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[2007] NSWSC 1274
Supreme Court of NSW
2007-11-14
Patten AJ, Dowd J
Original judgment source is linked above.
CITATION : Monica Frances Symonds and Gerald Symonds v Cedric Borsmann Vass and 24 Ors [2007] NSWSC 1274
23,24,26,27,30 April 07 HEARING DATE(S) : 1,2,3,4,7,8,9,10,11,14,15,16 May 07 1, 2 August 07
Trade Practices Act 1974 LEGISLATION CITED : Fair Trading Act 1987 Limitation Act 1969 Civil Procedure Act 2005
D'Orta - Ekenaike v Victoria Legal Aid (2005) 223 CLR1; Giannarelli v Wraith (1988) 165 CLR 543; March v E & MH Stramare Pty Ltd (1991) 65 ALJR 334; CASES CITED : Keefe v Marks (1989) 16 NSWLR 713; Yates Property Corporation Pty Ltd v Boland 145 ALJR 169; Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209; Law Society of NSW v Harvey (1976) 2 NSWLR 154; O'Reilly v Law Society of NSW (1988) 24 NSWLR 204.
Monica Frances Symonds - First Plaintiff PARTIES : Gerald Symonds - Second Plaintiff Cedric Borsmann Vass and 24 Ors
COUNSEL : Mr V R Gray - Plaintiffs Mr R Weber SC with Mr T Faulkner - Defendants
SOLICITORS : George Mallos - Plaintiffs Mallesons Stephen Jaques - Defendants
IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION
Monica Frances Symonds - First Plaintiff Gerald Symonds - Second Plaintiff v Cedric Borsmann Vass - First Defendant and 24 Ors
JUDGMENT INTRODUCTION: 1 The Plaintiffs sue their former solicitors in somewhat unusual circumstances. 2 Early in 1991 they contracted to purchase for $13m a waterfront property known as Paradis Sur Mer (hereafter "the Property"), 7 Wolseley Crescent, Point Piper, intending to subdivide and/or redevelop it. They claim that in doing so they relied on the advice and valuation of a valuer, Mr Frank Egan. 3 However, their scheme proved financially disastrous and, as seems to be common ground, the venture resulted in the loss of many millions of dollars. 4 Seeking to blame Mr Egan for the loss, they brought proceedings against him and a company, Egan National Valuers (NSW) Pty Ltd of which he was Managing Director (together hereafter "Egan"), in this court (the earlier proceedings) retaining for the purpose, the present defendants, at relevant times practising in partnership under the name Dunhill Madden Butler (I will hereafter refer to the Defendants as "Dunhill Madden") 5 The earlier proceedings were listed for hearing by Dowd J, commencing 29 January 1996 with an estimate of 5 weeks. During that hearing there were pleading and procedural difficulties and interlocutory applications, including an excursion to the Court of Appeal, which occupied most of the allotted time. In the result, following advice from their senior and junior counsel and from Dunhill Madden, represented by Mr Stephen Klotz, the Plaintiffs agreed to a compromise on the basis that the earlier proceedings were dismissed with no order as to costs. 6 The Plaintiffs believing that Dunhill Madden breached the terms of their retainer and were negligent in and about the prosecution of the earlier proceedings and in and about the compromise of them, commenced these proceedings, primarily seeking, in effect, damages for the loss of the chance of a successful outcome. 7 They also pleaded as a separate cause of action an entitlement to repayment of certain of the monies paid by them on account of costs. 8 Before me, the Plaintiffs were represented by Mr V Gray of counsel. Mr R Weber SC with Mr T Faulkner represented Dunhill Madden. With one significant exception, for the most part, all the witnesses who could have given evidence in the earlier proceedings gave evidence before me, the exception being Mr Egan who had died in the meantime. However, a statement he made for the purposes of the earlier proceedings was admitted into evidence as exhibit 47.
THE PLAINTIFFS: 9 The Plaintiffs are husband and wife having married in 1958. They both lived in England before migrating to Australia in December 1981. In England, following their marriage, they successfully engaged as equal partners in property development. 10 In Australia they continued to exercise their expertise in property development, having by 1987 redeveloped four sites. From 1987 until 1990, however, Mr Symonds worked full time in charitable and community activities. 11 According to his evidence, prior to 1989 Mr Symonds had retained Mr Egan, an experienced valuer, on several occasions "to give selling prices of prospective developments and I respected his judgment and his advice". THE PLAINTIFFS ACQUIRE THE PROPERTY: 12 Towards the end of 1989, Mr Symonds was told by a real estate agent, Mr Peter Engel that the Property was on the market for tender. Mr Engel opined that it was worth $15m. 13 Following discussion between themselves, the Plaintiffs decided to seek the advice of Mr Egan. In the meantime on 12 December 1989 Mr Symonds prepared a memorandum which he said constituted "some preliminary calculations as the profits achievable on development of the property". He gave a copy to his banker, Barclays Bank Australia Ltd (hereafter "the Bank"), in order to ascertain whether it was willing to fund the development. The memorandum which contained reference to the Plaintiffs' current assets read: "Purchase of 7 Wolseley Crescent 15.000.000 Stamp duty 810,000 Interest for 2 years @18% 5,691,600 Building 3 houses of 5,000 sq ft each @ $200 per ft 3,000,000 Professional fees @ 6 ⅔ % 200,000 Interest of building and fees @10% 320,000 Landscaping, pools and marina 300,000 Selling Agent @1% on $30m 300,000 Legal costs 50,000 25,671,600 Profit 4,328,400 Income of 3 houses @ $10m each 30,000,000 Security offered: "1/56 Wolseley Road 4,500,000 2/39 Elizabeth Bay Road - let @ $450p.w. (23,400 p.a.) 300,000 4/39 Elizabeth Bay Road - let @ $450 p.w. 300,000 13/39 Elizabeth Bay Road Restaurant @ $60,000 p.a. 600,000 _________ 5,700.000 Note 1) 1/56 Wolseley Road will be sold now reducing the borrowing and saving $1,620,000 interest (18% over 2 years) 2) ..…may be able to sell Paradis Sur Mer now @ 12m, giving us one building block of 14,000sq ft @ $4m. 3) I shall supply valuation from Frank Egan." 14 The Bank responded by letter to the Plaintiffs on 19 December 1989, the relevant portions of such letter being: "We are pleased to advise that Barclays Bank Australia Limited (the Bank) is willing to provide Loan Facilities (the Facility) of up to $22,000,000 (Twenty Two Million Dollars) to Gerald and Monica Symonds or to a company acceptable to the Bank which they may nominate (the Customer) for the purchase and development of "Paradis Sur Mer". …………………………….. Purpose: To acquire and develop the property known as "Paradis Sur Mer" in accordance with a feasibility study which is to be provided to and found satisfactory to the Bank following approval by a firm of Quantitive Surveyors to be appointed by the Bank. Security & Guarantors: Security for this Facility shall include:- a) 1st mortgage over 1/56 Wolseley Road, Point Piper. b) 1st mortgage over lots 2, 4 and 13/39 Elizabeth Bay Road, Elizabeth Bay. c) 1st mortgage over the property to be developed and known as Paradis Sur Mer. d) Letter of Credit from Barclays Bank PLC Jersey office for an amount of A$3,000,000 supported by a mortgage over freehold of Airways House Jersey e) Should the Facility not be in the same name as the owner of any of the above properties, the Bank will require an unlimited guarantee from the said owner supported by the above mortgage. Other Terms Conditions: a) The Bank will require professional valuations to be carried out for all real estate properties located within Australia. Such valuations are to be undertaken by a valuer nominated by the Bank at the expense of the customer and are to be undertaken to determine the market value for mortgage purposes ………………………………… d) The feasibility study to be provided as detailed earlier is to include a cash flow forecast which incorporates timings of drawdowns and sales etc. This study will be subsequently discussed with another real estate agent familiar with this type of project prior to drawdown. The Bank had approved these facilities subject to being provided with the valuations and feasibility study which must be found satisfactory. Once these have been provided together with the exact amount sought and advice as to the borrowing entity, we will issue a formal letter of approval for your acceptance which will detail all the terms and conditions applicable to the facilities proposed." 15 On or about 18 December, Mr Symonds had a conversation with Mr Egan as a result of which they met on the Property on 19 December when, according to Mr Symonds, there was this conversation: "Egan: I know the house well from a previous valuation about two years ago. Symonds: There are several alternative developments. I could sell the old house with Lot E and one new house on Lot 2. I could demolish the old house and build two new houses, on Lot 1 and Lot E combined, and one on Lot 2. I could build two large houses and one small house on Lot E. I could subdivide Lots 1 and 2 into 3 in order to build three medium to large houses, or I could build town houses. I would like all of these options considered and compared for financial feasibility." 16 On or about 4 January 1990, the Plaintiffs received from Mr Egan a document bearing that date which purported to be a Certificate of Valuation of the Property. The valuation stated that it was prepared "under instructions from Mr G Symonds" and that the valuation was assessed "for and on behalf of Barclays Bank Australia Limited". 17 After noting that the Property was held in 3 parcels, the measurements of which were specified, and after recording the permitted uses under the relevant zoning viz Residential 2a within a Harbour Foreshore Scenic Protection Area, the valuation proceeded to record the benefits of the site and the nature of the current improvements. 18 It then discussed development options: "Two major alternatives are obvious, firstly to sell the current building on Lot 1 with Lot E and sell Lot 2 as vacant land, or develop a major residence on Lot 2 and sell Lot 2 as an improved site. Secondly, subdivide Lots 1 and 2 into three allotments. The most eastern allotment having an area of 993.6 square metres, the centre allotment having a similar area and the most western allotment having an area of 696.78 square metres but be developed in conjunction which Lot E which has an area of 259 square metres. The centre and most eastern lots could be developed each with a residence of approximately 550 square metres, whilst the western allotment developed in conjunction with Lot E could be developed with a residence of approximately 525 square metres, or larger if the Council will recognise the area of Lot E. Other alternatives are available as it would appear possible to subdivide Lot E and develop it individually, however, it is expected that some resistance may be encountered with the Local Authority and a Development Approval may need to be argued before the Land and Environment Court. As the valuation is being prepared for mortgage purposes I have not pursued this alternative, however, it is not considered unrealistic. In considering the first alternative, it could be expected that the profit to the entrepreneur would be between $3 and $5 million. The second alternative could realise a profit to the entrepreneur of approximately $4.8 million dollars." 19 Before concluding that the value of the Property at 3 January 1990 was $15m, the valuation commented: "At the time of valuation the turnover of Sydney and Australian real estate has slowed due to the high costs of mortgage finance. It is predictable that these conditions may remain for some time and its long term effect is difficult to predict, however, from past experience the real estate market has been revitalised with the lowering of mortgage finance. Having regard to these conditions it is not possible to be dogmatic regarding the values of development of a future mansion on the subject site and in the attached calculation a number of selling prices have been considered in Option 1 and a conservative approach has been taken to the gross realisation in Option 2. In the alternatives considered a proposed purchase price of $15 million is justified and with an up turn in the economy the predicted profit could increase considerably."
20 Thereafter, the Plaintiffs, through Mr Symonds, embarked upon negotiations with the vendor's agent, which resulted in them exchanging contracts on 15 March 1990 for the purchase of the Property for the total price of $13m. As it transpired, there were 2 separate contracts, presumably to minimise stamp duty, one nominating a consideration of $10m and the other $3m, but nothing turns on this. The purchase was completed on 22 March 1990 and was wholly financed by the Bank, which took security over the Property and also over the other properties nominated in the Bank's approval, which the Plaintiffs owned or controlled. The Plaintiffs, by deed dated 15 March 1990, declared that they purchased the property on trust for Gowrise Pty Ltd which agreed to provide the purchase price and to indemnify the Plaintiffs in respect of the Property, including under any mortgage secured over it. It is difficult to understand the purpose of this trust, which the Plaintiffs themselves seem to have substantially ignored, however, it proved to be a factor in their subsequent problems.
THE PLAINTIFFS REDEVELOP THE PROPERTY: 21 The Plaintiffs encountered difficulties in obtaining approval from Woollahra Council for their proposals regarding the Property. They sought further advice from Mr Egan which he gave by letter dated 30 August 1990, as follows: "Re: Paradis Sur Mer Following our recent discussions and inspection of your site, I wish to confirm that the property adjoining, No 9 Wolseley Crescent, was recently sold for $11,250,000. No 9 Wolseley Crescent, had a land holding of approximately 10,000 square feet. I have had the opportunity to inspect this property during its construction and subsequently for a Mortgage Insurance company. My impression was that it was a specialised building and very well finished. However, the property only provided three certain bedrooms. The fact that it was a special design and had low sleeping accommodation, I believe adversely affected its market appeal. Also, the property does not have direct water frontage. To maximise the return from Paradis Sur Mer I believe that the property would be best developed with two large allotments each of 15,000 square feet with superior residences of a more universally accepted design and providing larger bedroom accommodation, living areas and outdoor facilities. I believe that on completion these properties would attract a price between $13,000,000 and $15,000,000 each and I feel supported in this opinion by the sale of the adjacent property. If the two larger lots are chosen as the sub-division pattern they would be superior in all respect to No 9 Wolseley Crescent." 22 By November 1990 the house erected on the Property had been demolished. In that month the Plaintiffs received an offer to purchase the Property for $13m. They decided to reject it. Thereupon the offer was increased to $14m but again it was rejected. 23 By March 1991, a house was in the course of construction on part of the property which was to be known as 7 Wolseley Crescent. On 5 April of that year, Mr Egan, at the request of the Bank wrote to it, with a copy to the Plaintiffs, in these terms: "RE: Paradis Sur Mer, Wolseley Crescent, Point Piper. Since my recent conversation with Steve Lawton, I have had the opportunity to meet Mr Symonds and inspect the plans for the house now being erected on the eastern lot. From the plans each house will provide approximately 840 square metres or 9,000 square feet, and are of excellent architectural design. Under these circumstances I would not alter my original estimate that the houses will retail for between $13 million and $15 million on completion. I base this assessment on the sale of 18 to 20 Carrara Road Vaucluse which sold on 3 April 1990 for $11 million and the sale of the adjoining property in 9 Wolseley Crescent which sold on 12 September, 1990 for $11,250,000. The subject properties will certainly be of better quality and design than No 9 Wolseley Crescent and the allotments have superior plottage. Mr Symonds' land has a high profile throughout Australia and overseas and would appeal to both the domestic and overseas market. Proceedings have been commenced in the Land and Environment Court to obtain development approval for the construction of the second home on the western allotment. The development application is in similar terms to that eventually approved on the eastern allotment and should be successful. It is proposed to commence the construction of both residences simultaneously for obvious building economy. On completion of the carcass of each building the eastern project will be "finished off" and occupied by Mr and Mrs Symonds. Then on completion of the eastern residence the remaining structure will be completed. On completion of both properties the marketing strategy will be decided. The completion of the bulk of both buildings at the same time will demonstrate to prospective purchasers that the view of each development will not be impaired by the other, and provide as a practical marketing aid, deemed necessary in the luxury residential market. The proposal is logical as substantial savings in costs will be made, completing the "structure" of the building at the same time." 24 The house known as 7 Wolseley Crescent was completed about January 1992. Mr Egan inspected it and on 6 February 1992, wrote this letter to Mr Symonds: Thank you for the opportunity of viewing the recently completed residence on Lot 1 defined on Deposited Plan 205027. The improvement comprise a multi level brick and Ferro concrete building providing 6 bedrooms, spacious living rooms, verandas, triple garage, in-ground swimming pool and extensive landscaped area. The property has been architecturally designed to exploit the unique position of the land on the northern extremity of Point Piper. The property is of modern glass design, which has exploited the expansive views over Sydney Harbour. The building is of high quality finish with the best quality prime cost items and all modern innovation. The land is a high profile site and probably one of the best known in Australia, it has a history of illustrious occupiers and has gained publicity through recent litigation. I personally do not know of a residence having the unique attributes that would form a realistic comparison for normal valuation procedures. Due to the above attributes the property could be marketed throughout Australia and overseas particularly the South Pacific Basin Countries. Having regard to its modern design the conservative section of the market could distance itself, however the magnificent vista could not be exploited with a conservative design When regard is had to the sale of the adjoining property to the west, and the sale of approximately $11 million in Carrara Road at Vaucluse, and a possible impending sale of a large waterfront property in the Crescent at Vaucluse, I believe that a sell price of $15 million dollars is realistic on the current market conditions, with an appropriate selling strategy." 25 According to Mr Symond's statement of evidence, problems in obtaining the consent of Woollahra Council and delays with appeals in the Land and Environment Court in respect of the second house to be erected on the property, which was to be known as 6 Wolseley Crescent, resulted in cost overruns and the Plaintiffs experiencing cash flow difficulties. They suspended the building of 6 Wolseley Road in February 1992 and concentrated their efforts on marketing 7 Wolseley Crescent. 26 Successively Richardson & Wrench (Double Bay) and Laing & Simmons (Double Bay) were appointed as agents for the sale. As it appears, the Plaintiffs instructed them to seek a purchaser for $15m. A sale at this price was unable to be achieved and in June 1992, Mr Bart Doff of Laing & Simmons (Double Bay) told Mr Symonds that he did not think a sale could be effected at a better price than $8m. 27 In September 1992 number 7 Wolseley Crescent, remaining unsold, the Plaintiff recommenced the building next door of 6 Wolseley Crescent. By then Mr Symonds had concluded that the partially built house may have been hampering the sale of number 7. The Bank agreed to provide further accommodation. 28 Number 6 Wolseley Crescent was completed in June 1993. After being submitted to tender without success, it was offered for public auction but bidding reached $7.2m only and the property was withdrawn from sale. In November 1993, it was auctioned again at the direction of the bank and sold for $6.87m. 29 Number 7 Wolseley Crescent was sold at public auction in March 1994 again, at the direction of the Bank, for $7.25m. This left a relatively small part of the Property on a separate lot (the lot E previously referred to) remaining in the Plaintiffs' hands. They sold this as vacant land known as 8 Wolseley Crescent in December 1994 for $1,440,000, thus putting an end to all their proposals regarding the property. 30 The project resulted, on any basis, in very considerable financial loss reflected virtually wholly by the difference between the amount of the facility provided by the Bank and the proceeds of sale of Number 6, 7, and 8 Wolseley Crescent. The Bank commenced action to realise its collateral securities. It may be inferred that it also contemplated action against the Plaintiffs upon their personal covenants. 31 A matter, which subsequently loomed large, was that of the six properties over which the Bank took collateral security, only one was actually owned by the Plaintiffs or either of them. According to the evidence property 1/56 Wolseley Road Point Piper was owned by Senneh Pty Ltd; properties 2/39 Elizabeth Bay Road, Elizabeth Bay; 4/39 Elizabeth Bay Road, Elizabeth Bay and 13/39 Elizabeth Bay Road, Elizabeth Bay were owned by Tisete Pty Ltd and a property known as Airways House on the Island of Jersey was owned by Tabard (Jersey) Limited. The evidence, however, also suggested that the beneficial owner of each property was Mrs Symonds and that no one other than the Plaintiffs had an interest in the companies, although apparently there was an existing mortgage given by Tabard (Jersey) Ltd over Airways House to the Bank's parent in England. THE PLAINTIFFS TAKE LEGAL PROCEEDINGS: 32 In June 1993, before their loss was fully ascertained, the Plaintiffs turned their minds to the possibility of taking legal proceedings against Mr Egan and consulted, for that purpose, Mr Klotz, on 28 June. 33 Documentary material supplied by the Plaintiffs to Mr Klotz emphasises their asserted reliance upon the validity and accuracy of the valuation and letters emanating from Mr Egan referred to above. In his statement prepared for Mr Klotz, Mr Symonds under the heading "conclusion" said: "Frank Egan knew that Monica and I relied upon his valuation and it appears to me that all of the points in "Shaddock's case" (which I attach) are relevant. Even though we have not yet suffered damage, we know that there is likely to be a major loss on the development and sale of the two houses. However, all of this pales into insignificance compared with his unforgivable negligence in not delving deeply enough into s 94 (and to a lesser extent the F.S.B.L and height limit) in which case we would not have touched the deal with a barge pole. He charged us full scale fees for the Valuation which he reduced at his own suggestion. I had asked him for a full service which we could rely upon and I am sure this was not undertaken correctly."
