Bailey v Bailey
[2006] NSWSC 756
•28 July 2006
CITATION: Bailey v Bailey [2006] NSWSC 756 HEARING DATE(S): 22 May 2006
JUDGMENT DATE :
28 July 2006JURISDICTION: Equity Division JUDGMENT OF: Windeyer J at 1 DECISION: Leave to amend refused CATCHWORDS: PRACTICE AND PROCEDURE - pleadings - amendment to pleadings - proposed amendment not complying with rules of pleading - impossibility of pleading to it - leave to amend refused PARTIES: Bruce Clyde Bailey (First Plaintiff)
Janet Beatrice Shafik Bailey (Second Plaintiff)
Arnold Neil Bailey (First Defendant)
Glenice Margaret Bailey (Second Defendant)
Annette Mavis Bailey (Third Defendant)
Terence Jessop (Fourth Defendant)
Robert Walter Locke and other persons named in the First Schedule to the Statement of Claim who constitute the Partnership Locke O'Reilly McHugh (Fifth Defendants)
John Baines Cheadle and other persons named in the Second Schedule to the Statement of Claim who constitute the Partnership practising as Holman Webb (Sixth Defendants)FILE NUMBER(S): SC 2313 of 2002 COUNSEL: Mr C J Bevan with him Mr R Young (Plaintiffs)
In Person(First Defendant)
No Appearance (Second and Third Defendants) (B J Miller as amicus curiae)
Mr D Pritchard (Fourth, Fifth and Sixth Defendants)SOLICITORS: Turner Freeman (Plaintiffs)
In Person (First Defendant)
No Appearance (Second and Third Defendants (BJ Miller as amicus curiae))
Ebsworth & Ebsworth (Fourth Defendant)
Middletons (Fifth Defendant)
Mallesons Stephen Jaques (Sixth Defendant)
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
WINDEYER J
Friday 28 July 2006.
2313/02 BRUCE CLYDE BAILEY & ANOR V ARNOLD NEIL BAILEY & 5 ORS
JUDGMENT
1 This judgment deals with an application by the plaintiffs for leave to file a second further amended statement of claim. The original statement of claim was filed on 18 April 2002. An amended statement of claim was filed on 17 March 2003, pursuant to leave. A further amended statement of claim was filed on 19 March 2004; two years later the fourth document appeared. The defendants oppose leave being given to file it. I regret the delay in deciding this application which was heard by me on 22 May 2006. I have spent many hours endeavouring to understand the proposed amended pleading put forward. The fact that this has been necessary, I hope indicates that there are problems with it. Most of the time was spent without attention to the submissions of counsel for the plaintiff as to what was done by the amendments, as they should be able to be understood on ordinary reading.
2 The plaintiffs may well be lucky to have got as far as they have. Arguments against the pleading filed on 19 March 2004 were determined by the then Master McLaughlin, but on the limited grounds of objection and on appeal heard by Campbell J the grounds were even more limited. However, that pleading stands and all defendants have filed defences to it. This judgment deals only with the document the plaintiffs now seek to file.
3 It may really be sufficient to state that the proposed pleading breaches all basic rules of pleading. It breaches the requirements of the rules. It does not set out in summary form a statement of material facts; it does not set out the material facts in separate paragraphs in circumstances where it could do so; it sets out material facts as particulars making it impossible to plead; it raises contentions of law in particulars; in many cases the particulars itemised are not particulars at all, but statements or summaries of evidence. There are many examples which illustrate the deficiencies which I have just listed. So that it will not be thought what I have said is petulant, I have attached paragraphs 37A, 37B, 37C, 68 and 69 of the proposed pleadings with amendments underlined at the end of this judgment.
4 It is not really necessary to go any further. There are numerous examples of such deficiencies in the document now sought to be filed.
Present pleading
5 The basic facts pleaded in the present further amended statement of claim filed by leave on 19 March 2004 are set out in the following paragraphs:
6 Disputes between various members of the Bailey family being the plaintiffs and the first, second and third defendants arose out of a partnership between those defendants and their parents. The plaintiffs are the executors of the will of their father, Mr H N Bailey who died on 5 February 1994. He survived his wife.
7 Disputes about the partnerships and the administration of the estate of Mr Bailey deceased were the subject of a mediation agreement made in 1995 and a supplementary agreement made in 1996.
8 Pursuant to those agreements the plaintiffs, as executors of the will of the father, were to put the family property known as “Hazeldene” and the water licences either attached to it or to the partnership up for sale by auction at which any partner could bid. The real estate and five water licences were to auctioned together and the other licences separately. Mr Bruce Bailey was to be entitled to a pre-emptive right to purchase what were described as “water licences number 6 and 7” at no less than the highest price bid for them by any outsider. The plaintiffs were successful bidders at the auction and purchased Hazeldene and five licences. In addition Bruce, pursuant to his rights, purchased water licences 6 and 7.
