intending any disrespect, to refer to the members of the Reilly family by the given names by which each was known. For many years, the mother, known as Peg (although christened Margaret Lillian), participated with her husband, Frank, in a partnership known as the FB & ML Reilly Partnership. The partnership conducted grazing activities on two rural properties near Forbes in central New South Wales, "Malaya" and "Boronga". Peg owned Malaya and Frank owned the parcels of land which comprised Boronga.
The critical events occurred in 2003 and 2009. In 2003, a solicitor (Mr Buckley) drafted a will for Frank, which Frank executed in the presence of him and his clerk. The will gave all of his real and personal property, save for Boronga, to his four daughters, as joint tenants. A separate clause addressed the gift of Boronga, but failed to indicate to whom it was given.
It was accepted that Frank was mentally incapable from at least 2009. In 2008 he suffered a serious accident and after a short stay in hospital, thereafter resided in a nursing home. It was said that the cost of that accommodation was in the order of $50,000 per year, and that while Frank owned Boronga, all of that cost had to be met without any government subsidy. Frank died in December 2012.
In June 2000, Frank had given an enduring power of attorney exercisable jointly and severally by Peg and their son Joseph. The instrument deleted the clause which otherwise would have conferred authority "to execute an assurance or other document, or do any other act, whereby a benefit is conferred" on the donees. Purportedly acting pursuant to that power, on 6 July 2009, Peg caused Boronga to be transferred to her four daughters Margaret, Carmel, Genevieve and Patricia (known as Tish), as joint tenants. (In what follows references to "Margaret" are to the daughter, not the mother who was known as Peg.) The stated consideration was $1. A formal market valuation dated 18 May 2009 valued the property at $815,000 (although the primary judge observed at [40] that that may have understated its value). Peg took that course with the involvement of Mr Duncan Maccallum, the employed solicitor of the sixth defendant, Mr Dennis McGroder. There is no issue as to Mr Maccallum acting within the scope of his employment, such that Mr McGroder is liable for his conduct, and rather than referring to the party (Mr McGroder) and the participant in events (Mr Maccallum) I shall mostly simply refer to "the solicitor" to denote whichever man is appropriate to the context.
In 2014, Joseph lodged caveats upon the various lots comprising Boronga, and later that year commenced proceedings against his mother, his four sisters and Mr McGroder. Relevantly for present purposes, he sought orders (a) rectifying Frank's will such that he was the devisee of Boronga, (b) for damages in negligence against his mother and sisters; (c) for equitable compensation for breach of fiduciary duty against his mother in which his sisters and Mr McGroder's employed solicitor had participated, and (d) for damages in negligence against Mr McGroder. Joseph had been in possession of Boronga, and by their cross-summons, his sisters sought possession of the property and the taking of accounts of a partnership. They also sought leave to apply out of time under the Succession Act 2007 (NSW) for provision for their maintenance, education and advancement in life.
The primary judge heard a trial over four days and delivered a judgment of 409 paragraphs: Reilly v Reilly [2017] NSWSC 1419. Broadly speaking, his Honour upheld Joseph's claims (although he found it unnecessary to determine whether Peg and her daughters were liable at law: see at [221]). He proposed some 25 orders, of which, relevantly: 1. orders 1-7 rectified Frank's will as sought by Joseph, and dealt with other ancillary matters; 2. orders 8-11 upheld Joseph's claim that Boronga was held on trust for the estate, and required his sisters to transfer title to him; 3. orders 12-16 upheld the claims of Margaret, Carmel, Genevieve and Tish for provision under the Succession Act, in amounts of $80,000, $275,000, $80,000 and $60,000 respectively, and charged those amounts upon Boronga and granted other ancillary relief; 4. orders 17-20 wound up a partnership conducted by Joseph and his sisters and ordered the taking of accounts; 5. orders 21 and 22 reserved for separate determination the questions of the amount of any equitable compensation to which Joseph (through Frank's deceased estate) might be entitled against Peg, and the quantum of any damages at common law he might be entitled to against Mr McGroder.
Following an opportunity for the parties to be heard as to their form, orders were made in substantially the terms proposed on 9 November 2017. His Honour delivered a separate judgment on costs. The two matters of quantification left unresolved (Joseph's claim in equity against Peg and at common law against Mr McGroder) have not yet been determined in light of the appeals.
All parties save Peg (who has filed a submitting appearance) have appealed or cross-appealed. It is best to deal with the procedural matters immediately. The sisters' appeal is as of right, from final orders declaring them constructive trustees and requiring the transfer of Boronga. However, their appeal was filed slightly out of time. Contrary to what was asserted on its face, the two month extension of time to commence an appeal is not engaged by serving an unfiled notice of intention to appeal within 28 days after the material date. However, no point was taken, and that extension (of some 6 days) should be granted.
The matters left outstanding by the primary judge mean that the other parties' cross-appeals are interlocutory. The solicitor's purports to be as of right, while Joseph's asserted that leave was granted on 18 June 2018. On that date, the Registrar made orders by consent for the filing of Joseph's cross-appeal (with which he failed to comply, although only by two days), but on no view was there a grant of leave. (The Registrar has no power to grant leave.) There should be grants of leave, given the sisters appeal as of right, and the fact that written and oral submissions proceeded on the basis that the appeals were properly before the Court. A further reason for mentioning this is that some of the unresolved issues affect the analysis of some of the issues (notably, relating to quantification) in this Court.
The issues which arise in this Court are fewer than those which arose at trial, although they are nonetheless numerous. What follows is not exhaustive, but indicates the main issues sufficiently to explain the structure of this judgment. 1. By their appeal, the sisters challenge the finding that they must transfer Boronga to the estate; that involves challenges to primary findings that the solicitor acted for them such that his knowledge of Peg's breach of fiduciary duty could be imputed to them. By amendment, they also challenge the finding that Peg breached her fiduciary duty as attorney. 2. The solicitor's cross-appeal contends that there was no duty owed by him to Joseph as a disappointed beneficiary under the (rectified) will, no breach of duty, and no causal connection between any breach and any loss suffered by Joseph. He also challenges the contingent finding by the primary judge at [391] that he ought to be held liable for 100% of any damages suffered by Joseph pursuant to s 35 of the Civil Liability Act 2002 (NSW). By amendment, he challenges the rectification of the will. 3. Joseph has filed a cross-appeal which may fairly be described as defensive. He contends that if he is not entitled to Boronga (as a result of the rectified will and the success of his claims against his mother and sisters), then there was error in the determination of provision under the Succession Act in favour of the sisters and in the finding that the estate had suffered no loss in the improvident transfer of Boronga to them.
The most efficient way of resolving the multiplicity of issues arising from the appeal and two cross-appeals is as follows. 1. First, to resolve the challenge to the rectification of Frank's will; this, unlike all other issues, concerns events in 2003, rather than years later in 2009 and thereafter. 2. Secondly, to resolve the other challenge to the judge's findings of primary fact, namely, whether there was an agreement between Peg and Frank that Frank would transfer Boronga to their daughters when he could no longer farm the land. 3. Thirdly, to resolve the remaining aspects of the sisters' challenge to their liability in equity to the estate. This includes addressing the submissions as to the breach of fiduciary duty by Peg and the imputation of the solicitor's knowledge to them, and also the effect of s 42 of the Real Property Act 1900 (NSW). 4. Fourthly, to resolve the common law liability of the solicitor in negligence to Joseph.
Rather than attempting to summarise the whole of the relevant evidence, findings and reasons of the primary judge at the outset, I shall do so insofar as is relevant to the particular issue at the same time as addressing and resolving the parties' submissions. But before doing so, it may be convenient to identify my conclusions resolving this multifaceted dispute. 1. First, I have rejected both challenges to the findings of primary fact. I would not interfere with the primary judge's decision to rectify Frank's will, nor with his conclusion that there was no agreement between Frank and Peg to transfer Boronga to the sisters. 2. Secondly, I agree with the primary judge that Peg's decision as Frank's attorney to give Boronga to their daughters breached the fiduciary duty she owed to Frank. 3. Thirdly, Peg's solicitor should have advised her against doing so, as an incident of his common law duty owed to Frank. 4. Fourthly, Mr Maccallum was also acting for the daughters. He was described on the conveyance as their solicitor, and he wrote on their behalf to the Office of State Revenue to seek a stamp duty exemption (he was also acting for them at this time in establishing two partnerships). His knowledge of Peg's breach of fiduciary duty is imputed to them for the purpose of their liability as recipients of property transferred in breach of fiduciary duty. 5. Fifthly, the sisters became registered proprietors of Boronga. By reason of the Real Property Act 1900 (NSW), that title may only be lost in cases of fraud within the meaning of s 42 of that Act, and, contrary to the reasons of the primary judge, that did not occur here. However, they are still required to account to the estate for the value of the property they were given in breach of fiduciary duty. 6. Sixthly, the solicitor owed a duty at common law to Joseph as a beneficiary under Frank's (rectified) will. The solicitor was retained for the purpose of estate planning, and requested and obtained possession of Frank's will. He knew that it was defective insofar as it dealt with Boronga. He also knew that Frank was incapable and would never make another valid will, and was assisting Peg to transfer Boronga to Joseph's sisters. In those circumstances, the solicitor owed a duty at common law to Joseph to take reasonable care to protect Frank's and Joseph's interests (which were wholly aligned), which in this case amounted to reasonable care to seeing that Frank's testamentary intentions were carried out and that his attorney did not breach her obligations to him. 7. Seventhly, the solicitor breached the duty he owed to Joseph by not drawing to Peg's attention the fact that the course she was proposing was contrary to Frank's intentions and best interests, and involved a breach of fiduciary duty on her part, absent which the transaction would not have proceeded and Joseph would have been entitled to Boronga under the will when Frank predeceased him. However, it has not as yet been determined whether Joseph has suffered any loss, or if so, its quantum.

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Rectification

Frank's will was professionally drafted, but on its face defective. The entirety of its substantive provisions was as follows: "THIS IS THE LAST WILL AND TESTAMENT of me FRANCIS BEDE REILLY of 'Boronga', Gunningbland in the State of New South Wales, Farmer. 1. I HEREBY REVOKE all Wills and Testamentary dispositions previously made by me and declare this to be my last Will and Testament. 2. I APPOINT my Wife MARGARET LILIAN REILLY Sole Executrix and Trustee of this my Will OR in the event of predeceasing me I APPOINT my Son JOSEPH THOMAS REILLY Executor and Trustee of this my Will. 3. I GIVE DEVISE AND BEQUEATH the whole of my farming property known as 'Boronga', Gunningbland together with my share of the stock and plant thereon. [sic] 4. ALL THE REST AND RESIDUE of my Estate both real and personal of whatever nature and wherever situated I GIVE DEVISE AND BEQUEATH to my Daughters MARGARET FRANCES McPHEE, CARMEL ANNE FARRELL, PATRICIA GAI CATTLE and GENEVIEVE CLARE WALLACE in equal shares as tenants in common."
Clause 3 is obviously incomplete. The primary judge addressed, as a threshold issue in his reasons, Joseph's claim that the will be rectified, on the basis that the omission of Joseph's name as a beneficiary was a clerical error. The primary judge relied on a handwritten note dated 18 March 2003 prepared by the solicitor who acted for Frank, which included "Leave 'Boronga' to Joseph Thomas Reilly together with 2/3 of your interest in your farming P'ship FB & ML Reilly": at [50]. The solicitor, Mr Buckley, was cross-examined and had no independent recollection of the conference at which he took instructions.
The primary judge considered that rectification should be ordered under s 27 of the Succession Act 2007 (NSW). No challenge was made to his reasons to extend time, which may accordingly be passed over. For the substantive exercise of the power, his Honour gave reasons at [65]-[67]: "The scheme of the will favours identification of [Joseph] as the intended beneficiary of clause 3. If [Joseph] were not the, or an, intended beneficiary of clause 3, the will would have made no provision for him whilst providing for his siblings as residuary beneficiaries in the subsequent, contrasting clause 4. The fact that the deceased named [Joseph] as his alternate executor is also consistent with an intention that [Joseph] be the recipient of a major asset, "Boronga". These considerations reinforce a finding, open on a reading of Mr Buckley's notes, that [Joseph] was intended by the deceased to be named in clause 3. [Joseph's] long term residence on 'Boronga' (as an adult, since 1995), his close personal association with farming operations on 'Boronga', his ownership (courtesy of his parents) of the adjoining property 'Malaya' and the subject matter of clause 3 (the deceased's 'farming property', together with his 'share of the stock and plant thereon') all point in the same direction, towards identification of [Joseph] as the intended beneficiary of the gift for which clause 3 imperfectly provides. No alternative thesis about the deceased's testamentary intentions fits so neatly with the text or context of the will."
Senior counsel for the solicitor declined to address rectification orally. He accepted that it was appropriate for the Court to rely merely upon what was said "in your rather short submissions on this point and not stray beyond it because you do not wish to elaborate it orally" (transcript, 27 September 2018, p 38). The solicitor addressed rectification at paragraphs 11-16 of his submissions. Aside from reiterating the need for the statutory power to rectify a will to be exercised with great care, the submission makes one point, which is based on the 8 days which passed between Mr Buckley's filenote and the date the will was executed by Frank and witnessed by Mr Buckley and his clerk. The first of Mr Buckley's cross-examiners elicited the following non-responsive speculation: Q. What I'm suggesting to you is that the difference between the typed words in the will and what is recorded in your file note, suggests that the file note was not the full and final instructions that you received? A. They were the instructions that I received. What - what I suspect happened, Mr Reilly didn't make an appointment to come and sign his will. I checked my diary, and I don't recall specifically, but I checked my diary, there's no appointment on 26 March. What I suspect has happened is that when someone turns up at the office to sign their will, one of my secretaries would give the will to the client to sit down quietly and read it. He may have given - said to the secretary I want to change that clause in the will. He never told me that directly, but that's, I think, is probably the only explanation. I mean, it's quite clear in the file notes what he - what he told me he wanted to do, and I suspect that he may have changed that on the day. Which may explain why the rest of it's missing."
The second cross-examiner then obtained these answers: "Q ... [A]s you've given evidence today already, you suspect that Mr Reilly said something to your secretary when he came to sign the will, and that she altered clause 3? A. That's a possible explanation. Q. I want to suggest to you that's the most likely occurrence? A. In my view, yes."
The solicitor's submissions then emphasised the unexplained absence from the witness box of Mr Buckley's secretary, and asserted that the primary judge failed to deal with this evidence.
I cannot accept the submission, for reasons which may be stated immediately. 1. First, the answers of Mr Buckley, although not objected to, were of no weight; they were the non-responsive and expressly speculative thoughts of a witness with no recollection of the events (that is not intended as a criticism of the witness). 2. Secondly, it is not the case that the primary judge did not deal with this evidence. His Honour expressly stated at [56] that Mr Buckley was "[i]nvited to speculate about how, and why, clause 3 of the deceased's will takes the form it does ... he could not exclude the possibility that there was an undocumented change of the deceased's instructions at or about the time the will was executed". 3. Thirdly, the submission fails to grapple with the basic problem posed by the will as executed. On no view can it have reflected Frank's instructions, or Mr Buckley's professional expertise, to draft a will which did not identify any devisee of Boronga. It is plain that there was a clerical error; the question then arises what should have been written had the error not been made. 4. Fourthly, the scenario as to which Mr Buckley speculated (a change of instructions implemented by a secretary) seems inherently implausible; one does not expect legal secretaries to make material changes to documents as instructed by a client. Further, his speculation does not address the fact that Mr Buckley apparently witnessed Frank executing the will in final form. Equally importantly, even if that is what occurred, it is clear that there has been a further clerical error, because (on this hypothesis) the devisee of Boronga was omitted from cl 3 of the will as amended. Hence the scenario still begs the question: what should have been written had the clerical error not been made? 5. Fifthly, the testator plainly intended to devise Boronga to someone. The only plausible candidates on the facts of this appeal are his children. If his son were to be wholly excluded in favour of his daughters, then there was no occasion for separate clauses 3 and 4; instead, the will would have provided for the entirety of his estate to his daughters. This point was raised by the judge with Mr Buckley, who agreed, and the further cross-examination took the matter no further. Further, there was no record of any instructions taken, let alone a memorandum or other formal record, addressing why it was that the testator chose to disinherit his only son. 6. Sixthly, Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 is of no assistance. The speculative answers of Mr Buckley are not to be converted into a basis capable of sustaining an inference. No inference can be drawn unless evidence has been given of facts "requiring an answer": see (for example) Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121; [2000] HCA 18 at [51] and Lim v Cho [2018] NSWCA 145 at [41]. Although Mr Buckley was permitted to make the statements reproduced above, they did not amount to a case which required the secretary to be called lest an inference be drawn as to her evidence.
Grounds 1(e) and 4(d) of Mr McGroder's amended notice of cross appeal are not made out.

