Barflys v Kliger Partners

IN THE SUPREME COURT OF VICTORIA AT MELBOURNE
COMMON LAW DIVISION
PROFESSIONAL LIABILITY LIST

Not Restricted

S CI 2013 2618

BARFLY’S NOMINEES PTY LTD (ACN 080 123 057)	Plaintiff
v
KLIGER PARTNERS (a firm) (ABN 27 254 281 216)	Defendant

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JUDGE:	Digby J
WHERE HELD:	Melbourne
DATE OF HEARING:	4-7, 11-14, 18-21 September and 25 October 2017 and final submissions filed 14 November 2017.
DATE OF JUDGMENT:	15 June 2018
CASE MAY BE CITED AS:	Barflys v Kliger Partners
MEDIUM NEUTRAL CITATION:	[2018] VSC 315

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NEGLIGENCE – Duty of care – Standard of care for professionals – Standard of care for Australian lawyers – Whether incorrect advice is negligent – Whether advice to settle proceeding is negligent – Whether advice to pursue former solicitor is negligent.

NEGLIGENCE – Causation – Whether incorrect advice caused loss or damage – Whether failure to advise caused loss or damage – Whether advice to settle proceeding caused loss or damage.

NEGLIGENCE – Quantification of loss and damage – Reliance loss – Loss of opportunity –Whether speculated loss is recoverable – Whether value of prospective judgment can be quantified.

STATUTORY INTERPRETATION – Accrued rights – Retail Tenancies Reform Act 1998, s 25 – Retail Leases Act 2003, ss 25 and 26 – Retail Leases (Amendment) Act 2005, s 43 – Interpretation of Legislation Act 1984, s 14.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr S Wilson QC with Mr J Kohn	JPM Law
For the Defendant	Mr S Anderson QC with Ms C Pierce	Obst Legal

HIS HONOUR:

Introduction

In this proceeding, Barfly’s Nominees Pty Ltd (‘the plaintiff’) sues its former solicitors, Kliger Partners (‘the defendant’), for breach of its duty of care in relation to its retainer. The plaintiff alleges that the defendant provided erroneous advice concerning the plaintiff’s prospects of success in a claim brought in the Victorian Civil and Administrative Tribunal (‘VCAT’) against former Landlords, Constantinos Manthos and Matthew Manthos (‘the Landlords’) and the Landlords’ estate agent, Alexander Robertson & Co Pty Ltd (‘the Agent’), (‘the VCAT Proceeding’), and other erroneous advice including that the plaintiff should settle the VCAT Proceeding and use the money received to pursue its former solicitor, Mr Brian McMahon (‘McMahon’), who had earlier acted for the plaintiff in the VCAT Proceeding.

The loss and damage identified by the plaintiff as resulting from the defendant’s alleged negligence includes the damages which the plaintiff asserts it would have been likely to recover in the VCAT Proceeding plus costs, but for the above incorrect advice provided by the defendant and consequential settlement by the plaintiff of its VCAT Proceeding. In the alternative, the plaintiff claims damages for the loss of the opportunity to pursue such damages at VCAT and costs.

Background
The Premises

The plaintiff is the lessee of retail premises situated at 14-16 Bourke Street Melbourne (‘the Premises’) pursuant to two separate leases entered between itself and the Landlords on 16 August 2001 (‘the Leases’).

In October 2002, the Leases were renewed for a further four years pursuant to the plaintiff exercising an option in respect of the Leases. As a result, the plaintiff’s further leasehold terms ran from 1 March 2003 until 27 February 2007. Adjoining buildings are situated on each of the Premises. Mutual accessibility was created in 1995 by openings in the party wall, as well as on the ground and first floors of the adjoining buildings comprising the Premises.

Throughout its tenancy the plaintiff occupied the Premises as a single premise.

At the Premises, from about August 2001 to October 2003, the plaintiff operated a bar and café business trading as ‘Barfly’s’.

Mr Tony Hachem (‘Hachem’) is the majority shareholder and the sole Director of the plaintiff.

The plaintiff complains that, throughout the Barfly’s tenancy, the Premises have been plagued by significant defects and damage. The plaintiff says this has prevented the Premises from being used and has forced the plaintiff on numerous occasions to cease trading.

The VCAT Proceeding

The VCAT Proceeding was brought against the plaintiff’s former Landlords. It was based on a claims for damages resulting from alleged breaches by the Landlords of their obligations under the Leases to carry out repairs to the Premises.

The plaintiff also brought claims at VCAT against the Landlords’ Agent. Those claims alleged that the Agent had made certain representations which were misleading or deceptive, or likely to mislead or deceive, contrary to s 9 of the Fair Trading Act 1999. In addition, the plaintiff alleged that certain representations made by the Agent were fundamental to the plaintiff entering into the Leases and to the plaintiff exercising its options to renew those Leases. The plaintiff alleged that those representations caused it to incur refurbishment costs.

The claim for damages against the Landlords and the Agent was just over $2 million. However, an expert report produced by Mr Nigel Rockliffe, intended to be relied on by the plaintiff, sought to establish approximately $3 million in loss and damage.

Brian McMahon

The plaintiff initially engaged McMahon to represent it in the VCAT Proceeding. In due course, the plaintiff terminated McMahon’s legal services and thereafter, in about November 2004, engaged Slater & Gordon Lawyers.[1]
[1]ATD2, Witness Outline of Hachem, 8 May 2017, [119].

Darren Cain

On 9 February 2006, the defendant was engaged to take over the plaintiff’s VCAT Proceeding. Mr Darren Cain (‘Cain’), of the defendant, was the solicitor with carriage of the matter. Cain was a lawyer, described as an ‘associate’, at the defendant’s firm from 2003 until 2007. In or around 2007, Cain was appointed a salaried partner. In or around 2012, Cain was appointed a senior partner and took up an equity interest in the defendant.

The Connor Advice

In March 2006, in the course of the defendant’s conduct of the plaintiff’s VCAT Proceeding, the defendant briefed Mr Chris Connor of Counsel at the Victorian Bar (‘Connor’) to advise on s 25 of the Retail Tenancies Reform Act 1998 (‘the 1998 Act’). As part of his involvement and advice, Connor conferred with his instructors and Hachem including in March and April 2006. He also prepared a Memorandum of Advice dated 14 March 2006[2] (‘the Advice’) addressing the effect of certain amendments to the 1998 Act.
[2]CB1281-1289.

