STUDER v BOETTCHER [2000] NSWCA 263 | Case summary

1 HANDLEY JA: This is an appeal by a former client from the dismissal by Young J on 21 October 1998 of his action against his former solicitor for professional negligence. He had also sued his former barrister in the same proceedings but that claim was compromised on undisclosed terms on the morning of the sixth day of the trial before Young J. The action arose from a mediation conducted before a retired judge on 16 May 1991 which concluded with a settlement of the litigation in which the respondent was acting as the appellant's solicitor. 2 The original proceedings arose out of the appellant's registered ownership of some 20 hectares of land at Mullumbimby in the Byron Shire ("the property"). The appellant, a Swiss national then visiting Australia, entered into a contract to purchase the property from Mr Hoskings for $82,000 (5/1020). The contract, in the standard form of the day, was dated 1 July 1984 but was entered into in January that year. Mr Graeme Smith, solicitor of Mullumbimby, acted for both parties. 3 The Second Schedule to the contract disclosed the existence of caveats by S L Granich and M D Koenig (sometimes Konig). The Third Schedule relevantly disclosed a lease of 11 acres to Sarah Lorraine Granich for 5 years from 16 October 1980 at an annual rent of $1 and another lease of 11 acres to Mirjam Denise Koenig for 5 years from 13 March 1981 at the same rent. The contract stated that the property sold was subject to the tenancies or occupancies particularised in the Third Schedule and printed Clause 11 stated that no objection, requisition or claim shall be made by the purchaser in respect of any matter disclosed in the Second or Third Schedules. 4 Ms Koenig's caveat (4/746) dated 2 April 1982 stated that she claimed an equitable interest under a written agreement of 13 March 1981. Her lease for a term of 5 years, expiring on 13 March 1986, had been granted by Mr Hoskings and was dated 5 December 1983 (5/1062). It replaced an earlier lease for the same term granted by Mr Peter Miller, the then registered proprietor, on 13 March 1981 (4/732). Clause 16 of the Miller lease conferred on Ms Koenig an option to purchase the leased property for $7,000 in consideration of an option fee of $4,000, but acknowledged that the $11,000 had already been paid. The option was subject to sub-division approval. 5 Clause 20 contained an acknowledgment by the landlord that any buildings erected on the leased land were the property of the lessee, and that he held such improvements as trustee for the lessee who was entitled to sole occupation. Clause 14 contained an option of renewal "for a further period". In cl 16(d) the lessor promised that no agreement would be entered into during the period of the option which would prevent the sale of the 11 acres to Ms Koenig and nothing would be done which would prejudice her rights under the option. 6 The lease from Hoskings to Koenig contained (cl 16) an option in the same terms as the Miller lease but the right of renewal in cl 14 was to "a further period which shall terminate on completion of any contract for sale entered into between the parties hereto pursuant to clause 16". Clause 21 provided that if the lessor sold the freehold to a purchaser other than the lessee the contract of sale would contain terms obliging the purchaser to observe and perform the covenants of the lease as if the purchaser had been the original lessor. The purchaser could also be required to enter into a fresh lease with the lessee for the balance of the term, together with any renewal thereof. 7 Mr Hoskings contracted to sell the property to the appellant before becoming the registered owner. Although the lease from Mr Hoskings is dated 5 December 1983, it was not executed by Ms Koenig until some date between 26 January and 7 February 1984 (2/325, 327). The lease was possibly dated when it was executed by Mr Hoskings. Mr Hoskings' signature was witnessed by Mr Graeme Smith and Ms Koenig's by Mr Andrew Sochacki, her then solicitor, and the latter attended to the stamping. Ms Koenig, having obtained a lease from Mr Hoskings, agreed to remove her caveat intending to replace it after his registration (2/327). 8 At an early stage the appellant entered into negotiations to buy out Ms Granich. This is referred to in a letter which Ms Koenig wrote to Mr James Black, a solicitor, on 25 January 1984 (2/324). Mr McDonnell of Elliot & Sochacki was acting for Ms Granich and Ms Koenig gave him the appellant's address in Switzerland (2/327). 9 On 18 April 1984 Mr Smith wrote to the appellant in Switzerland stating (2/329): "I confirm this matter has now been settled. I am obtaining the signatures on the fresh leases from the various tenants . The solicitors acting on behalf of Granich have enquired as to the possibility of a purchase of Miss Granich's share and I enclose a photocopy for your information". (emphasis supplied) 10 On 27 April Elliot & Sochacki wrote to Mr Smith enclosing stamped copies of the leases from Hoskings to Granich and Koenig. The letter stated that they had been informed by Ms Koenig that Hoskings had contracted to sell the property to "certain people from Switzerland" and that if this was correct they drew Mr Smith's attention to cl 21 and requested draft leases from him for execution by their clients (2/330). 