[11]

The reasons of the primary judge

The primary judge was not satisfied that there had been an oral agreement between Frank and Peg to the effect that if Peg transferred Malaya to Joseph, then he would leave Boronga to their daughters: at [87]-[88]. Nor was his Honour satisfied that that was why Peg exercised the power of attorney to transfer Boronga to her daughters: at [89]. His Honour rejected a criticism that Peg had not been sufficiently confronted with this in cross-examination: at [90]-[91], and then made positive findings as to the reason for the transfer at [93]-[95] as follows: "In my assessment, more probably than not [Peg] effected the 2009 transfer primarily because of her strong, personal, subjective opinion that that is what 'fairness' between her children required she do, encouraged in that opinion by [Tish] who assisted her in instructions given to [Mr McGroder] (as solicitor for all parties to the transaction), with the acquiescence of each of [Margaret, Carmel and Genevieve] (each of whom, with [Tish], made a declaration under the Duties Act 1997 NSW in support of an application for exemption from stamp duty on the transfer). [Peg] denies location of her motivation in the possibility that a divestiture of 'Boronga' would, in time, assist her to have the deceased's ongoing nursing home fees ($50,000 per year which, she says, she personally paid) met by social security. That denial cannot be accepted in light of a file note dated 16 April 2009 prepared by [Mr McGroder's] employee as a contemporaneous record of instructions given to him by [Peg and Tish] as a preliminary to the 2009 transfer. There appears to have been a clear connection between the proposed transfer and a purpose of moving the deceased towards pension entitlements by reducing the value of assets in his name. Accordingly, I infer, a secondary motivation of [Peg] in effecting the 2009 transfer was to relieve herself of costs associated with the deceased's nursing home care. [Peg's] 2009 transfer of 'Boronga' to her daughters was not in accordance with the intentions of the deceased (testamentary or otherwise), and not for his benefit, but, essentially, to give immediate effect to [Peg's] personal preference for what should be done with the property and, possibly, at future time, to relieve her of costs associated with his maintenance."
The primary judge noted that the effect of s 163B of the Conveyancing Act 1919 (NSW) was that the power of attorney did not confer power to execute a document which would confer a benefit upon herself: at [110]. His Honour rejected the submission that insofar as the conveyance was executed for the purpose of possibly relieving Peg of the obligation to pay the costs of Frank's nursing home care, that did not of itself involve an absence of authority or breach of obligation. He did so on the basis that if Peg incurred expense personally, she was entitled to reimbursement, and the absence of any allegation that there was some unlawfulness, for example, in fraud of the revenue: at [121].
The primary judge considered that while Peg could, by the exercise of the power of attorney, make a gift of Frank's property to a third party, the power was qualified by a fiduciary obligation and an obligation to exercise the power bona fide and not for an improper, foreign purpose, such as would amount to a fraud on the power. His Honour regarded the transaction as both a fraud on the power and a breach by Peg of her fiduciary obligations: at [126]-[127]: "[Peg's] gift of 'Boronga' (the deceased's main asset) to their daughters, for the purpose of giving effect to her own personal view of what was fair as between her siblings, and not for the purpose of advancing the interests (or for the benefit) of the deceased, was both a fraud on the power conferred on her by the deceased's power of attorney and a breach of her fiduciary obligations to the deceased. Cf, Cohen v Cohen [2016] NSWSC 336 at [65]-[67]. The gift was a 'fraud on the power' because [Peg] exercised her power 'for a purpose, or with an intention, beyond the scope of or not justified by the instrument creating the power': Vatcher v Paull [1915] AC 372 at 378. It is not necessary for such a finding to characterise [Peg's] conduct as 'dishonest' or 'immoral'. It is sufficient to characterise it as beyond the power conferred upon her."
Accordingly, the primary judge concluded that Peg was liable to account to Frank's estate for that property, although she herself was not a recipient of it: at [130]-[132].
There were essentially two challenges made to the refusal by the primary judge to find that there had been an agreement between Frank and Peg. The first was that, in light of the way in which Peg had been cross-examined, it was not open to reject her testimonial evidence. The second was that appellable error had been made in declining to find an agreement. For sensible forensic reasons, the former was at the forefront of the submissions in this Court. I shall address each, in turn, below.

[12]

Whether a finding of no Agreement was available in light of the cross-examination

It was submitted by the daughters that the primary judge was not entitled to make findings adverse to Peg, her daughters and Mr Maccallum in light of the way in which they had been cross-examined (amended notice of appeal, ground 7). The submission was supported by the solicitor, especially in relation to the findings against Peg as to the absence of an agreement, which, so it was put, "amounted to a finding that Peg was lying" and which was elaborated as follows: "None of these reasons for Peg to give this evidence is obvious or patent and none is an obvious implication of the pleadings or evidence in the case. Peg could not have known that her evidence was being disputed on the basis of its being a rationalisation of what she had done. It was essential that Peg be given the opportunity to confront the suggestion that her conduct in 2009 was being rationalised by her as something she did pursuant to an agreement whereas the fact was that she was doing it for her own purposes or because she perceived the fairness of the situation required the transfer. Rationalisation could only be a shorthand term denoting the attempt to justify an unpalatable event on the basis of a state of affairs that did not exist but which, if they had existed, would make the conduct acceptable: that is a serious allegation with a moral imputation."
The primary judge rejected a similar submission made at trial, saying at [91] that: "Throughout the hearing there was never any doubt that the first defendant's assertion of such an entitlement was under challenge. A cross examiner of the first defendant was not obliged to create sympathy in her favour by a robust confrontation. There was nothing unfair in a more subtle cross examination. The first defendant, represented by competent counsel, was on notice that her evidence was under challenge. The so-called "rule" in Browne v Dunn (1894) 6 R 67 requires no more: Allied Pastoral Holdings Pty Limited v Commissioner of Taxation [1983] 1 NSWLR 1."
It was not put that his Honour's statement of principle in that paragraph was incorrect. Nor was there, with respect, sufficient attempt to grapple with the subtleties of what his Honour was saying. The transcript records counsel for Joseph cross-examining Peg as follows (by reference to a solicitor's letter dated 21 July 2014): Q. There is no mention in there of any agreement between you and Frank that you gave Malaya to Joe as Frank was to give the Boronga to the girls? A. It was an oral agreement between Frank and me with the aim of being fair to all the children."
It is very much to be borne in mind that Peg was born in February 1929 and was 87 when she was cross-examined in August 2016. The primary judge saw, far more vividly than could be conveyed by any transcript, how she responded to questioning. The transcript does make it plain that Peg could give firm evidence about things that were demonstrably incorrect (in light of the contemporaneous documents); her evidence that she doubted anyone went with her to see Mr Maccallum at page 84 is an example. It is also plain, by his interventions, that the primary judge was alert to the need to draw aspects of her evidence to the forefront with a view to achieving a fair trial. An example of this turning on the agreement is found towards the conclusion of her cross-examination by Joseph, where the primary judge took her to the discussion to which she deposed giving rise to an agreement between Peg and Frank as to Joseph receiving Malaya and the daughters receiving Boronga, and established, with non-leading questions, that she had other real and personal property that was not part of the conversation she said she had had with Frank about being "fair" to the children.
The primary judge was thus demonstrably attuned to the need for Peg fairly to be confronted with the case, both during the hearing and in his reasons. And what is fair in cross-examination turns in part upon the personal characteristics of the witness. Not lightly would I accept that, despite what his Honour did during the hearing and said in his judgment, the findings which were made were unavailable. It seems to me that this is an area where an appellate court ought to be especially deferential to the primary judge, and even more so a primary judge who was highly familiar with dealing with elderly witnesses and who was evidently alert to ensure that curial processes were administered fairly. In cases such as this, the transcript is apt to provide a more than ordinarily imperfect record of what occurred in the court. The pauses, hesitations and intonations of any witness, but perhaps especially an elderly witness, bear upon the probative value of the testimony and what needs to be put in order to achieve a fair trial, but are seldom conveyed by the transcript.

[13]

Was there an agreement?

