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[2025] NSWSC 541
Supreme Court of NSW
2025-05-29
Faulkner J
Original judgment source is linked above.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Tekin v Stratford & Ors [2025] NSWSC 541
Hearing dates: 25 November 2024 – 3 December 2024
Date of orders: 29 May 2025
Decision date: 29 May 2025
Jurisdiction: Common Law
Before: Faulkner J
Decision: See [339]
Catchwords: NEGLIGENCE – professional negligence – where solicitor failed to draft notice to complete with reasonable care – client subsequently repudiated the contract – purchaser sued client for return of the deposit and damages – deposit repaid but no damages or costs awarded against client – whether unpaid deposit instalment would have been unrecoverable as a penalty in any event – causation of loss – whether client suffered loss by not lawfully terminating the contract
BREACH OF FIDUCIARY DUTY – where solicitor continued to act for client in defence of litigation brought against client about defective notice to complete – solicitor acted in circumstances where there was a conflict or possible conflict of interest and duty – where client nonetheless won the litigation – whether client suffered loss
BREACH OF FIDUCIARY DUTY – where solicitor acted for client on negotiation and implementation of refinance – where solicitor received payments from funds drawndown from new finance – payments for past legal costs and refinance expenses not properly accounted for – whether monetary benefit or profit received by solicitors when acting in circumstances where there was a conflict or possible conflict of interest and duty
Legislation Cited: Australian Consumer Law 2010 (Cth), s 60
Civil Liability Act 2002 (NSW), ss 5, 5A, 5D, 5E
Civil Procedure Act 2005 (NSW), s 100
Evidence Act 1995 (NSW), s 140
Cases Cited: Andrews v Australia New Zealand Banking Group Pty Ltd (2012) 247 CLR 205; [2012] HCA 30
Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 48 NSWLR 1; [1999] NSWCA 408
Bluth v Boyded [2024] NSWCA 67
Brickenden v London Loan & Savings Co [1934] 3 DLR 465
Briginshaw v Briginshaw (1938) 60 CLR 336
Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36
Chappel v Hart (1998) 195 CLR 232
Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22
Furs Ltd v Tomkies (1936) 54 CLR 583
Gerrard Toltz Pty Ltd v City Garden Australia Pty Ltd (in liq) [2024] NSWCA 232
Hasler v Singtel Optus Pty Ltd 87 NSWLR 609; [2014] NSWCA 266
Hillig v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1371
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Hungerfords v Walker (1988) 171 CLR 125
Iannello v Sharpe (2007) 69 NSWLR 452; [2007] NSWCA 61
Law Society of New South Wales v Harvey [1976] 2 NSWLR 154
Luong Ding Luu v Sovereign Developments Pty Ltd [2006] NSWCA 40
Maguire v Makaronis (1997) 188 CLR 449; [1997] HCA 23
Mao v Bao [2023] NSWCA 298
Pilmer v Duke Group (in liq) (2001) 207 CLR 165; [2001] HCA 31
Salmon v Albarran (2025) NSWCA 42
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4
Upside Property Group Limited v Tekin [2016] NSWSC 1260
Watson v Foxman (1995) 49 NSWLR 315
Winnote Pty Ltd v Page (2006) 68 NSWLR 531; [2006] NSWCA 287
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; [2004] HCA 16
Xiao v BCEG International (Australia) Pty Ltd (2023) 111 NSWLR 132; [2023] NSWCA 48
Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484; [2005] HCA 15
Category: Principal judgment
Parties: Celal Tekin (Plaintiff)
Phillip Norman Stratford (First Defendant)
Denis Gordon Low (Second Defendant)
Kelvin Reginald Low (Third Defendant)
Gary Patrick Doherty (Fourth Defendant)
Patrick Anthony Doherty (Fifth Defendant)
Representation: Counsel:
M K Condon SC (Plaintiff)
D A Priestly SC (Defendants)
Solicitors:
Corporate Legal (Plaintiff)
Gilchrist Connell (Defendants)
File Number(s): 2020/00343395
These proceedings are brought by Mr Tekin, a former client of a firm of solicitors. Mr Tekin alleges professional negligence and breach of other duties during a retainer which relevantly started in 2014. I will refer to the solicitors as the Firm. The Firm acted for Mr Tekin on a contract to sell development land and in the litigation against the purchaser which followed. It is a case where there is no dispute that some negligence occurred and no serious dispute that thereafter the Firm had a conflict of interest yet continued to act. The real issues in the proceedings are questions of causation of loss and receipt of monetary benefits by the Firm when acting under a conflict.
Whilst not as extensive as that claimed, some loss was caused by the Firm’s negligence and Mr Tekin is entitled to damages. In addition, the Firm received some monetary benefits in circumstances where there was a conflict or possible conflict of interest and duty. The Firm is liable to account for those benefits as a constructive trustee yet has not done so. Equitable compensation is an appropriate remedy for that failure.
The reasons for these conclusions are set out below. It is necessary first to address the credit of the witnesses.
Mr Tekin was the only lay witness who gave evidence for the Plaintiff. Some of Mr Tekin’s previous business activities were relevant but Mr Tekin did not have much documentation about the various transactions which he has undertaken over the years. This meant that Mr Tekin was heavily reliant on his memory when giving evidence about conversations, his past plans and his perspectives from time to time. In his closing submissions, Mr Tekin accepted that he was not always a good historian and the concession was well made. Nonetheless, Mr Tekin was clearly a truthful witness, ready to make concessions and accept errors in his Affidavits when appropriate. I accept that he considered to be true all that he said in Court. However, like any person giving evidence about events which occurred nine or ten years ago, Mr Tekin’s memory was sometimes shown to be unreliable by reference to the contemporaneous documents and other objective facts. In any such case the documents and objective facts are to be preferred.
Mr Tekin’s imperfect memory does not just affect the reliability of his evidence about the couple of conversations which matter in this case, but also his evidence about what his plans were are any particular stage and, ultimately, what hypothetically he would have done had the Firm acted with reasonable skill and care. In some respects, Mr Tekin has naturally come genuinely to believe that he would have avoided adverse consequences which he has in fact suffered even though the objective facts demonstrate otherwise. Although it does not generally affect the outcome of the case, I have treated Mr Tekin’s evidence with caution.
The two solicitors from the Firm who acted for Mr Tekin are Mr Stratford and Mr Doherty. They both gave evidence and both were cross examined as the nature of the case required. The solicitors were better placed than Mr Tekin because they had the benefit of the contemporaneous documents which solicitors usually produced when acting for a client. Mr Stratford generally took file notes which were better than average. Mr Stratford gave his evidence in an honest and straightforward manner. His evidence is to be accepted. Apart from one conversation, the only real point of challenge related to his non-perception of a conflict of interest when Mr Tekin got sued about the Notice to Complete which Mr Stratford had negligently drafted. Thereafter Mr Stratford left Mr Tekin in the hands of Mr Doherty and he may not have given the conflict the consideration he ought to have. It does not ultimately matter, but I think that it is more likely that Mr Stratford chose not to think about the conflict at the time. I do not find that he positively realised that there was a conflict in 2015 and then falsely denied it in these proceedings.
I also found Mr Doherty’s evidence to be on the whole truthful although there were occasions where he was evasive and argumentative rather than forthright. He too said he saw no conflict at the time, although in his case it was because he planned to fix the problem by acting for Mr Tekin without charge in defence of the proceedings caused by the defective Notice to Complete.
Mr Tekin was born in Turkey. He moved to Australia 43 years ago and has lived here since. He completed year 12 but has no tertiary education. English is his second language. When he gave evidence in these proceedings in November 2024 there was no discernible deficiency in his ability to understand what was said or to express himself in English. Mr Tekin is sometimes referred to as Jerry.
Since 1987, Mr Tekin has regularly bought and sold Sydney property. It is unclear if all the properties were residential. Some of them were. He has occasionally refurbished and/or subdivided property and then resold it. In addition to the properties which are the subject of the current dispute, Mr Tekin has been either the purchaser or vendor under approximately 16 contracts for the sale of land.
Between March 1989 and March 2012 Mr Tekin owned and operated five takeaway food shops in suburban Sydney. It is unclear whether Mr Tekin generally operated the shops sequentially or owned and operated multiple shops concurrently. He operated at least two shops in 2012. For the purposes of these businesses, Mr Tekin entered into and performed a number of contracts for the sale of a business either as purchaser or as vendor. Mr Tekin has been a tenant under commercial leases and has been party to a number of transactions by which commercial leases have been assigned.
From the outset Mr Tekin has retained the first Defendant, Mr Stratford, as the solicitor to act for him on these property and business transactions. Mr Tekin was originally introduced to Mr Stratford by a relative. Mr Stratford’s best recollection is that they first met in 1988.
Mr Stratford is a member of the partnership of solicitors called Low Doherty & Stratford, which is the Firm. The current five members of the Firm, including Mr Stratford, are the Defendants in these proceedings. Mr Stratford’s practice consists mostly of acting in property transactions. He does not litigate. Mr Stratford had been in practice for more than 40 years at the time relevant to these proceedings.
Another member of the Firm, and the second Defendant in these proceedings, is Mr Doherty. Mr Doherty’s practice includes litigation. He too had been in practice for more than 40 years when the relevant events occurred.
Until early 2015 Mr Stratford performed almost all the legal work that Mr Tekin brought to the Firm. There is a lack of clarity about the billing arrangements between Mr Stratford and Mr Tekin. Mr Tekin says that he was invoiced by Mr Stratford at the end of each transaction and that he paid those invoices. I accept that Mr Tekin paid when invoiced, but there is evidence that Mr Stratford was not an efficient invoicer, especially in more recent years. There were a number of matters upon which he was working for which he did not issue any invoices, whether by design or otherwise. In recent years, the invoicing arrangements lacked rigour.
In addition to the property dealings referred to above, between 1992 and 2003 Mr Tekin progressively purchased four contiguous parcels of land on Cecil Avenue, Castle Hill in New South Wales. I will refer to the four parcels collectively as the Land. Mr Tekin purchased the Land at least in part with funds borrowed from HSBC and La Trobe.
Mr Tekin purchased the Land in order to hold it as an investment and subsequently to develop and sell it. Three of the parcels were improved with residential dwellings which Mr Tekin rented out in the meantime.
In addition to the Land, Mr Tekin purchased another contiguous parcel for the purpose of obtaining a drainage easement to benefit the Land. Once the easement had been created, Mr Tekin sold the other parcel.
By about 2010 the Land had become reasonably well located for an approaching metro line. Mr Tekin took steps to develop the Land. He engaged an architect called Vastu Australia Pty Ltd. On 29 September 2011 Vastu obtained development consent to build 22 townhouses on the Land.
Mr Tekin initially planned to undertake the development in stages. The first five townhouses were to be constructed and sold, with the proceeds from the sale used to fund the construction of the 17 remaining townhouses. In January 2012 Mr Tekin entered into a building contract with ADN Investments Pty Ltd for the purpose of carrying out demolition and excavation work on the Land.
On 16 February 2012 Mr Tekin received an offer from the Commonwealth Bank to provide $7.33m of interest-only funding for a 15-month term. Given CBA’s offer, Mr Tekin changed his mind and decided to proceed with the whole development in a single stage. He arranged for ADN to demolish the existing dwellings and excavate all the Land. Unfortunately, in about April 2012 it became clear that the CBA funding would not proceed because there was a pre-sales precondition which Mr Tekin could not fulfill. It may be inferred that Mr Tekin undertook some work to obtain pre-sales and that some off-the-plan contracts were entered into with townhouse buyers, but there were not enough to fulfill CBA’s condition.
Mr Tekin did not otherwise have the resources to continue the development. Work stopped. Mr Tekin’s attempts to find alternative funding were unsuccessful.
These events left Mr Tekin owing a debt to ADN. On 11 February 2014 the debt matured into a default judgment for just over $250,000. On 13 May 2014 ADN communicated a threat to commence bankruptcy proceedings against Mr Tekin. ADN also lodged a caveat against the Land. Mr Tekin had other debts as well. He was under financial pressure.
Mr Tekin engaged in negotiations with another prospective development partner called Denis Harsany. On 23 May 2014 Mr Tekin made a deed with one of Mr Harsany’s companies, WRV Development Pty Ltd. The deed appointed WRV as the “Project Administrator” and contemplated progressing the development on the Land. The details of the deed are not important other than to say that WRV agreed to advance $300,000 to Mr Tekin at the outset. Mr Tekin received the money and used much of it to repay other debts but not his debt to ADN.
No development proceeded with WRV. There is a reference in the evidence to Mr Tekin’s inability to obtain development funding. At some stage WRV terminated the development deed. In July 2014 WRV lodged another caveat over the Land to secure repayment of the $300,000 advance.
Before proceeding with the narrative, an important factual issue in the case is Mr Tekin’s attitude to selling the Land. This particular fact is central to Mr Tekin’s claim that the Firm’s breaches of duty caused him loss, especially loss from not selling the Land earlier than ultimately occurred. Mr Tekin’s attitude to selling the Land at any particular time is an objective fact which is highly relevant to the hypothetical question of what would Mr Tekin have done if different events had occurred.
At the hearing, Mr Tekin tended to address this issue in binary terms. It was said that Mr Tekin wanted to sell the Land at a particular time or he did not want to sell. Submissions were also made about whether Mr Tekin ought to have been advised that he “should” sell the Land or he “should not”. Mr Tekin’s submissions also lacked precision about the time period to which they were directed and did not always take into account the fact that his attitude changed over the years.
A more nuanced assessment of Mr Tekin’s attitude is necessary to get an adequate understanding of the causation issues in the case. There is no dispute that in 2011 Mr Tekin wanted to develop the Land by the construction of townhouses which he would then sell as completed properties. At some stage prior to October 2014 Mr Tekin’s attitude changed. He no longer wanted to develop the Land as the developer. By October 2014 he wanted immediately to sell the Land as a single lot. After that it is clear from the evidence that from time to time his views changed as to whether he ought to sell immediately or whether he ought wait and sell at a future date. His views also changed about whether he ought first undertake work in an attempt to get the Land re-zoned before he sold it and, if so, how much work he should undertake. His attitude to these matters depended upon multiple considerations.
Naturally the zoning of the Land at any particular time and the prospect of re-zoning are highly relevant to a finding about Mr Tekin’s attitude towards selling the Land. The evidence on these important issues is limited and imprecise. At some point the Land became subject to a “proposed re-zoning to R4”. The implications of such a re-zoning were potentially significant for the value of the Land. In 2011 Mr Tekin had approval for 22 townhouses. If the Land were to be re-zoned to R4, it may have been possible to develop the Land with high-density apartments. One contemporaneous email refers to the “probability” of 90+ apartments.
The evidence does not reveal when the re-zoning proposal first arose. Nor does it address the nature or likelihood of the proposal. The proposal must have arisen after Mr Tekin excavated the basement for his 22 townhouses in 2012. By February 2015 the possibility of re-zoning was being referred to in contemporaneous emails. Even if Mr Tekin did not know about the prospect of re-zoning when he contracted to sell the Land for $7.8m in October 2014 (see below), the evidence suggests that it is likely that he was aware when he instructed Mr Stratford to issue the Notice to Complete on 3 December 2014. It is clear that Mr Tekin had definitely become aware of the re-zoning prospect by 13 March 2015 when he instructed Mr Stratford to issue the Termination Notice (see below).
By mid-2014 Mr Tekin’s debts to HSBC and La Trobe were about $2m. Since the demolition of the residences on the Land and the sale of his last takeaway shop, Mr Tekin had been without income to service those debts. He also owed about $80,000 in unpaid land tax. As stated above, ADN had served a bankruptcy notice. Mr Tekin also had the new debt to WRV.
In September 2014 Mr Tekin made a decision to sell the Land immediately. He intended to use the proceeds to repay all his debts including his debts to ADN and WRV. Mr Tekin attributes his decision to sell to advice received from Mr Stratford. Given the commercial nature of the decision and Mr Tekin’s evident ability to manage his own business affairs, it is implausible that Mr Stratford gave any such advice or that Mr Tekin made his decision to sell based on any such advice. In any event, nothing flows from it because Mr Tekin does not now criticise Mr Stratford for any role played in Mr Tekin’s decision to sell in September 2014.
Mr Tekin was able to negotiate an acceptable price for a sale to Mr Harsany, who would buy the Land through another one of his companies, Upside Property Group Limited. Upside was incorporated for the purpose of the acquisition. In about October 2014 Mr Tekin instructed Mr Stratford to prepare a contract. Mr Tekin considered his debts to be urgent and he initially instructed Mr Stratford that settlement was to occur before Christmas 2014.
On 21 October 2014 Mr Tekin and Upside exchanged contracts for the sale of the Land.
There are a number of terms of the Contract which are relevant to the current dispute. First, the Completion Date was 1 December 2014, a day or two earlier than the customary six week settlement period. Secondly, the price specified in the Contract was $7.8m. This was not the entire agreement about price because Mr Tekin and Upside made a Side Deed also on 21 October 2014 which potentially affected the amount Mr Tekin would receive for the Land. Clause 3 of the Side Deed provided:
“It is intended that the parties will complete the Contract on or before 1 December 2014. Prior to completion, the parties are free, subject to the terms and conditions of this deed, to market the Property for re-sale by the vendor or sub-sale by the purchaser to a third party.”
There are two copies of the Side Deed in evidence, neither of which is complete. From the pages in evidence and Mr Tekin’s commentary in his Affidavit, the effect of the Side Deed appears to have been that, despite entry into the Contract, both Mr Tekin and Mr Harsany would continue to market the Land up until completion, and if either was able to locate a third party buyer for more than $7.8m Mr Tekin would sell to the third party instead of Upside. The excess proceeds would be split between Mr Tekin and Upside in specified proportions. There was a cap of $1m on Mr Tekin’s share of any excess which could be achieved. This explains the reference in some of the contemporaneous documents to Mr Tekin selling for up to $8.8m.
Thirdly, the specified “deposit” under the Contract was $780,000. The Contract was the 2005 edition of the standard terms and contained standard provisions about payment of the deposit in clause 2.
Special condition 11 more specifically addressed payment of the deposit as follows:
“Deposit by Instalments
The Vendor agrees that the Purchaser can pay the deposit by instalments, on the proviso that:
(a) for the purposes of clause 2, the deposit payable under this Contract is 10% of the price, which is payable as follows:
i. the sum of $300,000.00 within seven (7) days of the date of this Contract which said sum will be released to the vendor forthwith and part of which will be used to repay all monies owing to ADN Investments Pty Limited (ACN 107 361 160) and for the balance to be used to enable the vendor to pay other personal debts;
ii. the balance either:
on termination of this Contract by the Vendor if applicable; or
in accordance with clause 16.7 of this Contract [i.e. on completion],
(b) the times for payment under this clause 11 (a) are essential;
(b) if the vendor is entitled to the deposit and the balance is not paid forthwith, the vendor is entitled to sue the purchaser for any unpaid balance of deposit and recover it as a liquidated debt; and
(d) the right contained in this clause is in addition to and does not limit any remedies available to the vendor in this Contract despite any rule of law or equity to the contrary.”