34 On or about 30 November 1993, the Plaintiffs signed an "Engagement Letter" from Dunhill Madden which, omitting formal parts, provided as follow: "Thank your for engaging us to represent you in the above matter. Set out below is some information which will explain the basis of our relationship. Please review this letter carefully and contact us promptly if you have any questions. Who Will Provide the Legal Services? Stephen Klotz will be responsible for and in control of the conduct of your matter. Some of your work may be performed by other solicitors within the firm, subject to the supervision of Mr Klotz. This delegation will allow us to provide services in the most efficient and timely manner. Fees The fees we charge will be determined by reference to time spent. We will keep accurate records of the time we spend on your work, including conferences, negotiations, factual and legal research and analysis, document preparation and revision, travel and other related matters. We record our time in units of tenths of an hour. The charge out rate for Mr Klotz is $270.00 per hour. Some of the work will be undertaken by other solicitors, at charge out rates of $120.00 to $270.00 per hour. We are sometimes requested to estimate the amount of fees and costs likely to be incurred in connection with a particular matter. Whenever possible, we will furnish such an estimate based upon our professional judgment, but always with a clear understanding that it is not a maximum or fixed fee quotation. The ultimate costs may be more or less than the amount estimated. Our estimate for this matter is as set out in the attachment to this letter. In certain cases, fees are fixed by prescribed scales. The Firm does not charge in accordance with any prescribed government or regulated scale and by signing this agreement, you will have waived any right to rely upon the scale in the event that our charges are in excess of those fixed by the scale. Disbursements (Out of pocket Expenses) We incur and pay on behalf of clients a variety of out of pocket expenses. Whenever such costs are incurred, we will carefully itemise and bill them on a monthly basis to you. Typical of such costs are court filing fees, witness expenses, travel expenses, charges made by barristers and outside consultants, long distance telephone charges, facsimile charges, courier and delivery charges and photocopy expenses. Trust Deposits All trust deposits we receive from you will be placed in a trust account for your benefit, the provisions of which are regulated by law. We will forward to you trust statements on a regular basis, as required by law. We will ask you, at regular intervals, to deposit funds of up to no more that $85,000 into our trust account for payment of our fees and disbursements. We will ask you to make an initial deposit of $10,000 upon your acceptance of the terms of this engagement letter. The moneys held on trust may, in accordance with your acceptance of the terms contained in this letter, be transferred from time to time and applied towards incurred and billed fees and disbursements. Termination You may terminate our representation at any time with or without cause, by notifying us. If this occurs, your papers and property will be returned to you promptly upon receipt of payment for outstanding fees and costs. Our own files pertaining to your matters will be retained. Your termination of our services will not affect your responsibility for payment of legal services rendered and out of pocket expenses incurred before termination. Billing Arrangements and Terms of payment We will bill you monthly for our fees and disbursements up to the amount of $85,000. Payment must be made within fourteen days of receipt of our invoice. We will give you prompt notice if your account becomes overdue and, if this continues we reserve the right to terminate your representation and pursue collection of your account. When the funds of $85,000, that will have been paid by you into our trust account, have been exhausted (whether applied toward incurred and billed fees and disbursements or reserved for anticipated disbursements, such as counsel's fees and transcript for the hearing - at present, we intend reserving $25,000 for anticipated disbursements), we will bill you for any further fees upon the conclusion of the proceedings, whether by settlement, judgment or otherwise. If the settlement or judgment amount is less than the amount of our further fees billed, we will not pursue collection of the difference between those amounts. Preliminary Opinion by Counsel Prior to the commencement of proceedings, we will obtain on your behalf a preliminary written opinion on your prospect of success from the barrister whom we would brief in the matter. We reserve the right to terminate or vary the basis of your representation upon consideration of counsel's preliminary opinion. Pre-Hearing Review Prior to the hearing, we will reconsider the merits of your case (including if necessary, obtaining counsel's written opinion). We reserve the right to terminate your representation at that time based upon that review. Our termination of your representation at that time will not affect the billing arrangements set out above. Service We pride ourselves on our service. If you have any difficulties or you are not satisfied with the service being provided, please contact Stephen Klotz or our managing partner, John Churchill (224 9605) If you are in agreement with the terms of this engagement letter, please sign at the foot of this letter, retain one copy and return the signed copy to us." 35 Attached to the letter was a document, not entirely easy to understand, which seems to estimate the actual costs and disbursements of the matter, based on a 5 week hearing and including a provision for appeal costs at $141,050. 36 On or about 2 December 1993, Dunhill Madden delivered a brief to advise to Mr David Hammerschlag (as Hammerschlag J then was). The "observations" in the brief signed by Mr Klotz seem to have accurately summarised the nature of the legal proceedings then contemplated. 37 In January 1994 Dunhill Madden retained Mr Terry Davis as an expert valuation witness. They also, as it seems, thereafter kept their clients regularly informed of the progress of the matter. The Plaintiffs reciprocated by sending to Dunhill Madden throughout such progress a series of numbered memoranda. An example is the memorandum Number 7 dated 6 February 1994: "I attach 2 page letter I obtained from Egan in August 1990 which has just come to light. It should be read in conjunction with Memo 2 of 11 January 1994. It is important to understand what was happening in August 1990. We had decided at that time not to go ahead with Egan's option 2 due to lack of council support and difficulties with section 94. We had been advised by Murray Tobias QC to develop the houses on their existing subdivisions. The position was similar to Egan's option 1 except that we had demolished the old house and wanted Egan's advice in the situation as it then existed. Nothing had been approved or built at that time. Basically his advice says that the property would be best developed with two large houses and a small one on Lot E. 9 Wolseley Crescent had just been sold for $11,250,000 and he felt that ours should reach between $13 million and $15 million as long as we avoided some of the design pitfalls of Number 9 which we did. I criticise his letter with the benefit of hindsight because (maybe) if the 2 new houses could have been magically produced at that moment his predictions might have been correct. However, he makes no allowance for what they might fetch and how long they might take to develop. Surely some very strong riders are missing here! If he had warned us of the difficulties we were to suffer, we had the option to get our money back at that time to sell the three blocks separately. However, with his reassurance and no warning we pressed on still believing that there was a large profit at the end." 38 According to Mr Symonds, on 18 March 1994, he had a telephone conversation with Mr Klotz as follows: "Klotz: Egan's valuation and profit predictions of 4 January, 1990 were clearly misleading and deceptive and in contravention of the Trade Practices Act and the Fair Trading Act. But, we will have to careful as there is a three year limit under section 52. I said: Well, Egan was continuing to predict a $15 million selling price right up to February 1992. Can't we use this letter to get around the time limit? Klotz: Maybe we can, I'll think about it. Me: The letter from Egan dated 6 February 1992 in my view is a very important addition to our case. The letter valued a completed house. We have a separate valuation which I relied on in our marketing of the finished house and which was important in my refusing an offer of $8 million for 7 Wolseley Crescent. I will send you a memo in relation to this. Klotz: That would be helpful and I will think about it." 39 The Plaintiffs followed up this telephone conversation with memorandum Number 10: "This confirms our telephone conversation this afternoon when we discussed Mr Egan's letter of 6/2/92. This is the letter when he inspected the finished house number 7 and predicted that it would sell for $15 million "on the current market condition". Surely this could give rise to any of the following possibilities: - 1. That we have a separate and additional claim against him as this could be treated as a separate valuation bearing in mind that at that time he was valuing a finished house as it actually existed rather than a prediction. 2. We relied upon his confirmation and as you know Mr Pillinger also confirmed reliance in his agency agreement. We received offers at that time of $8 million which we dismissed as "insulting" in the circumstances. Had we not been misled we possibly might have obtained a little more and, had $8 million been accepted and our borrowings reduced, we would have saved approximately $1 million per year of interest which would have been equivalent to $10 million now. 3. This might have some assistance on extending the 3 year limit under section 52 of the TPA." 40 Although, so far as the evidence relates, Dunhill Madden did not obtain a written opinion from counsel as to the prospects of success of proceedings against Mr Egan, they wrote to the Plaintiffs on 7 April 1994 as follows: "Claim Against Egan Valuers You have asked us for a short opinion on your prospects of success in this matter. Our opinion follows. As you know, there are never any guarantees of success in litigation, particularly where there are disputes of fact and conflicting expert opinions. That having been said, we presently have no reason to believe that either the statements of fact with which you have instructed us or the preliminary opinion of the expert valuer retained by you will not be accepted. If they are accepted, we consider that your action ought to succeed and that you ought to recover your damages. Mr Hammerschlag, whom you know to be briefed at the hearing of this matter, shares our opinion." 41 Mr Davis provided two reports. The first dated 22 April 1994 addressed the question whether "the Certificate of Valuation dated 4 January furnished by Mr F K Egan of Egan National Valuers in respect of the property at 7 Wolseley Crescent, Point Piper (The Preparation), fell short in any respect of the standard expected of a valuer of reasonable skill and competence and, if so in what respect." 42 The report comprised some 35 pages. For reasons which he detailed, Mr Davis was critical of Mr Egan and his views are, I think, encapsulated by the following paragraphs under the heading "Conclusion": "I do not consider that the valuer's valuation report is of an adequate standard as required of a reasonably competent valuer, having regard to the nature of the subject property and the instructions to the valuer. The major factors which I have taken into consideration may be summarised as follows: a) The report is unclear as to the details of instructions or purpose of valuation, and unsuccessfully attempts to combine the advisory/feasibility and mortgage valuation aspects of the instruction. The methodology is, therefore, flawed and the report structure does not adequately address the actual nature of the valuer's instructions; b) The valuer appears to have valued the property without discussing the matter in detail with the Town Planning Department at Woollahra Municipal Council; c) The valuer did not internally inspect the existing improvements on the subject land at the time of his valuation. Such procedure is, in my experience, well short of the standards required for a valuation of this type. It is common for such exercises to be referred to as kerbside valuations where access is unavailable. The term "valuation" would not normally be utilised in any report where important aspects such as internal inspection or Town Planning issues have not been adequately addressed. d) The rationale for Options 1 and 2 does not allow for a number of relevant cost items (e g promotion for sale). e) The report is inadequate in its use of market sales evidence to support key propositions, including the on-sale value of the existing house, Paradis Sur Mer, and the estimated sale prices of the proposed new dwellings. f) The conclusions in the report are not cross-checked by any summation analysis. There are a number of other matters upon which the report is open to criticism, and these are scheduled in the following section "Specific comments on the Egan Report". 43 Shortly afterwards in May 1994, the Defendants commenced the earlier proceedings against Egan. They were commenced by summons in the Commercial Division but were subsequently removed to the Common Law Division where a Statement of Claim was filed. It pleaded causes of action in breach of contract and in negligence and under the Trade Practices Act and the Fair Trading Act, based on the valuation dated 4 January 1990. Breach of retainer and negligence were particularised as follows: "The Defendant: (a) failed to apply conventionally accepted valuation methodology; (b) failed to have regard to relevant comparison sales information; (c) failed to have due regard for prevailing and reasonably foreseeable economic and market trends and conditions; (d) used the method of valuation being the hypothetical development method which was known to him or ought reasonably to have been known to him as perilous; (e) failed to ensure that assumptions he made for the purpose of assessing the hypothetical development of the property were accurate: (f) failed to adequately assess and advise upon matters which they knew or ought to have known would impact upon and restrict the form of the development of the property, being: (i) the zoning of the property (ii) the requirements of the Woollahra Local Environment Plan No 27; (iii) the location of the site within a harbour foreshore scenic protection area; (iv) the exact location and significance of the twelve metre foreshore building line; (v) the Woollahra Municipal Council Residential Development Control Plan which came into effect on 1 December 1989; (vi) the Woollahra Municipal Council Development Control Plan for the provision of and contribution towards the provision of public open space within the municipality of Woollahra, which came in to force on 10 July 1989; (vii) the lack of access for services and utilities to Lot E of the property; (g) failed to make any or any adequate enquiries of the Woollahra Municipal Council's Town Planning Department as to the feasibility of the proposed alternative developments or as to any of the matters referred to in the preceding paragraph; (h) relied solely on, or on an extract from, a Section 149 Certificate in respect of the property to describe and assess the town planning aspects of the proposed development. (i) failed to assess adequately or at all the size of the market for properties of the order that were contemplated to be sold; (j) failed to exercise due skill and competence in analysing the alternative development proposed; (k) failed to allow for a number of matters in advising upon the proposed alternative developments, including: (i) in relation to the first alternative development, (i) agent's commission on the sale of the second proposed house, (ii) legal fees on the sales of the then existing and the new houses, (iii) advertising and promotion of the properties or (iv) restoration of the then existing house; (ii) realistic agent's commission; (iii) realistic professional fees; (iv) in relation to the second alternative development, a realistic monetary contribution to the Woollahra Council in lieu of contribution of land for public open space; (v) statutory holding costs (land tax, local council rates, water rates); (l) failed to assess adequately or at all the time frames within which the development of the property might be executed. 44 As to the causes of action under the Trade Practices Act and the Fair Trading Act, it was pleaded that there was no reasonable basis for making the representations in the valuation upon which the Plaintiffs relied. 45 It is noteworthy and a matter which subsequently became of contention between the Plaintiffs and Dunhill Madden that the Statement of Clam made no mention of Mr Egan's three subsequent letters, respectively dated 30 August 1990, 5 April 1991 and 6 February 1992. 46 Mr Davis furnished a further report dated 21 August 1994. He noted that his instructions were: "..to prepare a retrospective valuation of the subject property for the following purposes; a) Providing advice and feasibility analysis in respect of alternative development proposals for the subject land; b) Preparing a retrospective valuation of the freehold interest in the subject property, as a 4 January 1990, for the purposes of security on first mortgage advance. It is noted that we have been unable to inspect the property in its January 1990 form as the improvements at that date have since been demolished. We have sought out and been provided with various information as to the size, state, condition, layout and general nature of the improvements at the valuation date and have had to rely on this data in coming to our valuation of the property. In addition, our town planning enquiries, which are also retrospective, have been made with the relevant current officers at Woollahra Municipal Council and are not the same personnel as were employed at the valuation date. We inspected the site on 22 February 1994." 47 Mr Davis proceeded to value the freehold of the property as at 4 January 1990 at $12.5m. He also expressed his opinion upon a "Feasibility Analysis" in these terms: "In addition to our formal valuation of the subject property we have analysed two alternative forms of development suggested by Mr G Symonds. We note that these alternatives do not represent the only forms of possible development of the site, and that in our opinion the highest and best use of the land as at the valuation date is perceived to be as a prestige home on the existing land holding. Our feasibilities have been prepared in conjunction with available market evidence. Whilst the subject land has potential for further development and/or subdivision our analysis concludes that neither of the suggested projects adds value to the property in its existing form." 48 In the course of his report, Mr Davis described the nature of the Property, its location, its improvements and topography in detail. He also recorded the applicable planning and legislative provisions and proceeded to discuss at length the 2 options initially suggested by Mr Symonds, namely "Option 1 Utilise the Existing form of subdivision of the subject property and either: i) Retain existing improvements, refurbish and on-sell, together with adjoining vacant block (Lot 2) ii) Demolish existing improvements and develop 2 new dwellings on Lots 1 and 2 and on-sell. Option 2 Subdivide existing Lots 1 and 2 into three separate building allotments, and redevelop with new dwellings (Lot E to be sold with adjacent allotment). 49 After closely analysing these options, Mr Davis opined that the proposals were of "questionable viability". He remained convinced, as I understand his report, that the highest and best use of the Property would have been to erect a single prestige home on the Property as it stood after demolishing existing improvements. THE PLAINTIFFS ARE RELEASED FROM PERSONAL LIABILITY: 50 During 1994, and before all its security was realized the Bank, apparently as an act of good will towards the Plaintiffs, agreed, in effect, to release them from personal liability over and above the proceeds of sale of the properties mortgaged which, of course, included the houses known as 6 and 7 Wolseley Crescent Point Piper, and the vacant land known as 8 Wolseley Crescent. This agreement was embodied in deeds executed by all relevant parties and it was common ground that the Plaintiffs were, albeit conditionally, effectively released from further personal liability. 51 It is unnecessary to refer to the deeds in detail. The conditions for the most part required the Plaintiffs' cooperation in the sale of the secured properties and the bank subsequently acknowledged that all the conditions had been fulfilled. I will hereafter refer to the deeds as "the deeds of release". 52 Dunhill Madden acted for the Plaintiffs and their interests in relation to the deeds of release. THE EARLIER PROCEEDINGS PROGRESS TO HEARING: 53 Although the earlier proceedings were transferred to the Common Law Division they were nonetheless managed under the Differential Case Management Scheme and were granted a degree of expedition such that towards the end of 1995 they were fixed for a hearing to commence on 29 January 1996. 