9 The supplementary mediation agreement provided for the sale of various partnership assets. The plaintiffs allege that on the true construction of the mediation agreement, there was to be immediate distribution of the proceeds of sale of those partnership assets. They allege that the first, second and third defendants refused to allow this but instead required the proceeds to be paid into a contingency fund account and held pending further accounting. They claim that as a result of this Bruce did not have the funds to purchase the seventh water licence which he had agreed to purchase and had to find another purchaser for it. The contingency fund agreement which is called in the pleading the “contingency fund retention stipulation” is claimed by the plaintiffs to have been a breach of the mediation agreements which they claim on their true construction required an immediate distribution of the proceeds of sale of the estate and partnership assets upon realisation. It is claimed that the contingency fund stipulation which brought into existence the contingency fund retention agreement was entered into by the plaintiffs as a result of unconscionable conduct and undue influence on the part of the Bailey defendants, the result of which was that the plaintiffs as executors and vendors of the seventh water licence had to arrange a new purchaser of that licence and that the first plaintiff lost the benefit of the seventh water licence as a result of which he or both plaintiffs claim compensation being the difference between the purchase price of the seventh licence under the contract and the current purchase price of such a licence. They now seek to add a claim for consequential loss of income which they would have made by way of additional farming income had the licence been available to them for use on Hazeldene. I said during the hearing there could be no objection to that claim. I adhere to that view.
10 The facts alleged in the same pleading against the three lawyer groups are essentially in support of a claim for the same loss. Mr Jessop originally acted for the plaintiffs in the proceedings brought by the second and third defendants for dissolution of the first partnership, those proceedings being brought by action number 5614 of 1991. Mr Jessop acted on the formation of a new partnership between Mr Bruce Bailey and his father which was dissolved on the death of the father and he acted for the plaintiffs on the mediations and early on in the sale of Hazeldene. Those persons listed as the fifth defendants were at the relevant time the partners in the firm of solicitors Messrs Locke O’Reilly McHugh (Locke O’Reilly). That firm acted for the plaintiffs as purchasers of Hazeldene and the two water licences from the estate from themselves as executors. The defendants grouped as sixth defendant were the partners at the relevant time in the firm of Messrs Holman Webb. That firm acted eventually on the sale of Hazeldene and the licences having taken over this task from Mr Jessop, whose retainer had been brought to an end.
11 The present pleaded claims against Mr Jessop are for damages for breach of contract and for damages in tort for negligence arising out of the same facts. Those facts mixed up as pleaded paragraphs and particulars allege that when the contingency fund demands were made by the Bailey defendants and Mr Jessop became aware of them, he failed to take proper action on inquiries made by Messrs Locke O’Reilly as to the entitlement to immediate distribution, failed to commence immediate proceedings to obtain a declaration of right as to the entitlement to immediate distribution and specific performance of that entitlement causing the plaintiffs to agree to the contingency fund retention and causing Mr Bruce Bailey to lose the seventh water licence.
12 The claim against Locke O’Reilly is based on the same facts as the claim against Mr Jessop, other than the failure to respond to their inquiries. There is however an additional claim based on failure to ensure that any contract for sale included a term under which, if the plaintiffs became purchasers, there would be set off against the purchase price the amount the plaintiffs’ were entitled to receive as a consequence of the immediate distribution entitlement pleaded.
13 The claim against Messrs Holman Webb is for breach of contract, negligence and for breach of fiduciary duty. In convoluted paragraphs numbered 82 to 97 it is alleged that Messrs Holman Webb ought to have prepared a contract to provide that if the plaintiffs purchased Hazeldene and the water licences then set off would apply. The additional claim against the firm is that it ought not to have acted as it was in a position of conflict because Mr Neil Bailey was an existing client, whose interests conflicted with those of the plaintiffs so that once the plaintiffs were the successful purchasers Holman Webb should have ceased to act for them as vendors in their capacity as executors. In essence it is claimed that they preferred the interests of Mr Neil Bailey to the interests of the plaintiffs, and in doing so failed to stop the bringing into existence of the contingency fund agreement.
14 In summary then, the present existing pleaded claim is grounded on the finality of the mediation agreements other than two matters referred to in the supplementary agreement; the breach of the mediation agreements by the Bailey defendants in insisting upon the contingency fund retention, a claim of unconscionable conduct on the part of the Bailey defendants on the basis that the plaintiffs were at the particular time, in a position of special disadvantage and a claim of undue influence based on the same particulars.
15 Again in summary, the claimed relief in money terms is for loss of the seventh water licence and the difference in its then price and the present value of such a licence. The other relief heads are for a declaration that all matters at issue in the estate and partnership have been resolved except as reserved by the supplementary mediation agreement; and that the partnership proceedings brought by Mr Neil Bailey in 1997 are an abuse of process and should be permanently stayed.
Proposed pleading
16 I have set out the general basis of the present claim so that there can be some understanding of the amendments sought. I do this because although I have come to the clear conclusion that leave should not be given to file the document sought to be filed, I think it desirable to endeavour to explain as best I can the amendments sought to be made. I will deal with the matters more or less in the order in which they appear in the proposed pleading.
The Locke O’Reilly Retainer definition
17 The terms of the contract of retainer are substantially widened in the particulars. If there is a contract its terms must be pleaded. It is not possible to plead to the particulars but if they were properly pleaded and then relied upon to found some cause of action, then it would be a completely new cause of action.
The Holman Webb Retainer – paragraph 13
18 The terms of this retainer are sought to be extended by particulars in paragraph 13 (c) and following and share precisely the same problem as the particulars in the Locke O’Reilly retainer. Those particulars relate to paragraph 13 which alleges the retainer arose on or about 19 April 1996, but are not particulars of that allegation but terms of the claimed contract of retainer.
19 It is admitted that there was a retainer. The particulars under 13(d) allege a contradictory retainer from all five members of the Bailey family.