In summary, Connor’s Advice stated that the relevant amendments had the effect, from either 15 April 2003 or 1 November 2003, of modifying a Landlords’ obligation to carry out repairs to retail premises and to maintain them in good repair, to an obligation to carry out repairs to maintain the premises to their condition at the time when the relevant lease was entered into. On this point, Connor’s Advice stated that ‘this change substantially diminished the rights of a tenant in relation to the standard of repair that a landlord was required to observe in a retail premises lease’.[3]
[3]CB1281 at CB1283.

Connor’s Advice also noted that, if the provisions of s 25 of the 1998 Act as amended ‘affect the consequences of past events, arrangements and entitlements’, then the plaintiff’s Landlords’ obligation with respect to the maintenance and repair of the Premises would be substantially diminished.[4]
[4]CB 1281 at CB1283 and CB1286.

There is a dispute about the significance of Connor’s Advice as it related to the whole of the VCAT Proceeding. In summary, the plaintiff does not dispute the substance of Connor’s Advice, but alleges that the Advice was limited to the plaintiff’s VCAT Proceeding claims for statutory breaches arising under s 25 of the 1998 Act. The plaintiff says the Advice did not deal with or affect the plaintiff’s contractual lease claims made against the Landlords; or the plaintiff’s claims against the Agent at VCAT.

There is also a dispute as to whether Connor’s Advice, in its original and summarised form prepared by Cain shortly after 14 March 2006, was provided to Hachem on or about 16 March 2006; and whether that same advice was provided to Hachem at conferences which took place on 21 March 2006 and 27 April 2006.

The Plaintiff’s Case
The Conference

Central to the plaintiff’s case is a meeting which took place at the defendant’s offices on 31 January 2007[5] (‘the Conference’). There is no dispute that Hachem attended the Conference with his brother, Mr Joseph Hachem (‘Joe Hachem’); his business advisors Mr Lou Gallo (‘Gallo’) and Mr Andrew Neophitou (‘Neophitou’); and his building advisor, an Architect, Mr George Batsakis (‘Batsakis’). Also present were Mr Roger Rothfield (‘Rothfield’) and Cain of the defendant; and Connor of Counsel.
[5]Initially it was alleged by the plaintiff that this Conference attended by Hachem, Joe Hachem, Gallo, Neophitou, Batsakis, Rothfield, Cain and Connor took place on 20 February 2007. At trial it was conceded by the plaintiff that the Conference occurred on 31 January 2007. This Conference is referred to as the ‘critical Conference’ at [1] and [footnote 1] of Plaintiff’s Closing Submission, 14 November 2017 (‘PCS, 14 November 2017’); refer also to Statement of Claim, 3 September 2015, [8].

What was said and occurred at this Conference is in dispute between the parties. It is not, however, controversial that the effects of the amendments to the retail leasing legislation on the VCAT Proceeding, as well as the likely costs of continuing to run the VCAT Proceeding, were discussed.

What is squarely in dispute is whether Hachem was, for the first time, advised of the material disadvantage to the plaintiff’s case occasioned by amendments summarised above to the Victorian retail leases legislation.

The parties also dispute whether the defendant gave advice at that Conference to the effect that the plaintiff should settle the VCAT Proceeding and use the settlement proceeds to prosecute a claim against McMahon.

In addition, the parties dispute whether the defendant advised that suing McMahon would yield a ’the windfall’; advised that recovery in an action against McMahon was estimated at approximately $3 million; and that McMahon had professional indemnity insurance cover extending to $5 million.

The Defendant’s Advice

More specifically, the plaintiff alleges the defendant’s advice to the plaintiff at the Conference was as follows:

(a) that the case against the plaintiff’s Landlords in the VCAT Proceeding had been materially disadvantaged as a result of the amendments to s 25 of the 1998 Act, which had previously required a Landlord to carry out repairs to retail premises and to maintain them in good repair; but post-amendment only required the Landlord to maintain retail premises in a condition consistent with the condition of the premises when the lease was entered into (‘the RTRA Advice’); and

(b) that in light of the above, the plaintiff should settle the VCAT Proceeding, accepting such settlement money on account of costs (‘the Settlement Advice’);

(c) that instead of continuing the VCAT Proceeding, the plaintiff should pursue its former solicitor, McMahon, who had acted in the plaintiff’s disputes against the Landlords and their Agent from about September 2003 until about November 2004 and that the settlement moneys received in respect of the VCAT Proceeding could be applied to prosecute the case against McMahon (‘the McMahon Advice’);

(d) that a claim against McMahon was ‘where the real windfall lay’ with a claim estimated by the defendant to be approximately $3 million (‘the Windfall Recovery Advice’).

The plaintiff argues that the defendant’s advice in respect of the legislative amendments was incorrect. It argues that the relevant amendments to the 1998 Act had no legal effect on the plaintiff’s rights in the VCAT Proceeding because the plaintiff’s cause of action had accrued prior to 1 November 2003 and the plaintiff’s suit in relation to the Landlords’ conduct impugned in the VCAT proceeding was not impacted by the changes to the retail tenancies legislation.

The plaintiff argues that the defendant failed to give careful consideration to the effect of the legislative amendments on the plaintiff’s claim against the Landlords, or the Agent, or its claims based on the express covenants in the Leases. The plaintiff submits that a careful, skilful and diligent lawyer in the circumstances in which the defendant was retained, would have correctly interpreted the effect of the amendments to the 1998 Act. Accordingly, at the Conference, on the plaintiff’s submission, the defendant gave negligent advice on this issue.

The plaintiff further contends that a careful, skilful and diligent lawyer would have known that pursuing a claim against McMahon was not ‘where the real windfall lay’ because:

(a) part of the claim articulated against McMahon by the defendant on the plaintiff’s behalf included a cause of action based on the same incorrect advice given by the defendant concerning the amendments to the 1998 Act;

(b) in any event, even if the amendments had the effect alleged, that did not give rise to any negligence on the part of McMahon in the context of his conduct of the VCAT Proceeding; and

(c) the extent of McMahon’s professional indemnity insurance cover and personal assets was such that a claim against him was never likely to realise $3 million, or anything approaching that amount.

Settlement of its VCAT Proceeding

On 7 June 2007, after agreement in principal on the VCAT settlement sum from about early May 2007, the plaintiff settled the proceeding at VCAT against the Landlords and the Agent for $341,500 inclusive of costs. The plaintiff thereafter instructed the defendant to issue proceedings against McMahon.[6]
[6]CB327.

Proceeding against McMahon

On 18 November 2009, the defendant filed proceedings on behalf of the plaintiff against McMahon in the County Court of Victoria (‘the McMahon Proceeding’).

On 27 August 2013, the plaintiff settled the McMahon Proceeding for $950,000, inclusive of costs. The costs of the McMahon Proceeding were approximately $506,315. This meant the damages recovered in the McMahon Proceeding amounted to approximately $443,685.

