168 I will now record my findings as to the course of events, stated in a way that comes most easily to me. I will then turn to the specific findings sought by the plaintiff.
169 Coleman introduced Brown and Freeman to McLaughlin. McLaughlin and Buckley's firm, McLaughlin & Riordan, was retained by the plaintiffs on 24 January 1991 to act in the Federal Court proceedings. McLaughlin was enthusiastic about the plaintiff's prospects in the proceedings. He told the plaintiffs they had a good case.
170 McLaughlin arranged for affidavits by Brown, Freeman and others to be prepared and filed. The affidavits were drafted or settled by counsel. Documents were obtained on discovery. The proceedings were set down for Monday, 23 March 1992.
171 In the Federal Court proceedings, it was alleged that United Systems had used formulae, wrongfully obtained from the plaintiffs, for the manufacture of products which it was marketing as its own. An account of profits was sought. United System's defence was that the formulae they were using had been provided by raw material suppliers and/or developed by United Systems such that the plaintiffs had no right or interest in relation to the formulae.
172 In earlier proceedings in the Equity Division of the Supreme Court, United Systems, as plaintiff, made similar assertions against Seamez and others in relation to products manufactured and marked by Seamez. Those proceedings were dormant.
173 McLaughlin did not inspect the Supreme Court file, and inspected some only of the papers held by the plaintiffs' previous solicitors, and that not until 19 March 1992. This delay occurrred notwithstanding that he knew about the Equity proceedings at least by mid-June 1991, that McLaughlin had been requested by counsel in October 1991 to find out about them and that, on his own admission, he should have done so.
174 It was thought that there were deficiencies in the discovery provided by the respondents in the Federal Court proceedings. Complaints culminated in an order made on 9 March 1992 for supplementary discovery. Asserted deficiencies were raised in a letter written by McLaughlin on 18 March 1992.
175 At a conference with Jacobson on 17 March 1992, Jacobson formed the view that Brown's affidavit was not genuinely his own and that there was a further problem arising from Brown and Freeman, both of whom were proposed witnesses, having been present together when Brown's affidavit was settled. On the evening of 17 March 1992, Jacobson informed Brender and McLaughlin of his views and of his intention to obtain a ruling from the president of the Bar Council as to whether it would be inappropriate for him to return his brief.
176 McLaughlin asserts that, on the same evening, he spoke to Brown about Jacobson's imminent departure from the case and the problems about the case mentioned by Jacobson, and recommended in strong terms that Brown settle the case. McLaughlin asserts that he repeated his settlement advice to Brown at a conference on 18 March 1992. Brown denies that any such advice was given at that stage. McLaughlin says that Brown's response to the advice was to find an alternative Queen's Counsel and to proceed with the hearing. It is common ground, therefore, that as at 18 March 1992, the plaintiffs wished to proceed with the hearing rather than settle, irrespective of whatever problems may have been brought to their attention at that stage.
177 Brender did not withdraw from the case at any stage. However, he indicated that he did not feel sufficiently experienced to conduct such a case on his own without a leader.
178 McLaughlin set about looking for a replacement for Jacobson and persisted in that endeavour until 20 March 1992.
179 Notwithstanding the difficulties mentioned by Jacobson to which I have referred and the existence of certain notes made by Brown which had recently come to light (and which were thought to be at odds with affidavit evidence filed by Brown in the Equity proceedings), McLaughlin believed that the plaintiff had a slightly better than 50% chance of succeeding in the Federal Court proceedings.
180 On the morning of 19 March 1992, McLaughlin had a meeting with Brown and Coleman at his office. The meeting was conducted in a light-hearted mood. In relation to Jacobson's concern about Brown not being aux fait with the technical material in his affidavit, Brown and Coleman assured McLaughlin that the concern was unfounded and that Brown would be ready for cross-examination on his affidavit at the trial. Brown proffered an explanation for the notes relating to the Equity proceedings. There was no discussion of settlement, nor any suggestion that the case could not proceed.
181 On Friday morning 20 March 1992, McLaughlin telephoned Coleman, saying the plaintiffs could not win because both barristers had left the case.
