Causation
264 In dealing with causation Patten AJ first found that the respondent's breaches of duty were capable of causing delay and disruption in the conduct of the trial, and this, his Honour said, was "the very situation which came about" (at [161]). For this reason his Honour held that the appellants were entitled to damages representing the loss flowing from the delay and disruption. These damages, as I have said, he assessed at $140,000.
265 In dealing with the damages relating to the loss of a chance of succeeding in the case against Egan, Patten AJ said (at [169]-[171]):
"[T]he settlement of the proceedings on 28 February 1996 so far as it terminated the [appellants'] right of action against Egan, was, as I have found, an act of the [appellants'] free will and must, I think, in relation to the negligence and breach of retainer of [the respondent], be regarded as a novus actus interveniens connected to the non-actionable conduct of the [appellants'] counsel and solicitors in the trial before Dowd J.
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Consistently with the quoted observations of Mason CJ [in March v E & MH Stramare Pty Ltd [1991] HCA 12 ; (1991) 171 CLR 506 at 517 et seq], in my opinion, the compromise of the action in the way it occurred was not a reasonably foreseeable consequence of [the respondent's] breaches, nor was it, in the ordinary course of things, something likely to happen."
266 Thus, his Honour held that the respondent's breaches of duties he had found did not cause the appellants to suffer damage by losing the opportunity of a better outcome in their case against Egan.
267 As regards the value of that loss of opportunity, his Honour firstly, held (at [30]) that "[t]he project resulted, on any basis, in very considerable financial loss [to the appellants]". His Honour, however, later observed that he would have assessed the appellants' prospects of success in the litigation against Egan "at very much less [than] 50%" (at [173]).
268 In their appeal, the appellants challenged Patten AJ's decision that they had not proved causation.
269 The appellants submitted, firstly, that his Honour erred in holding that, because entering into the compromise was an act of the appellants' free will, it must be regarded as a novus actus interveniens.
270 In March v E & MH Stramare Pty Ltd Mason CJ explained (at 517-518):
"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 … . To deny recovery in these situations because the intervening action is deliberate or voluntary would be to deprive the duty of any content." (Citations omitted.)
271 The respondent, as the appellants' solicitor, owed the appellants a duty to take reasonable care in the preparation of the case against Egan. The content of that duty involved taking reasonable care not to expose the appellants, by reason of inadequate preparation of the case, to the risk of having to compromise their claim on adverse terms (that is, on terms less favourable to those that might reasonably have been agreed upon had the case not been inadequately prepared, or to the terms of a judgment that the court might otherwise have handed down in the appellants' favour). In these circumstances, to paraphrase Mason CJ, to deny recovery because the appellants entered into the compromise of their own free will deprived the duty of any content. It was an erroneous approach.
272 The appellants then submitted that his Honour had erred in holding that "the compromise of the action in the way it occurred was not a reasonably foreseeable consequence of the respondent's breaches, nor was it, in the ordinary course of things, something likely to happen."
273 His Honour's phrase, "the compromise of the action in the way it occurred," is enigmatic. What was the "way it occurred"? His Honour made no express findings in this regard.
274 Mr Weber submitted that his Honour was intending to imply that hostile conduct by Dowd J, including the various statements reflecting on the appellants' credibility, made during the course of the appellants' opening and in extempore judgments, caused the appellants to decide (in the light of advice they had received from their counsel) to compromise as they did. Mr Weber submitted that Patten AJ used "a deliberately opaque expression to avoid being critical of the role that Dowd J played in the decision to settle". Mr Weber submitted that the respondent did not cause Dowd J "to say what his Honour said". He submitted that no one could possibly have foreseen that "a judge of this court would say the things [about the appellants] that he did without having even seen [them] in the witness box. That was rather extraordinary in anybody's experience of this Court".
275 In my opinion, Mr Weber was justified in submitting that Dowd J's comments were unforeseeable and extraordinary. In view of the seriousness of the issue I think it desirable to recapitulate what occurred.