The plaintiff alleges that it settled the VCAT Proceeding and instructed the defendant to issue the McMahon Proceeding on the basis of the erroneous advice provided by the defendant at the Conference and up to about 4 June 2007, acting as the plaintiff’s solicitors engaged pursuant to a retainer entered into on 9 February 2006.

The plaintiff alleges that it has suffered loss and damage as a result of the defendant’s negligence, namely the loss of the damages which the plaintiff would have recovered in the VCAT Proceeding; or alternatively the loss of opportunity to pursue such damages; and the loss of opportunity to recover the costs of the VCAT Proceeding, including the costs of its various solicitors.

Plaintiff’s Contentions in Support of its Allegations of Breach against the Defendant

The plaintiff explains the defendant’s erroneous advice as follows:[7]
[7]PCS, 14 November 2017, [8(a)-(h)].

(a) the amendments to s 25 of the 1998 Act by the Retail Leases Act 2003 (‘the 2003 Act’) and the Retail Leases (Amendment) Act 2005 (‘the 2005 Act’) had the effect of incorporating the obligation of a Landlord contained in that section as a term of a retail lease;

(b) the amendments to s 25 of the 1998 Act by the 2003 Act and the 2005 Act came into effect from 1 November 2003;

(c) the plaintiff’s action for breach by the Landlords of the Leases accrued on the occurrence of the conduct of the Landlords which fell short of the obligations of the Landlords pursuant to the terms of the Leases;

(d) the plaintiff’s causes of action against the respondents in the VCAT Proceeding had accrued prior to 1 November 2003, and also prior to 1 May 2003;

(e) the advice, alleged in paragraph [8(a)] of the plaintiff’s Statement of Claim, given by the defendant was wrong. Specifically, the amendments to the 1998 Act had no legal effect on the Leases (including the exercise of the options under the Leases for a further term thereof) which were entered into prior to 1 May 2003, and where the plaintiff’s causes of action against the respondents in the VCAT Proceeding had accrued prior to 1 November 2003 (the date of effect of s 25 of the 1998 Act as amended by the 2003 Act);

(f) the defendant, in giving the RTRA Advice, failed to give due weight to the fact and/or to explain to the plaintiff’s director, Hachem, that the amendments to the 2003 Act referred to above, whether they had the effect or not as explained by the defendant, also had no effect in any event on the defendant’s claim against the Landlords’ Agent for, amongst other things, misleading and deceptive conduct or for breaching s 26 of the 1998 Act;

(g) the defendant, in giving the said advice, failed to advise the plaintiff by its director, Hachem:

(i) that under the terms of the Leases entered into and in particular by virtue of clauses 2(j) and 2(p) of the Lease in respect of 14 Bourke Street, the Landlord was obliged to repair ‘structural work’ and/or ‘structural imperfections’ and/or ‘defects of a serious nature’ in any event;

(ii) that pursuant to cls 3.3.6(a) and (d), and items 6.2, 3.4.1, 6.1 and 11 of the Schedule to the Lease of the Premises in respect of 16 Bourke Street, the Landlord was in effect required to repair damage caused by ‘flood’, ‘storm and tempests’ and ‘internal floor water’, as well as by implication required to repair ‘structural repairs’;

(iii) that the above contractual obligations were not detrimentally affected, or at all, by the amendments to the 1998 Act, by the 2003 Act or the 2005 Act; and

(iv) that in respect of the McMahon Advice and the Windfall Recovery Advice, the alternative proceeding against the former solicitor, McMahon, was not where the ‘real windfall lay’ because:

(a) part of the claim articulated against McMahon by the defendant included a cause of action based on the aforesaid erroneous advice concerning the amendments to the 1998 Act and, in any event, even if the amendments had the effect alleged, there was no negligence on the part of McMahon in his conduct of the VCAT Proceeding;

(b) McMahon had limited professional indemnity insurance cover and personal assets whereby any claim against him was never likely to realise $3 million or anything like that amount;

(c) the defendant ought to have advised the plaintiff to continue with the VCAT Proceeding or, in the alternative, not to abandon its claim in the VCAT Proceeding on account of the aforesaid wrong advice.

In its submissions, the plaintiff also asserts that on its case the defendant’s position up to trial remained that its advice regarding amendments to the 1998 Act was correct and first provided in around mid-March 2007,[8] however the defendant’s position at trial was different. At trial, the defendant alleged that it advised Hachem at a meeting in March 2006 as to the amendments to the relevant legislation and at that time in 2006 advised that the amendments to the retail tenancies legislation in Victoria materially weakened the plaintiff’s claims in the VCAT Proceeding.
[8]Further Amended Defence, 29 May 2017, [8(a)] and [8(b)(i)]; CB3756-64; paragraph [8(a)] of the said Defence did not admit the plaintiff’s alleged date of the RTRA advice.

The plaintiff also relies upon the defendant’s Further and Better Particulars subjoined to paragraph [8(b)(ii)] of its Further Amended Defence dated 29 May 2017, alleging that the defendant was not prepared to give ‘off the cuff’ advice to sue McMahon. The plaintiff points out in its submissions that the conversation in which the ‘off the cuff’ statement was said to be made was between Rothfield of the defendant and Hachem. Cain was also present during part of this conversation. The plaintiff points out in its submissions that Rothfield’s evidence was that he could not attribute the phrase ‘off the cuff’ to either himself or Cain. The plaintiff emphasises that, notwithstanding Rothfield’s evidence, the defendant has not sought to further amend its Defence.[9]
[9]PCS, 14 November 2017, [11].

The plaintiff, in addition, points out that:

(a) the defendant has admitted that it advised the plaintiff its position against the Landlords in the VCAT Proceeding had been materially disadvantaged as a result of the retrospective legislative changes to the 1998 Act, by reason that the Landlords were only required to maintain the Premises in a condition consistent with the condition of the Premises when the lease was entered into;[10] and

(b) the defendant has pleaded that the Seventh Amended Points of Claim were consistent with the RTRA Advice and also pleaded that in mid-march 2007 it advised the plaintiff it should attempt to settle the VCAT Proceeding for an appropriate sum.[11]

[10]Further Amended Defence, 29 May 2017, [8(a) and (b)], CB3756-64.

[11]Ibid.

The plaintiff submits that the defendant should be confined to its pleaded Defence. In this regard, the plaintiff points out that the defendant does not plead any alternative defences. As examples of the effect this should have, the plaintiff points out that the defendant does not plead in the alternative that if its advice to the plaintiff was wrong in relation to the VCAT Proceeding, that proceeding was nevertheless weak or the quantum of the plaintiff’s claim in the VCAT Proceeding was minimal.