182 Later in the day, a meeting took place at McLaughlin's office attended by Brown and Coleman. On this occasion, there was no jocularity. McLaughlin repeated that both barristers had left the case and that Seamez had to settle because it could not win. Coleman asked about the possibility of an adjournment. McLaughlin said that was not possible and that the case could be settled "on a walkaway basis", with the $30,000, paid into court by Seamez as security for costs, going to the other side for their costs. Brown's response was one of anger. McLaughlin said that if he could find other counsel it would cost $30,000 to brief them over the weekend. Brown requested McLaughlin to obtain new counsel and have them apply for an adjournment. McLaughlin said they might obtain an adjournment but only until the Tuesday which would not help, and that, if the plaintiffs went on with the case, it would cost them $250,000. (That would have been for the costs of both sides, assuming the plaintiffs lost). Brown asked McLaughlin to apply for an adjournment and to find new counsel regardless of the cost. McLaughlin continued to urge settlement in strong terms, now adding that the settlement would not stop the plaintiffs from taking further proceedings if United Systems continued to sell the products in question.
183 On the way to Seamez's factory after the meeting, Brown told Coleman that he wanted to go on with the case and that his major concern was to protect Seamez's products from exploitation by United Systems.
184 At this stage, Brown's state of mind (which I impute to Seamez) was that, despite the difficulties mentioned by McLaughlin, he wished to proceed with the case rather than settle on the terms outlined by McLaughlin.
185 In the middle of the day, on 20 March 1992, McLaughlin telephoned the factory and told Brown that the other side had agreed to a settlement for $20,000 rather than $30,000. McLaughlin then told Coleman on the telephone that a defamation writ for $300,000 had been taken out against Brown and a Mareva injunction, both of which would be served before court on Monday unless the matter was settled. The Mareva injunction, according to what McLaughlin told Coleman, would prevent Brown from dealing with any assets so that he would be unable to continue in business. (That was, a considerable overstatement of the effect of a Mareva injunction. Coleman was not familiar with the remedy - being a criminal lawyer - and was not in a position to know that the effect of such an injunction had been overstated.)
186 Coleman communicated to Brown what he had been told by McLaughlin. He then told McLaughlin (in Brown's presence) that the money did not concern Brown, and that Brown was more concerned about protecting his products and stopping United Systems from manufacturing them.
187 No defamation proceedings of the kind mentioned by McLaughlin had in fact been instituted, nor had there been any application for a Mareva injunction against Seamez or Brown.
188 A letter, sent by facsimile transmission at about 2.00 pm on 20 March 1992, shows that McLaughlin genuinely understood from his conversation with Brown and Coleman that he had instructions to settle for up to $30,000. However, the letter does not show, one way or the other, what instructions were given in relation to further terms for any such settlement, nor even McLaughlin's understanding of such instructions.
189 Following communication between McLaughlin and Chris Brown (solicitor for United Systems), a draft deed was sent by Chris Brown to McLaughlin. At a second meeting, on 20 March 1992 in Mr McLaughlin's office, attended this time by Brown, Freeman and Coleman, the draft deed was discussed.
190 Materially, the effect of the deed was that United Systems and its associates were released from any liability for any past infringements of Seamez's rights in relation to products marked by United Systems or their associates to date. As to the future, the plaintiffs were precluded from preventing any future infringement by United Systems or their associates of any rights which the plaintiffs might otherwise have had in relation to products marketed by United Systems or their associates to date.
191 In these respects, the draft deed ran counter to McLaughlin's statement to Brown at the first meeting on 20 March 1992 that a settlement, as urged by McLaughlin, would not stop the plaintiffs taking further proceedings if United Systems continued to sell the plaintiffs' products. It also ran counter to Brown's primary concern, communicated to McLaughlin, which was to prevent United Systems from manufacturing products which Brown asserted utilised formulae which were the property of the plaintiffs. (In these respects, the final version of the deed executed by the plaintiffs later on 20 March 1992, was in materially the same terms.)
192 The tone of the meeting was set by an opening statement by Coleman that Brown was not happy about settling and would prefer to fight it out in court, but that he was willing to listen to McLaughlin's advice. McLaughlin repeated his advice to settle the case and did so in strong terms. Coleman then had a brief opportunity to read through the draft deed. He told Brown and Freeman that the draft constituted a total surrender, and they should not sign it because it gave away Brown's rights to his products. Coleman told McLaughlin that Brown would never agree to a settlement in which he had to give up his rights to his products. He said the deed would have to be confined to the products which were the subject of the proceedings, but should exclude the Beer Line 1 and 2 cleaner products altogether; the settlement should apply only up to the date of the deed, so that Brown would be able to commence proceedings against United Systems if they continued to produce the products in question; there should be mutual releases; and there should be a clause requiring withdrawal of the defamation suit and the Mareva injunction.
193 There was then discussion on the telephone between McLaughlin and the other side. Buckley brought in a revised draft deed which had been received. McLaughlin told the other side that the second draft was unsatisfactory.