11 On 16 May the appellant wrote to Mr Smith stating: "I'm going to deal with Miss Granich directly" (2/331). On 5 July Mr Smith wrote to the appellant stating "the lease documents are now with the solicitors for Koenig and Granich for execution" and stated that settlement of the purchase was not complicated "except for the fact that there were the lease arrangements in respect of the property". He asked if the negotiations with Miss Granich were completed "so that I can forward the relevant Withdrawal of Caveat and Surrender of Lease to the solicitors for her" (2/332). 12 On 25 July Elliot & Sochacki again wrote to Mr Smith asking for draft leases and on 31 July Mr Smith under cover of a letter headed "Studer - Lease to Granich and Koenig" forwarded lease documents to Elliot & Sochacki for their clients' consideration (2/334). On 3 August 1984 the appellant wrote to Mr Smith stating "also I'd like to know what a kind of complication were with the lease arrangements. Actually there is only one lease arrangement with Koenig. With Granich the negotiations is complete now … please write the 'banana-man', you know whom I mean, the dismissal on right time. This dismissal is very important, because I'm not interested in this lease" (2/336). This was a reference to the lease of 5 acres to Tony Pinna for 5 years from 1 October 1980 at a yearly rent of $100 which was also referred to in the Third Schedule of the contract of sale. 13 The contract between the appellant and Granich dated 9 July 1985 provided for him to purchase her "11 acres" for $9,000 payable by instalments (2/352). 14 On 22 July 1985 the appellant wrote to Mr Smith asking for Ms Koenig's lease which he had in his file (2/351), and on 20 August Mr Smith replied saying he was enclosing a Withdrawal of Caveat form to be signed by Ms Granich and a copy of the lease to Ms Koenig (2/353). Mr Smith actually sent a copy of the lease to Ms Granich (2/354). On 21 October the appellant sent Mr Smith the Withdrawal of Caveat signed by Ms Granich who by then had been paid in full (2/355). 15 On 27 November and 6 December Mr Smith wrote to Ms Koenig asking her to call to sign a consent to the registration of the transfer from Hoskings to the appellant (2/358, 360). 16 At some stage Ms Koenig attended at the office of Mr Smith and gave him or signed an informal withdrawal of her caveat. This was dated 31 October 1985 (2/399), and stated that it was "to enable the registration of a transfer from Raymond William Hoskings to Christian Johann Studer. Kindly reinstate the caveat following registration of the transfer" (2/356). In January 1986 Mr Smith sold his practice to Mr Forbes and retired. On 20 March 1986 Elliot & Sochacki wrote to Smith and Forbes seeking renewal of Ms Koenig's 5 year lease which had expired on 13 March (2/365). 17 On 6 June Mr Forbes wrote to the appellant informing him that the matter was now ready for registration and added (2/373): "As to the leases which are proposed to the two ladies it does seem to us at this stage that they would not be strictly legal but we can further investigate this situation as soon as the deeds have been returned to us duly registered in your name". 18 On the same day he wrote to his law stationers forwarding the Transfer for Registration, together with the Withdrawal of Caveat signed by Ms Granich and the Consent to Registration by Ms Koenig. On 22 July Ms Koenig wrote to the appellant stating: "I have followed up the course of my lease and I have found out that it got stuck in Smith' s drawers … right now I only need a new lease. The new lease will be sent to you to be signed eventually" (2/388). 19 The transfer was rejected by the Land Titles Office because the Certificate of Title and the Minister's consent under the Crown Lands Act which had been produced earlier and rejected had not been relodged. It then became apparent that the Certificate of Title had been lost and Mr Forbes had to obtain a new one. The necessary documents were forwarded by Mr Forbes to his law stationers on 20 October 1986. On 25 March 1987 Mr Forbes wrote to the appellant, who by this time was living on the property, informing him that the Certificate of Title in his name had been received from the Land Titles Office (2/405). 20 On the same day Ms Koenig wrote to Mr Richard Maloney, solicitor at Byron Bay, stating: " Tenancy in common Studer/Koenig it was decided that my name (and Erica's) would be put on the title as soon as the title arrives from the Title Office. My share of block 4 is marked yellow on the enclosed map. Would you please arrange tenancy in common as soon as possible". (2/406) (Erica was the appellant's wife.) 21 On 26 March Mr Forbes wrote to Elliot & Sochacki advising them that the appellant had become the registered proprietor of the property "but there are no caveats registered on the title" (2/410). 