Similarly, the plaintiff also submits that the defendant does not plead that if the advice which it gave in relation to the 1998 Act legislative changes was incorrect, it was not negligent in providing that advice.

Consistency of the Defendant’s Case and Credibility of Cain

The plaintiff submits that Cain was the solicitor in charge of the relevant VCAT Proceeding and provided the instructions to make the admissions referred to in relation to the change in the Landlords’ position under the 1998 Act. The plaintiff contends that Cain’s evidence in relation to the instructions he gave in relation to the defendant’s Defence of 30 October 2015 ‘contrasted’ with Cain’s evidence at trial. This included the point that, prior to the defendant amending its Defence on 29 May 2017, the defendant had admitted, amongst other things, it advised the plaintiff to institute proceedings against its former solicitor, McMahon.

The plaintiff, however, acknowledges that by its Further Amended Defence of 29 May 2017[12] the defendant withdrew its earlier admission that at the Conference it provided advice to the plaintiff to institute proceedings against McMahon.[13]
[12]CB3756-64.
[13]Further Amended Defence, 29 May 2017, [8(b)]; CB3756-64.

The plaintiff also recognises that the defendant’s case at trial is that in about mid-March 2007 the defendant advised the plaintiff to settle the VCAT Proceeding for an appropriate sum as a result of amendments to the 1998 Act but also informed the plaintiff that the defendant was not prepared to give advice ‘off the cuff’ as to whether a claim in negligence could be made out against McMahon.[14]
[14]Ibid [8(b)(ii)]; CB3756-64.

Plaintiff’s Submissions in Relation to Defendant’s Provision of Negligent Advice

The plaintiff submits that Connor’s Advice was to the effect that, as a result of the amendments to s 25 of the 1998 Act, it was necessary for the plaintiff to amend its Sixth Amended Points of Claim in the VCAT Proceeding. The plaintiff submits that Connor’s Advice does not state that its claims in the VCAT Proceeding were materially disadvantaged or that those claims were weakened, or that it should settle its claims as a result of the said amendments to the 1998 Act.

The plaintiff submits that the amendments required to its Points of Claim at VCAT to take account of the amendments to s 25 of the 1998 Act should not have formed the basis for the defendant’s advice to settle all of its claims in the VCAT Proceeding. Those amendments did not affect all of the plaintiff’s claims. In this respect, the plaintiff submits that the defendant erroneously relied on and misunderstood the utility and significance of the Advice provided by Connor which did not deal with all of the plaintiff’s claims in the VCAT Proceeding. The plaintiff notes that Connor was only briefed to provide advice about s 25 of the 1998 Act.

The plaintiff’s submissions are not critical of Connor in relation to the way he addressed the issues upon which he was briefed to advise. Nor does the plaintiff dispute the substance of Connor’s Advice.[15]
[15]PCS, 14 November 2017, [15], [17].

Further, the plaintiff submits that by its pleaded defence and the evidence, the defendant has failed to assert or establish that, at any time prior to the critical Conference, the defendant advised the plaintiff that it ought settle the claims made in the VCAT Proceeding because of the amendments to s 25 of the 1998 Act.[16]
[16]Ibid [18].

The plaintiff relies on Hachem’s evidence that, prior to the critical Conference, he at no time understood his case to be any worse off as a result of the amendments to the 1998 Act which were explained to him in March 2006 and also in April 2006. Further, the plaintiff submits that neither Connor nor Cain gave evidence of exactly what they told Hachem about the merits of the claims made by the plaintiff in the VCAT Proceeding prior to the Conference. The plaintiff also contends that neither Connor nor Cain gave evidence at trial that Hachem understood that the plaintiff’s claims would be worse off as a result of the amendments to the legislation. The plaintiff’s submission is that at its highest, the defendant’s case only presumed that Hachem understood the effect of the amendments on the legislation.[17]
[17]Ibid [18].

Further, the plaintiff submits that the evidence establishes that:

(a) On 7 March 2006, Connor conferred with Cain and Hachem. The plaintiff submits that Connor’s evidence about the 7 March 2006 conference was to the effect that it was unlikely that he gave advice at that stage about the changes to the 1998 Act because he considered it more likely to be the case that he did so after he prepared his Advice. The plaintiff submits Connor’s evidence is to be preferred over Cain’s evidence that the early March conference traced the history of the amendments and concluded that the Landlords’ obligations had changed to the point that a tenant was in a worse position.

In its submissions addressing the above evidence, the plaintiff re-emphasises that, in any event, at the conference of 7 March 2006 Cain did not give evidence that the merits of all of the claims made by the plaintiff at VCAT had been discussed.[18]
[18]Ibid [19(a)].

(b) On 16 March 2006, Savas Miriklis of the defendant sent an email to Hachem in relation to the 1998 Act, to the effect that as a result it was vital that the plaintiff amend his proceeding at VCAT to put that action ‘on the best possible foot’.[19]
[19]CB1294.

(c) On 21 March 2006, a further conference took place at the defendant’s offices, attended by Connor, Cain and Hachem. Connor’s evidence was that during this conference he explained to Hachem that the changes in the 1998 Act were of significance because the plaintiff’s pleaded case to date was to the effect that there was an obligation on the Landlords to put the Premises in good repair. However, the recent amendments to the 1998 Act brought about a situation where the Landlords’ obligation was simply to keep the condition of the Premises in the same state as it had been when the lease was entered into.

(d) In relation to the conference of 21 March 2006, that Connor’s evidence does not establish that the merits of all the claims made by it in the VCAT Proceeding were discussed at that meeting.

(e) The plaintiff also points out that Cain’s evidence was that he did not believe that a meeting took place with Hachem and himself on 21 March 2006.[20]
[20]T771.22-771.24.

(f) The plaintiff points out that Hachem was not cross-examined about the meeting of 21 March 2006.

(g) On or about 27 April 2006, Hachem attended a further conference with Cain and Connor. The plaintiff submits that the evidence was that, prior to this conference, Connor had prepared an agenda-like list of matters to be discussed. This note refers to a number of clauses in the Leases for the Premises. Connor’s evidence was that he discussed the items listed in a note which he had prepared for the conference on 27 April 2006.

(h) The plaintiff’s submissions point out that Connor’s agenda-like note for the meeting of 27 April 2006 does not refer to the plaintiff’s claims in the VCAT Proceeding being materially disadvantaged as a result of the amendments to the 1998 Act legislation. The plaintiff also points out that Connor gave evidence to the effect that he did not specifically recall having a discussion about the content or the significance of the amendments made by him to the Seventh Amended Points of Claim in the VCAT Proceeding at the 27 April 2006 conference.