54 No particulars of damages were given in the Statement of Claim but nonetheless the case seemingly proceeded towards hearing without undue difficulty. Egan by their defence put in issue the allegations of negligence and breach of contract against them and denied reliance by the Plaintiffs upon their advice. Specifically, in respect of the allegations in relation to the valuation of 3 January 1990, Egan pleaded: "As to paragraph 9 of the Statement of Claim, the Second Defendant on behalf of the First Defendant admits that he was of the opinion that the value of the Property as at 3 January 1990 for mortgage purposes was $15m as referred to in the Valuation Report and further admits that subject to the assumptions and qualifications contained in the Valuation Report and provided that the Property was developed pursuant to either of the two Options referred to in the Valuation Report that profits within a range of $4,325,500 and $6,325,500 in respect to Option 1 and that a profit of $4,805,000 in respect to Option 2 could be realised but otherwise denies the residue of the contents of that paragraph." 55 Egan also denied that any representations made by them were false or misleading and denied that the Plaintiffs suffered any damage as a consequence of any action or conduct by Egan. 56 The final paragraphs of the defence dated 6 June 1994 pleaded: "In further answer to the whole of the Plaintiffs' claim, the Defendants expressly limited and qualified the Valuation Report by reference to the possible impact of present and future economic forces on the Property specifically and the property market generally at the time of the Valuation Report in relation to the development of the Property as referred to in Option 1 and Option 2 contained in the Valuation Report. In further answer to the whole of the Statement of Claim the Defendants say that if any loss or damage has been suffered by the Plaintiffs arising out of their acquisition of the Property and their subsequent development of the Property (which loss or damage is not admitted) such loss or damage was caused by matters unrelated to the Valuation Report prepared by the Defendants. Particulars (a) The unforeseen drop in the property market. (b) The delay in realising the sale of the Property or any development thereon caused by the litigation between the Plaintiffs and the neighbouring owners and Woollahra Council. (c) Failure to follow a sound strategy for sale of the Property and any development thereon so as to realise a profit. (d) Acting in reliance on their own investigation and enquiries as experienced property developers (e) Acting against the advice of the Defendants contained in the Valuation Report in the development of the Property. (f) Acting in reliance upon the advice and information of others. Further and in the alternative the Defendants allege that if the Plaintiffs have suffered loss or damage (which loss or damage is denied) such loss or damage was brought about by the Plaintiffs' own negligence. Particulars (a) Failing to heed the warning signals contained in the Valuation Report. (b) Acting in reliance on their own investigations and enquiries as experienced property developers. (c) Acting in reliance upon the advice and information of others. (d) Failure to follow a sound strategy for sale of the Property and any development thereon so as to realise a profit. (e) Acting against the advice of the Defendants contained in the Valuation Report in the development of the Property." 57 The pleadings remained in that form namely the Statement of Clam filed 24 May1994 and the Defence filed 6 June 1994 until the commencement of the trial. 58 The Plaintiffs continued to remind Dunhill Madden of the omission from the Statement of Claim of any reference to Mr Egan's letters including those of 30 August 1990 and 6 February 1992 and of a valuation report dated 28 February 1992, notwithstanding that Dunhill Madden had sent copies of those documents to Egan's solicitors as early as April 1994. On 14 June 1994, the solicitors Phillips Fox enquired of Dunhill Madden: "Is it alleged that the Plaintiffs relied upon these documents? If so, please identify the nature of such alleged reliance. We note the strict timetable which has been ordered in respect of these proceedings following your clients' Motion for Expedition. Accordingly, we look forward to your response as a matter of urgency. 59 Dunhill Madden's subsequent reply of 9 August 1994, upon the subject of reliance stated: "The Plaintiffs executed the development of the property in reliance upon the advice contained in the letter dated 30 August 1990. In reliance upon the advice contained in the letter dated 6 February 1992, the Plaintiffs determined to ask for $15 million as the selling price of the completed residence on Lot 1 (7 Wolseley Crescent)." 60 In November 1994, Phillips Fox, having learned of the deeds of release from an inspection of documents at the office of the Plaintiffs' accountant, Mr Golan, wrote to Dunhill Madden seeking Discovery of those deeds. 61 A conversation occurred thereafter between Mr Symonds and Mr Klotz as follows, according to Mr Symonds: "Me: Stephen, I just received the fax in relation to the Barclays Deed. What do you think we should do about it? Klotz: I do not think the deed has any relevance to your claim and that we do not need to give them a copy. Anyhow, it is not finalised yet and will not be until all the mortgaged properties are sold. I shall send you a draft of my proposed rely for your information. Me: Thank you, I look forward to seeing your reply." 62 A number of other matters arose between November 1994 and the hearing date during which period the Plaintiffs continued to take a close interest in the case, sending Dunhill Madden a stream of memoranda. These other matters included notification by Phillips Fox of an intention to make amendments to the defence and a lengthy letter by Phillips Fox pointing up the asserted strength of Egan's case and offering as a compromise that they would bear their own costs if the proceedings were dismissed and the Plaintiffs gave an appropriate release. 63 Letters from Phillips Fox brought forth memorandum No. 44 from the Plaintiffs, which vehemently re asserted their position and included the following: "We believe that if the above letters are taken into consideration, nearly all of the points that Phillips Fox raise have no substance. However, we should like to respond to some of their allegations:- 1. Delays caused by council and neighbours. No need to be on the defensive here. Egan should have warned us only to buy property subject to DA as Ponton and Ingham advised. 2. Mitigating Losses. $14 Million Dollar Offer of 28.11.90. Their argument is a nonsense if one takes into account (a) we had no reason to "cut our losses" at that time because (b) we had Egan's letter of August 30 confirming all was well and (c) we still expected to make a substantial profit. 3. Changes to Concept / Architects Etc. No need to be on the defensive here (a) we purchased in March (b) Option 2 DA was submitted immediately (c) Option 1 DA withdrawn due to reasons already stated (d) Option 1 DA submitted in August when Egan's advice was forthcoming ---- Less that 5 months elapsed for the final concept to be created and this was not excessive in any way bearing in mind that we wished to maximise the full potential of the site. 4. Designs contrary to Planning Policies and Officers. Designs contrary to Victor Berk's Advice. This is not true. The DA for number 7 was supported. The second DA for number 6 was supported. The DA for number 8 was supported. It was only the first DA for Number 6 that was not supported and our architect led us to believe that we would win it on Appeal. If Berk now asserts that he advised differently - where is his correspondence? Bear in mind that he is now a hostile witness and we can produce all of the letters and findings of the Board of Architects confirming that he was found guilty of unprofessional conduct. 5. We Should Have Asked Egan's Advice Before Purchase. Only two months passed between the date of his Valuation and our purchase. He knew we were interested and one could ask, "Why didn't he tell us if he knew there were any disadvantageous signs?" We did ask his advice prior to his letter of August 30 and he did not see fit to sound any alarm bells then. (Ingham, Gothard and Ponton all saw fit to warn their clients).
88 His Honour proceeded to deal in some detail with what he found to be deficiencies in the proposed pleading concluding: "Although the plaintiffs have now set out the extent of the fiscal claim against each of the defendants, those claims are set out in terms of consequences in fiscal terms of the whole project and indicate the loss which each of the plaintiffs has sustained but do not assist in ascertaining the nature of the claim that each of the plaintiffs makes. It is clear that the first plaintiff is entitled to be a party to the proceedings in view of the action pleaded in contract and I dismiss the application to strike out the first plaintiff. I would, however, rather than simply dismiss the application to amend the Statement of Claim, in view of the desire of the Court to have the matter proceed on some basis which raises the issue between the parties, ask counsel for the plaintiffs what steps would be proposed in view of the findings that I have made in relation to the Amended Statement of Claim." 89 Seemingly, after the delivery of this judgment the trial was adjourned until the following Monday, 5 February. In the meantime a further draft Amended Statement of Claim was prepared. 90 On 5 February, Mr Stitt opposed the amendments to the Statement of Claim now proposed. He submitted that the Plaintiffs were attempting to raise entirely new causes of action. He pointed out to his Honour that the progress of the case had been subject to Differential Case Management and that orders had been made for service of written statements of the oral evidence on liability each party intended to adduce in chief on the issue of liability. He submitted that there was no evidence served to support the new causes of action. Although the submissions of Mr Stitt were quite lengthy, the thrust of them is perhaps encapsulated by the following paragraphs. "Presumably my learned friend is seriously going to ask your Honour to put Mr Symonds in the box sometime today, and I am supposed to deal with it. I can tell your Honour now we are not in a position to do so, and we are seriously prejudiced and opposing such evidence, this amendment is futile and the court would nor allow it. My learned friend should not be granted any further adjournment to put his house in order; he simply should not be allowed these amendments. If at a later stage he has a cause of action against his solicitors, this is not a matter which should affect your Honour. These sorts of proceedings are not a solicitors protection act. If they have causes of action which ought properly to have been pleaded and they have not, then the remedy lies elsewhere, but it does not lie at our door and it does not lie in your Honour's court in these proceedings in this particular way. The major area of prejudice is in relation to these two subsequent letters, which are pleaded in paragraphs 15 and 16. Those paragraphs suffer from these defects: one, there is no precise allegation of what it is that is said to be the breach. Assuming against my self arguendo that these do in fact, either form part of some contractual obligation, or alternatively the circumstances give rise to duty of care, there is nothing pleaded which alleges the breach. What is it about these letters that the plaintiffs complain about? They say that they relied on the letters, but are the letters negligent or is the information false? And it becomes even more difficult so far as the defendants are concerned when you ask the question, "Who is it that relied upon these letters, and for what purpose?" Again there is no supporting evidentiary statement which would make this clear, and in fact we have over the years asked for particulars of the various ways in which this case was being put, and the statement of claim as it is now sought to be amended has never been alleged. These are presumably causes of action, on which the plaintiffs seek to rely, that have emerged in the course of the opening of Mr Hammerschlag. This should not be permitted. What we are complaining about goes to the cause of action, and it needs to be pleaded because we have to join issue with it. We submit that document does not cure any defect in the proceedings, and if there is to be a proper statement of claim pleaded to which we can join issue or make admissions, then it has to be in the statement of claim. We submit these two causes of action are futile because there is no breach identified, no loss said to flow from it which we can identify, and there is no person identified who it is said relied to their detriment upon these two letters, particularly bearing in mind that we have now got three corporate plaintiffs to be added. It seems to be a Hedley Byrne and Heller type claim in relation to paragraphs 15 and 16, and that makes it more imperative that we know who it is who is said to have relied to their detriment on such advice. It becomes even more artificial when one of the parties claiming loss is Tabard. It is said that these two letters were in breach of the retainer. The retainer was to prepare a valuation for the bank and the valuation was directed to the bank. That is the valuation of 4 January, and that is the valuation which is said to be in breach of the retainer. How do paragraphs 15 and 16 fit into that, and the allegation of the Hedley Byrne and Heller type situation? The retainer as pleaded could not be breached by the two letters in paragraphs 15 and 16. 91 Mr Spender, in support of the amendments, in effect submitted that there was no prejudice to the defendants and said that he did not intend to put on additional evidence "save and except asking a few supplementary questions of Mr Symonds". Mr Spender also submitted that Mr Stitt was, in effect, asking his Honour to make a judgment upon the facts before determining whether he should allow the amendments. 92 During the argument, Mr Stitt mentioned the Plaintiffs' claim for indemnity in respect of capital gains tax, which, he said, despite a request had not been particularised. This led to further exchanges between Mr Spender and his Honour: "His Honour informed Mr Spender that he had a serious problem in relation to the capital gain issue and His Honour needed to know that basis upon which the capital gains issue arises particularly if there is a claim for indemnity. Mr Spender submitted it is a legal consequence, which may or may not flow from the damages proved. He stated if his Honour finds in favour of the plaintiffs on the basis of certain facts and awards a monetary sum which, together with interest computed under the Supreme Court rules, is the amount which the plaintiffs would ordinarily get. He stated as a result of the complexities of the capital gains tax laws in such circumstances it will be necessary to address the question whether as a matter of pure law, without requiring any further evidence, it is necessary to take account of the capital gains tax and if so what is the appropriate way of doing it. His Honour commented that it depends upon the factual basis of the loss that has already been written up at this stage, and which companies. Mr Spender stated that it depends on his Honour's findings and that issue would not arise before his Honour made his findings. In reply to his Honour's question as to how his Honour would know, since there were several plaintiffs, how the losses had been incurred if his Honour were not to hear any evidence, Mr Spender submitted that the losses are those set out in the damages. His Honour stated that he needed to know, if he was going to conduct an enquiry as to how it has been dealt with, where the write offs have occurred, if there were any, and which companies. Mr Spender conceded his Honour would need to know that at some stage but it was dependant upon his Honour's ultimate finding. His Honour: If that is all I am going to do then your clients have serious difficulties. There is no way in the world I am going to look at a series of balance sheets and tax returns and sit down and become a calculator, because I am not going to do it. Spender: We are not asking your Honour to. His Honour: Therefore I want to know what is the evidentiary issue upon which I have to make a determination on that claim for capital gains tax and I want to know how it has been dealt with in outline form by the various companies because your client is not going to get an indemnity out of me or any calculation out of me unless I am provided with evidence and telling me I am going to get balance sheets and tax returns is of no use at all. I am not going to do an accounting exercise, that is not what this case is about. This case is about what the Registrar was told. I am not going to do an accountancy exercise trying to work out the incidence of capital gains. Who is going to ------ Spender: At the end of the day we will have to put a figure to your Honour which we say flows from the whole of the evidence and the application of the law. His Honour: I have to make a judgment on the facts as to how that figure - there is no facts before me at this stage. Spender: The case is yet to really begin. There is further evidentiary material to put before your Honour. His Honour: I want to know now where it is - this is the sixth day of a five week period at the end of which I go to deal with another case and I am not going to take the matter further on this issue of capital gains unless I know what the case is and at this stage there is no case on capital gains upon which I can adjudicate. Spender: I am submitting to your Honour there is the amendment before your Honour on which you must rule. That amendment seeks to include as a head of damage an actual or contingent for capital gains in the way in which it is put. Your Honour must rule upon that amendment at this stage without seeking to confine the plaintiffs' evidence as to that issue. When we go to the material relevant to that issue your Honour then rules on the admissibility of that material. That is the way in which it should be dealt with. My learned friend is perfectly right, there was a request on 12 December 1994 made in respect of the capital gains tax issue to my instructing solicitors. I am not aware of any reply to that letter." 93 At the conclusion of the argument his Honour said, as the transcript records it: "On this sixth listed day for the hearing of this matter the parties have for the first time placed before the court a prayer in a proposed further amended statement of claim in the following terms: (Incorporation of letter of 14 March 1995) This came to my attention yesterday afternoon, being Sunday 4 February 1996, when the draft further amended statement of claim was faxed to my chambers in accordance with my direction. I have been told for the first time today that on 12 December 1994 a request for particulars in general terms was forwarded, seeking particulars, it being some eleven days after the listing conference pursuant to the differential case management procedures, and subsequent to a document signed by legal representatives for both of the paries dated 1 December 1994 called "Joint Memorandum as to issues", which did not raise this issue. It is a matter of considerable disappointment to the court that the legal representatives who appeared on 1 December 1994 were also aware that there was an issue involving diminution of damages in relation to deeds that had been entered into with Barclays Bank, and that the issue of capital gains tax had already arisen prior to that issues and listing conference. There had been produced to me a letter of 14 March 1995 which articulates the prayer which has been added to the further amended statement of claim furnished to me yesterday, it not having been adverted to by either side of legal representatives when I dealt with this matter last week It is not good enough for parties to expect a court to deal with the complex matter of capital gains tax, depending on the finding the court makes, where there are five potential plaintiffs involved, without any indication that the court is going to hear any more evidence that has been filed - and as I understand it the evidence is of no assistance on this issue - it is not good enough for the parties to expect the adjudication of an issue of the complexity of capital gains tax, and the consequences that may flow from an adjudication of the court, without any indication as to what the issues are which give rise to the prayer seeking in one case an indemnity and in the second case a calculation of damages. It is further of concern that the prayer omitted from the draft statement of claim which I considered last Friday, has suddenly appeared in last Sunday's version, and that there has been no attempt by the parties to qualify or particularise that claim or to bring it to the attention of the court, now well into the five week period allocated for the hearing of this matter. I direct therefore that the defendants' solicitors will deliver by fax or by letter, by 5 o'clock this afternoon, a request for particulars as to the nature of the claim for capital gains tax, and the nature of the indemnity. I further direct that by 5 o'clock on Tuesday 6 February 1996 the plaintiffs' legal representatives will furnish the particulars requested. I further direct that both documents be furnished to my Associate by 5.30pm on Tuesday 6 February 1996 to my chambers by fax or by letter. I disallow the application made on Friday in respect of the then further amended statement of claim and the application for addition of the parties, as the plaintiffs now seek to proceed by the amended statement of claim filed with the court on Sunday 4 February 1996." 