Claim against the Bailey defendants
20 The first new claim sought to be pleaded is a claim relating to what are called the “Rosewood West loan” and the “Rosewood West loan interest” claims. Both claims appear to be contrary to the claim presently pleaded in paragraph 16, 17 and 18 of the existing document and both claims appear to be contrary to the immediate distribution entitlements claim which really forms the basis of the plaintiffs’ presently pleaded action. There is then an attempt to bring these Rosewood West matters into play in paragraph 37A and 37B which I have set out which endeavour to plead by way of particulars a claim for moneys paid by mistake of fact. 37B is a somewhat incoherent and inappropriate claim for damages as a result of moneys being paid by mistake of fact rather than for restitution. The damages are said to be the inability to have the funds necessary to purchase the seventh water licence.
21 If the next claim for partnership accounts could be allowed to be pleaded then the Rosewood West claims would presumably be taken up in that accounting. As they stand they represent an entirely new cause of action based on entirely new facts. That cause of action would be statute barred.
Claim for accounts
22 Paragraph 37C is a claim for taking of partnership accounts of the Bailey family partnership. As I understand it – although the file is presently mislaid somewhere in the court – it is the claim which Mr Neil Bailey has sought to bring in his 1997 proceedings, which the plaintiffs claim are an abuse of process. They claim it is an abuse of process because all matters were determined by the mediation agreements. On that basis the claim which they now seek to make is itself an abuse of process. The particulars allege an entitlement to rectification but what is meant is rectification or reopening of accounts on which the parties proceeded in making distribution arrangements.
Unjust enrichment claim
23 Paragraph 37D which commences with the words, “alternatively in the premises” is a claim for unjust enrichment. As it is quite impossible to tell what is meant by the opening words there is no cause of action stated. Unjust enrichment in itself does not give rise to a cause of action.
July 1996 compromise claim
24 This is comprised in paragraphs 40A and 40B. It is difficult to know what is really intended other than to plead that all disputes were settled in July 1996, other than those preserved for determination by the supplementary mediation agreement. If that is so, then it contradicts a substantial part of the claim put forward by the plaintiffs under the amendments now sought, but in any event if it is raised as part of the cause of action for unconscionable conduct or undue influence, it would have to be pleaded as such and not by way of inarticulate particulars in what is apparently some new cause of action; and if it is raised as appears to be pleaded by paragraph 40B in answer to possible defences which have not been raised, then it should not be pleaded in a statement of claim, but by way of reply.
Claims against Mr Jessop
25 The claim as presently pleaded must stand. Insofar as further particulars are sought to be added to paragraph 53, they could not be allowed to stand. Insofar as it is sought in paragraph 43 to introduce a new cause of action being a claim for breach of contract or negligence resulting in loss of the eighth and ninth water licences this is a claim which would be barred by the Limitation Act. It is an entirely new claim relying on entirely new facts. It is not a claim, which even if it could be properly pleaded, could in my present view be allowed to proceed. Paragraph 66C and 66E raise a new claim against Mr Jessop for breach of fiduciary duty. So far as can be gleaned the allegation, which is not pleaded, is that Mr Jessop required the plaintiffs to make a fee agreement with him, a term of which was that they charged in favour of Mr Jessop their entitlements in the estate for his costs, that this was done without independent advice, and that after they had agreed to purchase Hazeldene and the water licences at the auction, he exercised a lien or threatened to do so unless the amount of $100,000 on account of unquantified costs was paid out of the funding which the plaintiffs had arranged with the bank to enable them to complete the purchase. It is alleged that in doing so he preferred his own financial interests over those of the plaintiffs, who by that time had become his former clients. This is a new claim arising out of different pleaded facts known to the plaintiffs since 1996. The particulars appear to assert improper conduct by Mr Jessop in suing for costs, obtaining judgment for those costs and entering into an agreement with the plaintiffs to pay the judgment debt by instalments. The loss claimed to have arisen as a result of the breach of fiduciary duty is the inability to purchase the seventh water licence because of the demand for $100,000 and in addition, extraordinarily enough, the loss arising from the inability to exercise a right to seek assessment of those costs. That is also an entitlement claimed in the final relief sought and could not possibly be allowed to be claimed after judgment for costs and about seven years after the event.
26 I have dealt with the new claims which it seems the plaintiffs wish to make in a brief way. It is impossible to deal with them finally unless pleaded in accordance with the rules. As I do not intend to allow this pleading, it seems to me that I should dismiss the notice of motion seeking leave to amend. My tentative view is that the matter has got so out of hand that it should proceed on the existing pleadings but allowing a claim for consequential loss of profits on the seventh water licence. At the present time and doing my best to comprehend what the plaintiffs might have sought to claim it seems unlikely that leave should be given to make any of the claims other than the claim for a taking of partnership accounts. I have not been able to find the file in the action commenced by the first defendant which I understand seeks such accounts. Mr Neil Bailey confirmed in court that he still wishes to proceed with his action. If that is the position then it seems to me that the proper position would be for the plaintiff to support that claim rather than to claim that seeking such accounts is an abuse of process.
27 In concluding this judgment I must state that although the case is not easy, proper attention to basic rules of pleading would have ensured the matter could be dealt with without delay. The only reason it has taken so long is because instead of dismissing the motion for amendment on the ground no court could allow such a pleading to stand, I endeavoured to work out what was intended. I shall add, however, in fairness to the plaintiffs’ counsel that counsel for the solicitor defendants only made oblique reference to the pleading deficiencies and attempted to deal with the amendments on their merits. I cannot do that and the Bailey defendants could not possibly be expected to do so.