There was no contemporaneous documentation recording the "agreement" to which Peg deposed. Indeed, if anything the contemporaneous documents told against such an agreement.
"Malaya" was transferred to Joseph in 2000. Peg's solicitor at that time, Mr Burke, wrote to Joseph, copying in Peg, in April 2000 saying that the intergenerational stamp duty waiver would apply and that: "You have been working on 'Malaya' for many years, whilst not drawing any partnership shares/share farming nor labour fee you would still be entitled to the stamp duty waiver if you intend to continue farming and grazing use on 'Malaya'."
Peg agreed in cross-examination that she did not correct her solicitor's statement in that letter. Against this, it was said that the statement was directed to stamp duty, and there was no occasion for her to do so.
The fact remains that the claimed oral agreement depended upon an acceptance of the testimonial evidence of Peg. The gravamen of the solicitor's submissions (which were the most elaborate on this issue) was that the finding should not have been made having regard to the way the trial was run; this has been addressed above.
It was also put by the solicitor (once again in writing; senior counsel advised that he did not wish to elaborate this aspect orally: transcript, 27 September 2018, p 26.16) that: 1. Peg gave unchallenged evidence that the reason for her instructions to Mr Maccallum was the agreement; 2. Peg remained on civil terms with Joseph at all times, and there was no underlying antipathy with him; 3. Consistently with the "agreement", Joseph in fact received Malaya, Peg received nothing and the transfer only occurred once Frank became incapable of farming the property.
Those matters were all said to be consistent with the agreement. It was also submitted that the primary judge "failed to grapple with" them.
I do not accept these submissions. First, in response to the first point, while Peg's evidence supported the existence of an Agreement, it did in a real sense sit uneasily with the testimonial evidence of each of the sisters (considered in more detail below) to the effect that each was told by Peg that the transfer of Boronga to them was because of Peg's view of what was "fair". If ever there was an occasion for Peg to tell her daughters that the reason for the transfer of a share of the property to them was because of what she had agreed with their father many years before, that was the time to do so. Further on this point, in the case of Tish, weight should also be given to an email she wrote to Mr Maccallum on 24 April 2009 (addressed further below, in connection with Mr Maccallum obtaining Frank's will). She said: "I do know Peg has nominated the four girls (no Joe) to receive her estate as Joe has already had 'Malaya' (800 acres) signed over to him." Although that statement might on its face appear to be consistent with the "Agreement" for which the appellants contended, it better fits Tish's understanding that Peg was acting in accordance with her own views as to what was fair.
Secondly, the second and third points lack force. It was not disputed that Peg remained on civil terms with Joseph, that Joseph received Malaya and the transfer of Boronga only occurred once Frank became incapable. But while those matters are consistent with an agreement between Peg and Frank, they are also consistent with Peg forming the view which she in fact told her daughters, namely, that she, Peg, thought that it was fair for the daughters to receive Boronga.
Thirdly, I entirely reject the criticism that the primary judge failed to "grapple" with this evidence (as to which see the decisions collected in Bunnings Group Ltd v Borg [2014] NSWCA 240 at [36]). The reasons of the primary judge disclose a close attention to the objective facts, inherent probabilities and testimonial evidence. It suffices to reproduce [87]-[89] of his Honour's reasons: "I am not satisfied that there was ever an agreement, or any informal arrangement, between the deceased and [Peg] to the effect that, if [Peg] transferred 'Malaya' to [Joseph], the deceased would leave 'Boronga' to the girls. That is because: (a) there is no contemporaneous record of any agreement between the deceased and [Peg] of the type to which [Peg] deposes. (b) a letter dated 10 April 2000 written by [Peg's] then solicitor to [Joseph] and copied to her (Exhibit P1) was couched in terms that described "a possible intergenerational transfer of [Peg's] farm 'Malaya' to [Joseph]" as a reward for faithful service on the farm, and as a means of continuing the family farming partnership, without any suggestion that the proposed transfer was part of an arrangement about the future disposition of "Boronga". (c) that letter was written shortly before the deceased executed his power of attorney in favour of [Joseph] and [Peg] jointly and severally (on 7 June 2000) and [Peg] executed the memorandum of transfer (later registered as Dealing No. 6899811Q) that transferred 'Malaya' to [Joseph]. The memorandum of transfer bears the date 26 June 2000, accompanied by a reference to the date 16 June 2000 under [Joseph's] signature as transferee. It was registered on or about 7 July 2000. (d) the terms in which the letter dated 10 April 2000 were written suggest that the parties were not unmindful of taxation implications of a transfer of 'Malaya' to [Joseph], an observation reinforced by the fact that the memorandum of transfer in favour of [Joseph] is marked 'No [Stamp] Duty payable'. In the absence of any contemporaneous written record of the agreement that [Peg] says she had with the deceased, the fact that there were, or may have been, economic imperatives for the transfer of the land to [Joseph] is consistent with, if not confirmation of, the absence of the alleged agreement in fact. (e) between 1997 and 2003 (in the lead up to the deceased's execution of his will dated 26 March 2003) a neighbour with an expressed interest in acquiring 'Boronga' from the deceased (Peter Thomas Reilly, a nephew of the deceased and [Peg]) had several conversations with [Peg] in which: (i) he asked [Peg] what she thought the deceased would do with 'Boronga'; and (ii) she replied with words to the effect, 'I don't care what [the deceased] does with the property, so long as he does not leave it to me'. (f) at a time in about 2003 when the deceased had declared to his neighbour an intention to see Mr Buckley about making a will, the neighbour had with [Peg] a similar conversation about the deceased's intentions in which, the neighbour recalls, [Peg] said words to the effect that '[the deceased] can do whatever he likes with 'Boronga', so long as he doesn't leave it to me'. (g) [Joseph] deposes to having heard conversations between his parents to the same effect, in about March 2003, when he was living with them in the homestead on 'Boronga'. (h) although the deceased's testamentary intentions as manifested in 2003 (in Mr Buckley's notes dated 18 March 2003 and, as I have found, the will dated 26 March 2003) need to be approached with caution upon any independent assessment of the evidence and intentions of [Peg], the fact that the deceased evidently felt at liberty to leave 'Boronga' to [Joseph] rather than to his daughters is not wholly irrelevant in a family in which there had long been, and there continued to be, close cooperation in the conduct of a family farming business. (i) the evidence is consistent with the absence of any agreement between the deceased and [Peg] of the type alleged by [Peg], and with the development in [Peg] of a strong, subjective opinion (perhaps encouraged by representations of [Tish], who aided her in effecting a transfer of "Boronga" to the daughters in 2009) that fairness between siblings justified, if not mandated, a transfer of 'Boronga' to the girls. (j) when instructing the [solicitor's] firm to effect the transfer of 'Boronga' to her daughters, [Peg] did not tell the [solicitor], or his employee, of the alleged agreement between the deceased and herself. (k) she did not tell any of her children of the alleged agreement at that time. (l) if [Peg's] evidence is accepted, her husband (with whom she had a close and loving relationship) misled her in March 2003 when, on her evidence, in anticipation of making his will later that month, he expressly affirmed to her an intention to leave 'Boronga' to their daughters, an intention not subsequently disclaimed. In disbelieving [Peg's] evidence about the existence of an agreement between the deceased and herself, it is not necessary to go so far as to find that she is a person of doubtful credit. It is sufficient to note, as McLelland CJ in Eq did in Watson v Foxman (1995) 49 NSWLR 315 at 318-319, the fallibility of human memory and the capacity of the human mind for ex poste rationalisation of events long since passed. To this might be added the Court's customary caution (often signposted with a reference to Plunkett v Bull (1915) 19 CLR 544 at 548-549) in the assessment of evidence of oral statements attributed to a deceased person. Just as I am not satisfied that there was ever any agreement between the deceased and [Peg] to the effect that, if [Peg] transferred 'Malaya' to [Joseph], the deceased would leave 'Boronga' to their daughters, so I am not satisfied that [Peg], in 2009, effected a transfer of 'Boronga' to the daughters in reliance upon (or even by reference to) such an agreement."
Contrary to the solicitor's written submissions, the primary judge self-evidently "grappled" with the testimonial evidence from Peg as to the agreement; the matters considered at length above call that evidence into question and support his conclusion. This is, with respect, far distant from the cases where the fact-finding process has been found to have miscarried. The decision which is perhaps most commonly cited in support of that proposition is Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 in which it was said at [66] that "[w]here it is apparent from a judgment that no analysis was made of evidence competing with evidence apparently accepted and no explanation is given in the judgment for rejecting it, it is apparent that the process of fact finding miscarried." That is not this case.
I do not consider that any proper basis has been made out to overturn the findings of primary fact made by the primary judge.

[15]

Breach of fiduciary duty by Peg

Peg as the donee of Frank's enduring power of attorney owed a fiduciary obligation to Frank. Insofar as she purported to exercise her power to dispose of Frank's assets in a way which she considered "fair", she was in a position of conflict between herself and Frank. She was exercising the power in order to give effect to her own views, which was not for the purpose of advancing Frank's interests.
There was a substantial body of evidence to that effect. Margaret gave evidence in her affidavit that her mother had a "rare" conversation with her in which she said: "I need to formalise the continued operation of the family farm. I don't want to sell at this point. The easiest way is to have something on paper and properly share things between you kids. Joe has already received Malaya."
Carmel gave evidence that she had a conversation with her mother: "Malaya was transferred to Joe. Boronga can be transferred to you girls. Joe might be a bit upset but I feel the decision is fair."
Genevieve likewise gave evidence that her mother has said: "I intend to transfer Boronga to the girls because I want everything to be fair."
Tish's evidence was to the same effect. She said she was present when her mother told Joseph that she was going to transfer Boronga to the girls, and when asked why, her mother had said: "Because it is fair. If you get Boronga you will get everything."
Contrary to a submission advanced by the sisters, no cross-examination was necessary in order for them to be found to have knowledge that would indicate to an honest and reasonable person that Peg, rather than trying to act in the best interests of Frank, was using the power of attorney in order to achieve what she considered to be a "fair" disposition of his property. To anticipate what follows in these reasons, it is trite that in order for a third party who receives trust property to be liable under the "first limb" of Barnes v Addy, it is sufficient for any of the first four, but not the fifth, categories of knowledge in Baden v Société Générale pour Favoriser le Dévelopment du Commerce et de l'Industrie en France SA [1993] 1 WLR 509 at 575-576, 582 to be made out. The fourth category is knowledge of circumstances which would indicate the facts to an honest and reasonable person. This was what the primary judge found at [215]: "On any view of the 'knowledge' required to attract the operation of the first limb of Barnes v Addy (as summarised in Simmons v NSW Trustee and Guardian [2014] NSWCA 405 at [90]), [Joseph's] sisters acquired title to 'Boronga' (on registration of the memorandum of transfer dated 1 July 2009 on 2 December 2009) with notice of [Peg's] breach of the fiduciary obligations she owed to the deceased. On a view of the facts most generous to them, they had knowledge of facts (including the incapacity of their father, their mother's deployment of her appointment as an enduring attorney, the improvident nature of the transaction and the dominant purpose of their mother in effecting a 'fair' intergenerational transfer of property) which, to an honest and reasonable person, would have indicated the existence of fiduciary obligations owed by [Peg] to the deceased, and of a misapplication of the deceased's property upon a purported exercise by [Peg] of her powers as his enduring attorney. They must be taken to have received title to 'Boronga' on notice of [Peg's] breach of her fiduciary obligations."
I agree with his Honour's analysis. It was never in dispute that the sisters knew that they were receiving title to Boronga for nominal consideration, nor that their father was incapable, nor that their mother was exercising an enduring power of attorney, and all four gave evidence that they were told by her that she was doing so because of her own view of what was "fair".
But in any event, it seems that these submissions by the sisters preceded Joseph's unequivocal concession that his case based on knowledge turned on the imputation to the sisters of the solicitor's knowledge (see the next section below).
As reproduced above, the primary judge concluded at [126]-[127] that Peg's exercise of the power was a breach of fiduciary duty and a fraud on the power. In the circumstances of this case, and especially where Peg was acting with the assistance of a solicitor, there is no necessary reason for moral opprobrium attaching to her conduct, its characterisation in equity notwithstanding. All that matters for the purpose of the litigation in this Court is whether Peg's conduct was (a) a breach of fiduciary duty sufficient to engage liability under the first limb of Barnes v Addy and (b) conduct which a competent solicitor in Mr Maccallum's position should have advised against and declined to participate in.
The solicitor submitted that there was no breach of duty by Peg for no fewer than five reasons: "(a) She was acting in accordance with the oral agreement with Frank; (b) She was acting in accordance with oral wishes expressed by Frank after the 26 March 2003 will; (c) Frank's 26 March 2003 will should not have been rectified, and accordingly Joe should never have been treated as a beneficiary of Boronga; (d) The transfer was at least partially and primarily to benefit Frank; and/or (e) Even if (a) and (c) above are not correct, the law permitted Peg as attorney to effect the transfer, in circumstances where she was receiving no benefit herself."
I have already rejected the solicitor's challenge to the factual finding of no oral agreement between Peg and Frank, and to the rectification ordered by the primary judge; cf reasons (a) and (c) above.
Reason (b) turned on other evidence that two of the sisters were told by Frank in 2007 and 2008 that Joseph would not be taking over Boronga: "That bloody Joe. He is a lazy little bastard. He is not going to get his hands on this place", and "Joe is not taking this place over. I have worked pick and shovel to get this place." It was said that the primary judge did not consider that evidence.
Reason (d) was that the transfer benefited Frank because it would facilitate the receipt of a pension, and enable a reduction in the costs of Frank's nursing home care, which ultimately was a liability for which the person who bore it would be entitled to an indemnity from Frank's assets. Mr Sheldon SC, who appeared for the solicitor in this Court but not at trial, emphasised that it was sufficient for there to be some benefit to Frank.
Reason (e) was aligned with reason (d). It was that the transfer reflected a "good faith assessment of what was in Frank's interests". It was said that Frank no longer had a need to use Boronga. It was also said, by reference to Taheri v Vitek (2014) 87 NSWLR 403; [2014] NSWCA 209 at [111] and [130] that an attorney might properly effect a transaction which did not directly benefit the principal, and that "[t]here is simply no doubt that the transfer was of some benefit to Frank so that, a fortiori, the transfer was within power and proper".
These reasons are unpersuasive. Giving away substantial property in order to obtain a pension and a rebate on nursing home fees is scarcely to the benefit of the principal; Frank would have been much better off in money terms if the property was sold for its fair value (which seems to have been at least $815,000). There was in truth no benefit to Frank in the transaction by which his attorney gave away one of his most substantial assets.
It is also far from clear that there was no benefit to Peg. The evidence does not seem to establish how payments for Frank's accommodation were made (I have found none, and the Court was told when this point was raised that there was none). In this Court, submissions proceeded on the basis that the two most likely candidates were funds in Frank's and Peg's joint bank account, or funds in Peg's personal account. Insofar as Peg did not seek reimbursement from Frank's estate (and there seems to be no evidence that she did), then the transaction was in a practical sense to the benefit of Peg, contrary to the restrictions upon the power of attorney. However, it is unnecessary to express a concluded view whether that sufficed to breach the condition to which the power was subject; it suffices to reject the factual premise of reason (d).
The evidence of Frank's animosity to his only son was evidence of statements made in 2008 or 2009, around the time of his mental decline. But in any event, it did not authorise Peg to give away Frank's property to his other children. Fundamentally, it was and is clear on the findings of the primary judge, not challenged in this Court and reflecting the evidence of the sisters, that Peg was in her capacity as Frank's attorney seeking to do what she thought was in the best interests of the family, rather than what was in Frank's interest. That did not permit her to cause Frank to enter into an improvident transaction, giving away his most substantial asset.
Reason (e) is simply wrong. It does not matter if an attorney receives no benefit if the power is exercised by the attorney in a position of conflict. Suppose Peg genuinely believed that the best thing to do with Boronga was to give it to a charity supporting research for dementia, or to a religious charity. Despite the absence of any benefit to herself, to act on her own views of how the property might best be deployed would not prevent such an exercise of power being in breach of her fiduciary duty as attorney.
True it is that if the position is analysed, colloquially, from the perspective to "the family", there was an overall benefit, insofar as Boronga was retained by family members while Frank (so it seems) became entitled after five years to certain social security benefits; that is slightly different from the philanthropic examples mentioned above. That there was no disadvantage to Frank, and an overall benefit to "the family" may very well be how all of the defendants saw the position at the time. There are however at least two problems with applying this approach to legal analysis. The first is that "[t]he members of the family are separate individuals", as the High Court said in a not unrelated context in Farah Constructions Pty Ltd v Say-Dee Pty Ltd at [128]. The second is that Frank was incapable, and although his autonomy was impaired, his interest in his own assets was not to be disregarded. It is no answer to say that "Frank could no longer use Boronga". To the contrary, especially given that Frank could no longer look after his own interests, care had to be taken when his attorney caused him to enter into an improvident transaction, such as that by which he gave his largest asset to his daughters.