94 The hearing of the matter was then adjourned until Wednesday, 7 February at 10 am. On that date, after further debate about the capital gains tax implications involved in the case, Dowd J gave judgment on the application to file an Amended Statement of Claim. 95 In relation to the application to join corporations as Plaintiffs, his Honour said in the course of the judgment: "Without evidence of the knowledge of the first and second defendant as to the corporate structure of the plaintiffs, the difficulty the court has is that the plaintiffs seek to rely on a Hedley Byrne v Heller [1964] AC 465 type claim, in respect of plaintiffs of whose identity the defendants may not be aware necessarily, or aware at all, and certainly, the defendants would not have been aware of the precise legal structure as to whether either of the plaintiffs was a trustee, or the nature of that trust. It is clear however that in respect of Senneh and Tisete, the properties that have been lost to those companies were the subject of the original proposal, as set out in a letter dated 12 December 1989, shortly prior to the original valuation and that these were owned by the first and second plaintiffs, either beneficially or actually. The difficulty of course that the court has is that, in the opening, the court was told that all the properties have been lost, but on cross-examination of Mr Hammerschlag by the bench, it emerged that one of the properties had in fact not been lost, that being premises 13/39 Elizabeth Bay Road; that the security in respect of that property had been discharged by the payment of $465,000.00 to Barclay Bank, by a Deed of Release involving the various parties to this application and another company and Barclay Bank and the extinguishment of a personal covenant on the part of the first and second plaintiffs and personal indemnities. As I now understand the matter and have not been told to the contrary, those premises are still owned by the first and second plaintiff, either beneficially or otherwise, the first or second or both of them and, although the opening address indicated that the plaintiffs were impecunious, the ownership of any real estate near to the centre of Sydney would indicate, subject to what the loan liability may be on the premises, that the position of both or one of them is to the contrary. The difficulty about a Hedley Byrne v Heller count is that, in effect, the plaintiffs allege that the defendant knew that Senneh and Tisete would rely on the valuation and that Senneh and Tisete would be giving security; that in effect the corporations should be substituted for the first and second plaintiffs or the second plaintiff who control them. Whether this ultimately is a valid count is a matter to be determined on the evidence but it may well be that, as a matter of law, the third and fourth plaintiffs were not owed a duty by the defendant, but since the defendant were aware of the first and second plaintiffs' ownership of these premises, the defendants may have been aware that there were companies which in fact were used to own the Elizabeth Bay Road premises legally. I propose to allow those amendments that relate to Senneh and Tisete and the consequential joinder of those third and fourth plaintiffs, without at this stage determining the issue of the extent to which the defendants might owe a duty of care to those companies."
96 Dowd J went on to consider the position of the third corporation, Tabard (Jersey) Ltd, sought to be added as a plaintiff. After referring in some detail to the position of that company his Honour said: "These courts are frequently determining issues of guarantees in this period post the recession, of which recession the court can take judicial notice, with the assistance of the new Evidence Act 1995 or otherwise and there will continue to be many claims where, in fact, it is a guarantor who suffers the damage and where, although there is a liability on the part of the person indemnified, that liability will not in fact be visited and, in fact in some cases may not even arise, between the guarantor or a person giving security and the person who has requested the furnishing of that guarantee or the security involved. The loss therefore by Tabard, or of the beneficial interest in Tabard, by the second plaintiff does not, in the court's view, create a liability on the part of the first and second defendants. I can see no cause of action either under the Trade Practices Act 1974 or the Fair Trading Act 1989. Therefore I do not propose to accede to the amendment of the statement of claim involving paragraph 4, nor the joinder of Tabard as a party." 97 Thereafter, in his judgment Dowd J refused to allow certain other amendments sought by the Plaintiffs and refused to strike out Mr Symonds as a plaintiff. He then, after allowing a minor amendment to the Statement of Claim, proceeded to deal with the capital gains tax issue which had manifestly caused him much concern: "The remaining issue is the final damages issue, which is in the following terms: "F. A. (a) An indemnity from the defendants for the amount of capital gains tax which may be payable by the plaintiffs or any of them in respect of any damages awarded; or (b) Such amount as represents capital gains tax which may be payable by the plaintiffs or any of them for any damages awarded, provided that they pay the defendants the difference between the amount paid by the defendant under this paragraph and the capital gains tax actually paid by the plaintiffs." This is prepared as though either as seeking an indemnity or a calculation of damages. As I expressed in the statement made by me earlier today concerning this issue, it is clear that the defendants were on notice of a capital gains damages claim shortly prior to the matter being listed before the Registrar on 1 December 1994. It is also clear that they sought from the plaintiffs particulars of that, which were not furnished and that they were advised by letter dated 14 March 1995 of the claim. Thereafter there was no request for particulars, either by way of seeking of quantum, or of the nature of the claim. If I may say on this aspect of the case, it now being some ten days after the case was due to commence, neither firm of solicitors have covered themselves in glory as to the manner in which they have precisely defined, for the assistance of the court, the nature of this claim or assisted the court in determining the issues to be raised by this claim and indeed the court was not aware until Monday of this week, 5 February 1996, that this claim was to be added. Nonetheless it is quite clear, there having been notice given of the claim that the plaintiffs or any of them may have an entitlement in damages, that for the court to endeavour to assess that quantum is not possible, since there is no evidence at this stage upon which the Court can make any adjudication; further that the quantum of that claim should await the decision of the Court on the other issues and the determination of which plaintiffs, if any, have suffered loss; and that the matter should be dealt with as a discrete issue, consequent upon determination of liability on the other issues before the Court. It may well be that a postponement of that determination until after matters of both capital gains tax and, as I have indicated, possibly income tax, have been determined, to assist the defendants and the court in knowing where the actual loss on the part of the plaintiffs and, therefore damages, falls. I have indicated income tax without having seriously contemplated the incidence of income tax, but it appears to the court to be possibly just as relevant, in terms of either mitigation of damages or calculation of damages, as capital gains tax. I therefore propose to allow the amendment of the statement of claim to include that claim, but to indicate that the court will not determine that issue until after the completion of the other issues and directions at that stage may need to be given to assist in the proper adjudication of any damages or any consequential loss on the part of the plaintiffs, or any of them."
98 After his Honour's judgment, debate ensued as to the filing of an amended defence and as to discovery. Mr Stitt also applied for an order for security for costs against the corporate plaintiffs. Although Mr Spender requested that oral evidence commence notwithstanding that these matters remained outstanding, his Honour indicated that he would prefer to re-read the documentary material before embarking on any oral evidence. He gave directions in relation to the application for security for costs, the finalisation of the pleadings, particulars and discovery. The hearing was then adjourned until 8 February at 9.30 am. 99 On 8 February, Mr Spender told Dowd J that he had instructions to apply for leave to appeal to the Court of Appeal from the judgment of 7 February. Mr Spender also told his Honour, "that it will be put to the Court that your Honour's conduct has given rise to a reasonable apprehension of bias, and that the matter should not in any event proceed further or come back before your Honour". He sought an adjournment pending an application to the Court of Appeal. 100 Legal argument followed, Mr Stitt submitting on authority that the application for disqualification must necessarily be made to his Honour. In subsequent legal debate His Honour declined to deal with Mr Spender's application for an adjournment until the application for disqualification had been dealt with. Mr Spender thereupon applied that his Honour disqualify himself. There is, I think, no need for me to dwell on the submissions made by Mr Spender or by Mr Stitt in opposing that application. It will suffice if I say that most of what had occurred previously in the trial was rehearsed. I should add that, in my opinion, whatever might be said about the progress or lack of progress of the trial up to that point, nothing appears in the transcript which caused me to apprehend bias by the learned trial judge. 101 In any event, after the disqualification argument had proceeded for some time and after Mr Spender had been provided with written copies of his Honour's judgments, the application for disqualification was withdrawn. 102 Mr Spender then returned to his application for an adjournment in order that he might seek leave to appeal to the Court of Appeal against Dowd J's interlocutory judgment of 7 February. He pointed out that 19 February was the earliest date upon which he would be able to move the Court of Appeal. 103 There followed argument on Mr Stitt's application to amend the defence and on his application for security for costs by the corporate plaintiffs. With the argument on these matters incomplete, the trial was adjourned until the following day, Friday 9 February at 9.30 am. 104 On 9 February, Mr Spender informed his Honour that in effect Mr and Mrs Symonds would indemnify the corporate plaintiffs in respect of any order for costs made against them. He submitted that in that circumstance the application for security for costs should be dismissed. 105 There was further argument as to whether security for costs should be ordered at the conclusion of which his Honour delivered an ex tempore judgment. In the course of this judgment, his Honour said: "Notwithstanding that on the evidence before me there appears to be assets owned by the plaintiffs and notwithstanding the lack of frankness of the plaintiffs, who have sat in Court listening to each of the various conflicting statements that have been made about their financial position, it would be unreasonable, in terms of the law as to security, to deprive them of their right to bring an action, if in fact the joinder of two corporate entities did not increase the costs. However, what is clear is that there will be additional costs which the Court, as is often the case, is unable to precisely determine, but for the purposes of this application, I find that the sum of $60,000.00 would be a sum that is likely to substantially, if not wholly, cover any additional costs. It is nonetheless a possibility that the first and second plaintiffs may order their financial affairs so that, even if they recover from the defendant, it may well be that an order for costs against them, in respect of the third and fourth plaintiffs, may place the defendants in the position where they are ranked after other creditors and where, indeed, the plaintiffs may still not have any assets against which the first and second defendants could recover. There had been no undertaking given not to place the defendants in a disadvantageous position by distribution of assets. The plaintiffs are clearly sophisticated commercial investors and are quite capable of making arrangements that are financially suitable to them." 106 In the result, Dowd J ordered: "In order that the third and fourth plaintiffs and the first and second plaintiffs not be prevented from continuing proceedings, I propose that the order to which their counsel have indicated that they would consent in respect of costs that may be recovered by the defendants against the third and fourth plaintiffs, be secured by a charge over the shares in Tabard, to the extent of the sum of $60,000 and that the sum be further secured by a registered mortgage, subject to existing encumbrances, over the premises 13/39 Elizabeth Bay Road, Elizabeth Bay." 107 His Honour also ordered that the proceedings by the corporate plaintiffs be stayed pending compliance with the terms of the order and that the Plaintiffs pay the costs of the application. 108 Following the delivery of the judgment, after short debate as to its impact upon the progress of the hearing and as to the outstanding matter of the defendants' application to amend their defence the case was adjourned until Monday, 12 February. 109 At the outset of the hearing on 12 February, Mr Spender announced to his Honour that he proposed to renew his application that Dowd J disqualify himself. Debate followed as to the precise form of the orders to be made in respect of security for costs, Mr Stitt having handed up draft short minutes. His Honour then delivered an ex tempore judgment at the conclusion of which he made orders 1, 2, 3 and 4 of the short minutes propounded by Mr Stitt. 110 Mr Spender then launched into his application that Dowd J disqualify himself, which he said "arises very largely out of the judgment given by your Honour on security for costs". 111 It is unnecessary for me to recite the lengthy submissions of both counsel upon Mr Spender's application, which were replete with references to authority. His Honour indicated that he would give judgment the following day. He also noted that he had still to deliver judgment on Mr Stitt's application to amend his defence. The matter was adjourned until 13 February. 112 According to Mr Symonds, on 13 February the court sat only for the purpose of Dowd J delivering outstanding interlocutory judgments of which there were four. Mr Symonds' assertion is borne out by the absence of any transcript for 13 February in the documents before me other than of the four judgments. 113 In the first judgment Dowd J declined to disqualify himself for reasons which he gave in some detail. His judgment included this paragraph: "I also wish to make it abundantly clear that I have not formed a view unfavourable to the plaintiffs or any of them in respect of the substantive issues that are to be tried in these proceedings, the issue of their credit of either the first or second plaintiffs has not yet arisen at any stage in any matters that I have considered, and I consider a reasonably informed observer of the security judgment and any reasonable observer of the whole of the proceedings will apprehend that the intention of the Court has been, at all time, to give all parties a reasonable opportunity and, indeed more than reasonable opportunity, to have the real issues in these proceedings before the Court to enable a proper adjudication of them." 114 The second judgment delivered on 13 February dealt with the application to amend the defence, which was substantially successful, and the third judgment dealt with the costs of the application to amend the Statement of Claim which, in the result, were reserved. 115 In the fourth judgment Dowd J granted Mr Spender's application for an adjournment in order that he might apply to the Court of Appeal. The matter was stood over for mention at 4.15 pm on 20 February and for further hearing on 22 February. 116 There seems to be no evidence as to what transpired at the mention on 20 February but the matter obviously came back before his Honour on 21 February as there is a transcript for that day's proceedings. It seems clear that by that date Mr Spender had arranged to apply to the Court of Appeal on 26 February. 117 On 21 February, Mr Stitt raised questions of particulars and discovery. His Honour then delivered an ex tempore judgment on the question of particulars which concluded with these paragraphs: "Mr Spender QC for the plaintiffs says that there is in fact no order expressed by the court obliging the furnishing of particulars and Mr Spender says we all know what the case is about. I want to say that if the court is included in the "we", that is not a view to which I accede. Mr Spender also states that the particulars sought are oppressive and unnecessary. It seems to me that the change in the plaintiffs' case has been a significant one, that the pleadings being in fairly general terms particulars are appropriate and the complexities of the proceedings because of the joinder of the third and fourth plaintiffs and the matters going to damages in relation to the question of the two Barclay Bank deeds are very much matters before the court. This case involves an apparently extraordinary waiver of a personal covenant by a finance institution and the waiver of indemnities of a sum of $10million, whilst there is a deed in existence dealings with property of the plaintiffs or a company over which they have control. My use of the word "extraordinary" is not intended to be pejorative of the plaintiffs; it is simply extraordinary in my experience. I think the court and the defendants are entitled to know with particularity, not only for cross-examination purposes but generally, the Plaintiffs' pleadings sufficiently particularise the case that the defendants have to meet and I consider that particulars are appropriate. The statement made in correspondence by Messrs Dunhill Madden Butler, solicitors for the plaintiffs, that the past three and a half weeks have been spent clarifying issues in the matter, is not a sufficient answer. As is set out in the letter, I did not afford the defendants the right to particulars of the matters relating to Barclays Bank deeds. Mr Spender in argument stated I did not direct that particulars of the Barclays Bank deeds be provided, which is of course correct. I do not however see, in terms of a very substantial claim, issues arising out of the Barclays Bank deeds and any suggestion that the issue of these deeds is not relevant to the claim for damages is, or course, on the face of it at this stage, incorrect. The issue of the deeds and the losses sustained by the plaintiffs and each of them are very much matters before the court, in terms of assessing the quantum of damages that the court may be obliged to determine. I therefore propose to order that the request for particulars, which is now a fortnight old, be satisfied. I would propose that the particulars requested be furnished by 1.45 pm tomorrow, 22 February 1996." 118 In a second ex tempore judgment delivered on 21 February, Dowd J dismissed an application by Mr Spender to strike out parts of the Defence to the Amended Statement of Claim. 119 There followed argument as to the admissibility of witness statements of Mr and Mrs Symonds upon which Dowd J delivered a number of further ex tempore judgments, giving rulings upon the objections taken. Substantial parts of the statements were disallowed. The trial was adjourned until the following day 22 February. 120 On 22 February, debate continued as to the admissibility of witness statements, including those of experts upon which his Honour gave rulings in ex tempore judgments. Again much of the material objected to by Mr Stitt was rejected. 121 From 22 February, the case was adjourned to Friday 23 February when argument continued upon Mr Stitt's objections to evidence tendered in the form of witness statements. Dowd J gave further ex tempore judgments embodying his rulings on evidence. Upon some matters his Honour reserved his decision to Tuesday, 27 February. 122 On Monday 26 February, Mr Spender sought leave from the Court of Appeal (Mahoney P, Priestley JA and Handley JA) to appeal against some of the interlocutory judgments of Dowd J including his refusal to disqualify himself. The first two paragraphs of the judgment of Mahoney P (in which the other judges concurred) given on February 26 are:
"The Court has before it applications for leave to appeal in respect of decisions given by a trial judge in a proceeding, the trial of which is still proceeding. The decisions were given in the course of the trial. The applications have now been dealt with over a period of some hours.