1. The notice of motion be dismissed.
2. The plaintiffs pay the defendants’ costs.
ANNEXURE ‘A’
- 37A On the completion of the sale of Hazeldene and the five water licences which were sold with it and the sixth water licence that was in fact purchased by Bruce and Janet on 26 July 1996, and on completion of the remaining three water licences sold by the estate at various times in early 1997, when a distribution of the proceeds of sale of the assets of the estate and the partnership was effected in part-performance of the immediate distribution term after the payment out to Bruce, Janet, Neil, Glenice and Annette of amounts totalling about $8 million, Neil, Glenice and Annette were overpaid their entitlements under the immediate distribution term on a proper taking of accounts in the Bailey family partnership in order to determine their respective entitlements in it under an operative common or mutual mistake of law, or fact and law, as to those entitlements (hereafter 'the mistaken overpayment of the defendant partners' entitlements').
A. Bruce's liability to account for the Rosewood West loan principal to the partnership:
(b) On completion of the sale of Hazeldene and the water licences, all of the partners erroneously believed that a new set of accounts for the partnership prepared by Mr Anthony Long of Michael Boyce & Co. in late 1995 or early 1996 showing a principal loan balance of $1.829 million overrode or rendered superseded the then executory contractual term, being clause 13 of the mediation agreement, requiring Bruce to account to the partnership for the amount of $1.42 million for this loan based on accounts prepared by Mr Long in late 1994 as at 30 June 1994 relied on by all the parties to the mediation (hereafter 'the first Rosewood West loan mistake');(a) The plaintiffs repeat the facts and allegations and particulars in paragraph 18A above;
(c) In common or mutual reliance on the first Rosewood West loan mistake the parties, whilst acting through their respective solicitors, arranged for Bruce to account to the partnership for the amount of $1.83 million rather than the amount of $1.42 million which he was required to account for under clause 13 of the mediation agreement, resulting in an over-accounting or overpayment by Bruce of some $410,000 (hereafter 'the Rosewood West loan principal overpayment');
(d) In consequence of the parties' common or mutual reliance on the first Rosewood West loan mistake, Bruce and Janet were deprived of an immediate entitlement on completion of their purchase of Hazeldene and the water licences they eventually purchased to their 49% share under the partnership agreement and the will (insofar as the will operated to dispose of the deceased's interest in the partnership) to the amount of that over-accounting or overpayment, namely, the amount of $200,900 (being Bruce's 32% share plus Janet's 17% share of that $410,000, determined by the combined operation of mediation agreement clauses 12 and 13 and clause 4 of the will) (hereafter 'the Rosewood West loan principal over-accounting loss') .
B1. Bruce's liability to account to the partnership for interest on the Rosewood West loan (plaintiffs' principal case):
(a) The plaintiffs repeat the facts and allegations and particulars in paragraph 18B above;
(b) On completion of the sale of Hazeldene and the water licences, all of the partners also erroneously believed, in addition to the principal loan balance being an amount of $1.829 million, that the interest accrual period was as provided for in the new set of accounts for the partnership prepared by Mr Anthony Long of Michael Boyce & Co. in late 1995 or early 1996 (hereafter 'the mistaken interest accrual period') and that the interest accrued on the loan was as stated in those accounts (hereafter 'the mistaken interest liability amount'), rather than the amount being the Rosewood West loan interest liability calculated on the basis of the Rosewood West loan interest liability accrual period (as defined in paragraph 18B above) (hereafter 'the second Rosewood West loan mistakes') ;
(c) In common or mutual reliance on the second Rosewood West loan mistakes the parties, whilst acting through their respective solicitors, arranged for Bruce to account to the partnership for the mistaken interest liability amount, which was based, firstly, on a principal loan amount of $1.83 million rather than the amount of $1.42 million, and secondly, on the mistaken interest accrual period rather than the Rosewood West loan interest accrual period (as defined in paragraph 18B above), resulting in an over-accounting or overpayment by Bruce of interest on that loan in an amount to be quantified in an expert's report (hereafter 'the Rosewood West loan interest over-accounting amount');
(d) In consequence of the parties' common or mutual reliance on the second Rosewood West loan mistakes, Bruce and Janet were deprived of an immediate entitlement on completion of their purchase of Hazeldene and the water licences they eventually purchased to their 49% share under the partnership agreement and the will (insofar as the will operated to dispose of the deceased's interest in the partnership) to the amount represented by that over-accounting or that overpayment, namely, an amount to be quantified in an expert's report to be filed and served in accordance with the directions made for the filing and service of the plaintiffs evidence made on 3 March 2006 (being Bruce's 32% share plus Janet's 17% share, determined by the combined operation of mediation agreement clauses 12 and 13 and clause 4 of the will) (hereafter 'the Rosewood West loan principal over-accounting loss').