“9 Purchaser’s default
If the purchaser does not comply with this contract (or a notice under or relating to it) in an essential respect, the vendor can terminate by serving notice. After the termination the vendor can –
9.1 keep or recover the deposit (to a maximum of 10% of the price)”
The effect of these clauses is that $300,000 of the deposit was to be paid and released to Mr Tekin immediately and the balance of $480,000 was to be paid on completion unless Mr Tekin terminated the Contract earlier.
The fourth part of the Contract relevant to the current dispute relates to issuing a Notice to Complete. Clause 15 of the Contract provided as follows:
“Completion date
The parties must complete by the completion date and, if they do not, a party can serve a notice to complete if that party is otherwise entitled to do so.”
“For the purpose of Clause 15 a "Notice to Complete" shall mean a notice requiring the other party to complete this Contract no earlier than fourteen (14) days after the date of service of the Notice. The vendor and Purchaser acknowledge and agree that the serving of such a Notice shall for all purposes make the time for the obligation of the parties to complete this Contract of the essence and further that the time period referred to in the notice shall in all circumstances be reasonable and sufficient notice. Notwithstanding any other clause herein, service of such Notice may be effected by facsimile transmission and shall be deemed to be served on the day the facsimile transmission has been completed.”
On about 21 October 2014 Mr Tekin received $300,000 from Upside which he used to discharge his debt to ADN. ADN removed its caveat and withdrew the bankruptcy notice. Mr Tekin’s most immediate financial pressure was relieved.
Mr Harsany looked for third party purchasers for the Land as contemplated by the Side Deed. As at 1 December 2014, some potential third party purchasers had been identified but no agreement had been reached. One of the potential purchasers indicated a willingness to pay $10.93m and negotiations were under way.
For its part, there is a lack of clarity about Upside’s attitude to completion of the $7.8m purchase as at 1 December 2014. Upside’s solicitors formally wrote to Mr Stratford on 28 November 2014 to say that there had been “a slight delay in finalising matters relating to finance” and requested a 14 day extension. The letter suggests that Upside was trying to arrange finance and therefore was intending to proceed with the purchase.
However, on 1 December 2014 Mr Harsany sent an email directly to Mr Stratford and copied in Mr Tekin and the solicitor acting for Upside. The email stated:
“Hi Phillip,
Jerry has asked me to describe the current status of plans moving forward on 10-16 Cecil Avenue, Castle Hill.
We are currently have 3 scenarios on the table and I will describe them in the order of what is likely to take place -
1. I have a letter of offer for refinancing being issued today which will allow Jerry to payout all of his existing commitments and have some cashflow for living. My company will be the borrower with Jerry only required to come on board with the property as a guarantor. Jerry will have his $8.8Mil locked in with an extra $100K per Month up to 7 Months should we on-sell after the refinance takes place. From there onwards, we will have a 50/50 share on net profits. I will be paying a deposit amount of $4,500,000 in total by Feb end from the refinance prior to Xmas and the balance in Feb when my project in Berowra completes. Our goal will be to actively apply for spot re-zoning, hold for re-zoning or on-sell as it is getting closer to re-zoning. I will ask Shing [i.e. Upside’s solicitor] to prepare an agreement describing the above prior to settling refinance.
2. On-sell the property prior to settlement of refinance. We still have a number of potential buyers and agents that we are negotiating with.
3. For Upside Property Group to settle the property as per the current arrangements. Please note we need 3 weeks from a decision being made to settle this contract for funding to be available. It would be my request to extend the settlement period by this length of time while we confirm the refinance facility and/or the on-sell.
To assist with the existing mortgage holders we have forwarded a letter requesting a settlement extension which you will be able to forward as required.
Please let me know if you require further details on the above at this stage.
Kind Regards, Denis Harsany”
The meaning of some of the matters referred to in this email is not apparent from the evidence, such as the reference to a deposit amount of $4.5m. The statement towards the end of the email that “we have forwarded a letter requesting a settlement extension” appears to be a reference to the letter dated 28 November 2014 which is referred to at [51] above, in which case that letter appears to have been written to help Mr Tekin ward off HSBC and La Trobe rather than to reflect Upside’s genuine attitude to completion. In any event, Mr Harsany’s email makes clear that his preferred course was not to complete the $7.8m purchase. His preferred course was to refinance in order to have more time to locate a third party purchaser and possibly apply for spot re-zoning.
As for Mr Tekin’s attitude, he said in cross-examination that he does not remember when he read Mr Harsany’s email dated 1 December 2014. It is not Mr Tekin’s document, although there is no evidence of Mr Tekin disputing what was said or instructing Mr Stratford otherwise.
Immediately after Mr Harsany’s email, Upside’s solicitor sent his own email to Mr Stratford which stated:
“Hi Phillip,
If your client would like to settle the current contract with Upside Property Group prior to the Christmas period, our client will need confirmation of this by close of business today.
As we understand it, our respective clients have come to an agreement to refinance the property instead of settle. Should the case be that your client prefers to settle by Christmas, our client will need sufficient notice of this, and hence your client's confirmation will be required today.
Our client has been trying to arrange the $50,000 balance for the deposit, however this has been delayed by a third party. Our client will try to rectify this ASAP.
We urgently await confirmation from your client as to the above.
Thank you in anticipation of the same.
Kind regards Shing Lam”
The reference to the $50,000 balance for the deposit is unexplained.
After the email from Upside’s solicitor, Mr Tekin had a telephone conversation with Mr Stratford during which he told Mr Stratford that he would discuss “refinancing” with Mr Harsany and advise how to proceed. It is unknown whether Mr Tekin and Mr Harsany then spoke and, if so, what was said. In any event, Mr Tekin did not instruct Mr Stratford to give to Upside’s solicitor confirmation of completion by close of business on 1 December 2014.
When 1 December 2014 came and went, Upside had not completed the purchase as required by the Contract.
On 3 December 2014 Mr Tekin and Mr Stratford had another telephone conversation. According to Mr Stratford’s file note, Mr Tekin said that he was getting nowhere with Mr Harsany. Mr Tekin reported to Mr Stratford that “no finance available. Says will take at least 6 weeks”. The reference is ambiguous. It may be a reference to the finance which Upside needed to complete the $7.8m purchase. It may instead be a reference to the refinance to implement Mr Harsany’s first option in his email on 1 December 2014.
Mr Tekin said in cross-examination that at this time it was his priority to complete the $7.8m sale to Upside. According to Mr Tekin’s Affidavit, Mr Stratford told him that he had to give a 14-day “extension”. He asked what would happen if Upside did not settle after 14 days and Mr Stratford replied that “You’re going to have to find someone else to settle with.”
In paragraph 73 of his Affidavit dated 18 September 2024 Mr Tekin gives the following evidence:
“I understood Mr Stratford's words above to mean that if Upside did not complete the sale of the Properties within 14 days after we had provided the extension, I would be free to sell the Properties to someone else. As a result, I instructed Mr Stratford to agree to the extension to Upside that we had discussed.”
As recorded in Mr Stratford’s file note, Mr Tekin instructed Mr Stratford to issue a Notice to Complete.
In view of the evidence, I find that as at 3 December 2014 Mr Tekin was re-considering his options. If not before, by 3 December 2014 he was alive to the possibility that he could sell the Land for more than $7.8m. He regarded an ability to sell to a third party as a “freedom”. He doubted Mr Harsany’s ability to complete the $7.8m purchase and his most pressing debt had been paid. He had also experienced a degree of interest in the Land at $10.93m, and possibly other interest as well. Mr Tekin would have completed the $7.8m sale if necessary, but he was at least as happy to have the Upside sale terminated so that he could get a new sale at a higher price.
On 4 December 2014 Mr Stratford issued the Notice to Complete. The date for completion was specified as 18 December 2014. There is no dispute that the Notice did not comply with clause 15 and special condition 7 of the Contract because only 13 days were specified for completion after the Notice was issued. Nor is there any dispute that the Notice to Complete suffered from another defect because it was issued at a time when Mr Tekin was himself in breach of the Contract by failing to answer the requisitions. By reason of the defects, the Notice to Complete was not effective to make time of the essence for Upside’s completion of the purchase.
Also on 4 December 2014, Mr Stratford and the solicitor acting for Upside exchanged correspondence about a possible on-sale to a third party and whether the particular on-sale was “legitimate”. The on-sale appears to have been sourced by Mr Harsany. This was the proposed on-sale at $10.93m. The proposal then being discussed included a delayed settlement with the progressive release of proceeds to Mr Tekin (and Mr Harsany). Negotiations continued with the third party.
Upside did not settle the $7.8m purchase on 18 December 2014. There is no evidence of communication about completion between Mr Tekin and Mr Harsany or their respective solicitors. There is no evidence of a communication between Mr Tekin and Mr Stratford about terminating the Contract and nothing was done to terminate at that time.
On 23 December 2014 Mr Harsany sent an email directly to Mr Stratford (copied to Mr Tekin) in which he confirmed that two previously proposed third party purchasers had “fallen over”. Presumably one was the $10.93m on-sale. The email set out “our plans” to refinance the HSBC and La Trobe debts with a less “conventional” lender. The email is not clear about what would be done with the Land if refinance was achieved. In any event, Mr Harsany’s email is inconsistent with an intention that Upside complete the $7.8m purchase. Upside’s $300,000 deposit is listed as a sum to be refunded from the refinance proceeds, albeit postponed to the payment of Mr Tekin’s other debts. Mr Harsany nonetheless stated that it was “critical” to him to “try to refund” the Upside deposit from the refinance.
Again, this email is not Mr Tekin’s document, although Mr Harsany stated that he wrote it at Mr Tekin’s request. There is no evidence of Mr Tekin disputing Mr Harsany’s statements or instructing Mr Stratford otherwise.
Mr Tekin’s evidence is that “from about late December” he was no longer confident that Upside would complete the $7.8m purchase or that Mr Harsany would find another purchaser. Mr Tekin started talking to selling agents himself. By 23 December 2014 he had signed an agency agreement with at least one agent and he subsequently received a proposed agency agreement from another agent. I infer from this conduct that by the end of 2014 Mr Tekin still wanted to sell the Land but he no longer considered $7.8m to be an acceptable price, even if he could get a $1m uplift under the Side Deed. Whether because of the previous prospect of a sale for $10.93m or other knowledge gained about the market, re-zoning and/or refinance, Mr Tekin now wanted to sell the Land for more than $10m.
All the while Mr Tekin was still in debt. He was in arrears (or further in arrears) under his loans from HSBC and La Trobe. He did not have the means to bring the loans back into order and could not borrow further money from HSBC or La Trobe. Mr Tekin still owed more than $80,000 in unpaid land tax. Altogether he estimated that he needed $2.35m to discharge his loans and pay his land tax. He still had a debt to WRV.
In paragraph 102 of his Affidavit dated 18 September 2024 Mr Tekin says:
“I decided to enquire with other lenders as well to see if they could help me at this time. Due to the increased potential value of the Properties and the offers I was receiving as deposed to above, I wanted to relieve myself of the financial pressure I was feeling and properly explore the opportunities presented to me by the recent developments in the re-zoning.”
The exact date when Mr Tekin started to consider refinance is not known. The first documented reference to refinance is Mr Harsany’s email on 1 December 2014 referred to in [52] above. There is evidence that Mr Harsany took (ineffectual) steps to help arrange refinance from December 2014. Paragraph 102 of Mr Tekin’s Affidavit appears to be directed to December 2014 or January 2015.
Mr Tekin himself took some steps to find refinance. On 22 February 2015 a lender called Chifley Securities issued an offer of $3.5m finance from which Mr Tekin would receive about $2.9m after deduction of fees and pre-paid interest. Chifley Securities offered the finance for a period of 12 months at 11.5% p.a. (assuming no default). The offer was conditional upon verification of the accuracy of the information contained in the finance application, a valuation of the Land, formal documentation, due diligence and absolute satisfaction of Chifley Securities’ solicitors.
“Around this time, I had a discussion with Mr Stratford and told him about the Chifley Letter of Offer. I recall that he was encouraging about it at first, however a short time later, he said to me words to the effect of:
PS: "Gary [Doherty] knows someone who might be able to help you with a loan. Maybe they would be better for you. Would you like me to ask him about it?"”
“Would you be able to have a look at this. Its quite expensive but if Gary can’t something positive from the other guy, this might be still better than Denis’.”
The reference to “Gary” was a reference to Mr Doherty. The “other guy” was an alternative financer. “Denis” was Mr Harsany.
I find that from the outset Mr Tekin was aware of Mr Doherty’s efforts to help him obtain finance and indeed Mr Doherty undertook the task at Mr Tekin’s request (via Mr Stratford).
Mr Doherty had a business relationship with a finance broker called Balmain NB Commercial Mortgages. Presumably Mr Doherty referred clients to Balmain NB and Balmain NB reciprocated. Mr Tekin suggested that Mr Doherty or the Firm had a more formal commission arrangement with Balmain NB. Mr Doherty denied it. On the evidence before the Court, the suggestion never rose higher than speculation.
On 2 March 2015 Mr Stratford sent an email to Mr Tekin in which he stated that Mr Doherty would be meeting with “his finance contact” that afternoon and asked whether Mr Tekin had any valuations of the Land. On 10 March 2015 Mr Stratford asked Mr Tekin for further information which had been requested by Balmain NB.
Mr Tekin gave evidence that after Upside did not comply with the 14-day “extension” given on 3 December 2014, he believed that the $7.8m Contract had automatically come to an end. Any such belief changed in mid-March 2015 when Mr Stratford told Mr Tekin that he could not issue a contract to a new purchaser “until we deal with Upside”. At that point Mr Tekin realised he was still contractually bound to Upside.
As a result of that revelation, Mr Tekin took immediate steps to terminate the Upside Contract. Mr Tekin’s evidence is:
“Earlier that day, I had had the discussion with Mr Stratford set out in paragraph 99 above, in which he told me I could not sell the [Land] while the Upside Contract was still in place. I understood that following that conversation, Mr Stratford would be doing something to deal with the Upside Contract to allow me to sell the [Land], however I did not know what it was, and he did not explain it to me. He said to me words to the effect of "I will take care of if'. I now understand that the Upside Contract had to be terminated in writing.”
“• Wants us to terminate now
• Does not want to take risk that might be able to settle
• Land worth much more now.”
This documentary evidence clearly establishes that as at 13 March 2015 Mr Tekin did not want to sell the Land to Upside for $7.8m. He wanted immediately to issue a Termination Notice in order to avoid the “risk” that he might otherwise be obliged to complete the sale to Upside at what he considered to be an unacceptably low price.
As instructed, later that day Mr Stratford sent a letter to Upside’s solicitors with which he enclosed a Termination Notice. The ground given for termination was failure to comply with the Notice to Complete dated 4 December 2014. The Termination Notice also stated that the deposit was forfeited.
On the evening of 13 March 2015 an angry Mr Harsany telephoned Mr Tekin. Mr Harsany told Mr Tekin that the Termination Notice should not have been sent and that he would claim his deposit back and sue for damages.
On Monday 16 March 2015 Mr Tekin reported Mr Harsany’s call to Mr Stratford. Mr Tekin says that Mr Stratford responded by saying:
“the firm made a technical error. Gary will be talking to you from here on. I don’t do court matters.”
It may be accepted that Mr Stratford said something like this (he does not deny it) but the conversation is more likely to have taken place on or after 19 March 2015 when the formal letter arrived from Upside’s solicitor (see below). In any event, Mr Tekin says that he was not given any further explanation about the defective Notice to Complete or the Firm’s short coming.
On 19 March 2015 the solicitors acting for Upside wrote to Mr Stratford. They asserted that the Notice to Complete was invalid for a number of reasons, one of which was that it did not allow 14 days for completion as required by the Contract. Another reason was Mr Tekin’s extant failure to answer requisitions. They further asserted that Mr Tekin had repudiated the Contract by issuing the Termination Notice. Upside formally accepted the repudiation and terminated the Contract. It demanded the return of the $300,000 deposit and said that proceedings would be commenced to claim damages. The letter included a demand that Mr Tekin give an undertaking that he would place in trust “any and all” proceeds from any sale of the Land pending the determination of the foreshadowed proceedings.
Mr Stratford read this letter and said that he thought litigation against Mr Tekin was likely. It is probably at this time that Mr Stratford told Mr Tekin that the Firm had made a technical error and Mr Doherty would be taking over.
“HSBC Bank $1,700,000
Latrobe $510,000
Land Tax $90,000
Caveat $330,000
Legal fees $110,000
Reimbursement of monies spent on approval, excavation $ 450,000
$3,200,000
Loan $3,960,000 60%
Brokerage Loan & Fees $80,000
Stamp Duty & Legals $22,000
Valuation $10,000
Interest prepaid @ 8.5% - 18 months $313,000
Net $3,535,000”
The reference to $330,000 for the “caveat” was a reference to the money claimed by WRV under the aborted development deed in 2014. Mr Doherty’s list of payments did not include money to refund the Upside deposit.
Mr Doherty says that he had previously discussed the distribution of the loan funds with Mr Tekin, who had told Mr Doherty what payments he needed. Mr Tekin denies having any such conversation directly with Mr Doherty but the denial is focused on the channel of communication rather than the topic discussed. Mr Doherty evidently had enough information about Mr Tekin’s affairs to submit line items and corresponding amounts to Balmain NB. Mr Tekin clearly participated in a conversation about the figures at this time.
Mr Doherty also says that he told Mr Tekin that the Firm would “cover” certain costs which are ordinarily incurred when applying for finance, such as valuation fees, application fees and other costs. Mr Doherty says that he did so because he understood that Mr Tekin was under financial pressure. Mr Tekin denies such a conversation took place. His denial is focused on the types of costs discussed and not the discussion itself. Mr Tekin accepts that they discussed valuation fees. Some such conversation is consistent with the contemporaneous documents which contain references to the Firm covering some of the finance application costs and Mr Tekin’s gratitude for that cover. I accept that Mr Tekin was told by Mr Doherty either directly or through Mr Stratford that the Firm would cover the upfront expenses of applying for finance.
As at 19 March 2015 Mr Doherty had not yet received an offer back from Balmain NB. As set out above, Mr Tekin knew that Mr Doherty was dealing with Balmain NB, although he may not have known how far the application had progressed. In any event, he must have been pessimistic about being approved by Balmain NB because on 19 March 2015 he decided to proceed with the Chifley Securities offer. He went as far as countersigning the Chifley Securities letter of offer and instructing Mr Stratford to return it to the finance broker. At the last minute, Balmain NB came through with its offer. Balmain NB’s offer was for an 18-month loan of $3.9m at 9.5% p.a. (assuming no default). Apart from the 18-month term, Mr Tekin accepts that the Balmain NB offer was superior to the Chifley Securities offer in every way. In particular the interest rate was lower.