The Court has indicated that it does not desire to hear the respondent to the applications in respect of two of them, which I shall describe as the application based on apprehended bias and the application in relation to security for costs. In my opinion each of those applications should be dismissed with costs."
123 The judgment concluded: "I emphasise that it is within the discretion of a trial judge, as it is within the discretion of the judge in the present case, to grant such amendments from time to time as justice may require. No doubt the judge in deciding whether an amendment is to be granted at any time will have regard to the necessity to ensure that cases are disposed of in due course. The cost and delay involved in applications for amendment of pleadings is a matter to be borne in mind. The judge dealing with such applications will no doubt have regard amongst other things to the intention of the case management rules, to the need to conserve cost and time, and to the extent to which justice will be served by the maintenance of them.
Having made those general remarks, I should say that in the present case I see no reason to interfere with the judge's decision. The judge set forth in his judgment of 7 February the basic reasons why he refused leave to amend in this regard. Even if the judge were wrong and it fell to this Court to exercise the discretion, in the circumstances to which Mr Spender QC for the applicant has referred, there would, I think, be ample grounds for a judge and this Court, on proper principles, to refuse the present application.
In all the circumstances, I am of the opinion that this is not a proper case in which leave to appeal should be granted. I propose that this application be dismissed. It must be dismissed with costs." 124 At the adjourned hearing of the trial on February 27 Mr Spender reported his failure to obtain any relief in the Court of Appeal and his Honour delivered a judgment ruling as to the admissibility of valuation reports by Mr Davis. There was further argument as to the admissibility of documentary evidence and as to the means by which the Plaintiffs quantified their damages claim. The atmosphere of the court and the attitude of Mr Stitt is illustrated by the following extract from the transcript: "STITT: Yes but the sentiment is exactly the same and the point must come in this case where the plaintiffs are forced to accept the fact that they are not going to be allowed to litigate this case bit by bit and piecemeal by piecemeal and that every time their obvious defects are pointed out, and some of them are still starting to come from my learned friend despite what has been said by the Bench and in the course of argument in the last few weeks. We cannot go on week after week and week after week with Mr Spender turning up and your Honour saying to him " Mr Spender, what about this? And he says every day " I will take that on board. I will give it due consideration". Your Honour, how long can this go on for? The time has long since passed when these indulgences should not be granted to my learned friend, particularly when he does not give any reason and particularly when he does not come forward and say "I made a Mistake' or " my solicitor misunderstood" or whatever. Why are we in this position? The short answer is the plaintiffs 's case is defective, it is defectively prepared, the evidence is defective and why should your Honour give any further indulgence? Can I just say that my instructions are that there was a directions hearing in 1994 when there was a timetable laid down. There was a further hearing in chambers when the timetable was amended by consent. There was a further direction hearing with the court and there was a proposed timetable laid down which was opposed where an extension under the timetable was sought by my clients and that was opposed by the plaintiffs. There was a final conference held in December 1994 at which time the court was assured that the plaintiff's case was then ready and that all the evidence was available. It was expedited. The court granted expedition on the plaintiff's application. Now your Honour, at the start of this case following that regime, that was the position. The first plaintiff, Mr Symonds had two statements, one dated 14 June 1994 and the second one dated 30 November 1994. Since this case has started Mr Spender has filed a further statement of 30 January 1996 and 6 February 1996 whilst this case has been running. Now the Plaintiffs want to come along and say "We want further statements" and I say in response to that, "Why should they?" Why should they be allowed to go on, coupling their case together as they go? Questions of fairness ultimately give way to the fact that fairness applies to both parties and this case should proceed on the basis that my learned friend has been given by your Honour, and I say this with no disrespect, indulgences that many other judges would not have given him up to this point. We are in the fifth week. Now I do not say that critically --- HIS HONOUR: I think the law is not only to both parties but fairness to other litigants as well" 125 After further debate the matter was adjourned until the following day 28 February. 126 In the meantime, according to Mr Symonds, his counsel and solicitor had begun to express misgivings as to the eventual prospects of success and, indeed, after the proceedings in the Court of Appeal, Mr Symonds said that Mr Spender told him "Justice Dowd will find against you on credit". 127 On 27 February, according to Mr Symonds, he was summoned to a meeting of Dunhill Madden's credit committee where the following conversation took place: "Credit Committee: Do you intend to proceed with the hearing? Me: It is our intention to proceed. Credit Committee: How do you propose to fund the proceedings as you are already considerably in debt to us? Me: This is new to me. I understand we are fully paid up for the 25 days which were reserved for the hearing. The two men appeared surprised and turned towards Klotz. Klotz: My Symonds is correct Klotz did not make any mention of the retainer letter. Me: Monica and I will consider our decision on proceeding or not and let Mr Klotz know our decision before the end of the week." 128 There seems no doubt that such a meeting occurred and a conversation occurred much as Mr Symonds related it. Documents, however, suggest that Mr Symonds was mistaken as to its date. On the probabilities, I think the meeting occurred on 28 February rather than 27 February but nothing of significance, in my view, turns on this. 129 Matters came to a head apparently at the conclusion of the court hearing on 27 February. Mr Klotz told Mr Symonds that Mr Spender and Mr Hammerschlag had written letters to him stating that they would only continue if paid their normal fees. Following this the Plaintiffs had a conference with Mr Spender, Mr Hammerschlag and Mr Klotz during which there was this exchange: Klotz: I estimate that the trial will continue for a further 5 to 8 weeks. John and David estimate that it will run for at least another 6 weeks. If you continue, you will not succeed. Monica: I don't want to discontinue, but I suppose I'll have to."
130 Later, Mr Symonds said that he had a conversation with Mr Spender: Spender: I think you have done the right thing by taking our advice. Stephen will endeavour to negotiate a settlement of the proceedings tomorrow. The Judge seems to have made an adverse decision as to your credit and this cannot be overturned on appeal. Your chances of winning have diminished. Me: I do not want to withdraw but I will accept your advice. 131 Mr Symonds' statement as to the situation the Plaintiffs faced continued: I was under an immense amount of financial pressure. At the time I believed that: - · There was an outstanding demand for security for costs; · The twenty five days reserved for hearing and paid for under the retainer were drawing to an end; · The twenty five days had been wasted by bad preparation and the appeal to the Court of Appeal; · Approximately six further weeks would be needed; and that · Spender QC, Hammerschlag and Klotz intended to charge Monica and I full fees for their time after the five week reserved period. The next day, Wednesday 28 February 1996 (Day 15) the Court was informed that security for costs would not be given by the corporate plaintiffs. Mr Stitt then made an application that the proceedings be dismissed against them and that indemnity costs be awarded against them. The Court was adjourned in order that submissions on the Application could be prepared. Upon adjournment, at approximately 10.50 am, Monica and I met with Klotz, Spender QC and Hammerschlag. Words were spoken to the following effect: Klotz: If you don't give the security ordered the Judge will stay proceedings. ……………………………… After lunch on 28 February 1996, Monica and I met with Klotz. Words were spoken to the following effect:- Klotz: What have you decided to do? Me: We would be willing to give in as long as we are not under any financial obligations to your firm or to Phillips Fox. Spender QC and Hammerschlag were present when Klotz returned to speak with Monica and me again. Words were spoken to the following effect:- Klotz: I have had discussions with Phillips Fox and they are willing to allow you to withdraw as long as we agree to sign a document that would excuse Egan and that we would not take any future legal action against him. Me: We will agree to this as long as we can maintain our claim on behalf of Tabard. Klotz: They will not agree to leave Tabard out even though it was not allowed to be joined as a party to this action Monica: I do not want to sign these terms. Klotz: I encourage you to do so, Monica. You have no choice. Monica appeared to me to be very upset. Monica: I will sign under duress." 132 When the proceedings resumed before Dowd J on 28 February, as Mr Symonds indicated, there was debate about compliance with his Honour's order for the provision of security for the costs of the corporate plaintiffs. The flavour of Mr Stitt's position is demonstrated: "Therefore what should happen in my submission, when my learned friend turns up this morning and simply says, "I am not gong to provide security" - what should happen is that the proceedings by the Plaintiffs should now be dismissed, and we ask in the special circumstances for an order for indemnity costs." It is, I must say, an extraordinary stance for the Plaintiffs to adopt. We have been here for 5 weeks arguing about the amendments and parties and evidence, and my learned friend having lost in the Court of appeal just simply says to your Honour, "Security is not to be given". It is not just a question of staying the action, it is a question that the proceedings should be dismissed with costs, and they should be indemnity costs in the light of all the matters that I have put to your Honour. This is a case where the plaintiffs have been running a tactical game. This is another part of that tactical game. I have been here for 5 weeks, waiting for my friend to tell your Honour - and he has not yet - that these plaintiffs did not in truth borrow the money from the bank, that these plaintiffs did not in truth incur these debts. It was incurred by Gowrise - the money was borrowed by Gowrise, it was lent to Gowrise, and the indebtedness was incurred by Gowrise. At a time subsequently - the circumstances of which need to be explored - the plaintiffs of their own volition assumed the liabilities of Gowrise. You have not been told one thing about this. Last night my learned friend produced ----- His Honour: I have been told in a deed that a certain debt which was assumed to be Gowrise was mistakenly -- Stitt: What your Honour has not been told is the true position. Last night we were given a bundle of documents which were said to be the basis for an agreed bundle. Part of that bundle relates to documents from Barclays Bank. I spent last night going through this bundle, and I can tell your Honour that it does not disclose - it is a very selected bundle - it does not disclose the true position, and the true position is as I have said: This indebtedness was incurred by Gowrise, the money for the purpose of the property was incurred by Gowrise, the bank debited Gowrise in respect of these expenses which were incurred in the subsequent development of the property. At a later date Mr Symonds simply wrote to the bank and said that he wished the indebtedness of Gowrise to be transferred to him. That was in November 1990, long after most of this indebtedness had been incurred. Now your Honour, that raises very real questions in this case. Gowrise is not a party to this litigation, it is not a plaintiff and it raises very real question as to whether these people have any entitlement at all against my clients. Now we have been here for 5 weeks and my learned friend plays this kind of ducks and drakes game this morning. I raise this matter of the bank documents because it is a matter that was going to be debated very soon, but it really is about time that my learned friend stopped playing games; it is really about time that your Honour was told the true position about this litigation. I have been sitting here for 5 weeks, not containing my self with great restraint, as your Honour has commented on a couple of occasions, but the time has now come for the true position to be revealed, and this whole business about standing up this morning and saying, "We are not going to give security and you can like it or lump it" is another example of what we have been subjected to and what this court has been subjected to and your Honour should be no part of this. These proceedings should be dismissed now, and they should be dismissed with indemnity costs." 133 During further argument, his Honour indicated that he would be unable after the end of the week, then current, to resume the hearing until about August. 134 Following an adjournment his Honour made by consent the following orders: "1. Tabard (Jersey) Limited be added as fifth plaintiff in the proceeding. 2. All orders for costs against the plaintiffs and against the defendants and all orders reserving costs be vacated. 3. Judgment for the defendants. 4. Each party to pay his, her or its own costs of the proceeding." 135 Mr Stitt read in open court an agreed statement. "The plaintiffs wish to acknowledge that the settlement of this action against Mr Egan and Egan National Valuers brings to an end all other litigation against him and his company. They accept that at all time Mr Egan and Egan National Valuers fulfilled their professional duties. The plaintiffs acknowledge that their substantial losses, which they sustained in the development of the Paradis Sur Mer property were to or brought about not by any act or omission of Mr Egan or Egan National Valuers, but rather were caused by factors beyond the control of the plaintiffs, Mr Egan or his company." THIS ACTION IS COMMENCED: 136 These proceedings were commenced against Dunhill Madden and Mr Hammerschlag on 13 December 2001, nearly 6 years after the earlier proceedings were terminated by Dowd J's orders of 28 February 1996. 137 The Statement of Claim as originally filed was amended more than once and the pleading before me was the "Third Amended Statement of Claim"(hereafter simply the Statement of Claim)" filed 23 April 2004. The Statement of Claim deleted Mr Hammerschlag as a defendant and pleaded against Dunhill Madden only. 138 Relevant paragraphs in the Statement of Claim include: "4. In about November, 1993, the Solicitors, by their partner and/or employee and agent Mr Stephen Klotz, solicitor, agreed for reward to provide professional legal services to the Plaintiffs in relation to a possible claim against Egan for damages for losses suffered by the plaintiffs in connection with the acquisition and development of Paradis sur Mer and to prosecute the claim in court proceedings in the event that they advised that such proceedings would be likely to succeed (the Retainer). 5. It was an implied term of the Retainer and also a duty the Solicitors owed to each of the Plaintiffs that the Solicitors would exercise due care, skill and diligence in and about the provision of advice and in the prosecution of the claim. ……………………………… 7. Ostensibly pursuant to their obligations under the Retainer the Solicitors advised the Plaintiffs that if the Plaintiffs were to bring proceedings against Egan to recover the losses the Plaintiffs had sustained by reason of their reliance upon the advice and opinions given to them by Egan in relation to the value of Paradis sur Mer such proceedings against Egan would be likely to succeed. 8. There were also express terms of the Retainer as set our in the Solicitors' letter dated 30 November 1993 (the letter of engagement) and the Plaintiffs rely on those terms as if fully set out herein. The letter of engagement included the following express terms that:- (a) prior to commencement of proceedings the Solicitors would obtain on the Plaintiffs' behalf a preliminary written opinion on their prospects of success against Egan from the barrister briefed in the matter; (b) the Plaintiffs reserved the right to terminate or vary the basis of their representation upon consideration of counsel's preliminary opinion. (c) The Plaintiffs were to deposit at regular intervals into the Solicitors' trust account for payment of their fees and disbursements an amount not exceeding $85,000.00 (d) the solicitors were to bill the Plaintiffs monthly for their fees and disbursements up to the amount of $85,000.00 (e) when the amount of $85,000,00, paid into the trust account had been exhausted, the Solicitors would not render any further bill until the conclusion of the proceedings and then only if the settlement or judgment amount was more that the amount of such further bill. (f) prior to the hearing, the Solicitors would reconsider the merits of the Plaintiffs' case (including if necessary, obtaining counsel's written opinion) and the Plaintiffs reserved the right to terminate their representation at that time based upon that review. …………………………………