B2. Bruce's liability to account to the partnership for interest on the Rosewood West loan (plaintiffs' alternative case) :
(a) The plaintiffs repeat the facts and allegations and particulars in paragraph 18C above;
(b) On completion of the sale of Hazeldene and the water licences, all of the partners also erroneously believed, in addition to the principal loan balance being an amount of $1.829 million, that the interest accrual period was as provided for in the new set of accounts for the partnership prepared by Mr Anthony Long of Michael Boyce & Co. in late 1995 or early 1996 (hereafter 'the mistaken interest accrual period') and that the interest accrued on the loan was as stated in those accounts (hereafter 'the mistaken interest liability amount'), rather than the amount being the alternative Rosewood West loan interest liability calculated on the basis of the alternative Rosewood West loan interest liability accrual period (as defined in paragraph 18C above) (hereafter 'the alternative second Rosewood West loan mistakes');
(c) In common or mutual reliance on the second alternative Rosewood West loan mistakes the parties, whilst acting through their respective solicitors, arranged for Bruce to account to the partnership for the mistaken interest liability amount, which was based, firstly, on a principal loan amount of $1.83 million rather than the amount of $1.42 million, and secondly, on the mistaken interest accrual period rather than the alternative Rosewood West loan interest accrual period (as defined in paragraph 18C above), resulting in an over-accounting or overpayment by Bruce of interest on that loan in an amount to be quantified in an expert's report to be filed and served in accordance with the directions made for the filing and service of the plaintiff s evidence made on 3 March 2006 (hereafter 'the alternative Rosewood West loan interest over-accounting amount');
(d) In consequence of the parties' common or mutual reliance on the alternative second Rosewood West loan mistakes, Bruce and Janet were deprived of an immediate entitlement on completion of their purchase of Hazeldene and the water licences they eventually purchased to their 49% share under the partnership agreement and the will (insofar as the will operated to dispose of the deceased's interest in the partnership) to the amount represented by that over-accounting or that overpayment, namely, an amount to be quantified in an expert's report to be filed and served in accordance with the directions made for the filing and service of the plaintiffs evidence made on 3 March 2006 (being Bruce's 32% share plus Janet's 17% share, determined by the combined operation of mediation agreement clauses 12 and 13 and clause 4 of the will) (hereafter 'the alternative Rosewood West loan interest over-accounting loss') .
C. Bruce's liability to 'account' for the Rosewood West loan to the partnership :
(b) On completion of the sale of Hazeldene and the water licences all of the partners erroneously believed (in addition to the first Rosewood West loan mistake) that, on its true construction, clause 13 of the mediation agreement required Bruce to actually 'pay' a principal amount of $1.83 million plus interest calculated on it to the partnership on completion of his purchase of Hazeldene and the water licences, rather than to 'account' to the partnership for that principal and interest liability as on a taking of accounts between partners on a dissolution of the partnership which was in fact required on the proper construction of clause 13 of the mediation agreement, being an accounting which reflected the partner's respective capital account balances and capital entitlements in the partnership as at 30 June 1994, being the operative date for the purposes of the interpretation and implementation of the mediation agreements (hereafter 'the third Rosewood West loan mistake') ;(a) The plaintiffs repeat the facts and allegations and particulars in paragraph 18A above;
- (c) In common or mutual reliance on the third Rosewood West loan mistake the parties, whilst acting through their respective solicitors, arranged for Bruce to 'account' to the partnership by actually paying the amount of $1.83 million plus interest accrued on that principal amount, without regard to any partnership capital balances or capital entitlements as at 30 June 1994 (or indeed at any other date), resulting in an over-accounting or overpayment by Bruce under clause 13 of the mediation agreement in respect of the Rosewood West loan of an amount to be quantified in an expert's report to be filed and served in accordance with the directions made for the filing and service of the plaintiffs evidence made on 3 March 2006 (hereafter 'the Rosewood West loan partnership entitlements over-accounting amount');
- (d) the Rosewood West loan partnership entitlements over-accounting amount arose because it is the loss flowing from the fact that Bruce had a greater entitlement in the capital of the partnership on a taking of partnership accounts as at 26 July 1996 because all other partners had drawn down drawings against profits in excess of their partnership shares as specified in clause 12 of the mediation agreement, being a liability to the partnership of all other partners which Bruce was, and remains, entitled to a credit for on a taking of final partnership accounts (as to which see the letter from Michael Boyce & Co., Chartered Accountants, to Terence Jessop dated 15 September 1995 and the partnership accounts attached to it which explain the Rosewood West loan partnership entitlements over-accounting amount issue and its genesis);
- (e) In consequence of the parties' common or mutual reliance on the third Rosewood West loan mistake, Bruce and Janet were deprived of an immediate entitlement on completion of their purchase of Hazeldene and the water licences they eventually purchased to their 49% share under the partnership agreement and the will insofar as the will operated to dispose of the deceased's interest in the partnership) to the amount of that over-accounting or overpayment, namely, an amount to be quantified in an expert's report (hereafter 'the Rosewood West loan partnership entitlements over-accounting loss').
- D. Definitions or future reference:
- (a) Hereafter the combination of the Rosewood West loan principal over-accounting loss, the Rosewood West loan interest over-accounting loss and the Rosewood West loan partnership entitlements over-accounting loss is referred to as 'the combined Rosewood West loan over-accounting losses'.
- (b) Hereafter the combination of the Rosewood West loan principal over-accounting loss, the alternative Rosewood West loan interest over-accounting loss and the Rosewood West loan partnership entitlements over-accounting loss is referred to as 'the combined Rosewood West loan over-accounting losses’.