[16]

The knowledge of Mr Maccallum

The primary judge did not express a concluded view as to whether Peg and her daughters saw Frank's will and the power of attorney: at [205]. However, his Honour was not required to make a firm finding on those issues, because it was quite plain that Mr Maccallum saw and considered both. The evidence relating to this was as follows.
At the first conference, at which Peg, Tish and Mr Maccallum attended, the latter's file notes corroborated his evidence that Peg and/or Tish said the following: "We are here to instruct you to arrange a transfer of a farm about 30 kilometres from Forbes. It is in Dad's name. Last September he became ill. He is now 'off the air' and in the Mater Hospital. I have a Power of Attorney for my husband with my son Joe. Because of financials we are paying $50,000.00 a year to the Mater. The family has spent the last six months discussing what to do. We have to pay for Frank for five years. The kids in the family are Joe and the four girls. It has been resolved by the family to arrange transfers to the kids. Joe was given 'Malaya' about three to four years ago. 'Malaya' is about 800 acres and was owned by Peg. The other farm 'Boronga' which is about 1200 acres is to be transferred into the names of the girls. ..."
Mr Maccallum was also instructed that Frank's other assets were to be transferred to all five children. A note the following week records his advice that there be created two separate partnerships, one with the four sisters, the other with all five siblings ("Perhaps two partnerships is my suggestion one for the land one for the other assets").
By email dated 23 April 2009, Mr Maccallum asked Tish for a list of assets, referred to the possibility that Peg might have to do a new will, and requested "copies of Peg's and Frank's will to be delivered so we can advise accordingly". Tish responded later that morning: "I will have the wills delivered to your office, but Peg & I [are] curious as to why this is required. Can you let me know?"
Mr Maccallum responded on 24 April 2009: "We have requested copies of Frank and Pegs [sic] wills for our records as we are implementing significant intergenerational dispositions which ordinarily happen only when someone passes on. From your instructions to date your parents [sic] estate planning appears to be well organised and uncontroversial. It might well be that what we are instructed to do now would happen anyway if both Frank and Peg passed on before completing the work. In these circumstances no changes to the wills may be necessary however it would be unprofessional for us to make any assumptions."
Tish responded: "Peter Buckley holds Frank's will in Parkes. Are you able to request this from him? I don't think I can make that call given my conflict of interest (???) and Peg would prefer you do it. Peg will drop hers in this week (hers is hand written and at the farm so will depend on when she gets out there next). I do know Peg has nominated the four girls (no Joe) to receive her estate as Joe has already had 'Malaya' (800 acres) signed over to him."
The will was provided under cover of letter dated 6 May 2009 from Mr Buckley's office. Mr Maccallum accepted that he "had noticed that there was an error in the will". Mr Maccallum also received, under cover of the same letter, the power of attorney.
On 20 May 2009, Mr Maccallum forwarded draft partnership deeds, for the creation of the Shadrack Partnership and the Boronga Partnership, to Tish for distribution by her. The four sisters were the partners of the Boronga Partnership; the five siblings were the partners of the Shadrack Partnership. The assets of the Boronga Partnership included "the right of grazing and farming on the property known as 'Boronga' or any other lands acquired by the partnership or any member thereof ..." In contrast, assets of the the Shadrack Partnership were to be investments.
Mr Maccallum therefore knew: 1. Frank was mentally incapable; 2. his retainer extended to estate planning, for which reason he requested and gained possession of Frank's will; 3. Frank's will had a clause devoted to Boronga but did not identify to whom it was to be devised, and by a separate clause left the balance of his estate to his four daughters; 4. Frank's attorney was instructing him to transfer Boronga to the four daughters, in circumstances where Frank was incapable and the attorney instructed that "the family" had agreed to that course; 5. simultaneously, the partnership of Frank and Peg which had conducted the farming business was to be replaced by two separate partnerships, involving four and five of the siblings respectively, with Joseph not being a member of the partnership which was to conduct the farming business.
The case in this Court was argued on the basis that the requisite knowledge on the part of the sisters in order to found first limb Barnes v Addy liability turned on their being imputed with the knowledge of Mr Maccallum. This was made clear, with commendable candour, by senior counsel for Joseph (who had not appeared at trial): "That's the only way my clients succeed on the knowledge point. There's no knowledge of the contents of Frank's Will that the daughters had; we accept that. The knowledge was Mr Maccallum's. The knowledge of misapplication was also Mr Maccallum's but because he was their solicitor, his knowledge per Sargent's case is imputed to the daughters. That's how the judge reasoned, and we say that the primary judge was correct to do so. Put another way, against me, if the retainer fails, our case fails."
It was put that Mr Maccallum's knowledge was insufficient to amount to Barnes v Addy liability: "Mr Maccallum's position was it didn't matter what the will said, this was an inter vivos transaction under a power of attorney, the will had been made several years beforehand, and that was his subjective belief; that was the evidence he gave about that proposition. Again, he wasn't tested about that proposition. It might have been right, it might have been wrong as a matter of law, it may have informed his duties as an attorney, it may not have, but it was never put to him that that was wrong or that he wilfully closed his eyes to the obvious or any other strand of knowledge in categories one to four of the Baden case."
True it is that Mr Maccallum was not cross-examined in such a way as to suggest knowledge or belief of impropriety, or Nelsonian blindness to a breach of duty. But it is sufficient if (a) Mr Maccallum had knowledge of circumstances which would indicate a breach of fiduciary duty to an honest and reasonable person, and (b) that knowledge was to be imputed to the sisters.
It was said by the sisters that: "A fundamental problem with how the case was conducted below by counsel then appearing for the plaintiff is it was never put to my clients or, indeed, Mr Maccallum that they had knowledge that made them liable in equity. There was no cross-examination at all about that particular issue."
Reliance was placed on this Court's decision in Bird v Bird [2013] NSWCA 262; 11 ASTLR 225, where there was some factual similarity. The two sons Warrick and Rodney were alleged to have received property obtained in breach of fiduciary duty by their mother who was the donee of a power of attorney (however, the sons had also been appointed attorneys, and had actual knowledge of the terms of the instrument). Macfarlan JA, with whom Beazley P and Ward JA agreed, said at [45]: "Whilst Warrick and Rodney were on notice through the pleadings that such awareness was alleged against them, the primary judge could not in my view have made a finding to that effect without the means by which they became aware being put to them in cross-examination. It needed to be put to them that they read the part of the document that had been deleted, understood that if it had not been deleted it would have conferred authority on the attorneys to use the principal's money for their own purposes, that its deletion resulted in there being no such authority and that in the case of Warrick who said that he read the reference in the documents to 'limitations' being 'nil' that that reference did not mean that the attorneys had unlimited authority. In the absence of this occurring and giving rise to evidence capable of supporting Deborah's case, a realistic inference that the attorneys did not read and appreciate the significance of the deleted clause remained, with Deborah not having established the contrary on the balance of probabilities."
However, that paragraph needs to be read with [43], which demonstrates that the trial was conducted on a particular basis: "[The plaintiff's] case at first instance was not put on the basis that Warrick and Rodney should have realised that as a matter of general law and common sense an agent cannot use the principal's funds for the agent's own purposes unless specifically authorised to do so. Rather, it was put on the basis that the Powers of Attorney denied the attorneys such authority and that Warrick and Rodney read those documents, including the crossed out clause otherwise conferring authority on the attorneys to use Percy's funds for their own benefit."
Bird v Bird is not applicable, given that in the present case, the state of mind is that of a solicitor, with reliance being placed on the fourth Baden category of knowledge. Rather, the matters set out above amount to knowledge of circumstances which would indicate to an honest and reasonable person a breach of fiduciary duty by Peg. Mr Maccallum must have known that Peg was a fiduciary, who was purporting to exercise a power of attorney giving away her principal's asset. An honest and reasonable man would have known that, notwithstanding his instructions that "the family" all agreed to what was proposed, it was not in Frank's best interests that that occur, and there was a conflict between Peg's intentions and Frank's best interests. It was not necessary to put any of this to Mr Maccallum in cross-examination. (The position would have been different if reliance had been placed upon, say, a studied refusal by Mr Maccallum to acknowledge the obvious.)

[17]

Should the knowledge of Mr Maccallum be imputed to the sisters?

Under the heading "The Role of the Sixth Defendant" the primary judge commenced a section dealing with the solicitor's retainer with the sentence (at [167]): "An important, if not critical allegation by the plaintiff in the statement of claim is that the sixth defendant acted as solicitor for 'all parties' to the transfer of 'Boronga'."
The reason it was important is that, as the primary judge recorded at [170], Joseph invited the Court to impute to Peg and his sisters the knowledge of the solicitor. The primary judge addressed this in some detail at [167]ff. His Honour addressed the following matters: 1. the fact that the employed solicitor Mr Maccallum had physical possession of the power of attorney and Frank's will from around 6 May 2009; 2. the fact that Mr Maccallum had authority to perform work delegated to him by Mr McGroder (the latter personally played no substantial role in the transaction); 3. although Mr Maccallum said that he considered Peg to be his client, and that Tish was assisting her, the primary judge found at [173] that: "More probably, he did not really turn his mind to the identity of his client, or clients, in any critical fashion. Incidental statements made by him in correspondence suggest that, without critical analysis or reflection, he regarded the [solicitor's] firm as simply acting for 'the [Reilly] family'."
There was no written form of costs agreement, although the primary judge observed at [181] that there was an exchange of correspondence in which a costs estimate was provided for "estate planning". The primary judge said at [181] that: "[Peg] and [Tish] held out to [Mr McGroder] (via his employee) that they would [sic] were instructing him on behalf of the Reilly family but, in relation to the transfer of 'Boronga', they were doing so only on behalf of themselves and [Margaret, Carmel and Genevieve]."
The primary judge was acutely concerned at the simplification involved in labelling a person as a "client", explaining at [174]-[176] that: "Identification of a solicitor's 'client' can, and in these proceedings does, involve layers of complexity. Care needs to be taken not to be captured by a label ('client') capable of obscuring a correct understanding of relationships underlying use of the label. The [solicitor] had no personal contact with the deceased, whose mental incapacity precluded any personal conduct of business. Mr Maccallum took his core instructions from [Peg] who, purporting to act as attorney for the deceased, advanced her own interests and those of her daughters in disregard of the interests of the deceased, her putative principal. Mr Maccallum's failure to test his instructions in a critical examination of the identity of his firm's 'client' lies at the heart of the present proceedings. By acting for the first defendant in two capacities (one personal, the other representative), as he did, without confronting an inherent ambiguity in her instructions, Mr Maccallum exposed the defendants to the dangers of fiduciary business tainted by conflicts of duty and interest."
The primary judge found that although the solicitor purported to act for Frank, he did not in fact act either for Frank or for Joseph: at [177]. The primary judge placed some weight upon the documents in fact executed with the assistance of Mr Maccallum, saying at [182]: "In the contract of sale of land (dated 1 July 2009) prepared by [Mr McGroder] as an integral part of the documentation leading to transfer of 'Boronga' to [Joseph's] sisters, [Mr McGroder's] firm was named as solicitor for the 'vendor' (the deceased, purportedly represented by [Peg] as his attorney) and as solicitor for the 'purchasers' ([Joseph's] sisters). The firm acted on both sides of the conveyancing transaction from go to whoa. They attended to the provision of advice to each of the parties to the transaction (excluding the deceased, with whom they had no personal contact); to the preparation of the contract, the memorandum of transfer and applications by the purchasers for a stamp duty exemption; to the issue of replacement title deeds when those held by the deceased could not be located; to registration of the memorandum of transfer; and to the service of 'notice of sale' on government authorities."
The primary judge then addressed at a level of detail the communications between Mr Maccallum and the various members of the Reilly family: at [183]-[203]. This included meetings between him with Peg and Tish, at one of which he made a note that "the other siblings are taking a back seat"; and letters, emails and telephone calls and (in the case of Tish and Genevieve) face to face meetings concerning the transaction.
Significantly for present purposes, the letter to three of the sisters (Margaret, Carmel and Tish) enclosing the draft documents concluded: "Please check through the documents, make note of any matters for query and contact the writer by phone to confirm your instructions."
The fourth sister, Genevieve, met Mr Maccallum personally, and his file note of 11 June 2009 states "Documents explained and signed". Mr Maccallum witnessed Genevieve's signature on the transfer.
Following the transfer, Mr Maccallum applied to the Office of State Revenue for an exemption based on "Transfer of farming property between family members". Each of the transferee sisters had completed an application in the terms drafted by his office and sent by him to them. He was unquestionably acting on behalf of the sisters at that stage, who as transferees were primarily liable to pay stamp duty.
Ground 1(a) of the sisters' appeal challenged the finding that the solicitor acted for them in relation to the transfer of Boronga. Their written submissions relied on: 1. affidavit evidence that Mr Maccallum had been approached by Peg to act for her, and that he regarded Peg as his client; 2. Mr Maccallum never met any of the sisters aside from Tish, and that he never spoke with Carmel; 3. that Tish "thought she was simply acting as a conduit between Mr Maccallum and Peg, in circumstances where her mother did not use email"; and 4. that when Mr Maccallum wrote to the other sisters, he noted that he was acting on the "instructions from your mother and Patricia", and added that "the reference to the latter should be taken to Patricia's role as her mother's assistant".
It was said that five matters pointed "decisively" to there being no retainer with the sisters: "a. the views of the relevant parties, as noted above; b. the fact that the appellants were not charged for Mr Maccallum's work; c. none of the appellants (other than Patricia) consulted Mr Maccallum and none sought out his services; d. there was no evidence that the appellants had previously retained him or Mr McGroder; e. Mr Maccallum's failure to give advice to the appellants about the terms of the proposed transfer."
The submissions went on to say that, as in Cassegrain v Gerard Cassegrain & Co Pty Ltd (2015) 254 CLR 425; [2015] HCA 2, it was relevant to consider why Mr Maccallum's knowledge should be imputed to the appellants.
The issue in the present case is a narrow one. The question is whether, when the sisters became registered proprietors of Boronga as donees, they are to be taken to have had Mr Maccallum's knowledge for the purpose of any liability they may have in equity as knowing recipients of property transferred to them in breach of fiduciary duty.
In order to resolve that question, there is no need to resolve all aspects of the solicitor's retainer. For example, it is unnecessary to express any view as to whether Peg, or Peg and Tish, or all five women, were jointly liable to pay the solicitor's fees or any part of them. I consider that it is best to approach the only issue that matters - was Mr Maccallum's knowledge to be imputed to the sisters - squarely.
I would analyse the position as follows. First, Mr Maccallum acted for the sisters on the conveyance. For either (a) the sisters acted for themselves on the transaction or else (b) Mr Maccallum acted for them; there is no other alternative. It is plain that they did not act for themselves. McGroder's Solicitors was the firm on the contract of sale, Mr Maccallum wrote on their behalf seeking a stamp duty exemption, and caused the memorandum of transfer to be registered.
Secondly, I would disregard the probative value of the sisters' own subjective views, and not merely because they were permitted to be given in litigation many years after the event, but principally because the terms of a retainer are to be determined objectively: see for example Hendriks v McGeoch [2008] NSWCA 53 at [10]-[11]. The subjective views of the solicitor fall into the same category. Senior counsel for the sisters in oral submissions accepted, in my view properly, that the question was to be determined objectively (transcript 27 September 2018, p 6.41).
Thirdly, this is a case where (if it matters) the retainer extended to acting for the sisters as transferees on the conveyance and in seeking a stamp duty exemption. McGroder's Solicitors was the firm nominated as the solicitor acting for both vendor and purchasers on the contract for sale as executed, and as was sent in draft to each sister. And that firm acted for the sisters (and only the sisters) in applying for a stamp duty exemption. The fact that the sisters did not seek out the solicitor is neither here not there; what matters is the legal services provided by him in relation to the conveyance, not how it came to be that the solicitor acted for them.
Fourthly, the solicitor communicated to Peg via Tish (who unlike her mother used email and who attended conferences with him).
Fifthly, the retainer was not confined to the conveyance of Boronga, but extended to "estate planning", which inevitably involved the children of Frank and Peg, not least because they were all called upon to execute a partnership deed, and the four sisters were called upon to execute a second and separate partnership deed. As part of that estate planning, the solicitor considered himself obliged to request and obtain possession of Frank's will.
There is no occasion in this appeal to deal with the numerous (not to mention inconsistent) decisions on the imputation of the knowledge of an agent to his or her principals, described in a series of editions of Bowstead and Reynolds on Agency as "a plethora of cases in different contexts, which are extremely difficult to reduce to any order" (see the opening words of the commentary to Article 95 in 18th ed 2006 and 21st ed 2018). The parties proceeded on the basis that the issue turned on whether the solicitor was acting for the sisters. I agree that that is dispositive. In all of those circumstances, I see no error in the finding by the primary judge that Mr Maccallum's knowledge ought to be imputed to the sisters for the purposes of any equitable liability arising from their receipt of legal title to the property.