On 20 March 2015 Mr Doherty emailed Balmain NB’s offer to Mr Stratford. In his covering email Mr Doherty set out indicative figures for the distribution of the $3.9m loan. The figures were:
“HSBC $1,700,000
Latrobe $510,000
Land Tax $90,000
Caveat $330,000
Balmain NB Fees 1.5% $60,000
Prepaid interest 18 months $540,000
Stamp Duty & lender legals $20,000
Valuation $10,000
On account of legal fees to LD&S $110,000 (incl GST)
LD&S fees on loan $30,000
$3,400,000
Balance to Borrower $500,000”
The reference to the “Caveat” was again a reference to the WRV debt.
The reference to “LD&S” was a reference to the Firm.
Consistent with the figures which Mr Doherty had submitted to Balmain NB on 17 March 2015, no provision had been made for the refund of the deposit to Upside.
Mr Stratford on-sent the Balmain NB offer and the figures to Mr Tekin. Mr Tekin reviewed Balmain NB’s offer. On the first page he saw that the interest rate was lower than Chifley Securities’ but that the term was 18 months. Mr Tekin did not want a loan for 18 months. He says that he does not remember reading the detail of Balmain NB’s offer after seeing the 18-month term. Mr Tekin and Mr Stratford had further discussions about the 18-month term and whether Mr Tekin would have options for early repayment. Mr Stratford made enquiries and was told that Balmain NB would charge a penalty if Mr Tekin repaid early. On 24 March 2015 Mr Tekin sent an email to Mr Stratford in which he stated:
“Can we go for 12 month term on the loan at all or do they want 18 months. I don’t think I want to keep the land for that long.”
“I am definitely going to get out it earlier than later from the site somehow therefore don’t you think we go with 12 months (if lender wouldn’t be a problem for shorter term) which will be lesser amount to borrow because we are paying 6 months less interest and maybe less fees. If you re fine with that i would like to go ahead and borrow 3.75m”
In simplistic terms, Mr Tekin submits that these statements demonstrate that he wanted to sell the Land. It may be accepted that Mr Tekin wanted to sell the Land as at 25 March 2015, but he had a price expectation that would have to be met. To achieve an acceptable price he was happy to wait and do some re-zoning work, and to refinance in the meantime. He did not want to sell the Land at any price.
In April 2015 Mr Tekin received an oral offer to purchase the Land for $20m. It may have fuelled his price expectations. Mr Tekin says that he reported the $20m offer to Mr Stratford. In paragraph 137 of his Affidavit Mr Tekin says:
“After receiving this call from Mr Khalil, I called Mr Stratford and we had a conversation to the following effect:
Me: "Phillip, I need a contract of sale now, George just offered me 20 million dollars for the property."
Mr Stratford: "We have to negotiate with Upside first and maybe pay them a couple of million out of the deal."
Me "Why do I have to give them anything?"
I do not recall if Mr Stratford answered my question. As explained above, I did not know then that the Firm had insurance and that I may have a claim against the Firm for the error made. I understood from the words he said above that I would be liable to pay significant monies to Upside myself, which I did not have access to without either selling the [Land] or borrowing those funds. My preference was to sell the [Land] over taking out a loan.”
In cross-examination Mr Stratford denied this conversation and did so in clear terms. He also said that he does not remember that Mr Tekin ever mentioned to him an offer of $20m.
The $20m offer from “George” did not proceed. Mr Tekin attributes the loss of the sale to him being told by Mr Stratford that he first had to negotiate with Upside. That seems implausible. The concluding words of paragraph 137 of Mr Tekin’s Affidavit are artificial. Mr Tekin’s statement that without selling the Land he lacked the funds to pay Upside makes no sense when the reason to pay Upside was to enable a $20m sale of the Land to occur. A $20m sale would provide ample funds for a payment of a couple of million to which Mr Stratford is said to have referred.
In any event there is no documentary evidence of the $20m offer. There is no basis in the evidence to find that Mr Tekin would have achieved a $20m sale in April 2015 had he received different or further advice from Mr Stratford about dealing with Mr Harsany.
On 5 May 2015 Upside commenced Supreme Court proceedings against Mr Tekin. The central allegations were that the Notice to Complete was defective and that Mr Tekin had repudiated the Contract by issuing the Termination Notice in reliance upon it. Upside alleged that it had validly terminated the Contract by accepting the repudiation on 19 March 2015. Apart from declarations, Upside claimed the return of the $300,000 deposit and damages, interest and costs. Upside’s loss was particularised by reference to the difference between the market value of the property and $7.8m.
The Firm acted for Mr Tekin in the proceedings. Mr Stratford did not litigate so Mr Doherty took responsibility for Mr Tekin’s defence.
Mr Stratford and Mr Doherty each say that they did not consider that there was a conflict of interest between Mr Tekin and the Firm after the defect in the Notice to Complete came to light in mid-March 2015. Mr Stratford had told Mr Tekin that he had made an error. Mr Stratford and Mr Doherty each considered that the best way to remedy the defect in the Notice to Complete was for the Firm to act for Mr Tekin in defence of the Upside proceedings free of charge.
In any event, Mr Stratford and Mr Doherty accept that they did not tell Mr Tekin that there was a conflict of interest. Neither told him about any potential liability of the Firm nor the possibility of bringing a cross-claim against the Firm in the Upside proceedings. Neither recommended to Mr Tekin that he get independent advice.
Mr Doherty says that at some stage he told Mr Tekin that the Firm would not charge for the Upside proceedings and that the Firm would pay all barristers’ fees and other disbursements. Mr Tekin denies the conversation. Either way, the Firm did not bill Mr Tekin and Mr Tekin did not pay any defence costs and disbursements. There is no evidence of a costs agreement. There is no evidence that Mr Tekin queried the Firm about why he was not receiving bills.
Mr Tekin claims that he was not consulted about the conduct of his defence and generally did not understand what was going on. Mr Doherty denies the allegation and says that they discussed the proceedings “regularly”. Nothing turns on this issue because there is no criticism of the way the defence was (successfully) conducted by Mr Doherty.
In early May 2015 Upside lodged a caveat over the property asserting a lien to secure the repayment of the $300,000 deposit. On 12 May 2015 Mr Tekin sent an email to Mr Stratford in which he wrote:
“Hi Phillip, Denis has restored a caveat over [the Land]. I hope we can get it lapsed by the time the loan settlement.”
The “loan settlement” was the refinance from Balmain NB. Mr Stratford responded by saying “There will have to be some sort of arrangement made with Denis Harsany”.
Mr Tekin had a meeting with Mr Doherty in which they discussed the caveat. Mr Tekin was told:
“You have to return Denis’ deposit of $300,000, to get rid of the caveat, with the caveat there, we can’t do anything.”
Mr Doherty continued to perform work in order to conclude the refinance with Balmain NB. One thing Mr Doherty did was arrange a valuation of the Land. There are different figures in the evidence for the cost of the valuation. One figure is $11,000. The Firm also liaised with a geotechnical engineer, the outgoing financiers and the incoming financier. Mr Tekin readily accepts that “a significant amount of work” was performed.
On 20 May 2015 Balmain NB issued a revised offer, this time for a term of 12 months. The letter of offer contained the following figures:
“Refinance HSBC $1,700,00
Refinance Latrobe $520,000
Repay WRV Developments $350,000
Land Tax $90,000
Solicitors debt $150,000
Prepaid interest $345,000
Reimbursement of costs to date $300,000
Future Professional costs $125,000
Associated costs val/stamp duty etc $120,000
TOTAL $3,700,000”
Some of the line items and corresponding figures were different to those set out in the original offer (see [99] above). Mr Tekin says he does not know how the changes occurred after the original offer from Balmain NB. He does not remember discussing the revised figures with anyone. This evidence was specifically directed to the amounts referable to the “Solicitor’s debt” ($150,000) and “Reimbursement of costs to date” ($300,000).
There is no dispute that Mr Tekin and Mr Doherty did discuss the $125,000 in “Future Professional costs”. The discussion occurred in the context of undertaking work to get the Land re-zoned. Mr Tekin’s Affidavit includes the following evidence:
“From about late May 2015, I understood that of the loan proceeds, $125,000.00 would be used for the purposes of re-zoning. I had not wanted to apply for the re-zoning of the [Land] myself before this. I wanted to sell them as quickly as possible or enter into a joint venture or partnership as referred to in the various offers I received in or about early 2015 above. I had no funds available to pay any re-zoning costs myself and no experience with such applications. I thought however that, as I now had these funds available to me, and the Firm had offered to help me, I could follow Mr Doherty's advice as set out in paragraph 155 above and obtain a better sale price for the [Land] if they were rezoned at the time of the sale. I also thought this was a good option while the Upside dispute was being resolved and (as I believed at the time) I could not sell the [Land].”
This evidence must be understood in the context of the evidence as a whole as set out above. The statement that Mr Tekin had previously wanted to sell as quickly as possible does not mean that he wanted to sell at any price, at least not since October 2014. Had he still wanted to sell at any price on 13 March 2015 he would not have instructed Mr Stratford to issue the Termination Notice immediately in order to avoid the “risk” that Upside would complete the $7.8m sale. What Mr Tekin wanted to do as quickly as possible was to sell the Land at a price in the order of those referred to at [71] and [106] above or do a joint venture from which he would receive $300,000 per apartment built or 33 apartments in addition to a large up front cash payment.
Absent a sale at that sort of high price or such a lucrative joint venture, in May 2015 Mr Tekin did not want to sell the Land as quickly as possible. He wanted to spend some time, professional fees, finance costs and other holding costs in order to progress the re-zoning of the Land so that his price expectations might be met in the future. He was willing to include in the new finance from Balmain NB $125,000 for future re-zoning costs.
On 10 June 2015 Balmain NB issued a more formal document called “terms of approval”. The document contemplated that the lender to retain $125,000 to meet future professional cost “re planning and R4 Re-zoning”.
Balmain NB’s more formal approval also provided for $150,000 of the loan funds to be applied to “Solicitors debt repayment”. One of the specified conditions precedent to drawdown was evidence of amounts owing with regard to the solicitors’ debt. In order to satisfy the condition precedent, Mr Doherty prepared a letter dated 26 June 2015 addressed to Balmain NB. The letter stated as follows:
“Balmain NB Non Bank
Dear Sir
RE: Advance to Celal Tekin 10-16 Cecil Avenue, Castle Hill
We advise that legal fees outstanding by Celal Tekin up to 26th June, 2015 are as follows:
Account for multiple proposed joint ventures Sales of sites – 2012 to 2015 $47,270.00
Account for sale files for 22 town houses $60,500.00
Account for Affairs in relation to Vastu, Architect and ADN Pty Limited $23,640.00
Account for affairs in relation to WRV Developments Pty Ltd $15,460.00
Yours faithfully, LOW DOHERTY & STRATFORD”
The total of these figures is $146,870.00.
Each of the four items listed in the letter was a matter about which Mr Tekin had previously communicated with Mr Stratford. It may be inferred that for some of those matters Mr Stratford has undertaken some legal work, especially the pre-sales of the townhouses. There is however no evidence about what work was actually performed, the terms upon which it was performed or the volume of that work (if any). There is no evidence of Mr Tekin being billed for any such work or of there otherwise being an “account”.
There is no dispute that Mr Doherty determined the figure for each matter without reference to Mr Stratford. Mr Doherty said the figures were “estimates” which he made from looking at the files. Given the surrounding circumstances, Mr Doherty’s letter dated 26 June 2015 cannot be accepted as evidence of a pre-existing liability for the fees to which it refers.
Mr Tekin accepted the revised offer from Balmain NB. One matter which was clear from Mr Tekin’s evidence is that he undertook his own comparison between the terms offered by Chifley Securities and Balmain NB and made his own choice based on his own commercial interests.
Settlement took place on about 17 July 2015. The application of the new loan funds was set out in the Firm’s letter to the solicitors acting for Balmain NB, which stated:
“Payee Amount
Bank Cheque - Office of State Revenue $90,606.72
Bank Cheque - La Trobe Financial $539,589.23
Bank Cheque - Purcell Partners $987.80
Bank Cheque - P Bain & Associates $99.00
Bank Cheque - Kwang Sup Lee $334,602.74
Bank Cheque - Panacea Lawyers Trust Account $13,386.40
Bank Cheque - Sydney Bay Pty Ltd $300,000.00
Bank Cheque – HSBC $1,750,425.76
Bank Cheque - Low Doherty & Stratford $127,398.17
Bank cheque fees $90.00
Total: $3,157,185.82”
The payment of $334,602.74 to Kwang Sup Lee was made to discharge Mr Tekin’s debt to WRV. Thereafter the WRV caveat was removed to allow the registration of Balmain NB’s new mortgage.
Sydney Bay Pty Ltd is a company associated with Upside and Mr Harsany. The payment of $300,000 to that company was the refund of the deposit under the Contract. Shortly before Mr Tekin refunded the deposit he made a deed with Upside which recited the litigation between them and Mr Tekin’s imminent refinancing of the Land. The deed recorded an exchange of promises to refund the deposit and to withdraw Upside’s caveat. The promises were performed on both sides and Upside’s caveat was withdrawn. Mr Tekin says that he agreed to refund the deposit to Upside because of the advice Mr Doherty had given him as set out in [118] above.
A payment of $127,398.17 was made to the Firm from the Balmain NB funds.
The total of the payments does not add up to the $3.7m total of the loan funds. Mr Tekin understood that $345,000 was held back by Balmain NB for pre-paid interest and $125,000 was held back for re-zoning costs. Mr Tekin does not know what happened to the remaining $72,814.18 and the evidence in these proceedings does not explain it.
From July 2015 Mr Tekin undertook some work on re-zoning the Land, first with Mr Doherty and a town planner arranged by Mr Doherty (Barker Ryan Stewart) and then with another town planner which Mr Tekin arranged himself. He went to meetings, including one with the local council. Preliminary planning reports were prepared.
From a meeting with the local council and a town planner from Barker Ryan Stewart in September 2015, it became apparent to Mr Doherty that the Land was “on the lower end of the density spectrum” and did not have significant re-zoning potential. After the meeting he told Mr Tekin that an application for re-zoning would be “a waste of money” with “no guarantee of success”. Mr Tekin denies any such conversation.
Mr Tekin says that in about November 2015 he formed a belief that Mr Doherty was not instructing Barker Ryan Stewart to work to re-zone the Land to the maximum extent possible, but was instead instructing them to prepare a report to use in defence of the Upside litigation. Mr Tekin was concerned that there was a conflict because it might be in his interests in the litigation for the development potential of the Land to be minimised given the way Upside had particularised its loss.
Mr Tekin made his own effort to progress re-zoning, including by liaising with another town planner. His re-zoning work was ultimately unsuccessful and came to an end in early 2016. Mr Tekin attributes the re-zoning failure to Balmain NB not releasing the $125,000 for future professional costs. There is no evidence about the circumstances in which those funds were requested and not released.
All the while, Mr Tekin continued to have discussions with potential purchasers of the Land. There is no documentary evidence of these discussions other than a chain of text messages. In his affidavit evidence Mr Tekin refers to one potential purchaser as “a Chinese man by the name of Andrew” and another as “the Aussie guy”. The prices discussed were $15m and $20m. Mr Tekin says that he did not accept the offers because he had been advised by the Firm that he could not sell the Land until after the Upside proceedings were resolved. Whilst a sale at such a price may have been acceptable to Mr Tekin in the second half of 2015, there is no evidence of an offer capable of acceptance.
In November 2015 Mr Tekin received a fee estimate from another firm of solicitors to act for him on the sale of the Land. The evidence does not reveal how Mr Tekin came to obtain the estimate. Mr Tekin says that he engaged the other firm in April 2016. The other firm prepared a new sale contract.
On 5 January 2016 Mr Tekin signed an agency agreement for the sale of the Land. The agent’s estimated selling price was recorded as $10–15m. Mr Tekin says in his Affidavit that he engaged the agent on 8 March 2016 although there is some ambiguity about the date. In the agency agreement, the term of the agency was specified to be from 8 March 2016 until 22 April 2016, but Mr Tekin’s signature was dated 5 January 2016. The agent’s signature was dated 5 April 2016. It is possible that Mr Tekin signed the document in January but did not return it to the agent until March or April. In any event, Mr Tekin engaged the agent before the Upside proceedings were resolved.
Mr Tekin’s undisputed dealings with new solicitors and selling agents are further objective facts which are inconsistent with him thinking that he could not sell the Land until the Upside proceedings were resolved. Mr Tekin says that in mid-April 2016 he asked the agent to stop advertising the Land for sale because he was concerned that a sale would have a bad effect on the litigation, but he does not explain how he came to engage the agent in the first place, nor the new solicitor who drafted a sales contract.
In February 2016 Mr Tekin asked the Firm to give him a breakdown of the application of the Balmain NB loan funds. The evidence does not explain the circumstances in which Mr Tekin made the request.
On 10 February 2016 Mr Doherty wrote an email to Mr Tekin which provided a partial breakdown. The email received close attention at the hearing and needs to be set out in full.
“Dear Jerry
Please find attached the following:
1. Copy of direction to pay on settlement of the matter.
2. Copy of our account for work in relation to sales.
3. Copy of account from Conceal in relation to refinance.
Of the $124,698.17 that was paid to Low Doherty & Stratford from the Balmain NB advance, this has been applied to:
| Conceal Pty Limited – Consultancy expenses | $59,657.00 | | Costs and Disbursements for work in relation to sales | $40,500.00 | | Barker Ryan Stewart - fees | $544.50 | | Barker Ryan Stewart – fees | $2,623.50 | | Barker Ryan Stewart – fees | $346.50 | | Cushman & Wakefield – Valuation fee | $3,080.00 | | Aaron Cornish – Barrister’s fees | $4,345.00 | | | $111,096.50 |
In relation to the other advance from Maxwell Mortgage Corporation, the sum of $97,879.45 was received and was paid to you on 20th July, 2015.
Please find attached copy of letter from Terry Leckie of 8th February, 2016. I think we should meet with Leckie on Monday next week, say at 11.00 a.m., at our office, so we can discuss the finance. Leckie could be asked to arrange reimbursement to you of moneys paid to Barker Ryan Stewart, and possibly the valuation fee, and any other expenses you have incurred.
Please ring Gary Doherty to discuss.
Regards”
The email referred to three attachments. The first of these was the letter of settlement directions set out in [131].