- F The plaintiffs rely on the following documents as particulars of the facts and allegations contained above:
(b) Letter from Terence Jessop to Bruce dated 27 June 1996 and copied to Mr Robert Locke enclosing a proposed 'Distribution Statement' and a document entitled 'Estimated Funding Requirement' relating to the purchase of Hazeldene and seven estate water licences by Bruce and Janet on 31 May 1996;(a) Letter from Terence Jessop to Doherty Partners dated 19 June 1996 and copied to Mr Robert Locke enclosing a proposed 'Distribution Statement' relating to the purchase of Hazeldene and seven estate water licences by Bruce and Janet on 31 May 1996 (settled by Bruce after it was sent to him in draft that day);
- (c) Facsimile letter Michael Boyce & Co. to Terence Jessop dated 21 July 1992 enclosing letter ultimately dated and sent on 27 July 1992 to PIBA on behalf of the Bailey family partnership;
- (d) Letter Michael Boyce & Co. to Mr A Moffat (copied to Mr Jessop) dated 3 March 1993;
- (e) Letter Holman Webb to Terence Jessop dated 13 June 1995
- (f) Letter Michael Boyce & Co. to Terence Jessop dated 15 September 1995;
- (g) Letter Terence Jessop to Locke O'Reilly McHugh dated 14 June 1996;
- (h) Facsimile from Michael Boyce & Co., Chartered Accountants, to Peter Chapman, of Doherty Partners, dated 14 June 1996 enclosing a set of partnership accounts containing, a schedule with a re-calculation of the principal for the Rosewood West loan (which Neil, Glenice and Annette insisted that they re-calculate), showing a new principal debt of $1,829,075. 76 and interest accruals based on an interest accrual period commencing on 5 June 1992 (rather than the 30 June 1994 date provided for in the mediation agreement) but without any total interest accrual calculation;
- (i) Letter Terence Jessop to Doherty Partners dated 19 June 1996 copied to Holman Webb on that date);
- (j) Letter Holman Webb to Terence Jessop dated 24 June 1996;
- (k) Facsimile from Michael Boyce & Co., Chartered Accountants, to Jury Wowk and Peter Chapman, of Doherty Partners, dated 9 July 1996 enclosing a set of partnership accounts containing a schedule with a re-calculation of the principal and interest for the Rosewood West loan (which Neil, Glenice and Annette insisted that they re-calculate), showing a new principal debt of $1,829,075.76 and interest accrued on that re-calculated principal debt of $365,351.56 based on an interest accrual period commencing on 5 June 1992 (rather than the 30 June 1994 date provided for in the mediation agreement);
- (l) Facsimile letter Terence Jessop to Mr Tony Long, Michael Boyce & Co., dated 9 July 1996;
( m) File note of Mr Robert Locke of his attendance on Bruce dated 9 July 1996
(o) File note of Mr Robert Locke of his telephone attendance on Mr Jessop dated 10 July 1996;(n) File note of Mr Robert Locke of his telephone attendance on Mr Jessop dated 9 July 1996 ;
(q) Letter from Terence Jessop to Mr Tony Long, Michael Boyce & Co., dated 10 July 1996 and copied to Messrs Robert Locke, Jury Wowk, of Doherty Partners and Richard Allsop, of Holman Webb, on that date by facsimile;(p) Facsimile letter from Terence Jessop to Robert Locke dated 10 July 1996;
(r) File note of Mr Robert Locke of his meeting with Mr Tony Monaghan, (a financial consultant acting for Bruce and Janet in connection with the funding of their purchase of Hazeldene and the water licences) dated 10 July 1996 ;
(s) Letter Locke O'Reilly McHugh to Terence Jessop dated 10 July 1996;
(t) Letter Locke O'Reilly McHugh to Holman Webb dated 12 July 1996 enclosing a an "all up" 'without prejudice' settlement proposal for the settlement of the sale of Hazeldene and the water licences being purchased by Bruce and Janet and various other partnership disputes then on foot;
(u) Letter Locke O'Reilly McHugh to Terence Jessop dated 12 July 1996 enclosing for Mr Jessop's approval a draft "all up" 'without prejudice' settlement proposal for the settlement of the sale of Hazeldene and the water licences being purchased by Bruce and Janet and various other partnership disputes then on foot to be sent later that day to Holman Webb and Doherty Partners containing Mr Jessop's handwritten amendments made in the course of his revision of the draft settlement proposal for engrossment by Mr Robert Locke;
(w) Letter Locke O'Reilly McHugh to Holman Webb dated 12 July 1996 enclosing an "all up" 'without prejudice' settlement proposal for the settlement of the sale of Hazeldene and the water licences being purchased by Bruce and Janet and various other partnership disputes then on foot;(v) Letter Locke O'Reilly McHugh to Doherty Partners dated 12 July 1996 enclosing an "all up" 'without prejudice' settlement proposal for the settlement of the sale of Hazeldene and the water licences being purchased by Bruce and Janet and various other partnership disputes then on foot;
(y) Facsimile from Holden & Bolster, Chartered Accountants of Sydney, to Mr Jury Wowk, of Doherty Partners, dated 17 July 1996 enclosing a daily compounding interest calculation for the Rosewood West loan based on a principal debt of $1.42 million and a two year interest accrual period as from 1 July 1994 (which records the state of mind as to the amount of the principal and the interest accrual period before Glenice and Annette made the Rosewood West loans on their part in reliance on new partnership accounts prepared by Michael Boyce & Co. in late 1995 or early 1996) and file note of Mr Jury Wowk of his telephone attendance on Mr Brian Willett of Holden & Bolster of the same date explaining Mr Willett's calculations; File note of Mr Robert Locke of his telephone attendance on Bruce dated 18 July 1996;(x) Letter Holman Webb to Locke O'Reilly McHugh dated 16 July 1996;