[18]

Indefeasibility

The conveyance effected by Peg and Mr Maccallum of Frank's land was registered, and the sisters obtained title by registration of Boronga. (Eventually, this seems to have occurred without the payment of ad valorem stamp duty.)
The primary judge noted that on the first day of the trial, the sisters amended their defence to rely upon the indefeasible title conferred by s 42 of the Real Property Act 1900 (NSW). Joseph advanced a case which was confined to the first limb of Barnes v Addy and the primary judge noted that mere notice of another's fraud was insufficient to overcome a recipient's indefeasible title: at [146]. The primary judge concluded that the sisters held Boronga on trust for the deceased estate on the basis that their notice of the breach went beyond mere notice: "Theirs was not a passive form of notice, but notice borne of active involvement in the process of divesting the deceased of his land" (at [216]).
The primary judge considered that this turned upon the sisters' knowledge that they knew the consideration was $1, that they "knew or might easily have inferred from other known facts" that the reason was Peg's own view of what was "fair"; and they knew that Peg was acting for a purpose beyond what was proper for an attorney: at [213]-[215]. This was preceded by an elaborate analysis of authority, which may be passed over, because Joseph conceded that the orders declaring that the daughters held Boronga on trust should be set aside, consistently with Farah Constructions Pty Ltd v Say-Dee Pty Ltd at [190]-[198]. (For completeness, Joseph's written submissions made a formal submission to the contrary, which was maintained orally.) In Farah Constructions, a unanimous High Court confirmed that a volunteer who became the registered proprietor of land held pursuant to the Real Property Act had a defence of indefeasibility against a claim in equity under Barnes v Addy unless the plaintiff could make out "actual fraud, moral turpitude". Joseph expressly disavowed any such finding. However, Joseph contended that he was entitled to equitable compensation against all of them in respect of the value of Boronga, and his cross-appeal sought judgment in the amount of $1.2 million in his favour in his capacity as Frank's personal representative.
A person who is liable under the first limb of Barnes v Addy is liable to account to the person to whom the fiduciary duty was owed for the property transferred in breach of duty. The liability to account is as a constructive trustee. In Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 it was emphasised "what has long been recognised as the essential characteristic of the Barnes v Addy liabilities: they expose the persons to whom they apply to personal, to in personam, liabilities": at [253]. Finn, Stone and Perram JJ went on to say (at [253]): "In knowing receipt cases, the recipient can be required to pay compensation for loss arising from the misapplication of the trust property, or to account for gains made from it. These liabilities do not depend upon the third party retaining any part of the property received (or its traceable proceeds) in his or her hands although, if such property is retained, it must be accounted for specifically."
In concluding that the same test of knowledge should apply to both "limbs" of Barnes v Addy liability, the Full Court said at [267] that: "We do not consider that a property protection rationale for recipient liability (beyond a proprietary claim to a subsisting equitable interest in property, or its proceeds, in the third party's hands) of itself provides a sufficient justification for imposing a personal liability to account. That liability arises as a matter of conscience not of property. As with assistance liability, recipient liability should be seen as fault based and as making the same knowledge/notice demands as in assistance cases." (emphasis in original)
Liability to account as a constructive trustee extends also to cases where a third party has assisted in a fraudulent and dishonest breach of trust, even though the third party has received no trust property: see Hasler v Singtel Optus Pty Ltd; Curtis v Singtel Optus Pty Ltd; Singtel Optus Pty Ltd v Almad Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 at [69]-[80].
The personal liability to account to the person to whom a fiduciary obligation was owed exists even if the property has ceased to exist, or has been transferred to a third party, or (as in the present case) is incapable of being held on constructive trust by dint of statute. Thus, although statute prevents a court ordering that the sisters hold Boronga as constructive trustees, they are still liable to account to the estate for the value of the property. I did not understand their counsel to submit to the contrary.
The value that was submitted to the Office of State Revenue was $815,000. The value which Joseph contended in his cross-appeal the sisters should account was $1.2 million. This issue did not arise on appeal, and the primary judge noted at [353] that the parties gave little attention to it at trial (despite the late amendment to rely on s 42). In this Court, no submissions were made save that it should be remitted for determination at first instance. That remitter should extend to any dispute as to the time or times at which the value ought to be determined, a matter as to which, once again, no submissions were made in this Court. The orders I propose will permit that to occur (assuming the parties cannot otherwise resolve their dispute).

[20]

Reasons of the primary judge on duty owed to Joseph

The primary judge, with respect correctly, observed at [366] that the starting point of considering whether the solicitor owed the alleged duty is the nature and scope of the retainer, citing Hawkins v Clayton (1988) 164 CLR 539 at 544; [1988] HCA 15; Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18 at [16], [19], [57]-[63], [78] and [81]. The primary judge noted at [181] that no written retainer between Peg and the solicitor was in evidence. The only written document in evidence which revealed anything substantial about the nature and scope of the retainer was a costs estimate dated 22 April 2009. Although the parties had agreed there was no contractual relationship between Frank and the solicitor (a proposition of which his Honour was understandably sceptical at [179]), no issue was taken as to his Honour's statements at [368]-[369]: "At a general level of abstraction, there is no dispute about the nature or scope of the [solicitor's] retainer. He was retained, in the language of the statement of claim, to facilitate a transfer of 'Boronga' by the deceased (acting through [Peg] as his attorney) to the [sisters]. The complexity of debate arises, at a lower level of abstraction, from the facts that: (a) the [solicitor's] retainer arose from instructions of an attorney who, as I have found, exercised her power as an attorney for a purpose of her own, foreign to the power; (b) the [solicitor] ought reasonably to have known that the attorney was acting beyond power; and (c) [Joseph], as a prospectively disappointed beneficiary of the principal, sues the [solicitor] through, although not on behalf of, the principal's deceased estate. In the language of the [solicitor's] costs estimate dated 22 April 2009, that transfer was seen by the [solicitor] as an exercise in 'estate planning' involving professional services (for example, a consideration of capital gains tax implications) more sophisticated than a mechanical conveyancing transaction. The [solicitor's] costs estimate described his retainer as: 'Attending to all aspects of intergenerational transfer of land', coupled with preparation of a partnership deed 'for farm management incorporating provisions on death' and a second partnership deed 'for management of investments including similar provisions'."
The dispositive reasoning on the existence of a duty of care appears at [384]-[386]: "In the current proceedings, although the [solicitor's] core instructions emanated from [Peg] as attorney for the deceased Mr Maccallum was bound to consult the interests of the deceased as the firm's ultimate client. Those interests were coincident with the interests of [Joseph] insofar as an ultra vires exercise of the deceased's power of attorney by [Peg] was not in the interests of either of them. Recognition that the [solicitor] owed a duty of care to [Joseph] in connection with performance of a retainer by [Peg], as attorney for the deceased, imposes on the [solicitor] no exposure to an indeterminate liability. Mr Maccallum had actual knowledge of the deceased's will, the existence of [Joseph], [Joseph's] family and commercial interest in 'Boronga' and the determination of [Peg] to bypass [Joseph] by an inter vivos transfer of the property to her daughters. He ought reasonably to have known that the plaintiff was, or was likely to be, the deceased's intended recipient of "Boronga", although not named in clause 3 of the will. The subject matter of clause 3 was an identified, single property. The [solicitor] was bound to exercise reasonable care in performance of his retainer, recognising that he was (relevantly) retained by [Peg] in a representative capacity that required him to protect the interests of the deceased (and, incidentally, [Joseph] as an intended beneficiary of the deceased)."

[21]

Submissions on duty

The solicitor recognised, in accordance with binding authority, that a solicitor could owe a duty of care to a disappointed beneficiary under a will. He contended that the present appeal stood outside such a duty of care, as recognised in Hill v Van Erp (1997) 188 CLR 159; [1997] HCA 9, for two main reasons: 1. First, the solicitor did not prepare the will. He merely possessed and read it. 2. Secondly, it was central to the Court's reasoning in Hill v Van Erp that the interests of the testator and disappointed beneficiary were entirely aligned. The solicitor submitted that the position here was less straightforward, because the instructions the solicitor received were not to benefit Joseph, but to benefit his sisters. That that was not Frank's true intention was only a conclusion reached following rectification resulting from contested litigation.
The absence of a duty of care owed to Joseph as a disappointed beneficiary was the main proposition for which the solicitor contended in this Court, and it is best to quote the careful and nuanced submissions extensively. In his written submissions, it was put as follows: "In the present case the solicitor's instructions came from the testator's attorney, who said that the testator's testamentary intention was to bequeath Boronga to his daughters. That intention was not precluded by the terms in which the will was executed. All that his Honour's conclusion in relation to the rectification argument entails is that when pulled apart and analysed in the face of the extensive evidence his Honour was satisfied that at the time it was executed Frank's intention was to leave the property to Joe. The solicitor had no opportunity to undertake such an inquiry. The solicitor cannot have known that this would the ultimate outcome: it took several days of evidence and a long, reserved judgment to get to that position. What the primary judge did was to 'relate back' his findings to the time when the solicitor was involved, not in drawing a will, but in carrying out a transaction which he was instructed reflected Frank's testamentary intentions. The will as executed did not say that Joe was the beneficiary. To impose a duty in this situation is to impose a duty to a third party when on the face of it that person's interests as later asserted do not coincide with the instructions given to the solicitor. That is inimical to the existence of a duty of care owed to a non-contracting third party. The retainer was to convey Boronga to the deceased's daughters: that was done. It is only if there was already a duty to Joe, on a basis not articulated, that the solicitor needed to execute the retainer with an eye to Joe's interests. That could never be the position because if he owed such a duty he could not accept the retainer. This demonstrates the lack of coincidence in interests. A solicitor who acted on Frank's instruction to transfer the property to the daughters inter vivos could not possibly owe a duty to Joe even if he had drawn the defective (or even an effective) will. The solicitor here cannot be in a worse position because he acted on the instructions of the attorney."
The solicitor continued: "A further reason why a duty could not have arisen is its incompatibility with the daughters' interests. Let it be assumed that the solicitor executed his instructions and yet benefitted Joe. The daughters could then have argued that he had breached his retainer with Peg because he had failed to benefit the daughters. They would arguably have a stronger claim than Joe because, at least, there was no ambiguity in Peg's instructions to the solicitor. The plurality in Badenach said that the duty recognised in Van Erp sprang from the retainer between the client testator and the solicitor drawing the will: [18]; see also [22]. It is apparent that that cannot be the basis of a duty owed to Joe in the present case because the solicitor never had a retainer from Frank to draw the will in question. The relevant principle is that the obligation assumed under the retainer substantially determines the existence of the duty. The obligation assumed under the retainer conferred by Peg was to transfer the property to the daughters: that obligation is wholly inconsistent with a duty to preserve an (at the time, at best, arguable) obligation to protect Joe's entitlement under the will."
Orally, Mr Sheldon's contention that the interests of Frank and Joseph were not relevantly coincident was put as follows: "We say a duty imposed by virtue of those circumstances would be one which would arise out of coincidence and not out of a principled approach to the respective positions of the deceased and Joe, the sixth defendant, and that is because there was only one respect in which they could be said to have consistent interests and that is in that Joe had an interest in being able, by reason of his father's continued ownership of the property, to farm the land and if the will survived, and operated as his Honour found it should, to receive the property at the end of his father's life but his father had any number of interests, potentially in conflict with that interest, while enmity remained alive including, importantly, an interest, though he wouldn't have recognised it, in doing something about the $50,000 a year he was incurring at the Mater. So to say they had this interest over here that was coincident but to ignore all the other interests that Frank might have had, which were against his retention of the property, is to identify a sliver of Frank's interests which happen to coincide with his sons at that point or a point in time and to thereby impose a duty of care. Now, we say because of what Peg told Mr Maccallum and because of what Mr Maccallum understood by that, and because of his experience, it was clear, we submit, that there was no necessarily correlation between Mr Reilly deceased's interests and Joe Reilly's interests at the time that Mr Maccallum acted in the transaction, therefore, the fact that this particular transaction profoundly affected the operation of the will could not give rise to a duty of care owed to Joe."
On the other hand, Joseph contended that the interests of Frank and Joseph were entirely consistent in the circumstances: "His Honour found that the solicitor was obliged to exercise care and skill in the interests of the testator (as distinct from Peg or the daughters), and the testator was the 'ultimate client' of the solicitor (judgment at [384]). The interests of the testator, as found by the primary judge, was not to transfer Boronga to the daughters for nil consideration. That interest was identical to that of Joseph. ... Stripped of complexity, the solicitor's duty to the testator was to exercise reasonable care to protect the vulnerable and mentally incapable testator from being deprived on his principal asset by the actions of an attorney acting in breach of her fiduciary duty. That is no different to the duty owed the Joseph."
In oral submissions on appeal, Joseph contended that the duty owed by the solicitor was that stated in Badenach at [45] (French CJ, Kiefel and Keane JJ): that is, the duty "recognised in Hill v Van Erp, to give effect to a testamentary intention."
To reiterate what was mentioned by the primary judge, the solicitor's 22 April 2009 "costs estimate" described the work as "estate planning" and "attending to all aspects of intergenerational transfer of land".