(i) The plaintiff’s submission is that Cain’s evidence was to the effect that he made notes in relation to the conference of 27 April 2006 on a draft hard copy of the proposed Seventh Amended Points of Claim in the VCAT Proceeding. Cain also gave evidence that those handwritten notes on the pleading referred to what was said at that meeting. In reliance on Cain’s notes in that regard, the plaintiff points out in its submissions that the notes which Cain made on the draft of the Seventh Amended Points of Claim do not refer to the VCAT Proceeding being materially disadvantaged or in any way disadvantaged as a result of the recent amendments to the 1998 Act.

The plaintiff submits that if the defendant had advised it prior to the Conference that the amendments to the legislation materially weakened its claims in the VCAT Proceeding, ‘one would expect written advice to have been provided to this effect rather than assuming that the client understood the effect of the amendments to the legislation’.[21]
[21]PCS, 14 November 2017, [20].

At the Conference, attended by Hachem, his brother Joe Hachem, Gallo, Neophitou, Batsakis, Rothfield, Cain and Connor at the defendant’s offices, the plaintiff’s case is that for the first time Hachem was told about the recent effects of the amendments to the retail tenancies legislation.

The plaintiff’s submissions also assert the following in relation to the evidence given by those in attendance at the Conference:

(a) The witnesses, Hachem, Joe Hachem, Gallo, Neophitou and Batsakis all gave consistent evidence about what happened at the Conference.

(b) Gallo’s evidence referred to a discussion at the Conference about what the plaintiff might expect to recover in the VCAT Proceeding against his former solicitor McMahon, that ‘I think that we knew that he had a professional indemnity limit of $5 million’.

(c) Batsakis, an Architect, took contemporaneous file notes of what was said at the Conference.

The plaintiff however concedes that Batsakis’ notes reflect those matters discussed which were of concern to him in relation to the VCAT Proceeding and the structural issues with the Premises. His notes were not in the nature of a minute of the conversations at the Conference.[22]
[22]Ibid [23].

(d) The plaintiff submits that the thrust of the advice given by the defendant at the Conference was that all of the claims in the VCAT Proceeding were materially weakened and the plaintiff should settle the VCAT Proceeding and use its money to prosecute a claim in lieu thereof against McMahon.[23]
[23]Ibid [24].

(e) The plaintiff submits that Connor’s evidence was that he did not recall what was discussed at the Conference in any detail, nor did he recall whether he gave any advice to any of the people present at the Conference. Connor could not recall whether the Conference included discussion in relation to the settlement of the VCAT Proceeding. Connor’s evidence also was that he did not take any lead in discussing settlement or in respect of any other matter discussed at the Conference. Connor’s evidence included that he did not recall any discussion about making a claim against McMahon.

(f) The plaintiff’s submissions are expressly uncritical of Connor and put the position that Connor simply did not recall what happened at the meeting.[24]
[24]Ibid [25].

(g) In relation to Cain’s evidence, the plaintiff’s submission is that the Court should conclude that Cain had no actual recollection of what was said at the Conference. The plaintiff submits that Cain’s recollection is based on piecemeal extracts from various witness statements from which he derived his evidence as to what did not happen at the Conference, rather than any positive recollection of what did occur at that meeting.

(h) The plaintiff’s critical submission of Cain’s evidence is supplemented by its submission that Cain’s evidence is unreliable. This is principally because Cain had provided the instructions resulting in the defendant making the admissions in its originally pleaded defence referred to in Cain’s evidence, whereas Cain’s evidence at trial, it is submitted by the plaintiff, contradict those admissions. In this regard, the plaintiff relies in particular upon Cain’s Outline Witness Statement at [64(b)] in which he stated that he ‘has no specific recollection of the Conference’, whereas at trial Cain gave evidence that he had read the witness statements filed on behalf of the plaintiff and that they jogged his memory of the Conference.[25]

(i) The plaintiff submits in respect of Rothfield that his evidence in relation to the Conference is of no real assistance to the Court because his recollection was that the advice given at the Conference about the change to the commercial tenancy law,[26] and the potential for the legislative changes in that area to detrimentally affect the plaintiff’s claim at VCAT. The plaintiff ultimately submits that Rothfield’s evidence does not disclose what was actually said by the persons attending the Conference at the defendant’s offices.

[25]T785.26-785.29.

[26]T350.1-350.5.

The plaintiff submits that, as a result of the advice received by Hachem at the Conference, the plaintiff in due course instructed the defendant to settle the VCAT Proceeding and issue proceedings against its former solicitor, McMahon.

The plaintiff also contends that the post January 2007 conduct both of it and the defendant is consistent with the plaintiff’s evidence as to the advice given by the defendant at the key Conference and therefore supports the plaintiff’s case as to what was said and advised at the Conference.

In the plaintiff’s submissions the instances of post January 2007 conduct which support its case in relation to the advice it received at the Conference are:

(a) Rothfield’s email to Hachem dated 20 February 2007[27] which, on the plaintiff’s submission, refers to the lengthy conversation recently held at the defendant’s office at which the merits and risks of the case were extensively analysed and discussed;[28]
[27]CB2512.
[28]PCS, 14 November 2017, [28(a)].

(b) Hachem’s instructions to the defendant in early March 2007 to reject the recently received offer from the Landlords in relation to the VCAT Proceeding in the sum of $300,000,[29] and Hachem’s request at that time for professional assurance that in accepting the Landlords’ $300,000 offer, his rights to pursue other parties would not be affected;[30]
[29]CB1373.
[30]CB1374.

(c) Rothfield’s email of 14 March 2007 conveying the defendant’s view that the settlement of the VCAT Proceeding would not prejudice the plaintiff’s rights against any of its previous lawyers because the damages which it ‘will have suffered if a claim is successfully made out against either or all of Barflys’ previous solicitors’ in respect of the extra costs, were costs incurred as a result of the handling by those solicitors of the plaintiff’s case;[31]
[31]CB1375-1377.

(d) the telephone conversation between Hachem and Rothfield on 14 March 2007. Rothfield’s file note of that conversation referred to the plaintiff’s claim against its previous lawyers Slater & Gordon;

(e) The same notes of the conversation of 14 March 2007 referred to changes to the law as a result of legislative amendments and the defendant’s view that the issue was complex and that it was not prepared to advise ‘off the cuff’ as to whether a claim of negligence could be made in relation to that particular aspect.[32] The plaintiff submits, however, that the evidence at trial was such that it is not clear who stated the words ‘off the cuff’ in the telephone discussion of 14 March 2007 referred to in Rothfield’s file note;
[32]CB1378.