The second attachment was an unsigned tax invoice dated 1 August 2015 from the Firm to Mr Tekin. The amount invoiced was $40,500. The author of the tax invoice narrated legal work from 21 March 2012 to 31 July 2015 in relation to the proposed subdivision of the Land including drafting, negotiating, exchanging and rescinding pre-sale contracts with third party purchasers of the townhouses. Mr Tekin’s evidence is that he did not receive any such tax invoice until after the Firm had been paid from the Balmain NB loan funds. Mr Tekin also says that he never received a costs agreement from the Firm for the work described in the tax invoice.
The third attachment was an unsigned invoice dated 4 August 2015 on the letterhead of Conceal Pty Limited. It stated:
“4th August, 2015
Celal Tekin [Address]
RE: 1-16 CEClL AVENUE, CASTLE HILL
TO: Costs in relation to work involving the arranging of loans from Balmain NB Non-Bank and satisfying All the Lenders' requirements $35,000.00
Plus GST $3,500.00
$38,500.00
Disbursements:
Valuation fee $11,000.00
Public risk Insurance $550.00
Establishment fee $5,500.00
Geotechnical Engineer $907.00
Barrister's fees $3.200.00 $21,157.00
TOTAL $59,657.00
Yours faithfully CONCEAL PTY LIMITED”
There is no dispute that Conceal is a company owned and controlled by Mr Doherty, Mr Stratford and their respective wives. It is a vehicle through which they have privately undertaken property development in the past. Given the allegations now made by Mr Tekin, the company has an unfortunate name. The evidence makes reasonably clear that it was the name under which the company was originally registered in 1998 before being sold as a shelf company to the Dohertys and Stratfords.
Mr Doherty prepared the Conceal letter but he does not say when he did so. Despite the letter being dated 4 August 2015, Mr Doherty accepts that he did not send it to Mr Tekin in August 2015. For his part Mr Stratford says he did not know about the letter in August 2015, February 2016 or at any time before Mr Tekin commenced these proceedings against the Firm.
Mr Tekin does not recall seeing the Conceal letter before February 2016. He did not know that a “commission” would be paid to a company associated with Mr Doherty and Mr Stratford. He further says that he would not have agreed to such a commission had he been told. He adds that had he been told about a commission he would have sought independent advice about the terms of the Balmain NB loan.
In February 2016 Mr Tekin had a meeting with Mr Doherty, Mr Stratford and a person from Balmain NB. They discussed Mr Tekin’s options for repaying the Balmain NB loan when it fell due on 17 July 2016. Mr Tekin does not remember what was said at the meeting. He does remember leaving the meeting and thinking that he had to sell the Land because “a further refinance will only make my situation worse”. However, Mr Tekin says that he thought that he could not sell the Land until after the Upside proceedings were resolved.
In June 2016 there was a further meeting of Mr Tekin, Mr Doherty, Mr Stratford and a person from Balmain NB. An arrangement was adopted under which the $125,000 in funds not yet drawn on the Balmain NB loan would be applied to further interest payments and the loan would thereby be extended for three months.
The final hearing of the case brought by Upside against Mr Tekin commenced on 5 July 2016. Shortly before the hearing Mr Tekin met Mr Cornish, the barrister who had been retained by the Firm. Mr Tekin says that Mr Cornish told him that Mr Stratford had “stuffed up”. Nonetheless, by lunchtime on the first day the mood was buoyant. Mr Doherty told Mr Tekin that he could sell the Land “at any price you want now because we are confident that Upside do not have a case”. Mr Doherty does not recall this conversation, but he does not deny it.
The hearing continued over four days in July and August. On 12 September 2016 Justice Darke dismissed Upside’s claim with costs. Whilst the Notice to Complete was defective and Mr Tekin was found to have repudiated the Contract in March 2015, Upside was not entitled to damages for two reasons. First, Upside had not proven that it was willing and able to complete the Contract in March 2015. Secondly, the market price of the Land was found to be less than the $7.8m which Upside had agreed to pay, with the result that Upside did not suffer any loss from Mr Tekin’s repudiation of the Contract. Upside’s only other potential loss was the $300,000 deposit which had already been repaid. Absent loss, Upside’s proceedings were dismissed.
Upside appealed. On 18 December 2017 Justice Darke’s finding that the market value of the Land was less than $7.8m was upheld by the Court of Appeal and the dismissal of the case affirmed.
The Firm did not charge Mr Tekin for its work on the litigation and absorbed all the disbursements, including fees paid to counsel. Costs orders were made in Mr Tekin’s favour both at first instance and on appeal. The evidence does not reveal whether the Firm’s costs arrangement with Mr Tekin permitted recovery of costs and/or disbursements from Upside and, if so, whether any recovery has been made.
Mr Tekin did not repay the Balmain NB loan on 17 July 2016. Despite the extension apparently agreed in June 2016, on 28 July 2016 the lender issued a default notice which Mr Tekin says he saw in September 2016. Mr Tekin did not sell or further refinance the Land. The evidence does not address the details. In about September 2016 Balmain NB exercised its security over the Land. Mr Tekin says the enforcement action by Balmain NB caused him to lose another undocumented offer of $12m, this time from a foreign client of an agent called “Suzie”.
In mid-2017 Balmain NB caused the Land to be sold for $6.85m. After repayment of the amount owing to Balmain NB and selling costs, Mr Tekin received slightly more than $2m.
Mr Tekin is dissatisfied with the outcome of his investment in the Land. As at 4 December 2014 Mr Tekin had debts of about $3m and a contract to sell the Land for $7.8m. The deposit had been received and used to pay ADN which was his most pressing debt at that time. If Mr Tekin completed the sale to Upside (and assuming Upside had the funds to pay the outstanding purchase price), a profit of more than $4m might have been expected. Greater profit might have been received if he or Mr Harsany could on-sell to a third party for a higher price. Greater yet profit might have been made had he lawfully terminated the Contract and sold the Land for $20m or some such figure. The actual outcome three years later was a profit of just over $2m, with the difference being consumed by large finance costs, fees, enforcement expenses incurred by Balmain NB and a sale price which was even less than the $7.8m to which Upside was bound as at 4 December 2014.
By these proceedings Mr Tekin seeks compensation from the Firm for its conduct on 4 December 2014 when Mr Stratford issued the defective Notice to Complete. He also seeks remedies for some of the Firm’s subsequent conduct.
Mr Tekin’s claim is pleaded in the Second Further Amended Statement of Claim filed on 18 June 2024. The final pleading lacks coherence and clarity, possibly because it appears to have passed through the hands of several different authors over the preceding four years. The Plaintiff’s submissions at trial were more focused, but a lack of clarity endured, particularly on the question of causation.
Having regard to the way the trial was conducted, Mr Tekin’s claims may be divided into five complaints:
the deficient drafting of the Notice to Complete, said to have caused the loss of the deposit and other loss;
the Firm’s failure to advise about selling the Land instead of refinancing the debt;
the Firm directing Mr Tekin to refinance with Balmain NB;
the Firm’s receipt of fees and other payments from the Balmain NB loan funds; and
the Firm acting for Mr Tekin in defence of the Upside proceedings when it had a conflict.
There is overlap between these complaints. Nonetheless, it is convenient to address each in turn and in the above order. Before doing so, the following is a summary of the elementary legal principles by which Mr Tekin’s negligence claims are to be determined.
Although other causes of action are also relied on, Mr Tekin’s case about the deficient drafting of the Notice to Complete is one of negligence. Negligence is addressed in Part 1A of the Civil Liability Act 2002 (NSW). The term “negligence” means failure to exercise reasonable care and skill: s 5. Part 1A applies to a claim resulting from negligence regardless of whether the claim is brought in tort, contract, under statute or otherwise: s 5A(1).
A determination that negligence caused a particular harm comprises two elements, one of which is “factual causation”. Factual causation requires that the negligence was a necessary condition of the occurrence of the harm: s 5D(1).
Section 5D(3) provides as follows:
(3) If it is relevant to the determination of factual causation to determine what the person who suffered harm would have done if the negligent person had not been negligent—
(a) the matter is to be determined subjectively in the light of all relevant circumstances, subject to paragraph (b), and
(b) any statement made by the person after suffering the harm about what he or she would have done is inadmissible except to the extent (if any) that the statement is against his or her interest.
There is no dispute that there was a failure to exercise reasonable care and skill when Mr Stratford served the Notice to Complete on 4 December 2014. When drafting the Notice to Complete, a solicitor acting with reasonable care and skill would have ensured that it complied with the Contract by specifying a sufficiently long time for completion by Upside. The solicitor would not have issued it at a time when Mr Tekin was himself in breach by not answering the requisitions. There is no suggestion that there was any difficulty (much less impossibility) with answering the requisitions and doing so at a time which would have entitled Mr Tekin to serve the Notice to Complete, if not on 4 November 2014 then very soon afterwards.
By drafting and issuing the Notice to Complete as he did, Mr Stratford failed to exercise reasonable skill and care. He was negligent for the purposes of Part 1A of the Civil Liability Act 2002 (NSW). He breached his common law duty of care to Mr Tekin and he breached the implied term of his retainer to provide his legal services with reasonable skill and care
In order to determine what, if any, loss was caused by this negligence, careful consideration needs to be given to the counterfactual: what would have happened had Mr Stratford acted with reasonable skill and care?
In the first instance, had Mr Stratford acted with reasonable care and skill the Notice to Complete would have been issued in such a way that it would have been effective to make time of the essence for completion by Upside. Depending upon what needed first to be done about the requisitions, the time-essential completion date would have been on or shortly after 19 December 2014. The objective historic facts demonstrate that Upside would not have completed on that date, just as it did not in fact complete on 18 December 2014 as required by the Notice to Complete. There is no suggestion that Upside immediately perceived that the defective Notice to Complete was defective and for that reason did not complete when otherwise it would have. Upon Upside’s failure to complete, Mr Tekin would have become entitled to terminate the Contract under clause 9.
Although on the hypothetical Mr Tekin would have been entitled to terminate at that point, there is no reason to suppose that he would have exercised that right before 13 March 2015 as in fact happened. The delay until 13 March 2015 was lengthy but no allegation is made about the Firm’s conduct during that period. Despite Mr Stratford’s concern about the Notice to Complete becoming stale, on the counterfactual it may be accepted that Mr Tekin’s right to terminate the Contract would have continued to be available to him when he eventually sought to exercise it on 13 March 2015. The Firm does not contend, let alone plead, otherwise. Mr Tekin would therefore have successfully exercised his right to terminate the Contract on 13 March 2015. The Contract would have come to an end without repudiation by Mr Tekin.
Mr Tekin claims that he has suffered four discrete losses, or groups of losses, because he did not lawfully terminate the Contract on 13 March 2015. They are:
(a) loss of his entitlement to retain the $300,000 deposit; (b) loss of his entitlement to claim, and if necessary sue for, the $480,000 balance of the deposit; (c) loss of his ability to sell the Land whilst the Upside litigation remained on foot; and (d) because he could not sell immediately, the adverse economic consequences which flowed from his need to refinance with Balmain NB from July 2015, namely:
(i) fees and charges paid to Balmain NB on the establishment of the refinance; (ii) interest subsequently paid to Balmain NB; (iii) receivers’ and other costs paid on the eventual realisation of the security by Balmain NB; and (iv) fees paid to the Firm and/or Conceal Pty Ltd as part of the refinance.
“Loss of the Plaintiff’s entitlement to rely upon clause 9.1 of the Standard Terms of the Sales Contract and thereby…keep the sum of $300,000, being that part of the deposit that [Upside] had paid under the Sales Contract.”
As stated in the factual narrative above, in October 2014 Mr Tekin received $300,000 from Upside as an instalment of the deposit to be paid under the Contract. Had Mr Tekin lawfully terminated the Contract he would have been entitled to retain the $300,000 deposit pursuant to clause 9.1 of the Contract. Instead, he was liable to repay. A failure to repay would have caused loss to Upside for which damages would in the ordinary course have been payable by Mr Tekin. As set out above, on 17 July 2015 Mr Tekin repaid the deposit and thereby extinguished that loss. To some extent at first instance and certainly on appeal, the fact that Mr Tekin had already repaid the deposit was material to the defeat the Upside litigation. It was also material to avoiding a costs order against Mr Tekin when costs subsequently followed the event.
For this item of loss, the amount of money necessary to put Mr Tekin in the position he would have been in had the Notice to Complete been valid is $300,000.
The Firm puts forward only one argument to resist this part of Mr Tekin’s claim. The Firm submits that the repayment of the deposit is not compensable loss because Mr Tekin would have repaid it to Upside even if he had lawfully terminated the Contract. For the following reasons I reject the hypothetical premise for the argument.
Would Mr Tekin have repaid the deposit to Upside after he lawfully terminated the Contract on 13 March 2015? Because the hypothesis relates to what Mr Tekin would have done, this question is to be answered on the balance of probabilities: Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 353; [1994] HCA 4 at [33] (Mason CJ, Dawson, Toohey and Gaudron JJ). It is to be determined subjectively in light of all relevant circumstances: s 5D(3)(a) of the Civil Liability Act 2002. The objective facts are the best guide in determining what Mr Tekin would have done: Fox v Percy (2003) 214 CLR 118 at 129; [2003] HCA 22 at [31] (Gleeson CJ, Gummow and Kirby JJ).
Before addressing the evidence it is important to identify the precise date at which the hypothetical question has to be answered. Mr Tekin received the $300,000 in October 2014 but he immediately paid it away to discharge his debt to ADN. Payment to ADN was expressly contemplated by special condition 11(a)(i) of the Contract. When Mr Stratford served the Termination Notice on 13 March 2015, Mr Tekin was again under financial pressure. Mr Doherty realised that Mr Tekin was under financial pressure and arranged for the Firm to meet some of the costs of applying for refinance. It may be accepted that Mr Tekin did not have the resources to repay $300,000 at that time. He next obtained the resources on 17 July 2015 when he drew down the Balmain NB loan funds. Whatever Mr Tekin’s attitude was previously, the question relevant to this part of his claim is whether he would have repaid the deposit on 17 July 2015 even though he had no obligation to do so.
“Q. You told him that you would repay it to him, whatever happened?
A. Yes.
Q. And that had been your intention since the middle of December, hadn't it?
A. Yeah, and to the question earlier, I told I had to return the deposit because I didn't think I, I had the legal right to keep it…”
The Firm submits that the Court ought not accept Mr Tekin’s evidence that he thought he was obliged to return the deposit even if he lawfully terminated the Contract. The Firm points out that Mr Tekin was by 2014 “very experienced in property” transactions. I accept that Mr Tekin’s general transaction experience is relevant. However, there is no evidence that any of his prior property transactions did not complete in circumstances which enlivened the vendor’s entitlement to forfeit the deposit. Had Mr Tekin lawfully terminated the Contract, it is probable that he would eventually have received advice from the Firm that he was entitled to keep the deposit. If not earlier, he would have likely received that advice as part of the arrangement of the refinance because the perceived need to pay $300,000 would have been relevant to the total amount of the refinance (which Mr Tekin was trying to minimise) and the distribution of the loan funds. On the hypothetical being considered, by 17 July 2015 Mr Tekin would have been better informed about his rights than he was in reality. Mr Tekin’s oral evidence does not demonstrate that he would have repaid the deposit even if he had been properly advised.
The Firm makes a further submission which seems to suggest that the purpose of the Contract between Upside and Mr Tekin was not to sell the Land but to help Mr Tekin out of his immediate financial troubles at the end of 2014. The implication appears to be that once that temporary assistance had been provided, the $300,000 was to be repaid in any event. There is little support for this submission in the evidence. Upside was incorporated specifically to purchase the Land. The formal documentation of the sale, including the Side Deed, is consistent with a genuine sale of the Land, as is the surrounding circumstances of paragraph 3 of Mr Harsany’s email on 1 December 2014 which is set out at [52] above. Even if Mr Harsany was motivated to help Mr Tekin, the form of the help might have been a bona fide agreement to purchase the Land on the terms set out in the Contract. Those terms included payment of the $300,000 deposit and immediate release to Mr Tekin. The terms also included Mr Tekin’s right to retain the deposit if the Contract was terminated under clause 9.1.
The Firm further points out that at 4:22pm on 13 March 2015 (the day the Termination Notice was issued) Mr Tekin sent a text to Mr Harsany in which he said:
“If you’re worried about the deposit, don’t…I will give it back to you in full, Denis.”
Mr Tekin could not remember if he thought he was legally obliged to give the deposit back when he sent this text but he agreed that he thought he was morally obliged to do so.
At 9:06am on 14 May 2015 Mr Tekin sent a text to Mr Harsany in which he said:
“Good morning Denis, how’re you going…No matter what even if you lose the court case I’m going to give you your deposit back…”
This text was sent after Upside had lodged a caveat over the Land which Mr Tekin was trying to refinance and over which he would need to give a new security to the incoming financer. The text was sent immediately after Mr Tekin discovered the caveat and, it may be inferred, after he heard Mr Stratford’s and Mr Doherty’s observations which is set out at [116]–[118] above.
Each statement by or attributed to Mr Tekin which is relied upon by the Firm was specific to the context in which the statement was made. The context deprives each statement of any substantial probative value for the hypothetical issue now being considered. In the middle of July 2015 no specific on-sale or re-sale was being considered, there would be no refinance under which Mr Harsany’s company would be the borrower and Mr Harsany would be the guarantor and Mr Tekin’s financial circumstances had deteriorated. Mr Tekin’s attitude had changed about other matters relating to the Land, including the price he was prepared to accept, the time he was willing to retain ownership and the re-zoning work he might undertake. Mr Tekin would have had the benefit of the Firm’s advice that he had no legal obligation to pay $300,000 to Mr Harsany. Importantly, Mr Harsany would not have had a caveat over the Land, which threatened to derail Mr Tekin’s refinance.
Another important objective fact is that the application for refinance which was lodged with Balmain NB on 17 March 2015 did not include $300,000 to repay the deposit. I have found that Mr Tekin was consulted about the figures. The most likely explanation (possibly the only explanation) is that Mr Tekin did not intend to repay the deposit on 17 March 2015. Money to repay the deposit was included in later figures from Balmain NB, but only after Upside lodged its caveat.
Having regard to the evidence as a whole, on the balance of probabilities I find that on 17 July 2015 Mr Tekin would not have repaid the $300,000 to Upside had he been entitled to keep it. This is especially so because Mr Tekin would have had to borrow a larger sum from Balmain NB in order to repay the deposit and he was trying to minimise his borrowings. The Firm’s only defence to this part of the claim fails.
One more issue needs to be addressed before moving on from the $300,000 deposit. In his submissions, Mr Tekin criticises the Firm because it advised him that he “had to” repay the deposit to Upside. The factual premise for the further complaint is doubtful. Mr Doherty observed on a number of occasions that Upside had a caveat over the Land which would be a barrier to refinance (or sale) and that the caveat (i.e. Upside’s claim for the deposit) would have to be addressed before Mr Tekin could “do anything” with the Land. These were statements about the commercially obvious. Mr Tekin would have understood them as such, as is apparent from Mr Tekin’s own email on 12 May 2015 (see [116] above) and also from his previous experience with ADN’s caveat. Apart from stating the commercially obvious, Mr Doherty did not advise Mr Tekin that he had to repay the deposit.