22 On 2 April 1987 the appellant wrote a letter (which was copied to Ms Koenig) to Mr Maloney, the solicitor to whom Ms Koenig had written on 25 March, stating: "We would also like you to draw up our Joint Ownership Contract (Tenancy in Common, page 9 in the booklet 'Legal Guide to Buying and Selling a Home' from the Law Society of NSW) with Mirjam Koenig". (2/411) 23 Mr Maloney wrote a letter dated 18 May to the appellant and his wife referring to the appellant's letter of 2 April and conferences on 24 April and 16 May. He drew attention to the possible illegality of the lease and option to purchase held by Ms Koenig and said that they might not be enforceable but this raised a complex question of law (2/414). There is a handwritten note on the letter which states that it was received in September 1987. On 30 September the appellant gave Ms Koenig a notice to quit (2/428): "You are illegal on my property. As I have got now my Title deed I do not accept your stay. Therefore I must give you notice that you have to leave my land by 31.10.87". 24 The correspondence between the appellant and Ms Koenig, and other correspondence of hers between January 1984 and September 1987, was also in evidence in the original proceedings. See 2/324-7, 341, 344, 350, 361, 364, 366, 368, 371, 382, 388, 389, 3/599, 4/757, 765, 767 and 771. This disclosed an apparently friendly relationship between Ms Koenig and the appellant and his wife, and an apparent acceptance of her status on the land. The appellant and his wife also availed themselves of her services while they were in Switzerland. She wrote to the local Land Board about the possible purchase of Crown roads. She also acted, for a time without a Power of Attorney, and for a time with such a power, to protect their property from the activities of Mr Costello, a developer, who had attempted to bulldoze a road through it outside the limits of a right-of-way. Ms Koenig succeeded in attracting the intervention of the Council and the police. 25 Ms Koenig did not accept the notice to quit and commenced proceedings to protect her possession of the 11 acres. The appellant was the registered proprietor, but she relied in her statement of claim (appellant's blue book) on a personal equity based on his knowledge of her interest, and his representations that he would recognise it and grant a new lease and option of purchase in her favour (71-2). 26 She alleged that in reliance on these representations she withdrew her caveat and consented to the registration of the transfer in his favour (72). She also pleaded a case of fraud based on these representations which were alleged to have been made dishonestly (73). She also claimed to have carried out improvements to the land. 27 These allegations had a solid basis in the documentary evidence alone, but Ms Koenig had also sworn affidavits. Her case also had a sound legal basis. Under s 43 of the Real Property Act the registered proprietor of land held it subject only to incumbrances notified on the certificate of title, but there is an exception in the case of fraud. The facts and documents referred to provided more than one basis for a case of fraud against the appellant. 28 The appellant had agreed in the contract of sale to take the property subject to the lease to Ms Koenig, and subject to her caveat. The correspondence shows that the appellant and his wife had been in contact with Ms Koenig before the contract was entered into, and she claimed that she had introduced them to the property and to the vendor, and in the process had informed them of the basis of her interest in the 11 acres. 29 Mr Smith, in his affidavit, filed and served shortly before the mediation, claimed that he had fully explained the legal position to the appellant and his wife, over about half an hour, before the contract was entered into. His explanations had been translated for their benefit by Mr Moeller, like Ms Koenig, another Swiss German who was resident in the area. 30 The appellant and his wife claimed that they were not aware of Ms Koenig's option of purchase and option of renewal which were not disclosed in the contract, and that Mr Smith's explanations were perfunctory and failed to draw to their attention the real nature of the interests of Ms Koenig and Ms Granich. 31 The affidavit evidence of Mr Smith was confirmed by his letter of 18 April 1984 to the appellant in which he said that he was obtaining signatures on fresh leases from the various tenants (2/329). This was followed by a further letter on 5 July in which Mr Smith told the appellant that the lease documents were now with the solicitors for Koenig and Granich for execution, and referred to "the lease arrangements in respect of the property" (2/332). These letters did not provoke any protest or question from the appellant. 32 On 3 August the appellant wrote to Mr Smith saying: "There is only one lease arrangement with Koenig. With Granich the negotiations is complete now" (2/336). The appellant recognised the interest of Ms Granich which he purchased for $9,000 by a contract dated 9 July 1985, although her five year lease referred to in the contract of sale was to expire on 16 October. There was obviously no reason for the appellant to pay such a sum to Ms Granich if her only interest in the land was about to lapse. 