THE EVIDENCE OF Mr KLOTZ: 140 The Defendant, Mr Stephen Klotz, was admitted to practice as a solicitor in Victoria in May 1987. He was admitted to practice in NSW in February 1988 and from June 1990 to June 1994 was employed as a litigation solicitor by Dunhill Madden. He became a partner of that firm on 1 July 1994 and remained such until 30 September 1997 when he joined another firm. 141 He said in his statement dated 20 July 2004 that he acted for the Plaintiffs in the proceedings against Egan from late 1993 until early 1996. 142 The statement contains the following paragraphs: "7. Throughout the course of the case, Mr and Mrs Symonds were very active clients, frequently telephoning me and sending me memos commenting on aspects of their claim. They appeared to me to be intimately familiar with the background facts of their claim. They actively participated in every significant decision that was taken. They questioned whatever they disagreed with or did not understand. They frequently asked me questions and expressed opinions about their case. ……………………………………. 11. When the matter came on for hearing, both Mr and Mrs Symonds were present in Court for every day of the hearing, for the whole of each day. They both took an active part in discussions with me and, in my presence (and, on occasions, in my absence) the barristers as to how the case was progressing. Both Mr and Mrs Symonds participated fully in every decision that was made as to how the case was to be conducted. 12. On 2 December 1993 I delivered a brief in the matter to David Hammerschlag of counsel. 13. Subsequent to 2 December 1993, I sent Mr Hammerschlag further papers to add to his brief as they became available. 14. I did not obtain from Mr Hammerschlag a preliminary written opinion on Mr and Mrs Symonds' prospects of success, prior to 30 March 1994 when the proceedings against Mr Egan were commenced by filing the summons, or at any other time. 15. Prior to the commencement of proceedings, it was my opinion that Mr and Mrs Symonds ought to succeed, provided that their evidence, and that of any expert valuer to be retained on their behalf, was accepted by the Court. ……………………………………… 18. After the commencement of proceedings in early 1994, I continued to work on preparation of the case. At all times up to the commencement of the hearing on 29 January 1996, I remained of the view that Mr and Mrs Symonds ought to succeed, provided that their evidence, and the expert evidence obtained on their behalf, was accepted by the Court. 19. If at any stage prior to the commencement of the hearing: (a) I had become concerned that Mr and Mrs Symonds did not have reasonable prospects of success; or (b) Counsel had communicated to me any such concern, I would then have sought a written opinion from Counsel. At no time prior to the commencement of the hearing did I become concerned that Mr and Mrs Symonds did not have reasonable prospects of success. At no time prior to the commencement of the hearing did Counsel communicate to me any such concern. ……………………………… 29. The instructions initially given to me by Mr and Mrs Symonds did not include the fact that they did not own the properties over which security was given to the bank for the finance for the transaction (and which were ultimately lost), and that these were owned by Senneh Pty Ltd (Senneh) Tisete Pty Ltd (Tisete) and Tabard (jersey) Limited (Tabard). However, sometime after the proceedings were commenced, I became aware that those companies owned the properties. 30. At all times it was my opinion that the proper plaintiffs in the proceedings against Mr Egan were Mr and Mrs Symonds, not the companies. Prior to the Barclays Bank deeds taking effect in late 1995 (see paragraph 39 below and following), it was my opinion that the loss which Mr and Mrs Symonds claimed they suffered was the debt they had incurred to Barclays Bank to fund the development, less the proceeds of sale of the development properties. After the Barclays Bank deeds took effect, it was my opinion that the loss which Mr and Mrs Symonds claimed they suffered was diminution in the value of their interest in companies which had provided securities to Barclays Bank as a result of those companies losing the secured properties. Mr and Mrs Symonds instructed me that the companies held no assets other than the secured properties. I agree with paragraph 136 of Mr Symonds' statement to the extent that he says his instructions had always been that the loss was ultimately Monica's and his. 31. During the course of the hearing, an application was made to join the companies as additional plaintiffs to the proceedings. As set out more fully below, during the course of the first day of the hearing, comments made by Justice Dowd led me to conclude that he was concerned that the companies were not plaintiffs. My perception of His Honour's comments was that he did not understand the damages case which Mr and Mrs Symonds were advancing in their personal capacities and that it was unlikely that his Honour could be made to understand it by further explanation. I considered it was in Mr and Mrs Symonds' interest to address his Honour's concern so that the case could be progressed. I formed the view that the simplest way of addressing His Honour's concern was to add the companies as plaintiffs. ………………………………. 42. As at November 1994, it was my opinion that the two bank deeds were irrelevant to the quantification of Mr and Mrs Symonds' claim against Mr Egan. The reason for this was my understanding of the operation of the deeds which was as follows, prior to entry into the deeds, Mr and Mrs Symonds had a debt to the Bank which represented an element of their loss as a result of developing the property. Under the deeds, the Bank had agreed to waive that debt, but only after certain obligations had been performed. Those obligations were principally the sale of the secured properties and the application of the proceeds of sale to reduce the debt. 43. At no time prior to November 1994 had I received instructions that the obligations prescribed in the deed had bee fulfilled. Therefore, as at November 1994 it was my belief that Mr and Mrs Symonds remained in debt to the Bank. I recognised that on fulfilment of the obligations and the waiver of Mr and Mrs Symonds ' debt, the loss claimed against Mr Egan would be reduced to the amount of the payment made to the Bank from the proceeds of the sale of the secured properties. However, in November 1994 the deed remained executory. It was therefore my opinion that he deeds had not yet affected Mr and Mrs Symonds' claim for damages. ……………………………. 53. When I read Phillips Fox's letter dated 19 December 1995, I perceived that Phillips Fox were concerned to ensure that Mr Egan could rely upon the Bank deeds to deny that Mr and Mrs Symonds had suffered any loss beyond that represented by the amount of the payments made to the Bank from the proceeds of the secured properties. I interpreted Phillips Fox's letter to be requesting particulars which went to the issue of whether the Bank deeds had come into effect, or whether it would be open to Mr and Mrs Symonds to contend that the Bank deeds were not yet effective by virtue of their inability to fulfil the obligations upon which the operation of the Bank deed was contingent. I noted that Phillips Fox stated that at the hearing they would object to the admission of any evidence of any inability to fulfil the obligations in the Bank deed. It was no part of Mr and Mrs Symonds' case, as I understood it, to contend that the Bank deeds were not effective and that their loss was not limited to loss of other secured properties. I did not have any instructions to adduce any evidence at the hearing of any inability to fulfil the obligations in the Bank deed. On the contrary, in October 1995 I had been informed by Mr and Mrs Symonds that they had taken steps to ensure all their obligations under the Bank deeds had been fulfilled (see memorandum dated 30 October 1995 referred to above). Therefore I did not consider my response to Phillips Fox's letter would be controversial. 54. For this reason, I did not regard Phillips Fox's letter dated 19 December 1995 as raising a matter of particular significance. Responding to Phillip Fox's letter dated 19 December was one of many issues to be dealt with as part of the final preparation for the hearing. I did not ignore the letter, but I did not regard it as one of the more important things to be accomplished before the start of the hearing. The hearing was listed for 5 weeks. It is and was then my experience that in the course of a lengthy hearing many matters which may be outstanding at the beginning of the hearing are dealt with, to the satisfaction of the parties and the Court, during the course of the hearing. I regarded Phillips Fox's letter dated 19 December 1995 as one such matter. ……………………………….. 56. Subsequent to 19 December 1995, I did not receive from Phillips Fox a request for a response to their letter dated 19 December 1995 and I was not aware that they regarded the provision of these particulars as an important issue. The complaint made by Mr Egan's counsel on the first day of the hearing about the lack of a response to the letter dated19 December 1995 was not foreshadowed to me. 59. On 4 October 1995, the proceedings were listed for a call-over at which they were allocated a hearing date to commence on 29 January 1996. It was my opinion in October 1995 that the proceedings were sufficiently prepared to take a hearing date commencing on 29 January 1996. I did not consider that there were any tasks outstanding for final preparation of the trial which could not be accomplished within the period between 4 October 1995 and 29 January 1996. 60. At no time prior to the commencement of the trial on 29 January 1996 did I consider that the case was not sufficiently prepared for hearing so as to warrant an application to vacate the hearing date. At all time, it was my view that any tasks outstanding for preparation for trial could be accomplished within the time then remaining before the commencement of the trial. 61. At no time did I advise Mr and Mrs Symonds that the case was not prepared for hearing, because at no time did I hold that view. ………………………….. 68. I did not ask Mr Hammerschlag to provide me with a written advice on evidence. Although I cannot remember what consideration I gave to it at the time, it is not my usual practice to request a separate advice on evidence when counsel is intimately involved with a matter, as Mr Hammerschlag was with this matter. This is because I consider it is part of counsel's retainer to raise any evidentiary issues that are picked up in the process of settling evidence. …………………………….. 71 At no time after Mr Justice Dowd handed down his various judgments in which he ruled on the admissibility of the lay statements which had been filed on behalf of Mr and Mrs Symonds did I consider that the rejection of evidence had significant consequences for Mr and Mrs Symonds ' prospect for success. The rejected evidence was largely rejected on the grounds of the relevance or form of the evidence. In my experience, when evidence is rejected because it is considered by the Judge not to be in correct form, it is customary for leave to be granted to adduce further evidence on the same topic. Therefore, it was my expectation that Mr and Mrs Symonds would be granted leave to adduce further evidence in order to fill any gaps which resulted from the evidence being rejected. 72. On 29 January 1996, the trial of Mr and Mrs Symonds' case commenced before Justice Dowd. Generally, the course of the hearing was defined by the defence team taking a particularly aggressive and difficult approach to the conduct of the case, and by the plaintiff's team having to take many steps to deal with points raised by the defendants or, on occasions, by his Honour. On a number of occasions, I formed the view that Mr and Mrs Symonds ought take a certain step simply in order to avoid any further argument on the issue, or to assuage the Judge's apparent concerns, rather than because I though the step was, from a purely legal point of view, necessary, appropriate or would improve Mr and Mrs Symonds' chances of success. For example, the joinder of the corporate plaintiffs. I advised Mr and Mrs Symonds to take these steps for strategic reasons. ……………………………… 77. When Justice Dowd gave judgment on the application for security for costs, he had not heard any oral evidence from, or cross-examination of either Mr or Mrs Symonds. Nonetheless, when I heard the judgment and subsequently read the reasons for judgment, I noted that his Honour made a number of comments which led me to form the view that it was doubtful that he would accept Mr and Mrs Symonds as witnesses of truth. In particular, I noted that his Honour said in his reasons for judgment that: (a) "the plaintiffs have elected not to correct the misleading opening statement "; (b) "for the Court to be left in the state of having two mutually inconsistent statements, and the first and second plaintiffs electing … not to produce evidence, is in my experience, as I have indicated quite extraordinary" (cc) there had been a "lack of frankness of the plaintiffs, who have sat in Court listening to each of the various conflicting statements that have been made about their financial position"; (d) the plaintiffs may order their affairs so as to defeat any claim by the defendants for costs: and (e) the plaintiffs had assets and had "elected not to disabuse the Court of that impression". 78. It was my opinion that Mr and Mrs Symonds' credit was critical to the success of their case. As a result of my preparation of the case and my knowledge of the defence that was being advanced on behalf of Mr Egan, it was clear to me that a central factual issue in the case would be whether or not Mr and Mrs Symonds had relied on Mr Egan's valuation in making their decision to purchase Paradis sur Mer. Mr and Mrs Symonds' evidence on this issue was largely their own witness statements and what would be said by them in oral evidence. 79. As a result of the reasons set out in paragraphs 77 and 78 above, I formed the view that Mr Justice Dowd was highly likely to disbelieve Mr and Mrs Symonds and dismiss their case. I was also conscious of the fact that if His Honour found against Mr and Mrs Symonds on issues of credit, it would be extremely difficult to overturn such a decision on appeal. 143 Mr Klotz gave oral evidence. Examination in chief was confined to formal matters, including verification of his two statements, the one referred to above and a subsequent statement dated 26 April 2007 in reply to statements of witnesses in the Plaintiffs' case to which it is unnecessary for me to make further reference. 144 He was cross-examined at some length by Mr Gray. He told Mr Gray that he regarded it as one of his responsibilities to identify the correct plaintiffs, but could not recall whether in drafting the initiating proceedings he had been aware of the declaration of trust in favour of Gowrise Pty Ltd. He said that he was satisfied that Mr and Mrs Symonds only were the correct plaintiffs. 145 The cross examination included the following exchanges: "Q. In any event, you must have known that Phillips Fox would be acting very shortly after you served the summons in April 1994? A. Yes. Q. Did you anticipate that they would represent Egan's interests thoroughly and competently? A. Yes. Q. And that would entail a detailed consideration of the facts and the law relevant to the case? A. Yes. Q. Did you recognise that the representation of the Symonds' interest would equally involve a detailed consideration of the facts and law relevant to the case? A. Yes. Q. And that that would include both liability and damages? A. Yes. Q. And the time that you instituted the proceedings on 30 March 1994, what significant factual issues did you perceive were likely to arise in the Symonds' case against Mr Egan? A. As far as I can recall, certainly I had identified that the most significant issue would be the issue of reliance, and of proving the negligence that was alleged against Mr Egan. I presume - I don't recall specifically thinking about it, but I believe I must have also considered the issue of what their loss was. …………………….. Q. Do you agree that in March 1994, if you had turned your mind to the possibility that there could be problems under the three year limitation period imposed by the Trade Practices Act, that it would be in Mr and Mrs Symonds' interest to assert any other causes of action that post dated the 4th of January 1990? A. Sorry, you are asking me my opinion now? Q. No. Whether it occurred to you in March 1994. A. I can't recall. I am thinking about it. Q. I am asking you your opinion now, with the advantage of hindsight, do you agree that it would have been in their interest to allege causes of action subsequent to 4 January 1990? A. I agree now that it is certainly something that I would give serious consideration to. ……………………….. Q. As you understand the position, there are said to be four separate occasions in which Mr Egan gave advice to the Symondses, which they claim as negligent. Is that your understanding? A. Yes. Q. In 1994, if you had turned your mind to the question, would you have appreciated that the Symondses may be able to prove that one of those valuations was relevantly negligent but not be able to prove that another one was? A. Yes, that's theoretically possible. Q. If you had turned your mind to the question in 1994, would you have recognised that against that contingency it would be in the interests of Mr and Mrs Symonds, if other elements were capable of proof, to allege causes of action based on all four of Mr Egan's valuations? A. It might have been. I'm not sure if they are all valuations in the true sense, but - I said earlier that I would certainly give serious consideration to it and take into account or consider the various matters that I referred to earlier. I haven't effectively reconstructed the position as it was in 1994 and analysed carefully each of those matters to the point where I could now give you a firm view. But if, after doing so, I formed the view that the benefit of adding a cause of action on one or all of those other advices outweighed possible disadvantages of doing so, then I would have recommended it. …………………………. Q. Do you agree that in 1994 a claim for damages of professional negligence for a sum in excess of $10 million was a significant litigious undertaking? A. Yes. Q. Do you agree that in 1994 such a claim needed to be prepared with very considerable skill and care? A. Yes. Q. If you had any perception of complications that may flow from alleging against Mr Egan causes of action based upon his subsequent letters, don't you think that was something on which it would have been prudent to obtain Mr Hammerschlag's advice? A. Yes. Q. Do you agree that in order to get that advice you would need to provide Mr Hammerschlag with the relevant letters and instructions about the circumstances in which they were given and the alleged reliance and consequential damage? A. Yes. Q. Did you do that? A. Yes. Q. When? A. At the time that further particulars were provided. Q. Are you saying that at the time that further particulars were provided you instructed Mr Hammerschlag to give advice on potential causes of action based upon the subsequent letters from Mr Egan? A. No. I said that at the time of providing particulars I gave him copies of the letters and the instructions that I then had as to Mr and Mrs Symonds' asserted reliance on them to enable him to settle the further and better particulars provided. Q. Did you instruct him to advise whether the pleadings should be amended to include causes of action based on those subsequent letters? A. I don't recall doing so. ………………………………….. Q. When exactly did you form the view that Mr and Mrs Symonds' claim for damages against Mr Egan would be affected by the deed entered into with Barclays Bank in 1994 once that deed took effect? A. I don't have a specific recollection about it, but I expect that it would have been at or about the time that the deed was entered into. Q. Wouldn't you have turned your mind to the question at the time the deed was being negotiated? A. I may have. I don't recall. Q. When you were first informed by Mr and Mrs Symonds that Barclays Bank had proposed some kind of release for them, was that something that came to you as a surprise? A. I don't recall how I reacted to it. Q. Have you ever encountered professionally before instances of a bank or financial institution entering into a deed like this with a defaulting customer? A. No. Q. And you understood, didn't you, that although you might not know an exact figure, the amounts involved were very substantial? A. Yes. Q. Are you saying that you can't be sure now when you realised that that may have some implications in relation to the Symonds' claim against Mr Egan? A. That I can't be sure now when I realised? Q. Yes? A. Yes. Q. Looking back at it now, don't you agree that given the amounts involved, the implications of such a deed for the claim against Mr Egan was a very important matter? A. Yes. Q. Looking back at it now, don't you agree that it was a subject which in itself would justify getting very careful considered legal advice? A. That I would consider getting legal advice about? Q. Well, before we say who, that it was a subject, that is the effect of this deed on the Symonds' claim against Mr Egan, was sufficiently important matter to obtain considered legal advice? A. Yes. Q. You didn't seek any such advice from Mr Hammerschlag, did you? A. Not that I can recall. Q. Or from anybody else? A. As to the effect that it may have on the claim against Egan, no, I don't recall. I don't believe I did. …………………………………….. Q. Did you understand in 1994 that Barclays Bank held securities for the moneys advanced to Mr and Mrs Symonds for this project given by various companies which the Symondses controlled? A. Yes. At some stage in 1994 I became aware of that. Q. When you say at some stage, don't you know when? A. I can't tell you now precisely. I can't recall precisely when I first became aware, but at least by the time the deed was entered into I was aware. Q. When Mr and Mrs Symonds first came to see you at the end of November 1993, didn't they tell you that they had lost their properties? A. I don't recall them telling me that at the time. Q. Do you remember them telling you that at any time? A. I don't recall them specifically telling me that, but it became apparent, at least by the middle of 1993, that that was so. Q. Even if this all came as a revelation to you with the Barclays Bank draft deed, by June 