194 Brown reaffirmed that he wanted the deed confined to the products which were the subject of the proceedings, and that the Beer Line cleaner product should be omitted altogether because it was non-negotiable. McLaughlin told Brown that the other side had agreed that the Beer Line cleaner product would not be included in the deed. McLaughlin also said that the other side had agreed that releases should be mutual and that the defamation proceedings and the Mareva injunction should be withdrawn.
195 Brown then became very emotional and said he wanted the weekend to think the matter over. Coleman asked McLaughlin to confirm that the other side had agreed to omitting the Beer Line cleaner product, that the plaintiffs would drop their claim in relation to the products which were the subject of the proceedings but only to the date of the agreement, and that the plaintiffs could start fresh proceedings against United Systems in the future using the evidence already obtained. McLaughlin said that was the agreement which the other side was prepared to sign.
196 Brown still sought time to consider. Buckley said the deed had to be signed that night or the deal was off.
197 McLaughlin then asked Buckley to confirm to Brown that United Systems were settling on the basis that they were forgiven for past infringements concerning the products specified in the Federal Court proceedings, that the Beer Line cleaner product was not part of the agreement, and that, if United Systems manufactured Seamez's products in the future, the plaintiffs would be free to pursue them using the same evidence. Buckley said that was right.
198 The current draft of the deed did not so provide. It did not exempt the Beer Line cleaner product from the release by the plaintiffs concerning any past conduct by the respondents; and it did not preserve the plaintiffs' capacity to sue United Systems if that company persisted in marketing products which it was currently marketing and in which the plaintiffs claimed to have an interest. Further amendment was required to incorporate what it was said United Systems was prepared to agree to.
199 At this point, Coleman left the meeting to keep another appointment.
200 A final version of the deed arrived from the other side. McLaughlin asserts that he read out the operative part of the deed to Brown and Freeman. They deny that. The deed was executed by Brown and Freeman. Brown says he signed the deed "under protest". That is also disputed.
201 These last mentioned matters of contention do not matter. The deed was unintelligible to a lay person or at least very easily misunderstood. Coleman and Brown had made it clear what the plaintiffs' requirements were. The deed, neither in its draft form nor in its final form, did not answer those requirements. Materially, the Beer Line cleaner product was not exempt from the release by the plaintiffs in relation to any infringement of their interests to date; and the deed did not preserve the plaintiffs' entitlement to sue in relation to any future infringement of their interests if the respondents continued to market any product currently marketed by them of which the plaintiffs complained. Neither McLaughlin nor Buckley assert that before the deed was executed they informed Brown and Freeman that the deed in its final form fell short of the settlement they had said was available in these respects. Brown and Freeman would not have executed the deed but for their reliance on the statements made by McLaughlin and Buckley as to what the terms of the settlement were to be. Those assurances were not met by the deed which McLaughlin invited them - and impliedly advised them - to execute.
Findings as to breach of duty sought by the plaintiffs
202 I now turn to the findings sought by the plaintiffs in relation to breach of duty. In ruling on each request for a finding, I bring to account the findings I have made as to the course of events between 17 and 20 March 1992.
203 (i) Failing to obtain full and proper discovery from the respondents in the litigation such that the applicants' case was not adequately prepared on the issue of documents held by the respondents regarding the chemical formulae of their products and also regarding profits made by them from sales of their products.
Rejected. It is questionable as to whether the action taken was deficient. But, it is not shown that more vigorous action would have had any effect. The consequence is speculative. There might have been no further documents. The evidence does not disclose a serious possibility that there were. It is not shown that further documents were necessary for proof of the plaintiffs' case.
204 (ii) (Not pressed).
205 (iii) Advising the applicants that the litigation should be settled or compromised only on 19 March 1992, one business day before the commencement of the hearing of the litigation or even on 18 March 1992, only two days before the commencement.
Rejected. A view about settlement often emerges during the final stages of preparation for trial. I am not satisfied that, in this case, the lateness of the advice involved breach of duty in not advancing the preparation programme in such a way that the same view about settlement would have emerged earlier.
206 (iv) Failing to obtain counsel's advice concerning the appellants' prospects for success in the litigation .
Rejected. Generally speaking, there is no obligation to obtain counsel's advice on settlement. There was no special reason for doing so in this case.
207 (v) (Not pressed.)
208 (vi) Failing to inspect the documents concerning the 1986 Equity Division proceedings at the time of initial instructions, in October 1991 or at any time prior to 18 March 1992.
Upheld. I refer to my earlier findings and observations on this matter. (Whether the breach had any consequence is another matter.)
209 (vii) Failing to obtain the advice of counsel concerning the 1986 Equity Division proceedings documents .
Rejected. The solicitor was competent to evaluate them