33 In Bahr v Nicolay [No 2] (1988) 164 CLR 604 the High Court held that an acknowledgment by a purchaser in the contract of sale that he would hold the property subject to unregistered interests in favour of third parties created a trust in their favour enforceable against the purchaser after he became the registered proprietor. 34 Moreover Mason CJ and Dawson J held that a purchaser who obtains registration on the basis of a representation to, or arrangement with, the holder of an unregistered interest which involves the recognition of that interest, commits a fraud if, after obtaining registration, he seeks to repudiate that representation or arrangement. At p 615 they said: "The section restricts, in the interests of indefeasibility of title, rights which would exist otherwise at law or in equity. And granted that an exception is to be made for fraud why should the exception not embrace fraudulent conduct arising from the dishonest repudiation of a prior interest which the registered proprietor has acknowledged or has agreed to recognise as a basis for obtaining title, as well as fraudulent conduct which enables him to obtain title or registration? … there is no difference between [a] false undertaking which induced the execution of the transfer … and an undertaking honestly given which induces the execution of a transfer and is subsequently repudiated for the purpose of defeating the prior interest. The repudiation is fraudulent because it has as its object the destruction of the unregistered interest notwithstanding that the preservation of the unregistered interest was the foundation or assumption underlying the execution of the transfer". 35 It therefore did not matter whether the appellant acted honestly and only changed his mind after having been advised by Richard Maloney of a possible basis for challenging Ms Koenig's title (2/414), or whether he had decided before becoming registered to repudiate her interest later and concealed this intention from her. A letter written by the appellant's wife on 14 November 1989 to his then solicitors would support a finding that he had intended for quite some time beforehand to repudiate Ms Koenig's interest after he became registered (2/453: "we were convinced we would need to become registered owner in order to do legal steps, so we just played her game. Surprisingly she never mentioned her lease and we of course avoided to talk about this affair as well"). 36 The appellant's recognition of Ms Koenig's unregistered interest culminated in the agreement he made with her on or about 25 March 1987 that the property would be transferred into the names of the appellant, his wife and Ms Koenig as tenants in common, and that Ms Koenig would have an interest as tenant in common commensurate with her 11 acres (2/406, 411). 37 There was other conduct by or on behalf of the appellant which involved representations to Ms Koenig or an arrangement with her. She asked through her solicitors for a new lease from the appellant, which Mr Smith later sent to her solicitors for execution. In due course the executed lease was returned to Mr Smith. When her existing 5 year lease expired, her solicitor asked Mr Smith for a renewed lease. 38 The appellant was able to become the registered proprietor only because Ms Koenig withdrew her caveat. This was done on the clearly expressed basis that she would lodge a fresh caveat after the appellant had become registered. She would only be entitled to do this if she retained an equitable interest in the land after registration. The lease sent by Mr Smith on behalf of the appellant to Ms Koenig's solicitors conferred such an interest. The appellant and his solicitors were only entitled to use Ms Koenig's withdrawal of caveat on the terms on which it was offered which involved a recognition of her rights under the new lease from the appellant which she had executed and returned to his solicitor. In this respect the case brought by Ms Koenig against the appellant bears an uncanny resemblance to some of the facts in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. 39 Ms Koenig had built a house on her 11 acres and carried out other improvements before the appellant purchased the property. She claimed to have continued to improve the property thereafter, building a garage and workshop in 1984, a laundry and bathhouse in 1986, and substantial fencing in 1986-7 (4/705). I don't understand this evidence to have been disputed in the original proceedings, particularly as Ms Koenig annexed to her affidavit photographs of these improvements other than the fencing. 40 A court would have readily found that Ms Koenig had effected these improvements in the belief that the appellant recognised her interest in the property. The appellant may have been in Switzerland at the relevant times and not known exactly what was happening on the property. However this would not have assisted him because he certainly knew that Ms Koenig was in possession and would be likely to carry out further improvements. 41 Equity acts to protect those who, under a verbal agreement or an expectation created or encouraged by a land owner, spend money on improving the land of the latter. See Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 416, 424. 