(f) The plaintiff submits that it is at all events clear Rothfield’s statements on 14 March 2017 concerning the defendant’s reticence to advise in relation to the plaintiff’s potential negligence claim in respect of its lawyer’s failure to properly advise in connection with legislative changes to the commercial tenancies legislation, had ‘nothing to do with Barflys’ previous lawyer’s negligence in failing to set aside the s 146 notice served by the Landlords of 16 Bourke Street’;[33]
[33]PCS, 14 November 2017, [28(d)].

(g) The plaintiff relies upon the VCAT Proceeding between the plaintiff and the Landlords and Agent being settled on about 16 March 2007;

(h) The plaintiff also relies upon an email from Hachem to Cain and Rothfield on 23 March 2007 attaching a document[34] which summarised the claims he wished to pursue and the grievances he wished to ventilate against McMahon.
[34]CB2754-2757.

(i) The plaintiff points out that at no time after receiving the email of 23 March 2007 did Cain or Rothfield communicate with Hachem about the Hachem 23 March 2007 email or its attachment;

(j) By 25 March 2007, the first draft of the Deed of Settlement of the VCAT Proceeding between the plaintiff and the Landlords had been prepared;[35]
[35]CB1390.

(k) On 13 April 2007, Hachem informed Rothfield that his former solicitor, McMahon, with whom he had met that day[36] had in substance admitted that he had acted negligently in respect of the Landlords;[37]
[36]T280.8-22; T281.7-8.
[37]CB1413.

(l) Rothfield and Hachem spoke on 16 April 2007. Rothfield’s file notes of that conversation with Hachem, the plaintiff submits, establish that Hachem wished to understand how to get the process of a claim against McMahon moving, and Rothfield advised Hachem that the initial process would be to write a letter to McMahon outlining Hachem’s claims which would be likely to result in McMahon notifying his professional indemnity insurer, which in turn should instigate discussions between the parties;

(m) The plaintiff also contends that, in their conversation on 16 April 2007, Rothfield informed Hachem that, prima facie, his claim was for costs, but if there was a cause of action resulting in damages separate and apart from the subject matter of the claim against the Landlords, potentially then a claim for that wrong could be brought against McMahon;[38]
[38]CB1416.

(n) By letter dated 17 May 2007, Rothfield emailed McMahon in relation to his client’s foreshadowed negligence claim, requesting that McMahon also notify his professional indemnity insurer accordingly;[39]
[39]CB1418.

(o) By 17 May 2007, Hachem and the respondent VCAT parties agreed in principle that the VCAT Proceeding would be settled;[40]
[40]CB1426.

(p) By email dated 24 May 2007, Rothfield advised Hachem of a draft letter outlining the various complaints against McMahon, which included a complaint in relation to McMahon’s negligence by failing to notify the plaintiff that one of the Landlords served a s 146 Notice pursuant to the Property Law Act 1958; and which also complained of McMahon’s dilatory conduct in joining the Agent to the VCAT Proceeding. Rothfield described this conduct in the draft letter as ‘the party that faced the greatest exposure for any claim to be brought’. The defendant sent a letter in substantially these terms, to McMahon on 29 May 2007;[41]

(q) On 3 July 2007, Rothfield emailed Hachem advising that it was time for Hachem to aggressively pursue a claim against McMahon;[42]

(r) By email dated 20 September 2007,[43] Cain outlined certain critical observations had been made by the defendant in relation to the McMahon legal file in respect of the VCAT Proceeding.[44] The plaintiff’s submission is that the only possible explanation of the ‘critical observations’ is that this referred to McMahon’s negligence in failing to set aside the s 146 Notice.

[41]CB2760-2763.

[42]ATD10.

[43]CB2773-74.

[44]CB2774.

The plaintiff also submits that a major driver for the defendant’s giving advice to Hachem at the Conference to settle the VCAT Proceeding was the defendant’s concern to be paid their outstanding fees and the defendant’s desire to shed Hachem as a client.[45]
[45]PCS, 14 November 2017, [29]-[30]; Put to Cain at T830.12; T831.1-8.

Prospect of Success at VCAT

The plaintiff maintains its case in VCAT against the Landlords and Agent had good prospects of success.

In relation to the Landlords, the plaintiff submits, amongst other things, that by failing to effect the relevant repairs, the Landlords breached the following obligations:

(a) from the time at which they first received notice of relevant damages and defects, the Landlords of 14 Bourke Street breached an express covenant to effect repairs to structural imperfections and defects of a serious nature;

(b) from the commencement of the lease, and the time at which they first received notice of relevant damage and defects, the Landlords derogated from the grant of tenancy by failing to provide premises which were safe or fit to occupy;

(c) from the commencement of the lease, and the time at which they first received notice of relevant damage and defects, the Landlords breached an express covenant to provide quiet enjoyment;

(d) from 15 April 2003, or at the latest 1 November 2003, the Landlords breached obligations imposed retrospectively by the 2005 Act to effect repairs to maintain the condition of the Premises at the time of entering into the lease;

(e) from the time at which they first received the Building Notices issued by the City of Melbourne, the Landlords breached obligations to comply with the Building Notices within the meaning of s 26 of the 1998 Act;[46]
[46]Eighth Amended Points of Claim (CB295-296); CB530-534 (The Manthoses) and CB535-539 (Nikpol Pty Ltd).

(f) from the time at which they first received notice of relevant damages and defects, the Agent breached its duty to pass on the plaintiff’s complaints to the Landlords;

(g) prior to entering into the Leases, the Agent misrepresented to the plaintiff on behalf of the Landlords that the first floor of the Premises at 14 Bourke Street would be lawfully occupiable by the plaintiff should it take a lease of the Premises;

(h) from in or about May 2002, the Agent misrepresented on its own behalf that, if the plaintiff carried out certain cosmetic repairs to the Premises, it would guarantee that the Landlords would grant two additional four year options to the plaintiff in respect of the Leases and they would get the Landlords to fix the rising damp prior to the renewal of the Leases in February 2003;

(i) from in or around May 2002 and October 2002, the Agent misrepresented that it would guarantee that the further terms of the Leases sought by the plaintiff would be granted by the Landlords.[47]

[47]Eighth Amended Points of Claim (CB315).

The plaintiff, at [64] and following of its closing submissions, submits that the dispute in the VCAT Proceeding (i.e. the Landlords’ breaches under the Leases) in relation to the Landlords failing to effect the relevant repairs were perpetrated before 1 November 2003, with the result that relevant liability in the VCAT Proceeding would have been resolved without reference to the above amendments to the retail tenancies legislation.