In paragraph 54 of the Second Further Amended Statement of Claim, Mr Tekin pleads that if the Notice to Complete had been properly drafted he would have received a further $480,000 as the balance of the deposit.
The relevant loss is particularised in paragraph 56 as follows:
“(a) Loss of the Plaintiff’s entitlement to rely upon clause 9.1 of the Standard Terms of the Sales Contract and thereby…recover from Upside or Mr Harsany the balance of the deposit in the sum of $480,000, and any interest thereon.”
The front sheet of the Contract specified the “Deposit” as $780,000 which was 10% of the purchase price. 10% is customary for a deposit for the purchase of land in New South Wales as is apparent from the statement on the front page of the Contract: “(10% of the price, unless otherwise stated)”.
Clause 2 of the Contract contained the standard terms about payment of the deposit, including the requirement that the purchaser must pay the deposit to the deposit holder (clause 2.1), time for payment of the deposit is essential (clauses 2.2 and 2.3) and if the deposit is not paid on time the vendor can terminate, although the right to terminate is lost as soon as the deposit is paid in full (clause 2.5).
Special condition 11, entitled “Deposit by Instalments”, specified the time for payment of the deposit. It provided that Upside could pay the deposit by instalments, the first of which was $300,000 to be paid within seven days of the date of the Contract. The balance was payable:
“either:
- on termination of the Contract by the Vendor if applicable; or
- in accordance with clause 16.7 of the Contract [which provides for payments on completion].”
“if the vendor is entitled to the deposit and the balance is not paid forthwith, the vendor is entitled to sue the purchaser for any unpaid balance of the deposit to recover it as a liquidated debt.”
The effect of these provisions is that had Mr Tekin lawfully terminated the Contract on 13 March 2015 he would have had a contractual entitlement to be paid $480,000 by Upside. Failing that, Mr Harsany had an obligation personally to pay under his guarantee in special condition 17(c)(i).
An issue arose at the hearing as to whether this contractual entitlement was void as a penalty. If so, Mr Tekin’s loss of that entitlement had no value. This is essentially a question of construction. Two questions need to be answered:
(a) was Upside’s contractual obligation to pay the $480,000 a penalty; and (b) if so, did it fall within the exception to the rule against penalties because it was a deposit (see Luong Ding Luu v Sovereign Developments Pty Ltd [2006] NSWCA 40 at [24] (Bryson JA, with whom Handley and McColl JJA agreed)).
A contractual promise is a penalty if it is collateral to another primary promise but it imposes an additional detriment on the promisor for the benefit of the promisee which is “out of all proportion” to the interest the primary promise is intended to protect. It must be in the nature of a security for, and in terrorem of, satisfaction of the primary promise. In the first instance, this requires identification of the interest the primary promise seeks to protect: Andrews v Australia New Zealand Banking Group Pty Ltd (2012) 247 CLR 205 at 216–17; [2012] HCA 30 at [10] (French CJ, Gummow, Crennan, Kiefel and Bell JJ agreeing).
Upside’s primary promise under the Contract was to complete the purchase. The interest which the primary promise sought to protect was Mr Tekin’s interest in receiving the $7.8m purchase price. The promise to pay the $480,000 was collateral or accessory to Upside’s promise in clause 16.7 to pay the purchase price on completion. It imposed a detriment on Upside ($480,000) which was in the nature of a security for, and in terrorem of, satisfaction of Upside’s primary promise. It may be accepted that the detriment was out of all proportion to Mr Tekin’s interest in receiving the $7.8m purchase price. If Upside failed to complete, Mr Tekin would not receive the $7.8m but he would retain ownership of the Land plus the $300,000 deposit already paid. Doubtless the $300,000 would cover any expense wasted by the aborted transaction. There is nothing to suggest that there was an anticipated fall in the value of the Land so as to make a further $480,000 proportionate to Mr Tekin’s loss from Upside’s failure to complete at the agreed price of $7.8m: Iannello v Sharpe (2007) 69 NSWLR 452 at 460; [2007] NSWCA 61 at [29] (Hodgson JA with whom Santow and Basten JJA agreed).
For these reasons, Upside’s obligation to pay $480,000 on termination was a penalty.
Did it fall within the exception for deposits? When referring to it in the Contract, the parties consistently and unequivocally described the $780,000 payment as the “deposit”. With reference to the “deposit”, the $480,000 payment was described as an “instalment” and the “balance”. However, whether a particular payment is a true deposit for the purpose of the rule against penalties is to be determined not by the label given by the parties but by the character of the payment and the obligation to make that payment: Luong Dinh Luu v Sovereign Developments Pty Ltd at [24]; Ianello v Sharpe at [31].
A true deposit is that part of the purchase price which the purchaser pays to show that he or she is in earnest in committing to pay the rest of the purchase price, on the understanding that the purchaser will not get the earnest money back if he or she does not complete the purchase: Luong Dinh Luu v Sovereign Developments at [24]. To be a deposit, the payment need not be made on the first day. It may be paid later and it may be paid by instalments over a period before completion occurs. However, it must be paid at a time when it is still capable of having the essential characteristic of demonstrating that the purchaser is committed to paying the rest of the purchase price: at [32].
This part of Mr Tekin’s claim is focused on the period from 19 March 2015 when the Upside dispute commenced and 17 July 2016 when Mr Doherty is alleged to have told Mr Tekin that he could sell the Land “at any price you want now”. There are also references in the Second Further Amended Statement of Claim and Mr Tekin’s Affidavit to the earlier period between 18 December 2014 and 19 March 2015 when Mr Tekin was labouring under the misunderstanding that the Upside Contract had already been terminated. Nothing was said about this period at the hearing. In any event the argument does not accommodate the fact that the Side Deed expressly contemplated that Mr Tekin might re-sell the Land even though the Upside Contract remained on foot. As set out above, there is no evidence of an offer for the Land which was capable of acceptance during this earlier period. Loss from the Land not being sold before 19 March 2015 (if any) may be put to one side.
For the period after 19 March 2015, the central premise for the claim is that the commencement of the dispute with Upside inhibited Mr Tekin’s ability to sell the Land until the dispute was resolved. The inhibition is illustrated by paragraph 27 of the Second Further Amended Statement of Claim where it is alleged:
“In breach of its Fiduciary Duty 1 referred to in paragraph 25B above, and also the Implied Retainer Term 1, Implied Retainer Term 2, Implied Retainer Term 3, and contrary to Firm's Representations 1, the Firm acted for the Plaintiff in the Upside Proceedings and the related appeal proceedings (Appeal Proceedings), from on or about 5 May 2015 to on or about 18 December 2017, while being in a conflict of interest (Conflict of Interest) as:
(a) while the Upside Proceedings and the Appeal Proceedings were on foot, and from the earlier point of Termination of Sales Contract on or about 19 March 2015, it was in the interest of the Firm for the Plaintiff not to sell the Property or to sell, or otherwise dispose or have disposed, the Property at a lower price; and
(b) it was in the interest of the Plaintiff to sell, or otherwise dispose or have disposed, The Property at the highest price possible.”
It may be accepted that the dispute with Upside gave rise to a complication for a sale of the Land. Upside claimed compensation for loss which was in part particularised by reference to the market value of the Land as at March 2015. Both parties marshalled expert evidence about the market value of the Land. Mr Tekin ultimately succeeded because Upside’s evidence did not prove that the market value exceeded the $7.8m purchase price in the repudiated Contract. Had there been an actual sale of the Land during 2015 for, say, $10m, the fact of that sale may have affected the expert evidence before Darke J. It may have otherwise affected his Honour’s finding that the market value was less than $7.8m. The higher the price for which the Land sold, the greater the potential effect. The implications for Mr Tekin are not clear because he would on this hypothesis have also received a high price. Nonetheless, if the Notice to Complete had been valid, Mr Tekin would have been able to make his decisions about selling the Land without having to consider the consequences for the Upside litigation.
In that context, Mr Tekin makes a causation argument in paragraphs 55 and 55A of the Second Further Amended Statement of Claim which provides:
“55 In the event that the Plaintiff had issued a valid Notice to Complete under the Sales Contract, and Upside had not complied with it, the Plaintiff could and would have sold the Property to a third party.
55A If the Property had been sold by the Plaintiff in the period from December 2014 to July 2017 to a third party, the Property sale price would have exceeded $6,850,000 at any point within that time period.”
“…
(b) Loss of the opportunity to sell the Property to a third party:
i. 14 days after the Purported Notice to Complete was issued; or
ii. in the alternative, after validly terminating the Sales Contract from 19 December 2014 onwards; or
iii. At any point in time from late December 2014 to July 2017.
…
(di) Further or in the alternative, loss of the opportunity to sell the Property to a third party after Upside terminated the Sale Contract from 19 March 2015.
(dii) In the event that the sale price of the Property exceeded $6,850,000 as at the date of Upside terminating the Sales Contract, being 19 March 2015, the Plaintiff's loss of the difference between $6,850,000 and the sale price of the Property.
…”
It is clear from the pleading that central to this part of the case is the proposition that Mr Tekin would have sold the Land after 15 March 2015 if he hadn’t been inhibited by the Upside litigation. This is another hypothetical question about what Mr Tekin would have done which he must prove on the balance of probabilities in accordance with the principles set out above.
The allegation is that Mr Tekin “would have sold” the Land. This is a part of Mr Tekin’s case which is undermined by his binary approach to his intentions about selling the Land. When the content and timing of Mr Tekin’s intentions are analysed with more rigour, it is clear that Mr Tekin did not suffer this item of loss. For reasons unrelated to the dispute with Upside, the evidence shows that Mr Tekin would not have sold the Land prior to the conclusion of the Upside litigation.
At least from 13 March 2015 Mr Tekin’s wish immediately to sell the Land was based on his belief that he could sell it for a very high price or as part of a lucrative joint venture of the kind contemplated by the “offers” referred to in [71], [106] and [141] above. However if he could not procure such a sale or joint venture, Mr Tekin wanted to retain the Land for a further period of uncertain duration in the hope or expectation that such a sale or joint venture could be procured at a later date. That was Mr Tekin’s attitude throughout early 2015 and into early 2016. In particular, Mr Tekin formed that attitude before the dispute with Upside arose in mid-March 2015.
The conclusion stated in the preceding paragraph is to be inferred from the following objective facts, namely:
(a) in October 2014 Mr Tekin removed his most pressing financial concern (ADN’s bankruptcy notice) which had been the catalyst for him to enter the contract to sell the Land for only $7.8m; (b) even in October 2014 Mr Tekin thought a price in excess of $7.8m was achievable as demonstrated by the fact that he and Mr Harsany went to the trouble of putting in place the Side Deed which presupposed that a higher price could be achieved; (c) although no on-sale or re-sale was secured under the Side Deed, Mr Tekin’s dealing with prospective purchasers brought to his attention other offers, including one for $10.93m; (d) in December 2014 Mr Harsany stated that refinance was more likely than completion of the sale at $7.8m – Mr Tekin was aware of Mr Harsany’s views and did not dissent from them; (e) in early 2015 Mr Tekin gained further knowledge of the potential market for the Land by virtue of the offers referred to at [71] above; (f) Mr Tekin said in cross-examination:
“PRIESTLY: You certainly would not have been content would you to have sold the property for less than $10 million by the end of February 2015?
TEKIN: Correct.
PRIESTLY: Did you say correct?
TEKIN: Yeah. I wouldn't have.”
from which it is clear that Mr Tekin did not want to sell at any price;
(g) on 13 March 2015 Mr Tekin positively took steps to avoid the “risk” that he would have to sell the Land for $7.8m; (h) even though he regarded it as “expensive”, in March 2015 Mr Tekin would have accepted refinance from Chifley Securities if he had not received a better offer from Balmain NB; (i) in April 2015 Mr Tekin gained further knowledge of the potential market as set out at [106] above; (j) Mr Tekin accepts that he and Mr Doherty discussed including $125,000 in the amount of funds to be borrowed from Balmain NB, which shows that Mr Tekin placed some importance on being able to fund re-zoning work given his express desire otherwise to reduce the amount he had to borrow in order to save interest and possibly fees; (k) Mr Tekin gained further knowledge of the potential market as set out at [141] above; (l) Mr Tekin’s evidence as set out at [123] above makes clear that by July 2015 Mr Tekin’s desire to sell the Land as quickly as possible envisaged a sale for a very high price or a lucrative joint venture; (m) it was not until September 2015 that Mr Tekin attended the meeting at Council after which Mr Doherty said that further re-zoning work would be a waste of money; and (n) even then Mr Tekin persisted into early 2016 with further re-zoning work by retaining another town planner and having another preliminary report prepared.
The proposition that during 2015 Mr Tekin would have been willing to sell the Land at any price is inconsistent with the objective facts. On the contrary, I find that at all times from at least October 2014 Mr Tekin was willing to sell the Land at a price acceptable to him but not otherwise, and that from at least December 2014 an acceptable price was more than $10m. As set out above, at no time during 2015 (or at any other time) was there a prospect of there being a buyer for the Land being sold at more than $10m.
There is no basis in the evidence to find that the Upside dispute made a material difference to Mr Tekin’s attitude to selling the Land. The evidence does not go further than Mr Tekin’s affidavit evidence set out at [123] above. In addition to the availability of $125,000 to meet re-zoning costs, Mr Tekin says that he thought re-zoning work was a good option “while the Upside dispute was being resolved and (as I believed at the time) I could not sell the Properties”. This statement does not demonstrate that Mr Tekin would have sold the Land immediately if the Upside dispute had not arisen in March 2015. The early part of Mr Tekin’s evidence at [123] above makes perfectly clear that his desire to sell envisaged a sale at a very high price or as part of a lucrative joint venture. No such sale or joint venture was available. That was the reason Mr Tekin did not sell the Land and instead undertook re-zoning work.
The same conclusion flows through to 2016. In July 2015 Mr Tekin obtained refinance for a period of 12 months, which he subsequently extended for a further three months. Once the new finance was in place Mr Tekin had no need to make an immediate sale. He had 12–15 months to look for a purchaser at a high price or a joint venture partner. He had funds with which to undertake re-zoning work in the meantime.
Mr Tekin has not proved that the defective drafting of the Notice to Complete caused further loss by virtue of the Land not being sold prior to the Upside dispute being resolved. Specifically, Mr Tekin’s loss does not include the difference between the market value of the Land in 2015 and the $6.85m ultimately achieved in 2017. In the language of s 5D(1) of the Civil Liability Act 2002, the defective drafting of the Notice to Complete was not a necessary condition of Mr Tekin’s failure to sell the Land for a higher price.
The conclusion makes it unnecessary to make a finding about the market value of the Land at any particular time.
In summary, the only loss suffered by Mr Tekin as a result of the Notice to Complete being defective and Mr Tekin not therefore validly terminating the Contract on 13 March 2015 is the loss of his entitlement to retain the $300,000 deposit.
That loss was suffered on 17 July 2015 when Mr Tekin repaid the $300,000 deposit from the funds borrowed from Balmain NB.
Mr Tekin contends that the Firm committed a separate breach of its duty of care when, on 13 March 2015, it issued the Termination Notice. The burden of the allegation is that the Firm ought to have checked the Notice to Complete, realised it was defective and not issued the Termination Notice. That contention cannot be accepted. The content of the Firm’s duty of care was informed by the terms of its retainer as at March 2015 not least because the retainer defines the task which the Firm was required to undertake: Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at 532; [2004] HCA 16 at [28] (Gleeson CJ, Gummow, Hayne and Heydon JJ). It cannot be assumed that an instruction to a solicitor to issue a termination notice includes an instruction to revisit the work previously performed on the notice to complete: Winnote Pty Ltd v Page (2006) 68 NSWLR 531 at 550; [2006] NSWCA 287 at [101] and [104] (Mason P with whom Tobias JA agreed). It depends on the facts of an individual case.
Mr Tekin’s instruction to Mr Stratford was given in March 2015. The Notice to Complete had been issued three and a half months previously and there had been no prior dispute about the efficacy of the Notice to Complete. Given the length of time, the Firm’s duty of care may have required it to consider whether the Notice to Complete was stale (which Mr Stratford did) but without more Mr Stratford’s duty did not require him to revisit the original drafting of the Notice to Complete on the facts of this case. This conclusion is consistent with the evidence of Mr Boyce about the usual practice of solicitors acting on a conveyance transaction. At paragraph 61 of his Report dated 21 August 2024 Mr Boyce says:
“It is understood that the Solicitors were not aware of the specific error in the Notice to Complete in that it fixed a completion date 1 day earlier than permitted under the Special Conditions in the Contract for Sale. Given that the solicitors acting for Upside had not as far as I am aware communicated with the Solicitors during the period fixed by the Notice for completion challenging the validity of the Notice to Complete it is unlikely that the Solicitors would have specifically reviewed the issuing of the Notice to Complete to ensure that it was a valid notice as to the timetable fixed for completion.”
Mr Tekin’s closing submissions on this aspect of the case were vague, but nothing appears to be relied upon other than the pleaded case.
The advice which Mr Tekin received from the Firm is relevantly pleaded in paragraphs 25A and 28 of the Second Further Amended Statement of Claim. Paragraph 28 alleges:
“On or about 13 March 2015, the Firm advised the Plaintiff that he could and should not sell the Property while the Sales Contract was on foot (Incorrect Not Sell Representation).”
“In about April 2015, the Firm by Mr Stratford, orally advised the Plaintiff that he was required to negotiate with Upside before selling the Property to a third party and may have to pay about $2,000,000 to Upside (Incorrect Negotiation Representation).”
“At the time that the Firm advised the Plaintiff to repay the deposit, the Firm ought to have informed but did not inform the Plaintiff that the Plaintiff could upon repayment of the $300,000.00 deposit to Upside upon settlement of the resale or otherwise, sell the Property to a third party or otherwise deal with the Property (Silence Conduct 4).”
“At the time that the Firm advised the Plaintiff to repay the deposit. and continuing until July 2017, that is the date Balmain NB sold and transferred title to the Property, the Firm could and should have, alternatively or additionally to the paragraph above, advised the Plaintiff that the Firm would repay the deposit due to the Firm's error or negligence in causing the Wrongful Repudiation, and that the Plaintiff should seek independent legal advice so that he could sell or otherwise dispose of the Property for the highest price he could achieve (Silence Conduct 6).”
“The Plaintiff relied upon the Firm's advice, the Incorrect Not Sell Representation, and Silence Conduct 4, referred to in paragraphs 28A and 29A and Dishonest Conduct 1 and did not seek to sell the Property for most of 2015-2016.”
“But for the events referred to in paragraph 39 above, the Plaintiff could and would have sold the Property to prospective buyers in or about mid-2015 and discharged the mortgage over the Property to HSBC.”