42 Ms Koenig's conduct in signing the withdrawal of caveat may also have constituted an act of part performance which may have made the new lease she had signed and returned to Mr Smith, binding on the appellant in equity so as to be capable of specific performance. 43 The leases Ms Koenig held from Messrs Miller and Hoskings, and the draft lease from the appellant which she had executed and returned, could not have been registered at the Land Titles Office without sub-division approval from the local council which was not likely to be obtained. However any difficulties in this regard would not prevent a Court of Equity from protecting Ms Koenig. 44 The Court could have declared a lien on the land in favour of Ms Koenig for her expenditure and improvements since the appellant contracted to buy the property. See Chalmers v Pardoe [1963] 1 WLR 677 PC, 682. The Court could have declared that she had an enforceable licence and protected her possession by appropriate injunctions as was done in Silovi Pty Limited v Barbaro (1988) 13 NSWLR 466. It could also have awarded her an interest in the whole property, as a tenant in common, commensurate with her entitlement to the 11 acres. As the Privy Council said in Plimmer v Mayor of Wellington (1884) 9 App Cas 699 at 714: "… the Court must look at the circumstances in each case to decide in what way the equity can be satisfied". 45 It will be clear that the appellant had an extremely difficult case on his hands on the law and the documentary evidence. Moreover the documentary evidence supported the affidavit evidence of Ms Koenig and Mr Smith. Mr Moeller (or Mohler) had translated Mr Smith's explanations for the appellant and his wife before he signed the contract of sale. Later, after the appellant and his wife returned to Switzerland, he helped the appellant at the property (4/705). He was not prepared to give evidence in the original proceedings for the appellant and told the appellant that he had been in Mr Smith's office for about half an hour on the occasion in question (1/232). This was contrary to the affidavit evidence of the appellant and his wife. 46 At the trial of Ms Koenig's action, the appellant would not have been able to call Mr Moeller, whom he had been friendly with in the past, to support his evidence against Mr Smith. He would thus have faced a submission that this witness had not been called because his evidence would not support the appellant's case. See Jones v Dunkel (1959) 101 CLR 298. 47 The least expensive method of settling the original proceedings would have been to recognise Ms Koenig's interest in the land as the appellant had done between January 1984 and September 1987. This would have involved the "loss" of the 11 acres, but on the terms of the contract, and the evidence of Ms Koenig and Mr Smith, the appellant had not paid for those 11 acres and had never had possession of them. However he and his wife were not interested in any settlement on this basis and instructed the respondent accordingly (1/218, 2/480). The appellant's notice to quit had provoked the litigation and the attitude adopted by he and his wife meant that any settlement would necessarily involve payment of a substantial sum to Ms Koenig to vacate the property. 48 The settlement negotiated at the mediation involved the appellant paying $130,000 to Ms Koenig for "her" 11 acres but he received contributions from Mr Smith and another solicitor which totalled $30,000. Ms Koenig was paid the value, as assessed by the valuers for both parties, of her land assuming it could have been subdivided. Ms Koenig was not prepared to settle for any less and, on the documentary and other evidence which has been summarised above, there was no reason to do so. In reality she could hardly lose the case. She could not have sold "her" 11 acres for that sum, but they could have been worth that to the appellant who otherwise had a clean title. The only reason she had to be paid anything is that the appellant and his wife wanted her off the property, and were not prepared to accept her possession of the 11 acres. 49 The respondent and Mr Walmsley had appreciated the difficulties in the appellant's case even before the mediation and this was reflected in their advice to him. Before the mediation they had been hopeful of being able to settle the case with Ms Koenig for much less than $130,000, but the situation changed immediately before and during the mediation. 50 Mr Smith's affidavit, which was adverse, was served a few days before the mediation. Until then the respondent and Mr Walmsley had been proceeding on the basis that if the appellant lost against Ms Koenig he would recover damages from Mr Smith equivalent to the value of her interest in 1984. Once they had had an opportunity to consider Mr Smith's affidavit they realised that the appellant could well lose against Ms Koenig and recover little or nothing from Mr Smith. 51 At the start of the mediation Mr Lever of counsel, who appeared for Ms Koenig, opened her case and this brought home to the respondent and Mr Walmsley just how strong Ms Koenig's documentary case was, and how important the withdrawal of caveat was that Mr Forbes had used to procure the appellant's registration. 