276 On the first day of his opening, Mr Hammerschlag submitted that the appellants had lost all their properties and that the Bank had sold all the properties. Both these statements were factually incorrect. The appellants were in court when Mr Hammerschlag made these statements. On the second day of the opening, Mr Hammerschlag corrected these errors. He explained that the appellants had discharged the mortgage over the restaurant property in Elizabeth Bay and still owned that property. He explained further that Tabard still owned Airways House.
277 The incorrect statements were obviously made through inadvertence and were very quickly corrected. They were, in any event, innocuous. As Mr Spender attempted to explain to Dowd J, the appellants had borrowed $465,000 to pay the mortgage debt owed to the Bank in respect of the restaurant property. This meant that, although they still technically owned the property, other lenders had replaced the Bank. Furthermore, although Tabard still owned Airways House, the Bank had taken possession of the property, it had been surrendered to the Bank pursuant to the First Barclays Deed, and the Bank was in the process of selling the property.
278 Mr Hammerschlag's errors were trivial, made without any sinister motive whatever, and were rapidly corrected. In context, they carried no malignant imputation of any kind. They should have been ignored.
279 Dowd J, however, took a different view. As appears from his quoted remarks he appeared to have decided that the appellants were directly responsible for the misstatements of fact that had been made, that this demonstrated that the appellants had not been frank with the court, and that the conduct in question was tantamount to insulting to the court. Dowd J said that if he had been misled "as to matters of pecuniosity" that should have been corrected by counsel who had been as frank with the court "as his then instructions permitted him to be". He said that he needed "to be a little more impressed by the appellants' frankness to the court in a matter such as this". He also made remarks suggesting that the appellants might order their affairs so as to thwart costs orders the court might make. These were very serious reflections on the integrity of the appellants, who were yet to give evidence in the case. They were quite unjustified and should not have been made.
280 It is true that on 13 February 1996, Dowd J, in giving judgment on the application that he disqualify himself, said:
"I also wish to make it abundantly clear that I have not formed a view unfavourable to the [appellants] in respect of the substantive issues that are to be tried in these proceedings, the issue of the credit of either the first or second appellants has not yet arisen at any stage in any matters that I have considered … ."
281 Despite these remarks, however, both counsel for the appellants - who were eminent and highly experienced barristers - advised the appellants that, by reason of the attitude the judge had manifested, he would find against them on credit and the appellants would lose.
282 I accept Mr Weber's submission that, in the circumstances I have outlined, the attitude taken by Dowd J to the integrity of the appellants (manifested before they had given evidence) was extraordinary and unforeseeable. It is uncontroversial that that attitude materially contributed to the compromise. It does not, however, follow that it was the sole cause of the settlement. Nor does it follow that the fact that the judge's attitude was unforeseeable means that the appellants failed to prove causation.
283 The appellants' case was that there were other causes for their decision to compromise. These other causes included the argument that they entered into the compromise because of duress, the fact that by 28 February 1996 their funds were exhausted and they were unable to continue financing the action, and the fact that because of inadequate preparation Dowd J had taken an unfavourable view of their case (apart from their credibility) and, by reason of the lack of adequate preparation, the various amendments that had been made and the unavailability of necessary evidence, their case was in shambles.
284 Patten AJ rejected the appellants' argument as to duress. His Honour did not, however, address the other factors that the appellants contended materially contributed to the entering into of the compromise.
285 There was evidence that the appellants' lack of funds contributed to their decision to compromise. Many of Dowd J's remarks to which I have referred demonstrate that he was of the view that the appellants' case had not been properly presented and that there was confusion on their part in several areas. This attitude on the part of his Honour was plainly justifiable. There were problems with Gowrise, with the basis on which damages were being sought, with the proof of damages, with the precise roles the Corporate Guarantors were playing as plaintiffs, with the claims in respect of losses in connection with the restaurant property and Airways House, with reliance on the part of the Corporate Guarantors, and with discovery.