Paragraph 55A alleges that such a sale would have been at a price in excess of $6.85m.
Corresponding allegations are made elsewhere in the pleading where particular causes of action are addressed, such as paragraph 52 where it is alleged that the Firm failed to advise Mr Tekin that he “could sell the [Land] to a third party”.
Addressing first the advice alleged positively to have been given, in closing submissions Mr Tekin contended that he was “actively dissuaded” by the Firm from selling. In their terms, the pleaded allegations hardly rise to the level of active dissuasion. I accept that a conversation with Mr Stratford occurred to the effect of that alleged in paragraph 28 of the Second Further Amended Statement of Claim. It occurred on 13 March 2015, at which time Mr Tekin was still contractually bound to sell the Land to Upside. The context of the conversation was Mr Tekin wanting to enter a fresh contract to sell the Land to a third party free of the Upside Contract and, by implication, free of the Side Deed. In its terms, Mr Stratford’s advice was limited to the subsistence of the Upside Contract. The advice was necessary, appropriate and (assuming Mr Tekin did not want to share with Upside under the Side Deed) correct. It did not amount to dissuasion to sell. On the contrary, Mr Stratford followed up the conversation by issuing the Termination Notice in order to facilitate a sale by Mr Tekin.
There is a factual dispute about whether the second conversation alleged in paragraph 25A occurred and, if so, what was said. The matters allegedly discussed in the conversation included a distinction between something Mr Tekin had to do (negotiate) and something he may have to do (pay money). The conversation addressed both legal matters and commercial matters. The words the effect of which Mr Tekin says he remembers are susceptible to nuance.
I have summarised the relevant evidence at [106] and [107] above. Apart from Mr Tekin’s recollection as set out in his Affidavit there is no evidence before the Court to prove that the conversation occurred or what was said. Mr Tekin must prove on the balance of probabilities that the effect of the words spoken by Mr Stratford was that Mr Tekin had an obligation to negotiate with Mr Harsany before selling the Land to a third party. The Court must have an actual persuasion that words were spoken to that effect: Briginshaw v Briginshaw (1938) 60 CLR 336 at 361 (Dixon J). There is no contemporaneous documentary record, so Mr Tekin is confronted by the difficulties of proof identified in Watson v Foxman (1995) 49 NSWLR 315 at 318-319 where McLelland CJ in Eq said in another context:
“In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.”
As text written on the page, the words which Mr Tekin set out in paragraph 137 of his Affidavit do not necessarily constitute dissuasion from selling the Land. They could also be read as words of encouragement because Mr Stratford identified a way by which a sale might be brought about (offer a couple of million). Mr Tekin evidently perceived them as dissuasive, but that might have depended on his reading of the tone of voice in which they were spoken by Mr Stratford.
There are a number of objective facts which weigh against the accuracy of Mr Tekin’s memory that Mr Stratford tried to dissuade him. Mr Stratford often took good file notes but there is none for this conversation, which throws doubt on whether the conversation occurred at all. In closing submissions Mr Tekin accepted that he “was not always an accurate historian”, a limitation not cured by his honesty. Mr Tekin says in paragraph 137 of his Affidavit that he does not remember what answer was given to his last question, or whether any answer was given, which leaves the evidence with an air of unreality. Mr Tekin says he never did understand why he would have to pay something to Upside. If the conversation occurred as alleged then, rather implausibly, Mr Tekin seems content not to make any further enquiry after Mr Stratford referred to such a payment.
Having regard to the evidence, I do not have an actual persuasion that Mr Stratford said to Mr Tekin words which had the effect stated in paragraph 137 of Mr Tekin’s Affidavit and pleaded in paragraph 25A of the Further Amended Statement of Claim.
The allegations about the Firm’s failure positively to advise Mr Tekin that he could sell the Land are set out above. The first observation to make is that it was no part of the Firm’s retainer to give Mr Tekin commercial advice about how to manage his finances or how to maximise his profit from his investment in the Land. Were it otherwise it would be an unusual case warranting specific pleading of the terms of the retainer. There is no such pleading in the Second Further Amended Statement of Claim. The question whether the Land should be sold in 2015, or in 2016, or in 2017 or whether at any particular time it should be refinanced with the aim of achieving a higher price at some date in the future, was not a matter for advice from the solicitors. Whether Mr Tekin ought manage his debt by selling some or all of the Land, or selling his other real estate, or whether he ought borrow more money and if so from whom, were matters for judgment, to be informed by numerous considerations including some peculiar to Mr Tekin such as his appetite for risk. The Firm’s duty of care did not include an obligation to give advice on such matters.
Another significant problem with the allegations is that from at least early 2015 Mr Tekin was attempting to address his financial difficulties not by selling the Land but by refinancing it. That approach climaxed on 17 July 2015 when Mr Tekin drew down the refinance from Balmain NB. Whilst Mr Tekin was always open to a sale at a very high price or as part of a lucrative joint venture, given Mr Tekin’s active pursuit of refinance it is implausible that an occasion occurred which required the Firm to advise Mr Tekin that he could instead sell the Land.
There was one occasion when the possibility of a sale arose for discussion between Mr Tekin and Mr Stratford, namely on 13 March 2015. There is no dispute that Mr Tekin and Mr Stratford had a conversation in which Mr Stratford advised that Mr Tekin could not sell the Land “while the Upside Contract was still in place”. Mr Tekin then gives the following evidence:
“…I understood that following that conversation, Mr Stratford would be doing something to deal with the Upside Contract to allow me to sell the Properties, however I did not know what it was, and he did not explain it to me. He said to me words to the effect of "I will take care of if'. I now understand that the Upside Contract had to be terminated in writing.”
In other words, from 13 March 2015 Mr Tekin understood that he could sell the Land because Mr Stratford had taken care of it. Thereafter the Firm did not specifically advise Mr Tekin that he could sell the Land but given the events on 13 March 2015, no occasion arose which required that specific advice to be given.
The only occasion for advice which is referred to in Mr Tekin’s closing submissions is the fact that Mr Tekin had “increasing financial problems”. However, to the Firm’s knowledge, from February until July 2015 Mr Tekin’s plan was to deal with his financial problems by refinance. Further, Mr Stratford knew from early 2015 that Mr Tekin was also taking some steps to sell the Land for a very high price or pursuant to a lucrative joint venture, which knowledge was inconsistent with a realisation that Mr Tekin was in need of advice that he could sell. Mr Tekin’s attempts to sell took place both before and after the Upside Contract was terminated and before and after the dispute with Upside arose.
Even if the Firm did owe a duty to advise Mr Tekin that he could sell the Land, there was no occasion upon which a solicitor acting with reasonable care would have given that advice. There was no breach of the duty.
Mr Tekin adds a further layer to this second complaint by alleging that the advice given (or not given) by the Firm breached not only duties of care owed under the contract of retainer and the common law of negligence, but also a fiduciary duty owed by solicitors to their clients. Mr Tekin’s articulation of this aspect of his case was particularly vague. Given the gravity of some of the allegations which were relevantly made, far greater clarity was warranted.
The fiduciary duty allegedly breached is pleaded in paragraph 25B of the Second Further Amended Statement of Claim as follows:
“The Firm had a fiduciary duty to the Plaintiff not to act in a conflict of interest (Fiduciary Duty 1)”
In paragraph 37C it is alleged that the advice given by the Firm and the failure to give specific advice about selling the Land was “motivated” by the conflict referred to at [222] above. It is further alleged that the Firm acted dishonestly. Apart from what may be gleaned from this part of the pleading, the Second Further Amended Statement of Claim does not squarely state how it is alleged that the pleaded fiduciary duty was breached. Mr Tekin’s closing submissions provided some further insight, but only to a limited extent.
A breach of duty is not a breach of fiduciary duty merely because the party in breach has the status of being a fiduciary, such as a solicitor. For any alleged breach of duty it is necessary to examine the content of the duties owned by the fiduciary and the conduct which is said to constitute the breach to determine whether a fiduciary component of the duties has been breached. In Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 48 NSWLR 1 at 45; [1999] NSWCA 408 at [188], Spigelman CJ, Sheller and Stein JJA said:
“Even in the case of a solicitor client relationship, long accepted as a status based fiduciary relationship, the duty is not derived from the status. As in all such cases, the duty is derived from what the solicitor undertakes, or is deemed to have undertaken, to do in the particular circumstances. Not every aspect of a solicitor client relationship is fiduciary. Conduct which may fall within the fiduciary component of the relationship of solicitor and client in one case, may not fall within the fiduciary component in another.”
The touchstone of a fiduciary duty is undivided loyalty to the interest of the person to whom the loyalty is owed: Beach Petroleum v Kennedy at [201]; Gerrard Toltz Pty Ltd v City Garden Australia Pty Ltd (in liq) [2024] NSWCA 232 at [36] (Stern JA, with whom Kirk JA and Basten AJA agreed).
Mr Tekin’s argument appears to be that the Firm had its own interest in the Land not being sold in 2015 lest the sale demonstrate that the Land was worth more than $7.8m. The Firm’s interest arose because it feared that it would be liable to Mr Tekin for any damages he had to pay to Upside. Mr Tekin also contends that the Firm had a further interest in Mr Tekin not selling the Land because the Firm wanted him to refinance with Balmain NB from which the Firm planned to receive money for its own benefit. This is addressed further below.
Given these interests, Mr Tekin contends that the Firm was subject to a conflict when advising Mr Tekin that he could not sell the Land and when failing to advise that he could.
The duty relied upon by Mr Tekin for this argument is correctly characterised as fiduciary. However, the fiduciary overlay does not cure the fatal defects in the equivalent contract and negligence claims. Factually, the complaint fails because Mr Tekin has not proved that he was positively advised he could not sell the Land or because there was an occasion when he should have been advised that he could sell. The Firm’s duty of undivided loyalty did not operate at large. It was constrained by the retainer which did not extend to giving advice about commercial matters. No fiduciary duty obliged the Firm to advise Mr Tekin that he could sell the Land in order to address his financial problems.
I also reject the allegation that Mr Stratford or Mr Doherty or any one else at the Firm was motivated to give (or fail to give) advice about selling the Land by a perceived interest of the Firm. I reject the allegation that Mr Stratford or Mr Doherty or any one else at the Firm acted dishonestly in this regard.
Nor does recasting this complaint as a breach of fiduciary duty overcome the problem that no loss was caused. The only remedy claimed for the alleged breach of fiduciary duty is equitable compensation. To the extent that Mr Tekin contends that this alleged breach of fiduciary duty caused him to lose a sale of the Land for more than $6.85m, he still has to prove an adequate or sufficient connection between the breach of the fiduciary duty and the equitable compensation which he claims. There is no equitable by-pass of the need to establish causation: Youyang Pty Ltd v MinterEllison Morris Fletcher (2003) 212 CLR 484 at 501-502; [2005] HCA 15 at [43]-[44] (Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ). He has to show that the Firm’s divided loyalty led to the loss: Beach Petroleum v Kennedy at 90; [429] and [432]. He must do so having regard to a common sense view of causation: (2018) 265 CLR 1 at 37*;* [2018] HCA 43 at [89] (Gageler J). Given my finding that from early 2015 Mr Tekin wanted to retain the Land and undertake re-zoning work, and that Mr Tekin’s plans were not affected by the Firm’s advice about selling the Land, Mr Tekin has not demonstrated an adequate or sufficient connection between the alleged breach of fiduciary duty and his claim for equitable compensation.
The third complaint is closely related to the second. To some extent they are two aspects of a single complaint.
In the Second Further Amended Statement of Claim, paragraph 29(d) alleges:
“On or about 16 March 2015 the Firm advised the Plaintiff (Mid March 2015 Conduct) that:
…
(d) the Plaintiff ought to apply to Balmain…to obtain a facility to refinance the facility…with HSBC and provide funds to the Plaintiff to repay the deposit of $300,000 to Upside.”
The advice is alleged to have been given in breach of the Firm’s retainer (apparently the implied term to act with reasonable skill and care) and in breach of the common law duty of care.
It is further alleged that in reliance on the advice Mr Tekin refinanced with Balmain NB. Mr Tekin alleges that he would not have entered into the loan agreement with Balmain NB but for the Firm’s advice. The loss suffered by Mr Tekin is the same as the loss said to have been caused by Mr Tekin being advised not to sell the Land.
The factual basis for the third complaint has not been made out. Refinance was being discussed by Mr Tekin from as early as December 2014. Mr Tekin’s evidence which is set out at [75] above makes clear that he made his own decision to seek refinance. He sets out his own reasons for the decision. Without any involvement by the Firm, Mr Tekin sourced an offer from Chifley Securities. On 26 February 2015 Mr Tekin sent the offer to Mr Stratford for comment. Mr Stratford agreed with Mr Tekin’s view that the Chifley Securities offer was “expensive”. Mr Stratford offered to ask Mr Doherty to see if he could get a “better” offer from someone he knew. Mr Tekin evidently approved and Mr Stratford spoke to Mr Doherty. Mr Doherty thereafter went to work and ultimately extracted an offer from Balmain NB which was better in every way. He did so just in time to avoid Mr Tekin accepting the offer from Chifley Securities which by that stage Mr Tekin had decided to accept in order to relieve the financial pressure he was under.
There is no evidence that Mr Stratford or Mr Doherty advised Mr Tekin that he ought to refinance or that he ought to borrow specifically from Balmain NB. They did not do anything to direct Mr Tekin to Balmain NB. They took steps to provide Mr Tekin with an alternative to Chifley Securities. Mr Tekin then made a commercial decision.
Nor has Mr Tekin proved that he suffered any loss from the Firm’s alleged advice to refinance with Balmain NB. The counterfactual put forward by Mr Tekin is that absent an offer from Balmain NB, he would have immediately sold the Land. For the reasons given above that contention is to be rejected. The counterfactual is inconsistent with my findings that Mr Tekin would only have sold for more than $10m and no such offer was available.
Mr Tekin’s counterfactual is also to be rejected for the reason that, if Mr Tekin had not refinanced with Balmain NB, he would have refinanced with Chifley Securities. He had already signed the letter accepting the Chifley Securities offer when the offer from Balmain NB arrived. With Chifley Securities he would have suffered the same loss which he now claims from not selling the Land in 2015. The terms offered by Chifley Securities were more severe than those offered by Balmain NB, including a higher interest rate. In all likelihood his loss would have been greater had he not accepted the offer from Balmain NB.
“The Plaintiff was subjected to dishonest conduct, motivated by the Conflict of Interest and an intention in the partners of the Firm, by the conduct of Mr Stratford or Mr Doherty, to make profits or fees secretly in breach of Fiduciary Duty 1 and Fiduciary Duty 2 (Dishonest Conduct 2) by virtue of the Dishonest Conduct 1 and Silence Conduct 7.”
If Mr Tekin’s allegations of improper motive and dishonesty are intended to extend to this part of his case then they are to be rejected for the same reasons as above. Mr Doherty accepted that it occurred to him that the Firm might receive some fees if Mr Tekin refinanced, but that evidence fell far short of Mr Doherty being motivated by self-interest let alone dishonesty when arranging the finance from Balmain NB.
Mr Tekin’s claim for equitable compensation for not selling the Land in 2015 plus refinance costs adds nothing and fails for the same additional causation reason.
Mr Tekin’s fourth complaint arises from the monetary benefits which the Firm received at the draw down of the Balmain NB refinance on 17 July 2015.
This complaint is related to the second and third complaints. Mr Tekin contends that the Firm dissuaded him from selling the Land and directed him to refinance specifically with Balmain NB because the Firm had a larger scheme commencing in mid-March 2015. The Firm is alleged to have had the twin motivations of:
(a) forestalling evidence of the market value for the Land in excess of $7.8m; and (b) obtaining for itself monetary benefits from the Balmain NB refinance.
By implementing the wider scheme, the Firm is said to have acted dishonestly and in breach of fiduciary duties which extends to the receipt of the financial benefits.
There is no dispute that the Firm did act for Mr Tekin on the negotiation and entry into the refinance transaction with Balmain NB: Second Further Amended Statement of Claim paragraph 43A is admitted by the Firm. Mr Stratford appropriately accepted that the Firm’s work on the refinance was the provision of professional legal services. It follows that independent of any larger scheme, the Firm owed Mr Tekin a duty of undivided loyalty when performing the refinance work. Its receipt of monetary benefits is to be understood in that context.
“In particular, the fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is "a conflict or a real or substantial possibility of a conflict" between personal interests of the fiduciary and those to whom the duty is owed.”
“Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it. Any such benefit or gain is held by the fiduciary as constructive trustee: see Keith Henry & Co. Pty. Ltd. v. Stuart Walker & Co. Pty. Ltd. That constructive trust arises from the fact that a personal benefit or gain has been so obtained or received and it is immaterial that there was no absence of good faith or damage to the person to whom the fiduciary obligation was owed. In some, perhaps most, cases, the constructive trust will be consequent upon an actual breach of fiduciary duty: e.g., an active pursuit of personal interest in disregard of fiduciary duty or a misuse of fiduciary power for personal gain. In other cases, however, there may be no breach of fiduciary duty unless and until there is an actual failure by the fiduciary to account for the relevant benefit or gain: e.g., the receipt of an unsolicited personal payment from a third party as a consequence of what was an honest and conscientious performance of a fiduciary duty.”
The principle is strict. The objective is not the avoidance of loss to the person to whom the fiduciary duty is owed but to hold the fiduciary (particularly a solicitor) to, and vindicate, the high duty owed: Maguire v Makaronis (1997) 188 CLR 449 at 465; [1997] HCA 23 at [38], (Brennan CJ, Gaudron, McHugh and Gummow JJ).
The duty turns on the existence of a conflict or possible conflict of interest. It is not therefore necessary to consider the fiduciary’s motive: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 103 (Mason J).
The duty is qualified by consent from the person to whom the duty is owed: Pilner v Duke Group at 199; [78]. For consent to relieve the fiduciary of liability, it must be fully informed: Hasler v Singtel Optus Pty Ltd 87 NSWLR 609 at 638; [2014] NSWCA 266 at [133] (Leeming JA with whom Barrett and Gleeson JJA agreed). There must be a conscientious disclosure of all material circumstances and everything known to the fiduciary relating to the proposed transaction which might influence the person to whim the fiduciary duty is owed: Law Society of New South Wales v Harvey [1976] 2 NSWLR 154 at 170 (Street CJ). Ultimately, it is a question of fact in each case what is required for consent to be fully informed: Maguire v Makaros at 466. In any individual case, what is required will depend on the sophistication and intelligence of the person to whom disclosure is to be made: Salmon v Albarran (2025) NSWCA 42 at [165] (Leeming JA with whom Ward ACJ and Ball JA agreed).