52 If Mr Smith properly explained the contract to the appellant, and if he already understood the nature of the rights possessed by Ms Koenig and Ms Granich, he had no worthwhile prospects of recovering substantial damages from Mr Smith. 53 In these circumstances I am satisfied that the respondent acted with proper care and skill during the mediation, and that his advice to the appellant to settle on the best terms then available was good advice. Moreover he acted professionally and properly in the interests of the appellant in bringing considerable pressure to bear on him to settle on the best terms then available and I am satisfied that this was in the appellant's best interests. 54 The appellant's case against the respondent required him to establish that the respondent had given bad or incorrect advice, and then to establish that he had been negligent in doing so. My assessment of the documents and the relevant law has satisfied me that the respondent's advice to the appellant at the mediation was sound. I am also satisfied that he and Mr Walmsley had properly prepared the appellant's case prior to the mediation. The appellant has failed to establish that they overlooked any relevant fact, document or legal argument in his favour. 55 It is most unfortunate for the appellant and his wife that their unwillingness to continue a neighbourly relationship with Ms Koenig that had existed between 1984 and 1987, and to recognise her interest in the 11 acres, has resulted in the loss of their land and their investment. However this was not the result of any negligence by the respondent at the mediation, nor was it the result of any inadequate preparation of the appellant's case beforehand. 56 In my judgment the appeal entirely fails and should be dismissed with costs. 57 SHELLER JA: I have had the benefit of reading in draft the reasons for judgment prepared by Handley JA and Fitzgerald JA. For the reasons given by Handley JA I agree that the appeal should be dismissed with costs. 58 I agree with Fitzgerald JA that it is never the function of the legal adviser to coerce the client into settlement; see Harvey v Phillips (1956) 95 CLR 235 at 242. The degree to which the legal adviser may seek to persuade the client to compromise the claim and the way in which that may be done can, I believe, only be resolved having regard to the circumstances of the case in question. A great deal will turn upon the capacity of the client. Moreover, the client's refusal to accept sound advice from the legal adviser may compromise their relationship. The legal adviser may feel that the client has lost faith in the legal adviser's competence and may be concerned by ethical restraints in pursuing what the legal adviser regards as a hopeless cause. I mention these matters only to explain the importance of the circumstances of the case. 59 In regard to the role of the mediator, current practice suggests different views about whether the mediator should do no more than facilitate negotiation and the extent to which any greater intervention is acceptable. There would, I think, be no doubt that it is generally agreed not to be part of the mediator's function to attempt to impose a settlement upon a party: see generally Yarn, Dictionary of Conflict Resolution 1999 at 274 and following. Again, any attempt by the Court to define the mediator's role must await the case where the manner of performance of the function has been challenged. 60 FITZGERALD JA: The circumstances giving rise to this appeal are set out in the reasons for judgment of Handley JA. I agree with his Honour that the appeal should be dismissed with costs. 61 The appellant compromised litigation (the "original action") on the advice of the respondent, who was then his solicitor. Subsequently, he sued the respondent, claiming common law damages. The appellant's essential allegations in this Court were that:

(a) he was induced to make the compromise by: (i) the respondent's negligent advice; and/or (ii) the respondent's improper pressure; and, (b) if the original action had proceeded to judgment: (i) he would (or at least might) not have been required to pay the plaintiff in the original action, one Konig, the sum of $130,000 by instalments secured by a mortgage on his property as the compromise required; or (ii) he would (or at least might) have recovered more than the sum of $30,000 provided for in the compromise from the cross-defendant, a solicitor named Smith who had previously acted for the appellant; and (c) he had also sustained consequential loss. For example, his property was sold when he was unable to make payments to Konig in accordance with the mortgage. 62 Advice to compromise is not negligent merely because a court subsequently considers that a more favourable outcome would or might have been obtained if the original dispute had been litigated to judgment (or a more favourable compromise would or might have become available later). As Anderson J said in the Ontario High Court in Karpenko v Parvian, Courey, Cohen and Houston: [1] ".. an industrious and competent practitioner should not be unduly inhibited in making a decision to settle a case by the apprehension that some Judge, viewing the matter subsequently, with all the acuity of vision given by hindsight, and from the calm security of the Bench, may tell him he should have done otherwise." 