[22]

Authority on duty

No party contended that there was any binding authority squarely on point. As will be seen below, assistance may be derived from Badenach, the most recent High Court appeal on the circumstances in which a solicitor acting for a testator will owe a duty to a disappointed beneficiary. The solicitor in that case received instructions from the testator to prepare his will, on the basis that the entirety of the testator's estate was to pass to the plaintiff, who was the son of the testator's de facto partner. The testator's principal assets were two properties that he owned as a tenant in common in equal shares with the plaintiff. The solicitor drew the will in accordance with his instructions, and the testator died shortly thereafter. The testator's biological daughter obtained an order for family provision, substantially depleting the estate. The plaintiff sued the solicitor, alleging negligence in failing to advise the testator of the possibility of such a claim.
The High Court held that the solicitor did not owe the claimant a duty of care: see [25]-[33], [56]-[66] and [78]-[91]. Central to that conclusion was the finding that the interests of the claimant were not coincident with the interests of the testator: see especially at [47], [74] and [85]. The basis for this conclusion was articulated by Gageler J at [62], in a passage demonstrating the centrality of the client's instructions to the question of the existence of a duty of care: "Unless there is some further factor affecting the relationship of the parties, however, a solicitor retained to prepare a will can have no duty to a person whom the testator intends to benefit other than to act in the manner and to the extent identified in the testator's instructions. That is because, outside the scope of the testator's instructions: there can be no requirement for the solicitor to act for the benefit of the person; there can be no damage to the person if the solicitor fails to act for that person's benefit; there can be no relevant vulnerability on the part of the person to the action or inaction of the solicitor; and there can be no necessary coincidence between the person's interests and those of the client. Where the testator's instructions stop, so does the solicitor's duty of care to the intended beneficiary."
The centrality of the client's instructions creates a difficulty in the present case, where the "ultimate client", Frank, was incapable of giving instructions, and was represented by an attorney. The solicitor never received any instructions directly from Frank, although he was bound to protect his interests and he undoubtedly owed him a duty of care directly.
French CJ, Kiefel and Keane JJ in Badenach summarised the effect of the decision in Hill v Van Erp in the following way (at [18]): "It must be conceded, as the appellants point out in the present proceedings, that the approaches taken by members of the majority to the question of whether a duty existed differed in some respects. Nevertheless it may be seen from most of the judgments that the duty found to be owed by the solicitor to Mrs Van Erp as the intended beneficiary had its source in the solicitor's obligations arising from the retainer between the solicitor and her client. The solicitor was obliged to exercise care and skill in giving effect to her client's testamentary intentions. The interests of the testatrix and the intended beneficiary in those intentions being carried into effect were relevantly the same. Recognising a duty to the intended beneficiary would not involve any conflict with the duties owed by the solicitor to her client, the testatrix." The same emphasis on identicality of interests is found in the reasons of Gordon J at [85] and [90]-[92].
The recognition by ultimate appellate courts in Australia and the United Kingdom that a solicitor may owe a duty of care to a disappointed beneficiary is relatively recent: Hill v Van Erp and White v Jones [1995] 2 AC 207; [1995] UKHL 5 were decided in the last quarter century. It is not therefore altogether surprising that other appellate authority is scant. However, mention should be made of two decisions, although they were not the subject of submissions.
The first is Clarke v Bruce Lance & Co [1988] 1 All ER 364; [1988] 1 WLR 881. The defendant solicitors drafted the testator's will in 1973. Under the will, the plaintiff was the devisee of a service station owed by the testator. In 1978, the defendants were engaged by the testator to draft a variation to the lease agreement to the service station, which variation gave the lessee an option to purchase the service station upon the testator's death. Following the testator's death, the plaintiff claimed in negligence against the defendants, alleging that they breached their duty to the plaintiff as beneficiary and the testator to advise the latter that the lease variation was an uncommercial transaction. The Court of Appeal held that the defendant owed the plaintiff no duty of care.
At 369-370, the Court of Appeal (May and Balcombe LJJ) listed four reasons militating against recognition of a duty of care in the circumstances. First, there was no close proximity between the defendants and the plaintiff at the time of the 1978 lease variation. Secondly, the 1978 transaction did not have as an object the benefit of the plaintiff (indeed, the plaintiff's interests were in direct conflict with the intended recipient of the benefit from the lease variation). The third was the spectre of indeterminate liability. Finally, it was said that recognition of a cause of action in negligence in favour of the plaintiff against the defendants was not necessary for achieving an effective remedy.
Clarke was decided before White v Jones and Hill v Van Erp, and so its modern applicability is to be approached with caution. However, at least two factors suggest the decision's continuing modern relevance in Anglo-Australian law. First, it was expressly decided on the assumption - favourably to the plaintiff, and anticipating what was established in the United Kingdom by White v Jones - that a solicitor instructed to prepare a will owes a duty of care to a beneficiary under the proposed will: at 367j. Secondly, the decision has subsequently been cited with approval - indeed, as a prime example of the limitations of the duty recognised in White v Jones and Hill v Van Erp. See White v Jones at 256E (Lord Goff, with whom Lords Browne-Wilkinson and Nolan expressed agreement), where it was cited as an example amongst instances where a solicitor will not owe a duty of care to third parties. In Hill v Van Erp, Dawson J (with whom Toohey J agreed) cited Clarke with apparent approval at 187: "These circumstances distinguish the present case from others in which a solicitor has been held to owe no duty to anyone other than his client. No doubt that is the general rule. [examples given] And in Clarke v Bruce Lance & Co no duty was owed by a solicitor to a prospective beneficiary under a client's will in relation to a proposed dealing with property during the client's lifetime." (citations omitted)
The second is Vagg v McPhee (2013) 85 NSWLR 154; [2013] NSWCA 29. There, Tobias AJA said at [47]-[49]: "It is well established in both English and Australian law that a solicitor is liable to a person who does not receive an intended benefit under a will due to the solicitor's negligent preparation, drawing or execution of the will. ... Liability in this situation has been justified in part on the basis that the law of negligence must fill a lacuna in the law: but for the existence of a duty of care to the beneficiaries, the only person who might have a valid claim (the testator and subsequently the estate) has suffered no loss, and the only person who has suffered a loss has no claim: White v Jones at 259 per Lord Goff; Hill v Van Erp at 195 per Gaudron J. The existence of a duty of care is supported by the fact that there can be no conflict of interest between the solicitor and client, on the one hand, and the intended beneficiary on the other: White v Jones at 276 per Lord Browne-Wilkinson; Hill v Van Erp at 187 per Dawson J; at 236 per Gummow J. Certain limitations on the duty are clear. First, a solicitor is not liable to a potential devisee under a will for negligence when acting for the testator in an inter vivos transaction affecting the subject matter of the devise: Clarke v Bruce Lance & Co [1988] 1 All ER 364 (CA). …"

[23]

Analysis as to duty of care

The general rule is that a solicitor owes a duty of care in negligence solely to his or her client: Badenach v Calvert at [49] and [83].
To that rule, there is an exception. In Hill v Van Erp and White v Jones, a duty of care was held to be owed by a solicitor to a disappointed beneficiary in respect of the drawing or execution of a will, where the will failed to confer a benefit which the testator intended to bestow. In Vagg v McPhee at [47], Tobias AJA, with whom Ward JA agreed, described the exception as "well established", while Basten JA summarised its development at [8]-[13].
It is best to consider separately the two matters to which Mr Sheldon pointed: the fact that the solicitor did not prepare the will, and the fact that Frank's will left his devise of Boronga blank.
Dealing with the first matter first, let it be assumed that the will which the solicitor received on around 6 May 2009 was in a form as rectified, and left Boronga to Joseph. In circumstances where the solicitor was retained for estate planning, was receiving instructions from the donee of an enduring power of attorney to enter into an inter vivos transaction which would subvert the transmission of assets in the will, and where the testator was incapable to the solicitor's knowledge, I consider that the solicitor owed a duty of care to the beneficiary under the will.
The issue resolves to how the rule and its exception apply when the testator has become incapable. That is to say, bearing in mind the importance attributed to consistency or coincidence of interest between testator and intended beneficiary, how do those principles apply when the testator is no longer capable of forming a testamentary intention, and can no longer effect an inter vivos disposition, save through a statutory mechanism (such as a statutory will or an enduring power of attorney)?
None of the authorities involving a subsequent inter vivos transaction was one in which the testator was incapable, while the principle explaining the duty owed to a disappointed beneficiary by a solicitor retained to draft a will rests on consistency. It is in this respect that Badenach is of some importance. The general proposition that a duty is owed is clear from Hill v Van Erp, but the divergent strands of reasoning in that case present a difficulty in determining whether the extension identified by the primary judge is warranted. Much of the reasoning reflects the now disfavoured metaphor of proximity. Dawson and Toohey JJ relied in part on assumption of liability (see at 186 and 190), which was rejected by Gummow J at 231. McHugh J dissented.
Badenach confirms the significance of the consistency and coincidence of interest to which reference is made in Hill v Van Erp, making it plain that consistency between the duty to the client/testator and duty to the client's intended beneficiary is central to the duty owed by the solicitor to that intended beneficiary. It has been said that the "notion of coincidence of interest contrasts with the High Court's refusal [in Hill v Van Erp] to embrace the notion of 'assumption of responsibility' as the touchstone of liability, which was a feature of the House of Lords' decision in White v Jones": S Walmsley et al, Professional Liability in Australia (3rd ed, Lawbook Co, 2016), p 446.
There is inevitably consistency of interest between a testator who is drafting his or her will, and the identified beneficiaries under that will.
Conversely, there is inevitably inconsistency in the two other most likely situations which arise in connection with cases of this general class: cases where a testator retains a solicitor to alter his or her will, and cases where the testator retains a solicitor for the purpose of entering into an inter vivos transaction which will alter the transmission of assets under the will. 1. In the former case, where a solicitor is retained to alter a (mentally capable) testator's will, there is an inevitable inconsistency, precluding any duty owed to the beneficiary whose hope to take an asset under the will is affected by the alteration. 2. The latter case is also necessarily inconsistent. The position is clearest when the inter vivos transaction is one whereby a specific devise or bequest is sold or given to another. Irrespective of the operation of the doctrine of ademption, there is a necessary inconsistency between the beneficiary's contingent interest under the will and the testator's instructions in the inter vivos transaction. There is inconsistency even where the inter vivos transaction reflects the will: it is one thing to receive an asset immediately, it is another to receive it at a time dependent upon the testator's death, and subject to the administration of the will including payment of estate creditors, and to the testator predeceasing the beneficiary.
Hence, these cases of subsequent alterations to the will, or inter vivos transactions, are ordinarily outside the scope of any duty of care owed by the solicitor retained by the testator. That is because the current intention and instructions of the testator are necessarily inconsistent with the interest of the beneficiary, which depended upon the testator's former intention.
The position is different when the testator has become incapable. First, in such a case there is no conflict between the former and current intentions and instructions of the testator; the testator in such a case has validly made a will but has no current legally effective intention (whether consistent or inconsistent). This point was made by Berger JA in Graham v Bonnycastle (2004) 243 DLR (4th) 617 at [57], albeit dealing with a subsequent will, rather than a subsequent inter vivos transaction: "in such circumstances there is no conflict whatsoever between the interests of the testator and those of the beneficiary under the former will. Lacking capacity, the testator must be taken to have expressed his intentions in the former will. It is the negligence of the solicitor that frustrates those intentions. The beneficiary under the former will was and remains the testator's intended beneficiary."
Graham v Bonnycastle concerned whether a subsequent will had been executed when the testator was incapable, in circumstances when the solicitor negligently permitted that to occur. The majority of the Alberta Court of Appeal considered that there was an adequate remedy in not having the later will admitted to probate, at the solicitor's cost. That example tends to emphasise the narrowness of the point in the present appeal, which arises out of a subsequent inter vivos transaction.
Secondly, in such a case there will inevitably be another natural person with authority to effect the transaction (typically, pursuant to an enduring power of attorney) who is a vital participant in the transaction and who will invariably owe fiduciary (or fiduciary-like) duties to the incapable person.
Contrary to the solicitor's submissions in this appeal, I do not regard the coincidence of interests in a case where the testator has become incapable as merely coincidental. There are two reasons for this. 1. First, the coincidence of interests is a necessary and inevitable consequence of the loss of capacity by the testator. 2. Secondly, the incapacity of the testator has strengthened the interest of the beneficiary under the will. In the ordinary class of case represented by Hill v Van Erp and White v Jones, the disappointed beneficiary can sue the negligent solicitor who was retained by the testator, even though the beneficiary's interest was at all times subject to the testator's power to alter the will or dispose of the asset inter vivos. But where the testator has become incapable, the interest of the beneficiary, whilst still contingent (because, amongst other ordinary contingencies, the beneficiary may predecease the testator) is no longer liable to being extinguished by those mechanisms.
Those considerations point to a conclusion that, given that the law recognises a duty owed to a beneficiary by a solicitor retained to draft a will, the position of a solicitor retained for the purpose of estate planning who acts for an incapable person entering an inter vivos transaction which will affect the interest of the beneficiary under the will should be subject to the same duty.
The primary judge appears implicitly to have regarded the duty of care upheld by him as an incremental extension of the principles stated in Hill v Van Erp. I incline to the view that that is the right approach. This is not a wholly new category of tortious liability; far from it. A solicitor's liability to a disappointed beneficiary arising from the coincidence of interests when the solicitor acted for a competent testator drafting his or her will is very closely related to a solicitor's liability to a disappointed beneficiary arising from the coincidence of interests when the solicitor acted for an incompetent testator on a transaction which would alter the expectancies created by an earlier will. In the present litigation, Joseph asks not so much for an extension of the law of negligence, but the application to the particular circumstances of an incapable testator of the principles stated in Hill v Van Erp (cf Robinson v Chief Constable of West Yorkshire Police [2018] AC 736; [2018] UKSC 4 at [29]).
No submissions were made as to the methodological approach in a case such as this (which is to say, whether the incremental approach I am inclined to favour is correct, or whether instead a fuller analysis is required). But I do not consider that anything turns on this, because further considerations point in the same direction.
In a case such as this, as I have said, there will at least typically be a third person exercising a power of attorney. The incapable testator is vulnerable, as is the beneficiary under the will. The loss to the beneficiary is foreseeable. As the primary judge noted at [385], there is no indeterminate liability by the posited duty of care. There is no real imposition on the autonomy or freedom of the solicitor, who should be acutely aware of the potentially divergent interests of the incapable person and his or her attorney. In short, the so-called "salient features" identified in Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649; [2009] NSWCA 258 at [103], to the extent that they are applicable, favour the imposition of a duty of care or are inapplicable.
Accordingly, I would conclude that the solicitor owed a duty of care to Joseph. I do not regard this as inconsistent with anything said in Badenach, nor in Clarke v Bruce Lance & Co or Vagg v McPhee. The general statements in those cases are not to be understood as applying to a case where the testator has become incapable, because those general statements are premised upon an inconsistency between the posited duty and the current instructions of the testator. The fact that neither the parties nor my own researches have identified any decision squarely on point - in which a disappointed legatee sued a solicitor whose retainer extended to estate planning and who was sued following an inter vivos transaction by an incapable testator effected pursuant to an enduring power of attorney - tends to confirm that the position is exceptional.
Turning to Mr Sheldon's second point of distinction, I consider this makes no difference. There is a factual complexity in the present case, arising from the obvious defect of Frank's will, which was liable to be rectified. That factual complexity should not unduly interfere with the analysis of whether a duty of care is owed to the disappointed beneficiary who may (albeit in subsequent court proceedings) discharge the burden of establishing that rectification by inserting the words "to Joseph" should be ordered.
I discount the rhetorical flourish to the effect that it took "several days" of trial and a "long, reserved judgment" to determine that the will was to be rectified. The length of the trial and the judgment was principally attributable to other issues. Conscious as I am of the advantages of hindsight, it is nonetheless plain on the face of the will that there is a clerical error. Mr Maccallum accepted that he recognised as much shortly after receiving it.
It was plain that whatever Frank's intentions were, they were being subverted by the instructions from Peg. The answer to the question of common law as to whether a duty of care is owed should not be distracted by the need for intervention (by a statutory expansion of equitable doctrine) to rectify the will so as to identify the devisee of Boronga. That said, I readily acknowledge that there may be other cases where the failure of the will to identify the devisee might tend against the imposition of a duty, or (perhaps more likely) make it harder or impossible to establish breach; I return to this issue below.
In the facts of this case, where Mr Maccallum knew that Joseph was one of five children of Frank and Peg, and the only child not mentioned in the will, and the only son, and the man who was in fact working Boronga, I do not see the fact that the will needed rectification in order to identify Joseph as the devisee of Boronga as standing in the way of the solicitor owing him a duty of care. Other cases may not be so straightforward (cf Gibbons v Nelsons (a firm) [2000] PNLR 734, a decision of Blackburne J noted in M Davies, Solicitors' Negligence and Liability (Oxford University Press, 2008), pp 363-4, but not mentioned by the parties).