1994 you understood that the bank held securities over various land properties owned by companies controlled by Mr and Mrs Symonds? A. Yes. Q. And you recognised, didn't you, that as separate legal entities the rights of those companies and the rights of the Symondses would be governed by the law that applies to principal debtors and guarantors? A. I don't recall. I really don't recall how I viewed the effect of those transactions or - the effect of those transactions. ………………………………………….. Q. Is it the case that the first time Mr Hammerschlag ever knew about this deed was at the conference on 24 January 1996? A. I don't recall. It may have been. Q. As at 24 January 1996 your belief was that the quantum of damages that the Symondses or somebody would have to claim from Mr Egan was the value of the properties that the bank had taken in reduction of its debt, wasn't it? A. Yes. Q. How were you going to prove that? A. I don't recall now. Q. You had never obtained at any stage a current valuation of any of those properties, had you? A. No. Q. One of them at least, that is the one in Jersey, had not even been sold, had it? A. No. Q. If you were going to claim damages based on the value of the properties taken by the bank, which included the property in Jersey, how were you going to do it? A. I don't know. ………………………………… Q. Was it the view expressed by at least advisors amongst themselves on 26,27,28 February 1996 that if the case was going to continue at all it would only be worthwhile continuing if the corporate plaintiffs were included? A. I don't recall that. Q. Was it your view that without the corporate plaintiffs there was no point in the case continuing with Mr and Mrs Symonds as the only surviving human plaintiffs alone? A. I thought at that point that there wasn't much point in the case continuing at all, so to answer the question as to whether there was any point of continuing without the corporate plaintiffs is difficult. Q. You say is difficult? A. I don't think there was - having formed the view that they were going to lose on the basis that they were unlikely to be believed as to their asserted reliance on Mr Egan's advice, I don't recall considering whether there was any point in continuing without the corporate plaintiffs. …………………………………… Q. Do you agree that if, instead of settling with Mr Egan, the case had been adjourned for a hearing at some later date, during the intervening period of that adjournment everything that could possibly be reviewed to improve the position in which the Symonds forensically stood at that date would have been done? A. Well, the significant problem that Mr and Mrs Symonds faced at that time was with his Honour and after the attempts to have his Honour disqualify himself and then before the Court of Appeal had failed, I am not sure what benefit might have been obtained by an adjournment in dealing with that issue and the view that - that I and Mr Spender and Mr Hammerschlag had formed that Mr Justice Dowd was not going to believe Mr or Mrs Symonds on that central issue of reliance. I don't believe that the - the other - the aspects of the case on which he had ruled, for example on evidence, whilst they may have been matters that could have been attended to in an adjournment, it was not my view then and it is not my view now that they influenced the advice that was given to Mr and Mrs Symonds to discontinue or any part of that decision. Q. Do you agree that if Mr and Mrs Symonds had rejected the advice to settle and had insisted on proceeding, that during the interviewing period everything that could possibly be reviewed to improve their position would have been done? A. Yes, if they had instructed the firm to do so, yes. …………………………………. Q. Was it your understanding, on 26 February 1996, that in terms of your retainer by Mr and Mrs Symonds, once $85,000 paid by them into the firm's trust account had been exhausted, however applied, the firm would bill them for any further fees upon conclusion of the proceedings and not before? A. No. This had been varied. This agreement, the amount of $85,000 had been varied on two occasions. Q. If you like, change the money account, make it $150,000. Once that sum had been exhausted, was it your understanding on 26 February that the firm would bill the Symonds no more until the end of the case? A. It was certainly my understanding that if the case had concluded within the five weeks that had been estimated, then they would not have been asked for any further payments. But I can't recall now whether in February 1996 I formed the view as to whether or not the firm was obliged, in the event that the matter did proceed beyond that period to an adjourned hearing, that the firm would be obligated to meet counsel's fees out of the firm's general account. But I certainly asked Mr and Mrs Symonds, said to Mr and Mrs Symonds, that they would need to pay $75,000 to cover the fees of Mr Spender and Mr Hammerschlag who had agreed to continue at a discounted, at discounted rates and as I said yesterday, Mrs Symonds indicated to me that they could and would. Q. Do you agree that there is nothing in writing, that anyone now can locate, which in any way changes the terms of this retainer letter in any respect, other than the changes to the monetary sum of $85,000 to which you have alluded? A. I think that's correct, yes. Q. Do you agree that on 26 February 1996 you knew that the Symondses had never agreed to any change in the terms of the retainer agreement, except, at most, in respect of increasing the amount to be paid into the firm's account? A. Yes. …………………………………………… Q. It was obvious to you, wasn't it, on 26 to 28 February 1996, that if the Symonds' case were to continue and it was going to be reviewed and problems solved, that the case would be likely to carry on for five to eight weeks? A. I don't recall being aware of it being five to eight weeks but certainly some further five weeks. Q. At least five weeks? A. Yes. Q. And you appreciated between 26 to 28 February 1996 that if that happened and if the firm had to meet counsel's fees, that would be a very substantial sum, wouldn't it? A. If the firm had had to, Yes. Q. And I suggest to you that you had, on behalf of the firm, a vested interest in bringing the Symonds' case to an end on the 28th of February 1996 to avoid that possibility, didn't you? A. Certainly a vested interest. The firm was interested in whether or not the matter proceeded, yes. Q. Financially interested? A. Yes, if - if the Symondses were not prepared to provide any further funds for the firm's fees or to pay any part of the unbilled time at that point, then yes. Q. I suggest to you that when you looked at it objectively, the only problems that had arisen for the Symonds in their case had arisen on and after the 29th of January 1996, hadn't they? A. Yes. Q. I suggest to you that it was open to you to say to them: "Look, Mr and Mrs Symond, we have this opportunity for an adjournment here. If Mr Spender can't act, we can get the best man for you in Sydney. We can start your case again and the firm will pay all the way up to judgment." You could have said that to them but you didn't, did you? A. I don't know that I could have said that to them but I - I don't believe that I did say that to them? ………………………………………….. Q. Now, what I am suggesting to you is that if you had put to Mr and Mrs Symonds the possibility of reconstituting the case possibly with a change of representation, certainly to have it heard some weeks at least and probably months later down the track, there was no necessary assumption that the Judge would have a closed mind to the case, was there? A. Well, we had formed a particular view about the Judge and there was no reason to believe that anything that might happen over the course of an adjournment would cause any of us to change that view. What was also possible over the course of an adjournment is that an opportunity to discontinue without any costs liability might have also changed. THE IMMUNITY OF AN ADVOCATE: 146 Paragraph 32 of the Defence referred to above pleads what is commonly referred to as "advocate immunity", recently confirmed by the High Court in D'Orta - Ekenaike v Victoria Legal Aid (2005) 223 CLR1. 147 Paragraph 1 of the joint judgment of Gleeson CJ, Gummow, Hayne and Heydon JJ identified the issue before the court in these terms: "[1] There are two principal issues in this matter. First, should the Court reconsider its decisions in Giannarelli v Wraith (a) at common law an advocate cannot be sued by his or her client for negligence in the conduct of a case in court, or in work out of court which leads to a decision affecting the conduct of a case in court; and (b) in 1891 (the date at which the extent of the liability of a barrister was fixed by the Legal Profession Practice Act 1958 (Vic) ("the LPPA")) an advocate was immune from suit for allegedly negligent acts or omissions committed in court in the conduct of civil or criminal litigation, or committed out of court but leading to a decision affecting the conduct of a case in court?
Secondly, does the immunity apply to the acts or omissions of a solicitor which, if committed by an advocate, would be immune from suit?" Later in the judgment, their Honours said:
"[43] The "unique and essential function" of the judicial branch is the quelling of controversies by the ascertainment of the facts and the application of the law. Once a controversy has been quelled, it is not to be re-litigated. Yet re-litigation of the controversy would be an inevitable and essential step in demonstrating that an advocate's negligence in the conduct of litigation had caused damage to the client.
[44] The question is not, as may be supposed, whether some special status should be accorded to advocates above that presently occupied by members of other professions. Comparisons made with other professions appear sometimes to proceed from an unstated premise that the law of negligence has been applied, or misapplied, too harshly against members of other professions, particularly in relation to factual findings about breach of duty, but that was not a matter argued in this Court and should, in any event, be put to one side. Nor does the question depend upon characterising the role which the advocate (a private practitioner) plays in the administration of justice as the performance of a public or governmental function.
[45] Rather, the central justification for the advocate's immunity is the principle that controversies, once resolved, are not to be reopened except in a few narrowly defined circumstances. This is a fundamental and pervading tenet of the judicial system, reflecting the role played by the judicial process in the government of society. If an exception to that tenet were to be created by abolishing that immunity, a peculiar type of relitigation would arise. There would be relitigation of a controversy (already determined) as a result of what had happened during, or in preparation for, the hearing that had been designed to quell that controversy. Moreover, it would be relitigation of a skewed and limited kind. No argument was advanced to this Court urging the abolition of judicial or witness immunity. If those immunities remain, it follows that the relitigation could not and would not examine the contribution of judge or witness to the events complained of, only the contribution of the advocate. An exception to the rule against the reopening of controversies would exist, but one of an inefficient and anomalous kind. …………………………………….. [85] No sufficient reason is proffered for reconsidering the Court's decision, in Giannarelli , that an advocate is immune from suit whether for negligence or otherwise in the conduct of a case in court. Should the boundary of the operation of the immunity be redrawn?
[86] Again, we consider that no sufficient reason is proffered for doing so. In particular, there is no reason to depart from the test described in Giannarelli as work done in court or "work done out of court which leads to a decision affecting the conduct of the case in court" or, as the latter class of case was described in the Explanatory Memorandum for the Bill that became the Practice Act, "work intimately connected with" work in a court. (We do not consider the two statements of the test differ in any significant way.) …………………………………….. [91] Because the immunity now in question is rooted in the considerations described earlier, where a legal practitioner (whether acting as advocate, or as solicitor instructing an advocate) gives advice which leads to a decision (here the client's decision to enter a guilty plea at committal) which affects the conduct of a case in court, the practitioner cannot be sued for negligence on that account." 148 In separate judgments Mc Hugh and Callinan JJ upheld the immunity claimed. Kirby J dissented. 149 In Giannarelli v Wraith (1988) 165 CLR 543 the issue concerned whether a Victorian barrister was liable in negligence to his clients who were tried and convicted of perjury, the negligence alleged being his failure to advise them that they had a good defence and his failure to object to certain inadmissible evidence essential to the Crown case. 150 After referring to the independent judgment which a barrister must exercise in conducting a trial, Mason CJ stated the reason for advocates immunity: "There is a real risk that, if counsel were exposed to liability in negligence, the existence of that potential liability would influence the exercise of his independent judgment by making him more mindful of the need to avoid any possibility of liability to his client. In some situations, in order to avoid that possibility, counsel would pursue matters which he would not otherwise pursue if the exposure to liability in negligence did not exist. To expect that counsel's conduct of a case would not be influenced by his exposure to such a potential liability would be little more than a pious hope. Inevitably some counsel would be more inclined to act as mere agents of their clients to the detriment of the interests of the court and of the administration of justice generally. Insurance might alleviate but would not eliminate the problem. Counsel would naturally be concerned to avoid allegations of negligence.
It follows that the exposure of counsel to liability in negligence for breach of a common law duty of care would create a real risk of adverse consequences for the efficient administration of justice. Litigation would tend to become more lengthy, more complex and more costly. " 151 Later, Mason CJ discussed the limits of the immunity in these terms: "However, the grounds for denying liability for in-court negligence have no application to work done out of court which is unconnected with work done in court: Saif Ali ([1980] AC 198) . The public policy considerations underlying immunity from in-court negligence have no relevance to a barrister's liability for negligent advice in relation to out of court matters, in accordance with the principles expounded in such cases as San Sebastian Pty Ltd v Minister Administering Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340 ; 68 ALR 161 , Hawkins v Clayton (1988) 62 ALJR 240 ; 78 ALR 69 , and Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465. The problem is: where does one draw the dividing line? Is the immunity to end at the courtroom door so that the protection does not extend to preparatory activities such as the drawing and settling of pleadings and the giving of advice on evidence? To limit the immunity in this way would be to confine it to conduct and management of the case in the courtroom, thereby protecting the advocate in respect of his tactical handling of the proceedings. However, it would be artificial in the extreme to draw the line at the courtroom door. Preparation of a case out of court cannot be divorced from presentation in court. The two are inextricably interwoven so that the immunity must extend to work done out of court which leads to a decision affecting the conduct of the case in court. But to take the immunity any further would entail a risk of taking the protection beyond the boundaries of the public policy considerations which sustain the immunity. I would agree with McCarthy P in Rees v Sinclair [1974] 1 NZLR 180 where his Honour said (at 187): "… the protection exists only where the particular work is so intimately connected with the conduct of the cause in court that it can fairly be said to be a preliminary decision affecting the way that cause is to be conducted when it comes to a hearing." This persuasive statement of the limits of the immunity was endorsed by four members of the House of Lords in Saif Ali (at 215, 224, 232, 236). The statement is all the more important in that it acknowledges the existence and the limits of the immunity in a country where the legal profession is fused. " 152 Brennan J referring to the position of a solicitor made this observation: "On the other hand, it is now seen that at common law there is no liability in a solicitor for anything done or omitted in the conduct of a client's case in court or in the making of preliminary decisions affecting the way in which the case is to be conducted when it comes to court. (I leave aside liability for failure to carry out preliminary decisions, whether made by the solicitor or by counsel briefed by the solicitor, when that failure impairs the conduct of the case in court in the way intended.) I would therefore take the common law as this court declares it today to be the common law of 1891." 153 In my opinion, advocate immunity clearly applied to everything which occurred after the commencement of the proceedings before Dowd J. The immunity, for the reasons made clear in the passages quoted above, prevents any attack upon anything done by counsel or by Mr Klotz in that period including the advice which led to a compromise of the action. 154 I am, in any event, satisfied that Mr Spender and Mr Hammerschlag, during the course of the proceedings before Dowd J, gave honest and dispassionate advice to the Plaintiffs. To the extent that Mr Klotz participated in that advice, it is hard to escape the feeling that his attitude may have been affected by a conflict of interest arising out of the terms of the retainer agreement. If, in truth, Dunhill Madden were committed to absorb even their own costs, let alone disbursements until the end of the trial no matter how long that took, they had an obvious interest in bringing the matter to a close as quickly as possible. However, I am satisfied that the Plaintiffs, in the end, whilst undoubtedly under stress were not subjected to duress and made an informed decision to terminate the proceedings. That decision, its implementation and the discussions and advice which preceded it were, in my opinion, protected by advocate immunity.
ARE THE PLAINTIFFS OTHERWISE ENTITLED TO SUCCEED? 155 In my opinion the Plaintiffs established breach of contract and negligence by Dunhill Madden as alleged in the Statement of Claim. 156 In particular, I find that the Plaintiffs proved the breaches alleged in paragraph 27 (a) (b) (c) (d) (e) (f) (g) (h) (i) and (k) set out above. They failed to prove breaches or negligence as particularised in paragraphs (l) and (m). It would not necessarily, in my view, be negligent or constitute a breach of retainer for an experienced solicitor not to obtain an advice on evidence from counsel, provided that the solicitor was in truth capable of providing such advice himself. 157 Obviously some of the breaches were more significant than others. I am satisfied, in particular, on the probabilities that Mr Klotz failed to apply his mind to the significance to the case of the companies Senneh Pty Ltd, Tisete Pty Ltd, Tabard (Jersey) Limited and Gowrise Pty Ltd, and as to how the involvement of those companies could impact upon the pleading of the Plaintiffs causes of action. He also failed to give adequate or any consideration to the proper quantification of the Plaintiffs damages, including as to the impact upon those damages of the deeds of release. As a consequence, Dunhill Madden also failed to provide proper particulars to Egan's solicitors. 158 In my opinion, the case against Egan was not ready for hearing and Dunhill Madden were negligent and in breach of their contractual obligations when they accepted a date for hearing and thereafter failed to apply for vacation of the hearing date.