(aa) File note of Mr Robert Locke of his telephone attendance on Bruce dated 18 July 1996 ;(z) Letter Locke O'Reilly McHugh to Bruce dated 18 July 1996 ;
- (ab) File note of Mr Robert Locke of his telephone attendance on Mr Jessop dated 18 July 1996;
(ac) File note of Mr Jury Wowk, of Doherty Partners, of his telephone attendance on Mr Richard Allsop, of Holman Webb, dated 19 July 1996 recording, in response to the Locke O'Reilly 12 July 1996 "all up" 'without prejudice' settlement proposal regarding inter alia the amount to be accounted for as interest on the Rosewood West loan, Mr Allsop's suggestion that "interest (on which there is no agreement) be-'split down the middle' ;
(ad) Letter ANZ Bank, Moree branch manager, Mr Brian Armitage, to Mr Robert Locke, and copied to Mr Tony Monaghan, dated 20 July 1996 with 9 pages of attachments, being a copy of a letter dated 19 July 1996 from Mr Armitage to Bruce and Janet (sent to them by the bank on 20 July 1996 and seven accounting spreadsheets prepared by the bank with tentative final settlement figures for the sale of Hazeldene and the water licences sold to Bruce and Janet in readiness for the settlement of those transactions on 26 July 1996 ;
(ae) File note of Mr Robert Locke of his telephone attendance on Mr Jury Wowk of Doherty Partners dated 22 July 1996 ;
(ag) Letter Locke O'Reilly McHugh to Doherty Partners dated 22 July 1996 enclosing four pages of the ANZ Bank's 20 July settlement spreadsheets ;(af) File note of Mr Robert Locke of his telephone attendance on Mr Brian Armitage of the ANZ Bank, Moree branch, dated 22 July 1996 ;
- (ah) Letter Locke O'Reilly McHugh to Holman Webb dated 22 July 1996 enclosing four pages of the ANZ Bank's 20 July settlement spreadsheets;
(ai) File note of Mr Jury Wowk, of Doherty Partners, of his telephone attendance on Mr Richard Allsop dated 22 July 1996 recording that Mr Allsop explained to Mr Wowk the "$264,000 payout column in the ANZ Bank settlement schedules in some detail" (being the schedules sent by the bank on 20 July 1996 to Mr Locke which he then sent to the Bailey defendants' solicitors);
(ak) Letter Locke O'Reilly McHugh to Bruce dated 23 July 1996 enclosing the ANZ Bank settlement spreadsheets and letters of that date to Holman Webb and Doherty Partners;(aj) Letter ANZ Bank, Moree branch manager's assistant, Ms Charm Wass, to Mr Robert Locke dated 22 July 1996 enclosing 4 pages of tentative final settlement spreadsheets and instructions to the bank solicitors, Norton Smith & Co.;
(al) Letter Locke O’Reilly McHugh to Doherty Partners dated 23 July 1996, copied to Bruce that same day by facsimile;
(am) File note of Mr Jury Wowk, of Doherty Partners, of his telephone attendance on Mr Robert Locke dated 23 July 1996, recording that "our clients [i.e. the Bailey defendants] agreed to the distribution of funds summaries [i.e. the summaries sent by the ANZ Bank on 20 July to Mr Locke which were then sent to the Bailey defendants solicitors] provided same amended to accord with our suggested contingency fund arrangements";
(ao) File note of Mr Jury Wowk, of Doherty Partners, of his telephone attendance on Mr Robert Locke, dated 25 July 1996, recording that the ANZ "Bank has requested written confirmation from the parties that they agree to the distribution] set out in the Stage 2 Settlement Schedule [which related to the sale of the three water licences not acquired by Bruce and Janet which occurred in early 1997. he to send us a copy of the bank's request & we to respond";(an) File note of Mr Jury Wowk, of Doherty Partners, of his telephone attendance on Mr Richard Allsop, of Holman Webb, dated 24 July 1996 recording that Mr Wowk "informed him of our clients' position on the issue of the [ANZ Bank Settlement] Schedules - he informed [Mr Robert Locke] that we basically agreed with same subject to the partnership asset sales figures & cotton crop [amounts which were to be paid into the contingency fund under the contingency fund agreement] being the actual sales figures achieved";
(ap) Draft affidavit with handwritten emendations of Mr Locke, which was prepared by Mr Robert Locke, of Locke O'Reilly, for Bruce to swear in his defence of the second partnership suit brought by Neil (namely, proceeding no. 5315/1997) in which Mr Locke and Bruce both approved of, and which Bruce subsequently swore to the truth of in reliance on Mr Locke's advice, both of them believing it to be true and correct at that time, evidence in paragraph 9 to the effect that "As a result of "the Mediation Agreement" the capital due by I Bruce Bailey to the partnership was calculated at 1.42M, but when interest was added the debt amounted to $1.83M.;
(ar) Letter Doherty Partners to Locke O'Reilly McHugh dated 27 March 2000 written in the context of ongoing proceedings in which the pre-mediation accounts of Michael Boyce & Co. as at 30 June 1994 are expressly adopted by Glenice and Annette as being the basis on which the mediation was conducted and the mediations agreements were negotiated and made;(aq) Letter Locke O'Reilly McHugh to Bruce dated 17 September 1999 reporting on a review of the file for the purchase of Hazeldene and the water licences by Bruce and Janet and their settlement in the context of ongoing proceedings;
37B In consequence of the combined Rosewood West loan over-accounting losses, or alternatively, the alternative Rosewood West loan over-accounting losses, Bruce and Janet have suffered loss and damage, in that they were unable to complete the purchase of the seventh water licence which they had contracted to purchase on 31 May 1996 by exercising the option granted to Bruce to acquire it in clause 5 of the mediation agreement, which he exercised at the same time that he agreed to purchase the sixth water licence.