[24]

Breach

The primary judge found that Mr Maccallum breached his duty of care owed to the deceased, and incidentally to Joseph, by acting on the transfer without "a critical examination of [Peg's] authority to effect the transfer, in circumstances in which [Peg] acted for a purpose foreign to her power and the effect of her so doing was to divest the deceased (and ostensibly, indirectly, [Peg]) of substantial property": at [387].
The solicitor's written submissions addressed breach very concisely. They made two points in three paragraphs. The first was that it was no breach to accept Peg's instructions, relying on cases holding that a solicitor is entitled to believe his or her client, even if the instructions appear improbable.
The second was that it was "unrealistic to think that a solicitor would have adverted to the status of the will as likely to involve rectification so as to make Joe the legatee [sic] with respect to Boronga." It was submitted that had Mr Buckley been consulted, "Buckley would have told him that Joe was the intended beneficiary according to his initial instructions but that, evidently, that testamentary intention had changed by the time Frank came to execute the will". It was put that Mr Maccallum would have been justified in thinking that Frank's intention was not to leave Boronga to Joseph.
Orally, it was put thus: "... Mr Maccallum was never told anything, nor did he discover anything which would have suggested, to a reasonable solicitor in his position that there was an excess of power being applied to achieve the outcome being sought. I've already addressed, in passing, the proposition that assuming that Mr Maccallum had, for whatever reason, decided he was going to challenge the instructions he'd received, the question as to what then could possibly have occurred because he couldn't have obtained instructions from the deceased and Joe's interests would not have been coordinate in any but one respect with those of the deceased. So that Joe would have had a conflict of interest in answering the question what do you make of this or however it's put and accordingly the problem with the imposition of this duty is that it's not readily discharged."
Then, by reference to a paragraph in Jackson & Powell on Professional Liability stating that the solicitor "must follow up these facts to ensure that he appreciates the real problem with which he's being asked to deal", the submission continued: "The real problem with which Mr Maccallum was being asked to deal was the transfer of assets so as to enliven rights that the deceased would have that would mean he would save $50,000 a year on the Mater and by reason of the other agreements, the partnership deeds, Joe would continue to be able to farm Boronga and the family as a whole would thereby be looked after. We submit Mr Maccallum well understood the real problem. What his Honour is here doing is imposing an obligation for Mr Maccallum to go looking for other problems which might be real to other people but which are not real to Frank in the sense of whether Peg is exercising bona fide and within power."
The short answer to these submissions is that they miss the point that Mr Maccallum was acting for Frank, and therefore had an additional obligation to test that Peg was properly authorised to give instructions on his behalf.
In the facts of this case, the fact that Joseph's expectant interest under the will required rectification made no difference; the solicitor was required to take reasonable steps to ensure that Peg's exercise of her power of attorney was proper.
No submissions were made in this Court (nor apparently at trial) to s 5B of the Civil Liability Act 2002 (NSW) nor the risk of harm on which that section is premised. The risk of harm in a case where a testator is incapable is that the attorney may (whether innocently or consciously) misuse the power conferred on him or her, to the detriment of beneficiaries under the will. That risk, in a case such as this where the donee was elderly, and not legally qualified, was plainly foreseeable and not insignificant. Reasonable precautions by the solicitor called on to act for Frank and Peg went beyond obtaining a copy of the will. They extended to testing what Frank's testamentary intentions in relation to Boronga had been, which would have disclosed that Peg's instructions did not accord with them.

[25]

Causation

Grounds 3(a) and 4(c) of the solicitor's cross-appeal challenged the findings that the solicitor's breach of duty caused loss. Those grounds were not the subject of oral submissions. The solicitor's written submissions were brief, occupying less than a page. They made one point, namely, that Peg's account of her instructions to Mr Maccallum about the 2000 agreement between her and Frank was not challenged in cross-examination and would have remained firm had the solicitor sought confirmation as to her instructions. It was put thus: Assuming that the solicitor had concerns in relation to Peg's instructions, in light of the terms of Frank's unrectified will, what would he realistically have done? The Trial Judge suggests certain hypothetical courses of action which with respect are at a further step removed from what a practising solicitor would seek to do. The obvious answer as to what the solicitor concerned about the will would do would be to confirm his instructions with Peg. The response would have been as per the above oral evidence. The solicitor would then have been entitled to act on Peg's instructions. Indeed he would have been required to do so. Having been so instructed as to the 2000 agreement, there would be nothing to reasonably suggest to the solicitor that the transaction could not proceed. There would be no breach of duty by the solicitor, as even on the Trial Judge's test Frank's interests were being accommodated. The statement in Badenach at [19] as to the solicitor being 'entitled to invoke the (retainer) in defence of, or to limit, any claim by a disappointed beneficiary' is also relevant in this context; the solicitor would be entitled to rely upon what he was told as to the 2000 agreement by Peg."
It was also put that the only other practical step would have been to speak to Mr Buckley, which would, so it was contended, have led to a conclusion that Frank did not want to leave the property to Joseph.
The causation case was based on the proposition that, but for the breach of duty, there would have been no inter vivos gift of Boronga to the sisters. That gave rise to a difficulty at first instance, because his Honour had held that Boronga was held by the sisters on constructive trust, and ordered that it be reconveyed to form part of the estate.
The primary judge addressed causation in two places. First, at [388], his Honour made a contingent finding: "Upon an assumption that the estate of the deceased is not entitled to recover title to 'Boronga' from the plaintiff's sisters, the sixth defendant's breach of the duty of care he owed to the plaintiff caused damage to the plaintiff as a disappointed beneficiary of the deceased."
The immediately following paragraph identified that "[i]n light of the way these proceedings have been conducted, the true measure of that damage is the market value of "Boronga" at or about the time of the death of the deceased". I conclude that the primary judge is to be taken as finding that the breach of duty caused the gift of Boronga to the sisters, which would not have occurred but for the breach.
Secondly, under the heading "Available, alternative course of action", the primary judge made further findings which bore on causation at [404]-[405], preceded by an introductory paragraph [393]: "A finding, such as I have made, that, by a want of reasonable care, the sixth defendant breached a duty of care owed to the plaintiff (a duty, it must be remembered, derived from, and ancillary to, a duty of care owed by the sixth defendant to the deceased) invites consideration of what the sixth defendant should, or could, have done had he exercised reasonable care. ... Exercising reasonable care in the performance of his retainer (however viewed), a prudent solicitor would have recognised that: (a) he could not act for all parties to the proposed 'sale' and 'transfer' of 'Boronga'; (b) given that the deceased had become mentally incompetent, an 'intergenerational transfer' of 'Boronga' could not be achieved effectively (if it could be achieved at all) absent invocation of the protective jurisdiction exercised by the Court, or the analogous jurisdiction exercised by the Guardianship Tribunal, or (more likely) by way of an application to the Court for a statutory will; and (c) any one of those legal procedures would have been likely to require a full engagement with the plaintiff in circumstances in which he would have had an opportunity to be heard about what was, or was not, in the interests and for the benefit of the deceased . It was not for [Mr McGroder], or Mr Maccallum, to dictate what course [Peg], or other members of her family, should take in addressing concerns about an "intergenerational" transfer of [Peg's] property in anticipation of his ongoing incapacity and the prospect of him dying without regaining capacity. They were, however, under a duty to warn, at least, [Peg] of risks associated with the course (unilateral transfer of property of the deceased under colour of an enduring power of attorney) she proposed to take. If, duly warned, she persisted in instructions to take that course, they were under a duty to decline to act for her. They could not act for her without exposing her and themselves to substantial risks of the nature illustrated by the current proceedings."
The unelaborated, contingent finding of causation at [388] is to be read with the further paragraphs I have reproduced above. No contrary submission was put. Further, the issue arose in oral submissions as follows: "PAYNE JA: What's the causation case against [the solicitor]; just help me through that. CURTIN: A prudent solicitor ought to have advised Peg, 'Don't proceed; if you insist, I can't act for you.' Therefore, no prudent solicitor would act for her in the same circumstances. The transfer would not have occurred. I don't think his Honour says this but, eventually, Frank would have passed; the will would have come to light. I'm sorry, his Honour does make a finding about it. PAYNE JA: The only competent thing to have done is cease to act? CURTIN: Yes." It will be seen that that is a concise summary of what the primary judge said at [404] and [405].
I regard the resolution of this aspect of the appeal as very much subject to the way in which the trial has been run and the points which were taken and which were not taken in this Court.
First, it is plain that the issue of causation falls to be determined by reference to s 5D of the Civil Liability Act. Once again, no submissions were made in this Court on that statute, nor was complaint made as to the failure by the primary judge to mention them.
Secondly, the no transaction case summarised above is sufficient to satisfy s 5D(1)(a), and I see no reason why (nor were any submissions made) it would not be appropriate for the scope of the solicitor's liability to extend to the transfer of Boronga to Joseph's sisters.
Thirdly, I agree with the solicitor's submission that had Peg been asked to confirm her instructions that there was an agreement between her and Frank in 2000, she would have done so. But I do not agree that that is a basis for setting aside the finding of causation.
The solicitor's submissions do not, with respect, attend to the basic problem which confronted Mr Maccallum. His client was Frank. The retainer was not just to effect the conveyance; rather the retainer extended to estate planning. The solicitor was receiving instructions from Peg. Peg's instructions were to cause Frank to give away Boronga to his daughters, pursuant to an agreement reached between him and her in 2000. Mr Maccallum was required to, and did, obtain Frank's will. The will was prepared in 2003, three years after the agreement. The will dealt with Boronga in terms, and in a way which was patently defective.
The client's will was not only inconsistent with the instructions. The client's will was inconsistent with the basis given by Peg for those instructions, namely, an informal agreement said to have been made with Frank three years prior to him executing his will.
As was said in Badenach at [19], the scope of the solicitor's duty will be set by the terms of the retainer. But Badenach was not dealing with the issues which arise where the client is incapable and the instructions from the client's agent are inconsistent with what appears on the face of the most recent legal document executed by the client when he was capable.
Faced with an irreconcilable clash between the source of the agent's instructions and his client's actual expression of testamentary intention, a competent solicitor would have advised against proceeding, and ceased to act. However firm Peg's instructions were, a competent solicitor could not act for Frank when Frank's agent's instructions were an improvident transaction based on an agreement which both predated and was inconsistent with Frank's later will. That answers the solicitor's principal submission on causation, reproduced in [162] above.
Fourthly, I do not accept the solicitor's final point. Had Mr Buckley been consulted, he would have said he had no recollection of the events of 2003, and no documentary evidence explaining the patently defective will. If Mr Buckley had speculated that Frank must have changed his mind at the time he executed the will in the same way as he was permitted to give evidence at trial (which has been reproduced above), then that would not have been sufficient to entitle a solicitor acting with reasonable competence to execute Peg's instructions.
The onus at all times lay upon Joseph to establish that, but for the solicitor's breach of duty, the gift of Boronga to his sisters would not have occurred. A solicitor acting for an incapable client in a matter of estate planning would have declined to act on the instructions from the client's agent which were inconsistent with a will which post-dated the agreement which was the reason given by the agent for those instructions.
That is sufficient to conclude that grounds 3(a) and 4(c) of the solicitor's cross-appeal, which were far from the forefront of the issues debated in this Court, are not made out.