286 It is against this background that I return to the phrase used by Patten AJ, namely, "the compromise of the action in the way it occurred" (my emphasis). His Honour gave no explanation of what he meant by "the way it occurred". It is not possible to resolve, satisfactorily, what his Honour meant by this phrase. It is reasonably arguable that he had in mind not only Dowd J's attitude to the appellants' credit but also the appellants' lack of funds and the breaches of duty that he had found in relation to the respondent's preparation of the appellants' case. It is also reasonably arguable that he meant only the remarks that Dowd J made about the appellants.
287 In my view, it was reasonably foreseeable that the case might come nowhere near finishing in the five weeks allocated to it if the respondent breached its duties in preparing the case for trial. It was also reasonably foreseeable that, in that event, the appellants might run out of funds and be forced to settle. It was also reasonable foreseeable that, should the respondent breach its duties in preparing the case for trial, the appellants would face incalculable problems in presenting their case and the judge might take a strongly adverse view as to its merits.
288 The evidence is capable of establishing that the appellants' lack of funds and the respondent's breaches of duty that his Honour found in relation to the respondent's preparation of the appellants' case materially contributed to the appellants' loss of the opportunity of obtaining a better outcome in their case against Egan. Accordingly, had I not dismissed the appeal on the advocate's immunity ground, I would have upheld it in regard to causation and ordered a retrial of that and all other issues.
289 I should also say that I accept Mr Bennett's argument that it was reasonably foreseeable that the breaches of duty such as those found by Patten AJ might lead a judge, at an early stage in the trial, to form an adverse view of the appellants' case. I accept further his submission that, for the appellants' to succeed on causation, it was only necessary for them to prove that Dowd J's expressed attitude to the credibility of the appellants (while not itself specifically foreseeable) was a consequence of the same general character as forming an adverse view of the appellants' case: Chapman v Hearse [1961] HCA 46; (1961) 106 CLR 112 at 120 and 121. The test of foreseeability does not require precise events that caused the harm to be foreseeable. Rather, as Barwick CJ stated in Mt Isa Mines Ltd v Pusey [1970] HCA 60; (1970) 125 CLR 383 (at 390):
"The rarity of such an injury in the circumstances does not in my opinion deny the foreseeability of an injury of the class of which it forms one. That it is sufficient that the class of injury as distinct from the particular injury ought to be foreseen as a possible consequence of particular conduct in order to establish liability for damages for the particular injury is well established (see eg Chapman v Hearse [1961] HCA 46; (1961) 106 CLR 112 at 115)."
290 As the High Court said in Chapman v Hearse (at 121):
"[I]t would be quite artificial to make responsibility depend upon, or deny liability by reference to, the capacity of a reasonable man to foresee damage of a precise and particular character or upon his capacity to foresee the precise events leading to the damage complained of."
291 Thus, in my opinion, Patten AJ erred in rejecting the appellants' case on causation on the grounds that Dowd J's reaction in relation to their credibility was not foreseeable. It was sufficient for the appellants to show, as they did, that the judge's reaction fell within the general risk of harm to which they would be exposed should their case be inadequately prepared.
292 Whether it was foreseeable that breaches of duty on the respondent's part might contribute materially (in the Chapman v Hearse sense) to a compromise of the kind that was in fact effected depends, to a material extent, on the precise breaches found to have occurred, the facts that gave rise to the breaches and the facts that gave rise to the compromise. The precise breaches could only be determined, reliably, at a retrial.
293 Likewise, a decision could only be made on causation once the precise breaches of duty, if any, were identified.
294 Thus, had I not considered that the appeal should be dismissed on the grounds of advocate's immunity, I would have proposed that the appeal be upheld and the issue of causation, and all other issues, be remitted for retrial.