THE LIMITATION DEFENCE: 159 As stated above, it was pleaded that s14 of the Limitation Act bars any claim in respect of breaches of retainer and breaches of fiduciary duty committed prior to 13 December 1995. 160 Some of the breaches alleged were continuing breaches such as paragraphs 27 (c) (d) (e) (f) and (i) in the Statement of Claim and those breaches continued to be committed each day after 13 December 1995 until the commencement of the trial. The defence did not relate to the cause of action pleaded in negligence, presumably because it is accepted by Dunhill Madden that the Plaintiffs suffered no damage before 29 January 1996. CAUSATION: 161 Causation is a question of fact to be decided by the application of common sense (March v E & MH Stramare Pty Ltd [1991] 65 ALJR 334). On the fact of this case, it seems to me both foreseeable and a matter of common sense that Dunhill Madden's breach of duty would cause delay and disruption in the conduct of the trial, the very situation which came about. The same consequences naturally flowed, in my view, from Dunhill Madden's breaches of retainer. 162 In my opinion, the Plaintiffs are entitled to damages representing the loss flowing from such delay and disruption. They are not so precluded, in my view, by the principle of advocate immunity because the negligence of Dunhill Madden and their breaches of retainer were not, in my opinion, intimately connected with the conduct of a case in court as that expression has been interpreted in cases such as Keefe v Marks (1989) 16 NSWLR 713 and Yates Property Corporation Pty Ltd v Boland 145 ALJR 169 (per Branson J whose approach was expressly approved by Gleeson CJ in Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209). 163 Keefe was a personal injuries case in which the Statement of Clam made no claim for interest, nor was any such claim made at trial, with the consequence that Master Greenwood awarded no interest. The solicitor was subsequently sued and the claim against him was compromised. He then sued in the District Court the barrister who conducted the case before Master Greenwood. His Statement of Claim was struck out by Mahoney DCJ. 164 The Court of Appeal (Gleeson CJ, Priestley and Meagher JJA) dismissed (Priestley JA dissenting) an application for leave to appeal from the decision of Mahoney DCJ and held that advocate immunity applied. In the course of his judgment Gleeson CJ said: "The substance of the complaint that was made against the barrister is, in my view, simple and clear. It is that, having been briefed to act as counsel for Mr Tehfe in his action for damages for personal injuries, he did not at any relevant time, either prior to the commencement of the hearing, or during the hearing, direct his mind to the desirability of making on his client's behalf a claim for interest or take the steps necessary to propound such a claim and that his neglect in that regard produced the result that Master Greenwood failed to award interest and the Court of Appeal declined to intervene. As a consequence, it is alleged, Mr Tehfe did not recover his full entitlement. That, it is claimed, gave rise to a liability on the part of the opponent to Mr Tehfe, and the claimant seeks contribution or indemnity based on the existence of that liability. The question is whether a claim of that nature is within the area of immunity to which reference has earlier been made. Whatever may be the answer to that question, it does not appear to me that it could depend upon the detail of the evidence adduced at a hearing of the District Court action. Indeed, the relevant principle of immunity would be capricious in its operation if its application in a case such as the present were made to depend upon the precise history or circumstances of the communications and dealings between the barrister and his solicitor and lay client. A rule of law which is said to be based upon considerations of public policy should not depend for its practical operation upon chance. Furthermore, it does not seem to me that a plaintiff can circumvent the immunity, simply by constructing allegations of damage in a manner which attempts to relate the harm suffered as a consequence of a barrister's alleged negligence to that aspect of his conduct furthest removed from physically standing up and speaking in Court. The statement of claim is to be read as a whole, and there is no doubt about what it is the barrister is said to have done that was wrong, or what form of harm befell his client. The barrister's alleged negligence involved a continuing course of conduct, or inaction, which extended up until the conclusion of the hearing before Master Greenwood and manifested itself in a failure to make a claim for interest, and to apply for any necessary amendment to the pleadings in order to enable that claim to be pursued.
In Giannarelli v Wraith , Mason CJ stated the relevant principles, both positively and negatively, in a manner which, in my view, clearly indicates the answer to be given to the question which arises in the present case. His Honour said, referring to Saif Ali v Sydney Mitchell & Co (A Firm) [1980] AC 198 (at 614; 424; 7): "However, the grounds for denying liability for in-court negligence have no application to work done out of court which is unconnected with work done in court."
It is impossible to characterise that aspect of the opponent's conduct which occurred prior to the commencement of the hearing before Master Greenwood as "work done out of court which is unconnected with work done in court". On the contrary, in so far as complaint is made of action or inaction prior to the commencement of the hearing it concerns a matter which was intimately connected with the work ultimately done in Court, that is to say, the presentation of Mr Tehfe's claim for damages and any consequential relief to which he was also entitled." 165 Yates v Boland concerned the liability of solicitors in respect of a case conducted in court by barristers instructed by those solicitors, and is thus more akin to this case. 166 In relation to the position of solicitors Her Honour said: "The definition of the boundary between circumstances in which a solicitor involved in the preparation of a case for trial is immune from liability and circumstances in which he or she may be liable will, no doubt, develop on a case by case basis. The circumstances of the present case are far removed from those considered in Donellan v Watson . The case in negligence pleaded by the applicant against ATRK is that by reason of its failure, in effect, to act with the professional care, skill and diligence reasonably to be expected from solicitors, the applicant:
(a) wasted significant costs and other moneys attempting to value the [subject] land based upon the notional capitalised income stream referred to in para 65 hereof [ie costs resulting from the hearing time before the Land and Environment Court being extended];
(b) lost the opportunity in the Land and Environment Court proceedings to formulate and prove its claim for special value in accordance with the proper principles and practice of valuation law based on the matters pleaded in paras 43-51 inclusive hereof [ie head start]; and
(c) was thereby inadequately compensated for special value by the special value allowance. Each of the above matters relates to the in-court conduct of the applicant's claim for compensation upon the resumption of the subject land.
I have indicated above that I am not satisfied that ATRK failed to act with the professional care, skill and diligence to be expected from competent solicitors experienced in valuation law having regard to the circumstances in which they were retained. Even if they did fail so to act, it has not, in my view, been shown that their failure in any way affected the conduct of the Land and Environment Court proceeding. The conduct of the Land and Environment Court proceeding was in the hands of Mr Simos assisted by Mr Webster. However, if it be assumed that the out of court conduct of ATRK was a cause of the Land and Environment Court proceeding being conducted in the way that it was, it seems to me that the policy considerations which support the immunity of advocates would support such immunity being extended to ATRK. That is, in my view, the relevant work of ATRK would in such circumstances be viewed as "work done out of court which leads to a decision affecting the conduct of the case in court" within the meaning of the test formulated by Mason CJ in Giannarelli v Wraith . I agree with the submission put on behalf of ATRK that: "It would be an anomalous and unjustifiable distinction if, in respect of advice and decisions affecting the conduct of proceedings, counsel should have immunity but the solicitors should not where both are held to be obliged to give the same type of advice in respect of the conduct of the proceedings." 167 This case, in my view, fits neither Keefe nor Yates. The problem which arose here did not derive from a predetermined decision to conduct the case in a particular way as in both of those cases, but rather from Mr Klotz's failure to apply his mind to the many difficulties inherent in the case. Rather, this case seems to fit the category mentioned in parenthesis by Brennan J in the passage from his judgment in Giannarelli quoted above. 168 Moreover, in no way, in my view, could it be said that the failure to provide proper particulars, the acceptance of a trial date for a case, in truth, unready for trial and the failure to seek vacation of the hearing date were matters intimately connected with the conduct of the case in court. In my opinion, advocate immunity does not protect Dunhill Madden from liability in respect of the matters referred to in this and the preceding paragraph. DAMAGES: 169 As I have already indicated advocate immunity applies to the conduct of the proceedings before Dowd J and to the settlement of the proceedings on 28 February 1996. That settlement, so far as it terminated the Plaintiffs' right of action against Egan, was, as I have found, an act of the Plaintiffs' freewill and must, I think, in relation to the negligence and breach of retainer of Dunhill Madden, be regarded as a novus actus interveniens connected to the non actionable conduct of the Plaintiffs' counsel and solicitors in the trial before Dowd J. 170 Relevant principles are discussed by Mason CJ in March v EH & M Stramare under the heading "Novus Actus Interveniens": "In similar fashion, the "but for" test does not provide a satisfactory answer in those cases in which a superseding cause, described as a novus actus interveniens , is said to break the chain of causation which would otherwise have resulted from an earlier wrongful act. Many examples may be given of a negligent act by A which sets the scene for a deliberate wrongful act by B who, fortuitously and on the spur of the moment, irresponsibly does something which transforms the outcome of A's conduct into something of far greater consequence, a consequence not readily foreseeable by A. In such a situation, A's act is not a cause of that consequence, though it was an essential condition of it. No doubt the explanation is that the voluntary intervention of B is, in the ultimate analysis, the true cause, A's act being no more than an antecedent condition not amounting to a cause. But this explanation is not a vindication of the adequacy of the "but for" test.
The facts of, and the decision in, M'Kew illustrate the same deficiency in the test. The plaintiff would not have sustained his ultimate injury but for the defendant's negligence causing the earlier injury to his left leg. His subsequent action in attempting to descend a steep staircase without a handrail in the normal manner and without adult assistance resulted in a severe fracture of his ankle. This action was adjudged to be unreasonable and to sever the chain of causation. The decision may be explained by reference to a value judgment that it would be unjust to hold the defendant legally responsible for an injury which, though it could be traced back to the defendant's wrongful conduct, was the immediate result of unreasonable action on the part of the plaintiff. But in truth the decision proceeded from a conclusion that the plaintiff's injury was the consequence of his independent and unreasonable action.
The fact that the intervening action is deliberate or voluntary does not necessarily mean that the plaintiff's injuries are not a consequence of the defendant's negligent conduct. In some situations a defendant may come under a duty of care not to expose the plaintiff to a risk of injury arising from deliberate or voluntary conduct or even to guard against that risk: see Chomentowski v Red Garter Restaurant Ltd (1970) 92 WN(NSW) 1070. To deny recovery in these situations because the intervening action is deliberate or voluntary would be to deprive the duty of any content.
It has been said that the fact that the intervening action was foreseeable does not mean that the negligent defendant is liable for damage which results from the intervening action: see Chapman v Hearse at 122; M'Kew, at 25; Caterson v Commissioner of Railways (1973) 128 CLR 99 at 110. But it is otherwise if the intervening action was in the ordinary course of things the very kind of thing likely to happen as a result of the defendant's negligence. In Dorset Yacht , Lord Reid observed (at 1030): "But if the intervening action was likely to happen I do not think that it can matter whether that action was innocent or tortious or criminal. Unfortunately, tortious or criminal action by a third party is often the 'very kind of thing' which is likely to happen as a result of the wrongful or careless act of the defendant. " Much the same approach was adopted by this court in Caterson where Gibbs J (with whom Barwick CJ, Menzies and Stephen JJ agreed) pointed out (at 110) that, if the plaintiff's action in jumping from the train was, in the ordinary course of things, the very kind of thing likely to happen as a result of the defendant's negligence and was not unreasonable, the jury was entitled to find that the plaintiff's injuries were caused by the defendant's negligence. The finding that the plaintiff's action was not unreasonable was then essential to that conclusion because contributory negligence was a defence in New South Wales at the relevant time. See also Chapman v Hearse , at 124-5; and note the reference in Mahony (CLR at 529) to the acceptance by Gibbs J in Dillingham Constructions Pty Ltd v Steel Mains Pty Ltd (1975) 132 CLR 323 at 329-30 ; 6 ALR 171 , of the suggestion that, if a pedestrian were run over by two drivers consecutively and both were negligent, the injuries caused by the second driver would be damage for which both drivers were liable if those injuries were also the foreseeable consequence of the first driver's negligence.
As a matter of both logic and common sense, it makes no sense to regard the negligence of the plaintiff or a third party as a superseding cause or novus actus interveniens when the defendant's wrongful conduct has generated the very risk of injury resulting from the negligence of the plaintiff or a third party and that injury occurs in the ordinary course of things. In such a situation, the defendant's negligence satisfies the "but for" test and is properly to be regarded as a cause of the consequence because there is no reason in common sense, logic or policy for refusing to so regard it. " 171 Consistently with the quoted observations of Mason CJ, in my opinion, the compromise of the action in the way it occurred was not a reasonably foreseeable consequence of Dunhill Madden's breaches, nor was it, in the ordinary course of things, something likely to happen. But even if that were not so, in my opinion, advocate immunity prevents the Plaintiffs from relying on the compromise of the earlier proceedigns as a component of their damages. Consequently, in light of the findings I have made, I would exclude from the Plaintiffs' damages an assessment of the value of their lost chance of success in the proceedings against Egan. 172 I have reached the conclusions earlier expressed as to liability and damages largely upon what I regard as incontrovertible facts based on contemporary documentation, including the transcript of proceedings before Dowd J. It has thus been unnecessary to evaluate the credibility of the witnesses whose evidence was significantly challenged, namely the Plaintiffs and Mr Klotz. In fairness to them, however, I think I should say that, in my opinion, they gave evidence honestly and did what they could to assist the court. However, it must be borne in mind that they were giving evidence as to events and conversations which occurred a long time ago, most or all of which would not, at the time, have appeared particularly significant. In those circumstances it would be surprising if there were not some degree of reconstruction. 173 It has also been unnecessary for me to assess the Plaintiffs' prospects of success in the litigation against Egan. I observe, however, that it was intrinsically a very difficult piece of litigation which required extremely careful consideration, particularly on the issues of negligence and reliance. Only partly with the benefit of hindsight, I would have assessed its prospect of success at very much less that 50%. If I may say so, in my view, the sanguine terms of Mr Klotz's letter of 7 April 1994 were quite unjustified by reality. Indeed, a large part of the closing submissions made by counsel for Dunhill Madden was devoted to establishing why the proceedings against Egan, which their own clients had advised, were doomed to fail. There was, I think considerable force in those submissions. 174 It seems to me that the loss which the Plaintiffs did suffer as a result of Dunhill Madden's breaches of retainer and negligence may appropriately be related to the fees which were paid to the firm. In effect, the Plaintiffs were deprived of the benefit of a very large proportion of those fees. 175 According to Mr Symonds Statement as at 28 February 1996, the Plaintiffs had paid to Dunhill Madden the total sum of $171,148.79 and that evidence was not challenged. Of course not all the sum paid was wasted and indeed part related to the costs of Dunhill Madden acting in connection with the deeds of release. Moreover, even during the trial itself, the application to the Court of Appeal seeking the disqualification of Dowd J and for leave to appeal against his interlocutory rulings was not, I think, a foreseeable consequence of Dunhill Madden's wrongful conduct but rather the product of decisions taken by counsel during the course of the trial. 176 There is of course no way of calculating the Plaintiffs' loss accurately using the basis I have suggested. Doing the best I can, on the evidence, I assess such loss at $140,000. THE CLAIM FOR BREACH OF FIDUCIARY DUTY: 177 The nub of this claim is that Dunhill Madden sought from the Plaintiffs and received, in breach of fiduciary duty, substantial sums in excess of the amount of $85,000 referred to in the retainer agreement. 178 The retainer agreement, I think, makes it tolerably clear that prior to the conclusion of the proceedings Dunhill Madden was not entitled to require of the Plaintiffs that they pay more than $85,000. In my view, if the case had not been settled Dunhill Madden were obliged to continue acting for the plaintiffs until the action concluded without an entitlement to more than $85,000. Whether they then would have been required to absorb such items as counsels' fees themselves if the action did not result in a substantial verdict in the Plaintiffs' favour remains, I think, a moot question. It depends upon the proper interpretation of the somewhat ambiguous terms of the paragraphs under the heading "Billing Arrangements and Terms of Payment". It is unnecessary for me to decide this question. 179 Whenever a solicitor negotiates the payment of fees with a client or potential client there is always scope for a conflict of interest to arise. A fortiori, where as in this case there is an existing agreement the terms of which the solicitors are seeking to alter.
180 The relationship between solicitor and client is undoubtedly a fiduciary one. A request or demand by Dunhill Madden for payment of monies in excess of those provided for by the retainer agreement involved a conflict of interest which, in my view, required Dunhill Madden to act in perfect good faith, to make a frank disclosure of their interests, and to advise the Plaintiffs to seek independent advice (See for instance Law Society of NSW v Harvey (1976) 2 NSWLR 154 and O'Reilly v Law Society of NSW (1988) 24 NSWLR 204). 181 There is no evidence in this case that Mr Klotz tendered to the Plaintiffs the advice which he was, in my view, obliged to give and, indeed, he admitted that such advice was not given. 182 If it had been necessary, I would have found a breach of Dunhill Madden's fiduciary duty constituted by them calling upon the Plaintiffs to pay further sums of money, contrary to their contractual obligations, without full and frank disclosure and a recommendation that they seek independent advice. However, in light of the way I have approached the issue of damages, the question does not arise. INTEREST: 183 There is, in my opinion, no reason why the Plaintiffs should not be entitled to interest upon their damages pursuant to s100 of the Civil Procedure Act. By the end of July 1994, the Plaintiffs had paid $70,000. By 28 February 1996, they had paid $171,148.79. I think it would be just to allow interest from 1 January 1995 on the amount of the assessed damages viz $140,000 at 10% p.a. Such interest to date amounts to $180,198.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Monica Frances Symonds and Gerald Symonds
Cedric Borsmann Vass and 24 Ors
(1988) 165 CLR 543
(1991) 65 ALJR 334
(1989) 16 NSWLR 713
(1999) 74 ALJR 209
(1976) 2 NSWLR 154
(1988) 24 NSWLR 204
(1986) 162 CLR 340
(1988) 62 ALJR 240
(1973) 128 CLR 99
(1975) 132 CLR 323