The plaintiff, at [65] of its closing submissions, submits that Cain incorrectly understood the relevant consideration to be when the damage to the Premises occurred rather than when the breach which caused the damage took place.

The plaintiff notes that in its Eighth Amended Points of Claim at VCAT, a claim was added under s 26 of the 1998 Act which requires Landlords to comply with any requirement of a public statutory authority or government department, if it is the Landlords’ responsibility to do so. In this respect, the plaintiff submits that the Landlords failed to comply with the Building Notice served by the City of Melbourne.

The plaintiff points out that at trial Connor’s evidence acknowledged in cross-examination that s 25 of the 1998 Act has no bearing on liability under s 26 of that Act.[48]
[48]T1081.4-7.

The Defendant’s Case

The key assertions in the defendant’s case are in essence that it:

(a) admits that it was engaged by the plaintiff in about January 2006 to act in and conduct the plaintiff’s VCAT Proceeding;

(b) in substance admits the allegations made by the plaintiff in relation to the nature and scope of the duty of care owed by the defendant to the plaintiff in respect of its retainer;

(c) admits that in March 2006 and at the Conference it advised the plaintiff that its position against the Landlords in the VCAT Proceeding had been materially disadvantaged as a result of retrospective legislative changes whereby the Landlords were only required to maintain the Premises in a condition consistent with the condition of the Premises when the Leases were entered into;

(d) denies that at the Conference it advised the plaintiff to settle its VCAT Proceeding and accept a settlement from the Landlords and Agent;

(e) denies that at the Conference, or at any other time, the defendant advised that the plaintiff could utilise its settlement moneys from the VCAT Proceeding and apply them to prosecuting a case against McMahon;

(f) denies that at the Conference, or at any other time, the defendant advised the plaintiff that the prosecution of a case against McMahon was where the plaintiff’s ‘real windfall lay’;

(g) denies that the defendant’s advised that in relation to a claim against McMahon the plaintiff’s recovery was estimated at approximately $3 million;

(h) admits that in or around mid-March 2007 it advised the plaintiff that because of the changes made to the retail tenancies legislation the plaintiff should attempt to settle its VCAT proceeding for an appropriate sum;

(i) claims that in or around 14 March 2007 it told Hachem that the defendant was not prepared to give the plaintiff advice ‘off the cuff’ as to whether a negligence claim could be made out against McMahon in relation to a change of law because this was a complex question;

(j) denies that the defendant advised the plaintiff as to the quantum or the terms of settlement upon which it should settle its proceeding against the Landlords and the Agent;

(k) admits that pursuant to a Deed of Settlement dated 7 June 2007, the plaintiff settled its VCAT Proceeding against the Landlords and the Agent on the basis that the plaintiff would be paid $341,500;

(l) refutes that the defendant, prior to about late 2007, provided any advice to the plaintiff in respect of the possible merits of its claim against its former solicitor, McMahon;

(m) admits that the plaintiff settled its County Court Proceeding against McMahon on 27 August 2013 for the sum of $950,000, inclusive of costs;

(n) denies the plaintiff’s alleged loss and damage and loss of opportunity.

Defendant’s Pleadings on Liability

By the defendant’s Further Amended Defence dated 29 May 2017,[49] it pleads:
[49]CB3756–3764.

Negligence
8. As to paragraph 8: [of the plaintiff’s Statement of Claim dated 3 September 2015]
(a)they admit that they advised the plaintiff that its position against the landlords in the VCAT proceeding had been materially disadvantaged as a result of retrospective legislative changes by reason that the landlords were only required to maintain the Premises in a condition consistent with the condition of the Premises when the Leases were entered into and they say that an allegation consistent with that advice had been made in the Seventh Amended Points of Claim dated 29 May 2006 filed in the VCAT proceeding pursuant to an order of Deputy President McNamara (as he then was) made 26 May 2006, but otherwise they do not admit the allegations in subparagraph (a); and
Particulars
The Defendants refer to paragraph 42G and 42K of the Seventh Amended Points of Claim a copy of which may be inspected at the office of the Defendants’ solicitors by appointment.
(b)they say further that:
(i)in or around mid-March 2007 they advised the Plaintiff that, by reason of the circumstances referred to in subparagraph 8(a) above and otherwise, it should attempt to settle the VCAT proceedings for an appropriate sum;
(ii)on or about 14 March 2007, they told Mr Tony Hachem on behalf of the Plaintiff, and in his capacity as the Plaintiff’s director, that they were not prepared to give the Plaintiff advice “off the cuff” as to whether a claim in negligence could be made out against Mr Brian McMahon (“McMahon”) who was the solicitor who had formerly acted for the Plaintiff in the VCAT proceeding, in relation to a change of the law, as thus was a complex question;
Particulars
A.The advice was given verbally by Mr Roger Rothfield on behalf of the Defendants during a telephone conversation with Mr Hachem, during which conversation Mr Darren Cain was also present.
B.A copy of Mr Rothfield’s file note of the conversion is available for inspection at the office of the Defendants’ solicitors.

…
11.They admit:
(a)that the County Court proceeding was settled on 27 August 2013 upon terms whereby the defendant McMahon agreed to pay to the plaintiff $950,000 inclusive of costs;
(b)that at the time of settlement the Plaintiff had incurred costs in the County Court proceeding;
but otherwise they do not admit the allegations in paragraph 11.

12.They deny the allegations in paragraph 12 and say further the advice admitted in subparagraph 8(a) was correct.
Particulars

Section 107 of the Retail Leases Act 2003 (“RLA”) substituted for s. 25 RTRA, inter alia:
“s. 25 Landlord’s liability for repairs
(1)A retail premises lease is taken to provide as set out in this section.
(2)The landlord is responsible for maintaining in good repair –
(a)the structure of, or fittings in, the retail premises; and
(b)….

(6)This section only has effect from 1 November 2003”

On 22 November 2005 the Retail Leases (Amendment) Act 2005 (“RTLAA”) received Royal Assent.
Section 43 of the RLAA amended s.107 of the RLA to result in s.25 of the RTRA providing, inter alia:
“s. 25 Landlord’s liability for repairs
(1)A retail premises lease is taken to provide as set out in this section.
(2)The landlord is responsible for maintaining in a condition consistent with the condition of the premises when the retail premises lease was entered into –
(a)the structure of, and fixtures in, the retail premises; and
(b)…

(6)This section only has effect from 1 November 2003”.
Subsection 47(2) of the RTRA provided:
“(2)A provision of a retail premises lease is void insofar as it is contrary to or inconsistent with anything in this Act or with anything that by this Act the lease is taken to provide.”