Properly viewed, disclosure by a fiduciary is a defence to the alleged breach of duty rather than performance of a positive duty to disclose: Xiao v BCEG International (Australia) Pty Ltd (2023) 111 NSWLR 132 at 163; [2023] NSWCA 48 at [144] (Gleeson JA, with whom Mitchelmore JA and Griffith AJA agreed). If the defence is to be relied upon, the fiduciary must positively plead it: Salmon v Albarran at [145]. The fiduciary bears the burden of proving that the consent was fully informed: Hasler v Singtel Optus Pty Ltd at 638; [135].
A fiduciary is liable to account for a monetary benefit if it was obtained in circumstances where there was a conflict or possible conflict of interest and duty: Hospital Products at 107 (Mason J). All that needs to be shown is that the monetary benefit would not have been obtained but for the wrongdoing: Ancient Order of Foresters at 12; [9] (Kiefel CJ, Keane and Edelman JJ) and 43; [88] (Gageler J).
The fiduciary is liable to account as a “constructive trustee”. That label serves no purpose other than to indicate that the fiduciary is amenable to a range of remedies traditionally available in equity against a trustee who is proscriptively in breach of trust, including equitable compensation and an order to account: at 32; [74] (Gageler J).
The facts about the Firm’s receipt of monetary benefits from the refinance with Balmain NB are set out above. The evidence shows that at settlement, the Firm received a bank charge for $127,398.17. When later asked to explain where that money went, Mr Doherty wrote the email set out at [146] above. The email is the only evidence of where the money went.
For reasons explained in more detail below, none of the money received by the Firm can be viewed as a fee for providing legal services when arranging the Balmain NB loan:
(a) Some of the money was for legal services provided by the Firm, but not in relation to the Balmain NB loan. (b) Otherwise the “consultancy expenses” were not paid to the Firm but to the private company owned by Mr Doherty, Mr Stratford and their wives. It was relevantly a lump sum payment which bore no discernible relationship to the amount of services provided. If it was for legal services, the documentation of the “consultancy expenses” departed from the statutory regulation of solicitor costs to an extent which deprived the Firm of any entitlement it otherwise had to be paid the money.
“If, when it is his duty to safeguard and further the interests of the company, he uses the occasion as a means of profit to himself, he raises an opposition between the duty he has undertaken and his own self interest, beyond which it is neither wise nor practicable for the law to look for a criterion of liability.”
Turning then to the specifics of the monetary benefits received by the Firm, the email which Mr Doherty sent to Mr Tekin on 10 February 2016 only accounts for $111,096.50. The Firm has not accounted for the remaining $16,301.67. There is no suggestion let alone evidence that the $16,301.67 was for legal fees properly due to the Firm. As an unexplained receipt be a fiduciary, the Firm is to be ordered to pay that sum to Mr Tekin.
The first item listed in the email is $59,657 paid to Conceal as “consultancy expenses”. The only evidence of a liability to make the payment is the form of invoice dated 4 August 2015 referred to in [149] above. It is not signed. Although it purports to include an amount by way of GST, it is doubtful that it is a tax invoice because it does not describe itself as a “tax invoice” which is the usual way that a document is taken to comply with s 29.70(1)(d) of A New Tax System (Goods and Services) Act 1999 (Cth), as set out in the ATO’s Goods and Services Tax Ruling GSTR 2013/1 at paragraphs [17]–[18]. The invoice is addressed to Mr Tekin but I accept his evidence that he did not receive it in August 2015 and that he did not see it until Mr Doherty sent it to him on 10 February 2016. In view of that fact plus the fact that Mr Doherty admits he did not send it in August 2015, the fact that Mr Stratford says that he did not see it until these proceedings were commenced and the absence of any documentary evidence of a contemporaneous payment to Conceal, I find that the letter dated 4 August 2015 was never sent but was prepared after Mr Tekin made his enquiry in February 2016. I further find that no payment was made by the Firm to Conceal, whether in the amount of $59,657 or any other amount.
As a fiduciary recipient of money drawn down from the client’s lender, the Firm bears the onus of proving where the money went. By reason of the matters referred to in the preceding paragraph the Firm has failed to do so. Like the $16,301.67, the further sum of $59,657 is not accounted for. The Firm is to be ordered to pay that further sum to Mr Tekin.
Even if it is assumed that the Firm paid the $59,657 to Conceal on or about 17 July 2015, it is still appropriate that it be ordered to pay an equivalent sum to Mr Tekin as equitable compensation. As set out in Conceal’s invoice, the $59,657 includes a $38,500 fee charged by Conceal. There is no evidence that Mr Tekin had a liability to pay a fee to Conceal. The invoice refers to a further $21,157 which is described as “disbursements”. The term “disbursements” implies that they are sums paid by Conceal to third parties, but no documentary evidence has been adduced to prove that Conceal was liable to pay any such sums or that they were in fact paid. The five recipients of the disbursements are not even named. No explanation has been given as to why such evidence has not been adduced when it would be readily available if it existed given Mr Doherty’s and Mr Stratford’s intimate association with both the Firm and Conceal.
“30 In response to paragraph 150 of the Fifth Affidavit, I recall that $110,000 was for legal work we had done relating to aborted sales of townhouses on the Properties (off the plan) and for the legal work in arranging the refinance. The other amounts were necessary to pay out the amounts that Mr Tekin had told me he needed. I discussed these points with Mr Tekin at around the time of the email of 17 March 2015.
31 On 20 March 2015 at 3.08 pm I sent an email to Mr Stratford attaching an indicative funding proposal from Balmain NB, and setting out the proposed disbursements. I note this email was passed on to Mr Tekin who entered into an email exchange ending on 24 March 2015. A copy of that email exchange appears at page 46 of CT-4.
32 On 25 March 2015, I received an email from Mr Leckie attaching a funding proposal. A copy of that email appears at page 5 of GD-1.
33 On the same day, Mr Stratford sent an email to Mr Tekin attaching the funding proposal received from Balmain NB. The funding proposal was for $3,750,000. A copy of that email and attachment appears from page 6 of GD-1. I am aware Mr Tekin responded to Mr Stratford's email. A copy of his response is at page 17 of GD-1.
34 Around this time, I told Mr Tekin there were a number of disbursements that needed to be paid for in arranging the Balmain NB Loan. I was aware, based on my previous conversations with Mr Tekin that, he was under financial pressure. I had a conversation with Mr Tekin to the following effect.
Me: Payment will be required for a number of disbursements for the loan including application fees, valuation fees and the cost of satisfying any other Lender requirements which we will cover.
Mr Tekin: Thanks for that.
35 I do not recall whether I told Mr Tekin the name of the company that would pay the disbursements was Conceal Pty Ltd (Conceal). Conceal is a company that Mr Stratford and I were, and still are, directors of. Conceal is mainly used by Mr Stratford and myself for our personal property development ventures.
36 To the best of my recollection, Mr Tekin did not raise any issue with the Firm paying the disbursements, or those disbursements being paid from a company associated with the Firm.
…”
“Q. …As far as you know in the course of 2016 your firm has never made any claim for payment of those matters, is that right?
A. Well, that's correct, but in my discussions with Mr Tekin he, he acknowledged the fact that these matters - that legal work had been done and he indicated that he was prepared to pay them, right.
Q. But no figure, on your evidence, had ever quantified as what was owing, is that right?
A. Correct, yes.
Q. Certainly you never asked anyone, be it Mr Tekin or perhaps Balmain NB for payment of those particular items, correct?
A. I - no bill had been rendered to Mr Tekin. The discussion I had with Mr Tekin was that there's work been done here and he said, "I know that", I said, "Well, it's a substantial sum of money", and he said, "I know that". He said, "I would like to pay them". On that basis I prepared some of the estimates. That letter that was referred to previously had estimated figures in it, he was aware of that and had a copy of that.”
It follows that Mr Tekin has made good his fourth complaint. Upon receipt of the $127,398.17 the Firm became a constructive trustee in the sense described above.
The Firm’s receipt of the monetary benefit in breach of fiduciary duty and its failure subsequently to account should be viewed as a breach of trust. That applies not just to any part of the money kept by the Firm but also to money actually paid away to Conceal or some other third party (if any). In his Second Further Amended Statement of Claim Mr Tekin seeks equitable compensation which is an appropriate remedy in this case. The benefit received by the Firm was at the expense of Mr Tekin and therefore was relevant loss.
Whilst Mr Doherty’s work on Balmain NB finance assisted Mr Tekin by enabling him to refinance on terms which were superior to those offered by Chifley Securities, the Firm makes no claim for a just allowance to compensate it for its time, effort and business contacts. Mr Tekin is to be compensated for loss of the whole $127,398.17 without reduction for any such allowance.
The amount of equitable compensation is to be assessed as at the date of judgment, not the date of the breach of fiduciary duty: Youyang v MinterEllison at 500. In order for the equitable compensation to do equity in this case, the Firm must also pay interest from 17 July 2015.
For equitable compensation, the basis on which interest is ordered is in the discretion of the Court: Hillig v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1371 at [7] (Barrett J). In Hungerfords v Walker (1988) 171 CLR 125 at 148, Mason CJ and Wilson J said:
“Equity has adopted a broad approach to the award of interest. It has long been accepted that the equitable right to interest exists independently of statute: Wallersteiner v Moir (No 2) [1975] QB 373. Equity courts have regularly awarded interest, including not only simple interest but also compound interest, when justice so demanded, eg, money obtained and retained by fraud and money withheld or misapplied by a trustee or fiduciary: La Pintada, at 116.”
Mr Tekin’s fifth and final complaint is that the Firm did not cease to act for him when Upside commenced the dispute. Despite the defect in the Notice to Complete, Mr Stratford, who did not litigate, passed the file to Mr Doherty who acted as Mr Tekin’s solicitor in the ensuing proceedings. Rolled up with this complaint are the Firm’s failures to inform Mr Tekin that it had been negligent, to provide a full explanation of Mr Tekin's rights and obligations and to recommend that Mr Tekin obtain independent advice. Mr Tekin also relies on the fact that no cross-claim was filed against the Firm in the Upside proceedings.
As set out above, the Second Further Amended Statement of Claim alleges in paragraph 27:
“In breach of its Fiduciary Duty 1 referred to in paragraph 25B above, and also the Implied Retainer Term 1, Implied Retainer Term 2, Implied Retainer Term 3, and contrary to Firm's Representations 1, the Firm acted for the Plaintiff in the Upside Proceedings and the related appeal proceedings (Appeal Proceedings), from on or about 5 May 2015 to on or about 18 December 2017, while being in a conflict of interest (Conflict of Interest) as:
(a) while the Upside Proceedings and the Appeal Proceedings were on foot, and from the earlier point of Termination of Sales Contract on or about 19 March 2015, it was in the interest of the Firm for the Plaintiff not to sell the Property or to sell, or otherwise dispose or have disposed, the Property at a lower price; and
(b) it was in the interest of the Plaintiff to sell, or otherwise dispose or have disposed, the Property at the highest price possible.”
“The Firm ought to have informed but did not inform the Plaintiff of the Conflict of Interest referred to in paragraph 27 at any time prior to or during the time it acted for the Plaintiff in the Upside Proceedings and the Appeal Proceedings (Silence Conduct 2).”
“The conduct after the False Termination Representation and Termination of Sales Contract, constituted by: the Incorrect Negotiation Representation, Silence Conduct 2, Silence Conduct 3, Silence Conduct 3A, the Incorrect Not Sell Representation, the Mid March 2015 Conduct, Silence Conduct 4, Silence Conduct 5 and Silence Conduct 61 was motivated by the Conflict of Interest and was dishonest and in breach of Fiduciary Duty 1 (Dishonest Conduct 1).”
The above pleadings are put forward as a further breach of fiduciary duty. Mr Tekin submitted that the Firm’s conduct was also a breach of its duty of care but the substance of the complaint is focused on the Firm’s conflict and not the Firm’s care and skill.
There is little doubt that the Firm breached its fiduciary duties by acting for Mr Tekin in defence of proceedings brought about by the Firm’s own negligence. It is not necessary to have recourse to the Solicitor Rules or expert solicitor evidence to find that by doing so the Firm placed itself in a position of conflict or a significant possibility of conflict. At the very least, the potential conflict arising from the matters pleaded in paragraph 27 of the Second Further Amended Statement of Claim meant that Mr Tekin was entitled to advice independent of the Firm’s interest. The conflict was not eliminated by the Firm bearing all the costs of the defence nor by hindsight’s revelation that the defence was successful. There was nothing approaching informed consent and the Firm does not suggest otherwise.
However this is a case where the breach of fiduciary duty goes nowhere because there was neither gain to the Firm nor loss to Mr Tekin. The defence of the Upside proceedings was entirely successful. With the possible exception of Mr Cornish’s fee of $4,345 and possibly some expert witness costs which are addressed above, there is no allegation that Mr Tekin suffered any monetary loss by reason of the Firm acting for him.
There is no allegation that Mr Tekin suffered any non-monetary prejudice from the Firm acting for him. There is no suggestion of delay or prolongation of the dispute by the Firm’s conduct.
The Firm was not joined as a cross-defendant to the Upside proceedings, but nothing flows from that when Mr Tekin’s defence was conducted free-of-charge and without prejudice to Mr Tekin’s rights against the Firm. Those rights are now being vindicated in these proceedings and interest will be included in the relief granted in order to compensate Mr Tekin for delay. No argument has been articulated that Mr Tekin would have been better off had the Firm instead been joined to the Upside proceedings which commenced in May 2015.
In these circumstances, the fact that the Firm breached its fiduciary duty by acting for Mr Tekin in the Upside proceedings does not add to the case based on Mr Tekin’s first four complaints.
(a) judgment for damages of $300,000; (b) interest in accordance with s 100 of the Civil Procedure Act 2005 on that judgment sum from 17 July 2015; (c) in addition, an order that the Firm pay equitable compensation of $127,398.17; and (d) an order that the Firm pay compound interest on the equitable compensation calculated at yearly rests from 17 July 2015 at the rates prescribed for the purposes of the Civil Liability Act 2005.
There are a number of other matters which need to be addressed.
In addition to the claims for breach of retainer, negligence arising from the defective drafting of the Notice to Complete and the Firm’s separate conduct when the Termination Notice was issued, Mr Tekin alleges that breaches occurred of a consumer guarantee arising under s 60 of the Australian Consumer Law 2010 (Cth). It is not contended that this further claim adds to the general law claims or that any additional or alternative relief is warranted. This extra claim needs not be addressed further.
The Second Further Amended Statement of Claim also includes various allegations of misleading or deceptive conduct by the Firm. It is alleged that by reason of the retainer, the Firm impliedly represented that the legal services provided by the Firm would be provided with reasonable care, skill and diligence. By serving the Notice to Complete, the Firm is alleged to have impliedly represented that it had been drafted with reasonable skill and care. Some of the representations are alleged to have been as to future matters for which the Firm did not have a reasonable basis at the time the representation was made.
No submission was made that these allegations add to or alter the case Mr Tekin otherwise brought. There are cases where there is a reason to include an additional statutory cause of action but this is not one. The misleading and deceptive claims need not be considered further.
Mr Tekin expressly pleaded that the Firm’s conduct was dishonest, which allegation was directed to the Firm’s advice about not selling the Land (complaint 2 above), refinancing with Balmain NB (complaint 3 above) and taking $127,308.17 from the refinance (complaint 4 above). The larger scheme which the Firm was alleged to have is described at [287] above. Mr Stratford and Mr Doherty were cross-examined about their motives for the advice they gave after the dispute with Upside arose and the refinance with Balmain NB. Each denied any improper motive. I accept their denials. There are two reasons why. First, this is the kind of issue which is likely to be informed by the impression of the witness derived from the cross-examination: Salmon v Albarran at [95]. I observed the cross-examination and consider that each of Mr Stratford and Mr Doherty gave truthful answers to these key questions. Secondly, the propositions which were being put to them were objectively implausible. The suggestion that Mr Stratford or Mr Doherty sought to influence Mr Tekin about whether he sold the Land immediately or retained it until the Upside litigation concluded was disconnected from reality. As I have found, throughout 2015 Mr Tekin wanted to sell the Land for a very high price or pursuant to a lucrative joint venture and retain ownership in the meantime. Mr Tekin’s attitude was formed before and independently of the discovery of the defect in the Notice to Complete and the onset of the Upside dispute, and independently of anything said by Mr Stratford or Mr Doherty. The occasion simply did not arise for Mr Stratford or Mr Doherty to conceive let alone implement the larger scheme of which they are now accused.
(a) judgment for damages of $300,000; (b) interest in accordance with s 100 of the Civil Procedure Act 2005 on that judgment sum from 17 July 2015; (c) in addition, an order that the Firm pay equitable compensation of $127,398.17; (d) an order that the Firm pay compound interest on the equitable compensation calculated at yearly rests from 17 July 2015 at the rates prescribed for the purposes of the Civil Liability Act 2005; (e) an order that the Defendants pay the Plaintiff's costs; and (f) either party wishing to seek an alternative or additional order in relation to costs has liberty to apply in the next 14 days.
**********
Orders amended.
Tekin
Stratford & Ors [2025] NSWSC 541
(2012) 247 CLR 205
(1999) 48 NSWLR 1
(1938) 60 CLR 336
(1984) 154 CLR 178
(1998) 195 CLR 232
(2018) 265 CLR 1
(2003) 214 CLR 118
(1936) 54 CLR 583
(1984) 156 CLR 41
(1988) 171 CLR 125
(2007) 69 NSWLR 452
(1997) 188 CLR 449
(2001) 207 CLR 165
(1994) 179 CLR 332
(1995) 49 NSWLR 315
(2006) 68 NSWLR 531
(2004) 216 CLR 515
(2023) 111 NSWLR 132
(2003) 212 CLR 484
Mr Doherty’s evidence was also undermined by the fact that he had to explain the circumstances in which he provided documents to Mr Tekin in February 2016 about the application of the money received by the Firm from the drawdown of the funds which Balmain NB lent to Mr Tekin. However, to the extent that Mr Doherty was asked, he accepted some unattractive propositions which was more an indicator of honest evidence rather than the opposite. It does not generally matter, but I accept Mr Doherty’s evidence with a suitable degree of caution.
I address below the competing evidence on the small number of factual matters which are material to the resolution of Mr Tekin’s claims.
There is no doubt that Mr Tekin trusted Mr Stratford. By 2014 one had been advising the other for over 25 years. There was a degree of business loyalty between the two men. Mr Stratford was familiar with Mr Tekin’s business activities. There is no evidence, however, that Mr Tekin sought or expected advice from Mr Stratford about anything other than legal matters or that Mr Stratford voluntarily proffered any such advice. There were times in the hearing when Mr Tekin portrayed himself as reliant upon Mr Stratford for commercial advice, but I make no such finding. Watching Mr Tekin in cross-examination and reading the contemporaneous documents makes clear that Mr Tekin was an astute operator within his own areas of business activity who made his own commercial decisions. He may have lacked administration skills but he was business-minded. He ran matters past Mr Stratford, but Mr Stratford was his trusted solicitor and no more.