[27]

Conclusion and orders

There are at least potentially some problems presently unresolved having regard to the way the litigation has been conducted to date. Damage is the gist of Joseph's claim in negligence. It is true that, by reason of indefeasibility of title, Boronga has not itself fallen into Frank's deceased estate. It is not as yet clear whether the obligation to account on the part of the sisters will result in any deficiency of assets in the estate. This in turn affects Joseph's claim against the solicitor (which is why the orders from which the solicitor has appealed are interlocutory). These matters should be regarded as being within the issues remaining for determination by a judge in the Equity Division. As presently advised, no separate order is required remitting those undetermined issues.
There also remains Joseph's claim for remedies for breach of fiduciary duty by his mother (who filed a submitting appearance in this Court, and which has not been determined as yet) and Joseph's (defensive) cross-appeal against his sisters seeking to set aside the awards made pursuant to the Succession Act for family provision. This latter cross-appeal was not the subject of any submissions at the hearing. It is perhaps not pellucidly clear what should occur in relation to it. On the view I presently favour, it should be dismissed, because the sisters' obligation to account to the estate for the value of Boronga leaves all of Frank's and Peg's children in the same position they enjoyed when the primary judge exercised his Honour's discretion, which proceeded on the basis that it was valued at at least $1 million: see at [262]. However, the orders I propose will permit the parties to be heard as to the resolution of Joseph's cross-appeal if there is a basis for some different outcome.
The Court was told that, notwithstanding the absence of a stay, the parcels of land comprising Boronga had not been transferred to Joseph in his capacity as administrator of Frank's deceased estate. This is to be deprecated. They were ordered to transfer the land "no later than 19 December 2017". It is not for the parties to agree amongst themselves not to comply with an order binding them, even if it is subject to appeal. However, it has the consequence that no orders to restore title to Boronga to the sisters are required.
A further consequence of the indefeasible title now enjoyed by the appellants is that Boronga will not form part of Frank's deceased estate. Instead, there is presently an entitlement to equitable compensation from his daughters for the value of Boronga, which may in due course be converted into an amount of money. Notwithstanding Joseph's concession as to indefeasibility, no submissions were made as to the operation of Frank's will (as rectified) upon the estate's entitlement to compensation for the value of Boronga. That may well be because it is accepted that Joseph in his capacity as specific devisee is entitled to that compensation, and that there is no room for the doctrine of ademption. I express no view on a point which was not argued, in an appeal and cross-appeals where so many points were taken.
Joseph has failed in relation to indefeasibility, a point which took next to no time at the hearing. He has otherwise succeeded in this Court (irrespective of the outcome of his (defensive) cross-appeal), and the sisters and Mr McGroder have failed. I favour exercising the costs discretion such that the sisters and Mr McGroder are all liable to pay Joseph's costs of the appeal and both cross-appeals, on the basis that as between themselves, the sisters are liable to pay half of those costs and Mr McGroder is liable to pay the other half. However, given the number of issues and the fact that Joseph's success has not been entirely unqualified, I would hear from the parties, if they so wish, as to the exercise of the costs discretion in this Court. There seems to be no reason to interfere with the costs discretion exercised by the primary judge, although once again, I would hear from the parties if they seek to propound a basis for its re-exercise.
Finally, one of the members of the Court which heard this appeal will, because of retirement, be unable to participate in the making of any further orders after late January 2019. It is with this in mind that I propose the slightly unusual course of remitting not merely any outstanding question of costs, but also as to other orders, to a single Judge of Appeal. However, I would permit the parties to be heard as to that proposal, and of course there are other possibilities notwithstanding that in 2019 the Court as presently constituted will be unable to make further orders in these appeals.
I propose the following orders:
Extend the time within which to appeal to 13 December 2017.
Grant leave to the first and third respondents to the appeal (Joseph Reilly and Dennis McGroder) to cross-appeal.
Appeal allowed in part.
Set aside orders 8-12 as proposed in [409] of the reasons for judgment published as [2017] NSWSC 1419 and made (with a minor modification to order 11) on 9 November 2017.
Otherwise dismiss the appeal.
Dismiss Mr McGroder's cross-appeal.
Subject to order 10 below, dismiss Joseph Reilly's cross-appeal.
Subject to order 10 below, order that each of the appellants and Mr McGroder pay Joseph Reilly's costs in this Court, on the basis that as between themselves, the appellants are liable to pay half of those costs and Mr McGroder is liable to pay the other half.
Note that the remaining issues for determination, pursuant to orders 21 and 22 of the orders made on 9 November 2017, extend to the time at which the value of Boronga is to be assessed.
In the event that any party wishes to be heard in relation to any further orders (including orders contrary to orders 7 and 8 above), grant leave to the parties to file and serve a notice of motion, any evidence, and short submissions in support within 28 days of today, with the other parties to respond within 14 days thereafter and with the notice of motion to be heard and determined on the papers and by a single Judge of Appeal unless submissions are made for some different course.
PAYNE JA: I have read the decision of Leeming JA in draft. Like his Honour, I will refer to the relevant parties by their given names, without intending any disrespect.
I agree with Leeming JA for the reasons his Honour gives that the finding by the primary judge that the will should be rectified was plainly correct. I agree with Leeming JA that the appeal must succeed to the extent that the constructive trust finding cannot stand on the basis of s 42 of the Real Property Act 1900 (NSW) as explained in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22. I agree with Leeming JA that the finding by the primary judge that he was not satisfied about proof of an oral agreement between Peg and Frank should not be disturbed. In joining in that conclusion I am particularly influenced by three things. First, the absence of contemporaneous documents supporting the existence of such an agreement. Secondly, the findings of the trial judge who saw the witnesses give evidence. Thirdly, the incompatibility of the oral agreement (allegedly made in 2000) and the instructions for Frank's will (given in 2003) which on any view do not provide for the transfer of "Boronga" to the daughters. I also agree with Leeming JA that the knowledge of the solicitor, Mr McGroder (and his employed solicitor Mr Maccallum), was relevant and should be attributed to Margaret, Carmel, Genevieve and Patricia (Tish). For the reasons given by Leeming JA, Peg's daughters are liable in equity to account to Frank's estate for the value of "Boronga".
I have found the question of a duty of care owed by the solicitor to Joseph to be difficult. In particular, I have had difficulty reconciling the judgments in Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18 with the facts here established. As far as I am aware, there is no authority directly raising the issue addressed in this case. Certainly, the parties did not refer to any such authority.
Such assistance as can be obtained from decided cases, including Graham v Bonnycastle (2004) 243 DLR (4th) 617 which Leeming JA refers to, supports the imposition of a limited duty of care here. This is because, as Leeming JA explains, the imposition of a duty of care is a coherent application of the law in that a duty, correctly framed, is consistent with Frank's testamentary wishes. The vulnerability of Frank and Joseph to the exercise of due care and skill by the solicitor acting on instructions from the holder of Frank's enduring power of attorney is a critical feature in favour of the imposition of a duty of care.
On the other hand, this case does not fit comfortably within the principles applicable to the imposition of a duty of care explained by the plurality (French CJ, Kiefel and Keane JJ) in Badenach: "[18] It must be conceded, as the appellants point out in the present proceedings, that the approaches taken by members of the majority to the question of whether a duty existed differed in some respects. Nevertheless it may be seen from most of the judgments that the duty found to be owed by the solicitor to Mrs Van Erp as the intended beneficiary had its source in the solicitor's obligations arising from the retainer between the solicitor and her client. The solicitor was obliged to exercise care and skill in giving effect to her client's testamentary intentions. The interests of the testatrix and the intended beneficiary in those intentions being carried into effect were relevantly the same. Recognising a duty to the intended beneficiary would not involve any conflict with the duties owed by the solicitor to her client, the testatrix. [19] …The scope of the solicitor's duties will be set by the terms of the retainer with the client. The solicitor would be entitled to invoke that contract in defence of, or to limit, any claim by a disappointed beneficiary." (footnotes omitted)
The judgment of Gageler J in Badenach also poses a challenge to the imposition of a duty of care here: "[59] …Confined to taking reasonable care to benefit the intended beneficiary in the manner and to the extent identified in the testator's instructions, the solicitor's tortious duty to that beneficiary is coherent with the solicitor's contractual and tortious duty to the client, thereby allowing the two to co-exist. The duty is coherent because it admits of no possibility of conflict: the interests of the client and the interests of the beneficiary necessarily coincide completely." (footnotes omitted)
The solicitor here was not the solicitor who drew Frank's will, although he was aware of its terms. As Leeming JA explains, however, the solicitor must have understood that Frank's will left "Boronga" to somebody other than Peg's daughters. So much is clear by the bequest of the residue to the daughters in the succeeding paragraph of the will. Not without hesitation, I have ultimately come to the conclusion, for the reasons given by Leeming JA, that the remarks of the High Court in Badenach are not to be understood as applying to a case where the grantor of an enduring power of attorney has become incapable.
In reaching this conclusion I am influenced by the close analogy between the duty owed to Mrs Van Erp and the duty owed to the incapable grantor of the power of attorney, Frank. I am also influenced by the fact that the imposition of a duty of care of the kind found here will be rare indeed. The duty is confined to a solicitor engaged to advise the holder of an enduring power of attorney about estate planning issues where the grantor of the power has become incapable. In advising the grantee of the power as part of the estate planning retainer about an inter vivos transfer of property, the solicitor is obliged to exercise care and skill in giving that advice, taking into account any separate testamentary intentions of his or her client, the incapable grantor. In this limited way, the duties owed to Frank and to the beneficiaries under Frank's will coincide completely.
Accordingly, I agree that Badenach is able to be distinguished in the way suggested by Leeming JA and that a correct application of the "salient features" test to the facts of this case leads to the conclusion that the solicitor owed Joseph a duty of care.
The content of that duty of care, as found by the primary judge, was not expressed with clarity. It may be that by examining the primary judge's findings about breach, at [387], the content of the duty owed to Frank, and indirectly to Joseph, may have been to conduct "a critical examination of [Peg's] authority to effect the transfer". It may be, by reference to a later description of breach, at [406], that his Honour found that the solicitor owed Frank a duty to warn Peg not to act for a purpose foreign to her power.
Accepting either formulation of the duty of care owed by the solicitor for present purposes, I agree with Leeming JA that Joseph established causation under s 5D of the Civil Liability Act 2002 (NSW).
I was initially troubled by the evidence Peg gave, in answer to a question by counsel for the solicitor at T78.17 as follows: "Q. When you went to see Mr Mccallum and you instructed him, what were you trying to do in having Boronga given to the girls, was give effect to Frank's promise from 2000 that Boronga go to the girls? A. That we had, yes, agreed upon to be fair to all the children."
I agree, for the purposes of the claim in equity against Peg and her daughters, there was sufficient detail in the cross-examination to put Peg on notice that her evidence about the oral agreement was being challenged. I do not agree, however, that it was ever suggested to Peg that the content of her instructions to Mr Maccallum were other than she described in this passage.
If Mr Maccallum had conducted "a critical examination of [Peg's] authority to effect the transfer" or warned Peg not to act for a purpose foreign to her power, the evidence is tolerably clear that Peg would have told Mr Maccallum that she and Frank had orally agreed in 2000 that "Boronga" would be "given to the girls".
The problem, from Mr Maccallum's perspective, is that he knew that in 2003, three years after the oral agreement Peg claimed to have made with Frank, that Frank gave instructions that "Boronga" was to pass under his will to somebody other than his daughters. I agree with Leeming JA that in those circumstances the no transaction case Joseph was conducting succeeded on the balance of probabilities. Acting with due care and skill, Mr Maccallum could not give effect to Peg's instructions.
I agree with the orders proposed by Leeming JA.

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Judgment (28 paragraphs)

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Cases Cited (34)