63 A lawyer's advice to a client to make or reject an available compromise is commonly not concerned only with the client's rights, obligations and hopes. Usually, other matters must also be considered. For example, it is often impossible to predict the outcome of litigation with a high degree of confidence. Disagreements on the law occur even in the High Court. An apparently strong case can be lost if evidence is not accepted, and it is often difficult to forecast how a witness will act in the witness-box. Many steps in the curial process involve value judgments, discretionary decisions and other subjective determinations which are inherently unpredictable. Even well-organized, efficient courts cannot routinely produce quick decisions, and appeals further delay finality. Factors personal to a client and any inequality between the client and other parties to the dispute are also potentially material. Litigation is highly stressful for most people and notoriously expensive. An obligation on a litigant to pay the costs of another party in addition to his or her own costs can be financially ruinous. Further, time spent by parties and witnesses in connection with litigation cannot be devoted to other, productive activities. Consideration of a range of competing factors such as these can reasonably lead rational people to different conclusions concerning the best course to follow. Advice to compromise based on a variety of considerations is not negligent if a person exercising and professing to have a legal practitioner's special skills could reasonably have given that advice. [2] 64 Handley JA has carefully considered the issues in the original action and concluded that the advice which the respondent gave the appellant was not "bad or incorrect" but "good" and "sound". In the circumstances, a conclusion that the respondent was not negligent is inevitable. 65 Having regard to the test of negligence which is applicable, a conclusion that advice to compromise was not negligent does not necessarily mean that a client who acted on that advice did not sustain loss as a result of doing so. The appellant also based his claim against the respondent on pressure which he alleges the respondent improperly applied to force him to compromise. The appellant submitted that that pressure was a breach of the duty which the respondent owed to him and that, in consequence, he sustained the alleged loss which has earlier been outlined. 66 The trial judge preferred the respondent's evidence to the evidence given by the appellant and his wife (who was not present at the mediation) where there was conflict. His Honour said: "I was not at all impressed with [the appellant] as a witness. He gave every impression of a man that had a fixed idea in his mind and he was not going to let it go, no matter what. I formed the impression that it was more likely than not that he was now thoroughly convinced that the act of agreeing to the settlement was not an act of his free will and his whole evidence was clouded by the fact that he had now taken that as his primary paradigm. … The only other witness to give oral evidence was the [respondent]. He presented well, but I must remember that as a solicitor and used to public speaking he would not have the same nervousness as perhaps the [appellant and his wife] did. Yet despite a day of cross-examination he was untroubled. He gave every indicia of an experienced, knowledgable and capable solicitor and was able to give a very credible account of what happened during the mediation. … I have no trouble at all in saying that where there was any dispute as between the version of facts given by the [appellant and his wife], on the one hand, and [the respondent], on the other hand, I prefer [the respondent's] evidence." 67 The mediation at which the original action was compromised extended over a period of 8 to 10 hours on 17 May 1991. There were discussions between the parties and lengthy private discussions between the appellant, his barrister and the respondent. The mediator circulated, making suggestions. The advice which the respondent and the appellant's barrister gave him in the course of those discussions was considerably more pessimistic than advice which they had previously given. That is not unusual. Additional information frequently leads to changed perceptions. 68 The respondent acknowledged that, in the words of the trial judge, ".. for quite a while the appellant was not interested in moving beyond some $30,000 - $50,000." However, "… at some time the [mediator] said that it was quite plain that the case was not going to settle unless [the appellant] made an offer of at least $100,000." The respondent and his barrister persuaded the appellant not to withdraw from the mediation, as he said he wished to do, but to make the compromise which he did. 69 The trial judge referred to, and apparently accepted, a number of passages in the respondent's evidence which were to the effect that:

STUDER v BOETTCHER

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Judgment (20 paragraphs)

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Cases Cited (9)

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