Another important factor relevant to Mr Tekin’s attitude to selling the Land is the cost of professional work necessary to assist the re-zoning process and the availability of funds to pay for that work.
Another relevant factor was Mr Tekin’s market experience about how much someone might be willing to pay for the Land, which changed over time.
Drawing on the objective facts, in the narrative below I have included my findings about Mr Tekin’s attitude to selling the Land at moments which are particularly relevant to the claims in the case.
Mr Tekin also had a changed attitude about timing. Although he had communicated urgency to Mr Stratford when the Contract was entered into in October 2014, Mr Tekin’s Christmas deadline had clearly ceased to apply. His most immediate financial pressure (ADN) had been addressed. He had been exposed to the possibility of a higher price. Some more time may be required to achieve a higher price. There is no evidence of steps being taken to enforce the $7.8m sale to Upside once the Notice to Complete expired, or even communication with Mr Stratford about such steps. By the end of December 2014 Mr Tekin had become willing to delay the sale.
Mr Tekin’s expectation of a price above $10m was fuelled by events in the New Year. He gave evidence of having a number of conversations with prospective purchasers. Someone called Mr Merhi said he would give Mr Tekin a cheque for $10m. People from “Kanebridge” told Mr Tekin that they were interested and would pay $8m up front plus $300,000 for each apartment built on the Land. On 6 February 2015 Mr Tekin sent an email to Mr Stratford and asked him to issue a contract to Kanebridge, which was done. Mr Tekin received an offer from “BV Property Group”. At Mr Tekin’s request, on 9 February 2011 Mr Stratford’s assistant, Ms Pertzel, emailed a contract to shane@bvproperty. A man from “Alpha Fund” offered $8m up front plus 33 apartments upon completion of the development. On 11 February 2015 Mr Tekin gave instructions for a contract to be issued to Alpha Fund. On 24 February 2015 an agent sent Mr Tekin a draft deed which contemplated that Mr Tekin would grant Alpha Fund a ten-day option to purchase the Land for an unspecified price. The draft deed specified an option fee of $10,000. At some stage Alpha Fund changed its offer to an all-cash offer of $17m.
The evidence about these “offers” is largely confined to Mr Tekin’s Affidavits. There are one or two emails and a draft option deed, but otherwise there is no documentary evidence of Mr Tekin’s communications with any of these prospective purchasers. The sale of the Land for a composite consideration (e.g., cash and apartments) or the entry into a development joint venture would be a large and complex transaction. In the ordinary course, a transaction of that nature would generate documentation. However Mr Tekin does not even have a heads of agreement for any of these prospects. I accept that the discussions occurred, but I infer from the minimal documentation that the discussions were of a very preliminary nature. There is no evidence of any “offer” which was capable of giving rise to a binding agreement to buy the Land for a high price or by entry into a lucrative joint venture.
Nonetheless, it is clear from these discussions that in early 2015 Mr Tekin formed the view that the Land was worth significantly more than he had previously thought. He still wanted to sell but it had to be at the right price. He accepted in cross-examination that in February 2015 he would not have been willing to sell for less than $10m. I find that that was his attitude up until July 2015 at least.
Prior to 17 July 2015 there were a number of statements made by Mr Tekin (or which are now sought to be attributed to him) about the repayment of the $300,000 to Upside. On 4 December 2014 Upside’s solicitor sent an email which referred to repayment of the deposit in the context of a specific on-sale or re-sale (the email does not say which) as contemplated by the Side Deed. Repayment of the deposit makes sense in that context because the sale to Upside was to be replaced by a sale to a third party. The third party would pay its own deposit. On 18 December 2014 there were further communications about repaying the deposit, again in the context of a re-sale to a third party. On 23 December 2014 Mr Harsany wrote an email which contemplated that the deposit would be repaid, this time in the context of a refinance in which Mr Harsany’s company would be the borrower and Mr Harsany a personal guarantor. As can be seen, the context of each of the statements is materially different to that which would have pertained on 17 July 2015. In any event, none of these December statements were made by Mr Tekin.
Mr Stratford gives evidence, which I accept, that he had a conversation with Mr Tekin in early December 2014 in which Mr Tekin said he would repay the deposit to Upside. Mr Stratford is not precise about the date of the conversation nor the context in which it occurred. Mr Stratford’s file note suggests it was in the context of a specific on-sale or re-sale which was being discussed at that time. Alternatively, it may have been in the context of Mr Harsany’s refinance. Either way Mr Tekin was not addressing a situation where he had validly terminated the Contract for Upside’s failure to comply with a valid Notice to Complete.
In his oral evidence at the hearing, Mr Tekin accepted that before 13 March 2015 he told Mr Harsany that he would return the deposit, but this was because he incorrectly thought that he was only entitled to keep the deposit if the sale to Upside completed. For example, in cross-examination, Mr Tekin gave the following evidence:
In any event, if after Upside made its demands on 19 March 2015 the Firm had advised Mr Tekin that he had to repay the deposit, it would have been advice which a solicitor acting with reasonable care and skill could have given. Following the subsequent decisions of Darke J at first instance and on appeal, such advice would have proved to be not only reasonable but correct. Apart from enabling Mr Tekin to refinance in July 2015, repayment of the deposit ensured that Mr Tekin won the case against Upside and avoided an adverse costs order: Upside Property Group Limited v Tekin [2016] NSWSC 1260 at [148] (Darke J).
More recently Mr Tekin’s complaint regarding the Firm’s advice about repayment of the deposit includes the submission that Mr Tekin should have been advised that Upside’s caveat could be removed by payment of $300,000 into Court or a solicitor’s trust account. The submission does not demonstrate any greater loss. He would still have had to make a $300,000 payment at the time the refinance settled and he would still have had to borrow sufficient money from Balmain NB to fund that payment. At the conclusion of the Upside litigation, the $300,000 would have been released to Upside, not Mr Tekin. No different outcome would have been achieved even if the advice was given.
It follows that by reason of the negligent drafting and issuance of the Notice to Complete, on 17 July 2015 Mr Tekin suffered a loss of $300,000.
Under special condition 11(a)(ii) of the Contract, the time when Upside was obliged to make the $480,000 payment was either on termination of the Contract or on completion. On neither occasion was the payment capable of demonstrating that Upside was still committed to paying the rest of the purchase price. At termination, Upside would be relieved of all future obligations under the Contract, including the obligation to pay the purchase price. At completion, Upside would have by definition paid the purchase price and thereby relieved itself of the obligation to make further payments. As Hodgson JA said in Ianello v Sharpe at [32], an obligation to pay on either of those occasions is inconsistent with the character of a deposit.
It follows that the second instalment of $480,000 was not a deposit. Upside’s obligation to make that payment was void as a penalty. Upon termination of the Contract, Mr Tekin’s entitlement to claim the $480,000 had no value.
There are further reasons why the loss of the right to claim $480,000 is not compensable loss. First, even if Mr Tekin had an enforceable right to claim the balance of the deposit, he must prove on the balance of probabilities that he would have asserted that right and, if necessary, sued Upside (and Mr Harsany) after he had lawfully terminated the Contract: Sellars v Adelaide Petroleum NL at 354, [33]. Mr Tekin says in his evidence that he would have, but that hypothetical evidence is inadmissible (s 5D(3)(b) Civil Liability Act 2002 (NSW)). In any event it is notoriously unreliable even when given by an honest witness (Chappel v Hart (1998) 195 CLR 232 at 246, [32], footnote 64 (McHugh J)).
The objective facts are again the best guide in determining what Mr Tekin would have done in the hypothetical circumstances under consideration. I have made the finding that Mr Tekin would have retained the first instalment of $300,000, but it does not follow that he would have sued for the balance of $480,000. Leaving aside any moral qualms Mr Tekin may have had, the commercial merits of suing Upside and Mr Harsany would have in part depended on Mr Tekin’s expectation that Upside or Mr Harsany had the resources to pay $480,000. As explained next, the evidence does not allow a finding that there was anything more than a speculative prospect of either Upside or Mr Harsany paying $480,000 in March 2015. The evidence does not allow a finding that Mr Tekin would have perceived otherwise. On the contrary, there is evidence that by March 2015 Mr Tekin was dubious about Mr Harsany’s ability to pay. At the end of 2014 Mr Tekin believed that Mr Harsany would have to fund the $7.8m purchase with money from the aunt of Mr Harsany’s ex-wife who lived in China, a circumstance which would not have inspired confidence. In early December 2015 Mr Harsany apparently told Mr Tekin that there was no finance available. In paragraph 77 of his Affidavit he states that “from about late December 2014, I was no longer confident that the Upside Contract would complete”. In March 2015 Mr Tekin described Mr Harsany’s ability to pay the purchase price as no more than a “risk”.
Further, Mr Tekin would not have pursued recovery without legal advice, presumably from Mr Stratford. He would have been advised that his prospects for success were limited because the promise to pay $480,000 was an unenforceable penalty. With the benefit of that advice, Mr Tekin has not proved that he would have sued Upside and Mr Harsany for the further $480,000 even if he had lawfully terminated the Contract.
Secondly, even if Mr Tekin would have sued there is no compensable loss unless Mr Tekin proves that Upside or Mr Harsany would have been both willing and able to pay.
As for Upside, there is no evidence that it had any assets. It was a $100 company incorporated on 20 October 2014 specifically for the purpose of purchasing the Land from Mr Tekin. There would have been no rational reason for Mr Harsany to put Upside in funds to make a $480,000 payment for a transaction which was not going ahead. Upon Mr Tekin's termination of the Contract, a right to sue Upside for $480,000 would have been valueless.
Mr Tekin also had the guarantee from Mr Harsany. Mr Tekin submits that Mr Harsany’s guarantee had value, but all that is said in support of that submission is “it should not be assumed that [Mr Harsany] would have willingly entered bankruptcy in lieu of paying $480,000”. Determination of this issue is to be based not on an assumption but on evidence. The threat of bankruptcy may have made Mr Harsany willing to pay if possible, but it is still necessary for Mr Tekin to prove that Mr Harsany would have been able to pay. Even if this part of the case is viewed as a claim for loss of a commercial opportunity (which may not be open to Mr Tekin on the pleadings), Mr Tekin has to prove on the balance of probabilities that the right to sue Mr Harsany had some non-negligible value within the meaning of Sellars v Adelaide Petroleum at 355, [39]; Bluth v Boyded Industries Pty Ltd [2024] NSWCA 67 at [2] (Bell CJ with whom Gleeson JA agreed) and at [96] (Harrison JA, with whom Bell CJ and Gleeson JA agreed). Mr Tekin does not refer to any evidence and none is otherwise apparent from which it can be found that the entitlement to sue Mr Harsany had any non-negligible value.
For these further reasons, Mr Tekin is not entitled to compensation for not receiving the $480,0000 balance of the deposit.
In his closing submissions Mr Tekin refered to Brickenden v London Loan & Savings Co [1934] 3 DLR 465 as authority for the proposition that it is not open to the Firm to assert that Mr Tekin would have gone ahead with the refinance from Balmain NB in any event. In a case such as this where equitable compensation is sought for loss said to have been caused by a breach of fiduciary duty constituted by advice given (or not given) about selling the Land, Brickenden does not require a departure from the principles stated by the High Court in Youyang v MinterEllison; Mao v Bao [2023] NSWCA 298 at [175]-[177] (Ward ACJ, with whom White and Mitchelmore JJA agreed). It is still necessary for Mr Tekin to prove an adequate or sufficient connection between the advice given (or not given) by the Firm and the claimed equitable compensation. Mr Tekin pleads the counterfactual that he “could and would have sold the Property to a third party”. He must make good that allegation. For the reasons given above he has not done so.
As with the Firm’s advice about selling the Land, Mr Tekin alleges that the Firm’s advice to apply for refinance from Balmain NB was motivated by the conflict referred to at [222] above and was dishonest. It is therefore alleged that it was a breach of the fiduciary duty which is alleged to have arisen from the conflict. In the Second Further Amended Statement of Claim, paragraph 46A alleges:
The second item listed in Mr Doherty’s email dated 10 February 2026 is a payment to the Firm of $40,500. Mr Doherty enclosed an unsigned tax invoice for legal fees in that sum. The invoice was dated 1 August 2015. I accept Mr Tekin’s evidence that he did not receive the invoice until after the Firm had been paid and that he did not receive a costs agreement in respect of the work described in the invoice. Whether or not Mr Tekin was liable to pay $40,500 in legal fees, the payment of that sum was a monetary benefit to the Firm. The fees were not for the Firm’s work on the refinance, but for other work previously performed over a period of three years. The payment was made in circumstances where it is unclear that the Firm would otherwise have been paid, not least because of the financial pressure Mr Tekin was under. Receipt of the sum was a monetary benefit to the Firm. The Firm is to be ordered to pay that sum to Mr Tekin.
The next three items listed in Mr Doherty’s email are a total of $3,514.50 in fees to a firm of town planners, Barker Ryan Stewart. Even if it is assumed that the Firm paid $3,514.50 to Barker Ryan Stewart, there is no evidence about the circumstances in which it did so. There is also no evidence of the particular services for which the fees were incurred. The evidence indicates that Barker Ryan Stewart were retained to perform two separate roles, namely the provision of expert evidence in the Upside proceedings and advice to Mr Tekin in relation to re-zoning the Land. If the payments were for Barker Ryan Stewart’s work on the Upside proceedings, then they represent a monetary benefit received by the Firm because the Firm had undertaken to bear the costs and disbursements of those proceedings. If Barker Ryan Stewart’s fees were incurred to assist Mr Tekin with re-zoning, they may not have been a monetary benefit to the Firm. However the Firm is the only party which would be able to prove how these fees should be characterised and it has not done so. Mr Doherty’s email on 10 February 2016 does not even reveal the date on which the fees were paid from which the purpose of the fees might otherwise have been guessed. No explanation is given for why the Firm has not proved these matters. I infer that had further evidence been given by the Firm it would not have assisted the Firm to demonstrate that fees to Barker Ryan Stewart were not a monetary benefit received by the Firm. I therefore find that the sum of $3,514.50 was such a benefit. The Firm is to be ordered to pay that further sum to Mr Tekin.
The same applies to the sum of $3,080.00 said to have been paid by the Firm for “Cushman & Wakefield – Valuation fee”. In the second half of 2015 and in 2016 the Firm obtained valuation advice for two separate reasons, namely provision to Balmain NB in support of the refinance application and as expert evidence for the purposes of the Upside litigation. There may have been other reasons. There is no evidence from which it can be inferred that the $3,080.00 ceased to be a monetary benefit to the Firm even if it was actually paid away to Cushman & Wakefield.
The final item listed in Mr Doherty’s email on 10 February 2016 is $4,345.00 for barrister fees paid to Aaron Cornish. The same analysis applies to this payment. Mr Cornish appeared for Mr Tekin in the Upside litigation although there is no evidence about when he received the brief for the hearing commencing on 5 July 2016. However, Mr Cornish was also briefed soon after the Upside dispute arose, apparently to advise the Firm about its prospective liability to Mr Tekin. It might be inferred from the cross-examination of Mr Doherty that the Firm nonetheless charged Mr Tekin for the cost of that advice.
In its submission, the Firm did not address the problems with the evidence about where the money went. Its case appears to assume the documents emanating from Mr Doherty in February 2016 should be taken at face value despite the fact that, on their face, they are riddled with the problems referred to above.
For these reasons, there is nothing in Mr Doherty’s email on 10 February 2016, or any of the other evidence before the Court, from which it can be inferred that any part of the $127,398.17 was not a monetary benefit to the Firm. Receipt by the Firm of that monetary benefit was subject to the conflict referred to above and occurred in breach of fiduciary duty.
In its Defence, the Firm does not plead that Mr Tekin gave his consent to the payment of $127,398.17 to the Firm (or any part of it), let alone fully informed consent. For the reasons given above this was a matter for specific pleading. In its closing submissions the Firm nonetheless submitted that Mr Tekin did give his consent (except for Mr Cornish’s $4,345 fee). The Firm does not squarely address the requirement that the consent be fully informed.
Dealing with it as a matter of substance, Mr Doherty’s affidavit evidence touches on disclosure and consent. His Affidavit dated 16 October 2024 contains the following evidence:
Mr Tekin also alleges that Mr Doherty’s conduct was dishonest in relation to the payment of monetary benefits to the Firm when the refinance was drawn down. The allegations of dishonestly appeared to be more focused on Mr Doherty directing Mr Tekin into refinance with Balmain NB (rather than Chifley Securities) and not so much on taking the $127,398.17. It is not necessary to make a finding about Mr Doherty’s state of mind at any particular time. Irrespective of Mr Doherty’s motive, a breach of a fiduciary duty occurred which is to be remedied in the way set out above. Beyond that, Mr Tekin had to prove dishonesty having regard to s 140(2) of the Evidence Act 1995 (NSW). In this context, dishonesty means contrary to ordinary standards of honest behaviour regardless of whether the fiduciary subjectively viewed it as such: Salmon v Albarran at [117]. There are some unsatisfactory aspects of the way Mr Doherty applied the $127,398.17, especially the way Mr Doherty subsequently accounted for it when Mr Tekin inquired in February 2016. Nonetheless, the evidence falls short of that which would be necessary for the Court to find that Mr Doherty did not act honestly in any particular respect. Mr Doherty apparently regarded the money paid to Conceal as a fee for service which, given Mr Tekin’s wish to retain the Land and the expensive offer from Chifley Securities, was fair and, had he been asked, acceptable to Mr Tekin. The legal fees paid to the Firm were for work which Mr Stratford had actually performed but for reasons not explained never billed. Various disbursements may have actually been paid by the Firm although I have found that the purpose for which the disbursements were incurred has not been explained. The low point of Mr Doherty’s conduct was charging Mr Tekin for Mr Cornish’s advice, although even here the cross-examination of Mr Doherty suggested a confusion of thought rather than a deliberate trespass on Mr Tekin’s rights. Mr Tekin has not proved dishonesty on the part of Mr Doherty or Mr Stratford and I make no such finding.
Significant attention was given in each party’s submissions to the application of the profession standard scheme by which, depending on the facts, a solicitor’s liability might be limited to $1.5m. In view of the findings I have made above, this issue does not arise. Even when interest is taken into account, the $1.5m limit will not be reached. It is not appropriate in this case for me nonetheless to consider the application of the scheme. In his Reply filed on 18 September 2024 Mr Tekin disputes the application of the scheme to some or all of the relief claimed by him for reasons which include the allegedly dishonest conduct of the Firm, the inapplicability of the scheme to equitable compensation, the number of causes of action and whether specific aspects of the Firm’s conduct falls within the statutory definition of “occupational liability”. Each issue needs to be considered having regard to the precise facts. None of the issues lends itself to hypothetical consideration in the absence of the necessary findings of facts.