Bruce and Janet repeat paragraphs 31 to 33 above as the quantification of their losses here and the consequence to them of the deprivation of this amount of money or entitlement under the immediate distribution term on their then contractual entitlement to purchase the seventh water licence had they had the necessary funding to do so when that agreement for sale fell de for completion on 26 July 1996 when their purchase of Hazeldene and the sixth water licence fell due for completion.
(a) The plaintiffs are entitled in equity to rectification of the erroneous performance of Bruce's contractual rights under clause 13 of the mediation agreement arising by virtue of the first, second and third Rosewood West loan mistakes because there has been no final taking of accounts of the Bailey family partnership when the sale of Hazeldene and the six water licences eventually purchased by Bruce and Janet were completed on 26 July 1996 or thereabouts.
(c) The plaintiffs are entitled to have the partnership accounts rectified to reflect the true entitlements of all the partners in the capital of the partnership and which rectify the effect of the partnership accounts of the three Rosewood West loan mistakes on the final taking of accounts at the time of the winding-up of the partnership under the supervision of the Court.(b) That is, Bruce's rights as a partner in respect of the capital of the Bailey family partnership remain wholly executors rights which have not yet been exhausted because there has not yet been a final dissolution of that partnership nor any final taking of partnership accounts nor has there been any winding-up of the partnership or any final determination of the partners' rights in the partnership inter se.
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68. Locke O'Reilly also owed a common law duty of care to Bruce and Janet.
The content of that common law duty of care is identical to the contractual duty, by virtue of the relationship between Locke O'Reilly and Bruce and Janet and the proximity of their professional conduct to Bruce and Janet's commercial and proprietary interests, including their relationship as Bruce and Janet's solicitors throughout the pendency of the Hazeldene sale agreement and the agreement for sale made pursuant to the exercise of the water licence option (hereafter ' the common law duty of care').
A. Particulars of the contractual and common law duties breached by Locke O'Reilly :
(a) Subject to the four exceptions identified above, the Locke O'Reilly retainer contained relevantly the same terms and conditions and required them to perform the same or similar duties in respect or the Hazeldene sale agreement and the agreement for sale made upon exercise of the water licence option and the other transactions and matters which were the subject of the Locke O'Reilly retainer that Mr Jessop owed under the Jessop retainer, due to the overlap or similarity between the nature of those matters and transactions which were the subject of each retainer, being duties owed to Bruce and Janet as purchasers under the Hazeldene sale agreement and, in respect of the purchase of the sixth and seventh water licences, being duties owed to Bruce as purchaser of those assets in consequence of his due exercise of the water licence option and in respect of Bruce's and Janet's respective interests in the estate and the partnership.
(b) In particular, but without limiting the generality of the foregoing, Locke O'Reilly committed the same breaches of contractual duties and common law duties of care as are alleged and particularised in paragraphs 50, 51, 56 to 58, 59(a) and (c), 60 to 66B inclusive above insofar as they acted for Bruce and Janet in their capacity as the purchasers of Hazeldene and seven of the estate water licences, as executors of the will and also as beneficiaries of the will of the deceased and as partners in the Bailey family partnership;
(c) In particular, Locke O'Reilly breached their contractual duty and their common law duty to Bruce and Janet when they advised Bruce and Janet to capitulate to the demands of Neil, Glenice and Annette to enter into the contingency fund agreement (as a condition for securing their co-operation to the completion of the sale of Hazeldene and six of the water licences which Bruce and Janet had agreed to purchase from the estate), being advice given to Bruce and Janet at various times in mid July 1996 and, in particular, in their letter to Bruce dated 19 July 1996, contemporaneously with Bruce's efforts to locate urgently an alternative purchaser for the seventh water licence because of his inability to complete its purchase in consequence of the contingency fund demands of Neil, Glenice and Annette, Locke O'Reilly should have advised Bruce to approach Santow J, who was then case managing the partnership issues left unresolved by the supplementary mediation agreement, with an application for urgent relief to enforce the contractual obligations of Neil, Glenice and Annette under the mediation agreements unconditionally ad without the need to capitulate to the contingency fund demands or to enter into the contingency fund agreement in order to properly perform those contractual and common law duties.
B. Particulars of the documents relied on as providing particulars of these allegations :
(a) The documents listed in. paragraph 37A (F) above ;
(b) Letter Locke O'Reilly to Terence Jessop dated 29 May 1996 ;
(c) Letter Locke O'Reilly to Bruce dated 19 July 1996 ;
(d) File note of Mr Robert Locke of his telephone attendance on Mr Jury Wowk of Doherty partners dated 23 July 1996 ;
(e) Letter from Doherty Partners to Locke O'Reilly dated 24 July 1996;
(f) Letter from Locke O'Reilly to Bruce dated 24 July 1996 ;
(g) Letter Doherty Partners to Locke O'Reilly dated 24 July 1996 ;
(h) Letter Holman Webb to Locke O'Reilly dated 30 January 1997 ;
(i) Letter Holman Webb to Locke O'Reilly dated 22 July 1997 ;
(k) Letter Locke O'Reilly to Bruce dated 17 September 1999 reporting on a review of the file relating to the completion of the purchase of Hazeldene and six water licences and the distributions of the estate and partnership entitlements which occurred in July 1996 and early 1997 in relation to the remaining three water licences .(j) Letter Locke O'Reilly to Cummins & Wallace Chartered Accountants, dated 10 September 1999 and the draft affidavit of Bruce and Janet enclosed with it for approval ;
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