Damages
13. They deny the allegations in paragraph 13.

The settlement related advice referred to in the Further Amended Defence above [8(b)(i)] is referred to hereafter as the Admitted Settlement Advice.

Resultant Issues for Determination

On the plaintiff’s submission, the key issue for determination is whether the defendant provided negligent advice to the plaintiff at the Conference.[50] In the event that the key issue is answered in the affirmative, the following subsidiary issue for determination is whether the defendant’s negligence caused the plaintiff to suffer loss and damage.
[50]PCS, 14 November 2017, [2].

The plaintiff identifies five sub-questions for determination in the proceeding[51] as follows:
[51]Ibid [14(a)-(b)].

(a) What was the likelihood that the plaintiff would have succeeded on its claim in the VCAT Proceeding?

(b) What was the likelihood that the plaintiff would have recovered more than $341,500 as damages in the VCAT Proceeding?

(c) Would the plaintiff have pursued its claims in the VCAT Proceeding if properly advised?

(d) Having regard to the answers to the above questions, if the plaintiff did lose a chance of value because of the defendant’s negligence, what is the proper award of damages to compensate it for that loss?

(e) If it was likely that the plaintiff would succeed on its claim in the VCAT Proceeding what is the quantification of that loss and damage.

In my view, there are three main issues for determination:

(a) Was the defendant negligent, as assessed by reference to a qualified, competent and careful lawyer in the circumstances in the practice of his or her profession?[52] This accords with the standard of care imposed on professionals at common law: that of the ‘ordinary skilled person exercising and professing to have that special skill’.[53]

(b) If the defendant was negligent, did its negligent conduct cause the plaintiff to suffer loss or damage?

(c) If the defendant’s negligence caused loss or damage, what is the quantum of the plaintiff’s loss or damage?

[52]Hawkins v Clayton (1988) 164 CLR 539, 580; GE Dal Pont, Lawyers’ Professional Responsibility (Lawbook Co., 6^th ed, 2017) 178.

[53]Rogers v Whitaker (1992) 175 CLR 479, 483 (Mason CJ, Brennan, Dawson, Toohey and McHugh JJ).

Considerations
Advice Given by the Defendant to the Plaintiff

On the case as pleaded and advanced by the plaintiff, the critical foundational questions in relation to the defendant’s liability are:

(a) Whether by the RTRA Advice, the defendant negligently advised the plaintiff that its case against the Landlords in the VCAT Proceeding had been materially disadvantaged as a result of amendments to the 1998 Act;

(b) whether the defendant advised the plaintiff in the terms of the:

(v) Settlement Advice;

(vi) the McMahon Advice;

(vii) the Windfall Recovery Advice;

(c) whether the defendant failed to consider and explain, as part of the RTRA Advice, that the Agent was not affected and that certain terms of the Leases were also unaffected by the legislative changes;

(d) whether the negligence of the defendant, if established, caused the plaintiff loss and damage as a result of the plaintiff settling its action in the VCAT Proceeding.

Defendant’s Retainer by the Plaintiff

In February 2006, on behalf of the plaintiff, Hachem signed a fee agreement with the defendant.[54] Subsequently, additional terms and conditions were agreed between Hachem and the defendant in respect of the plaintiff’s engagement of the defendant to act on its behalf.[55]
[54]CB1025.
[55]CB1025; CB2696.

The defendant’s pleaded position in the proceeding in substance accepts its engagement by the plaintiff. The defendant also admits that it owed a duty of care to the plaintiff in relation to that engagement to exercise all due care, skill and diligence.[56]
[56]Statement of Claim, 3 September 2015, [5]; Further Amended Defence, 29 May 2017, [5].

Soon after its engagement to act for the plaintiff in the VCAT Proceeding, the defendant engaged experienced Counsel, Connor, whose practice included specialisation in the area of retail tenancy disputes.

Australian Lawyers Standard of Care

The standard of care of solicitors, faced with negligence allegations of the type made by the plaintiff in this proceeding, may be summarised as follows:

At general law, the relevant standard of care is "that of the ordinary skilled person exercising and professing to have that special skill”. Translated to the lawyer-client context, it is one of a qualified, competent and careful lawyer in the circumstances in the practice of her or his profession. … A breach of the duty of care will be established only if the opinion or advice does not reflect the standard expected of a reasonably competent lawyer.[57]
Whether at general law or under statute, the standard of care dictates that a lawyer is expected to possess the knowledge of the reasonable competent lawyer of well-settled principles of law, and the relevant procedure and rules of court, applicable to the client's needs.[58]

[57]GE Dal Pont, Lawyers Professional Responsibility (Lawbook Co, 6^th ed, 2017) 178.

[58]Ibid 180.

In Hawkins v Clayton,[59] Deane J observed:

It is neither necessary nor desirable to attempt to define, in the abstract, the precise content of the firm’s duty of care or the precise extent to which the firm was required to take positive action…That question [of breach] must be answered by reference to the standard or measure of care which was reasonable in the circumstances. In the present case, that standard or measure of care was that indicated by Windeyer J in Voli, namely, the care and skill to be expected of a qualified and ordinarily competent and careful solicitor in the exercise of his [or her] profession.[60]

[59](1988) 164 CLR 539.

[60]Ibid 580 (citations omitted).

In Badenach v Calvert,[61] Gageler J observed:

Subject to statutory or contractual exclusion, modification or expansion, the duty of care which a solicitor owes to a client is a comprehensive duty which arises in contract by force of the retainer and in tort by virtue of entering into performance of the retainer. The duty is to exercise that degree of care and skill to be expected of a member of the profession having expertise appropriate to the undertaking of the function specified in the retainer. Performance of that duty might well require the solicitor not only to undertake the precise function specified in the retainer but to provide the client with advice on appurtenant legal risks.[62]
[61](2016) 257 CLR 440.
[62]Ibid 457 (citations omitted).

Defendant’s RTRA Advice

The defendant admits that at the Conference it gave advice to the plaintiff in terms of the RTRA Advice.

For the following reasons, however, the defendant did not breach its retainer by failing to exercise due care, skill and diligence in relation to the RTRA Advice.

Changes in the Retail Tenancies Legislation

In my view, the likely position in respect of the amendments in question in relation to the relevant retail leases provisions in issue is that:

(a) at all relevant times, the Leases of 14 and 16 Bourke Street comprised retail premises leases under the relevant legislation. At the time at which each lease was initially entered into, the relevant regime for retail premises leases was contained in the 1998 Act;

(b) by s 118 of the 2003 Act, the 1998 Act was repealed. The 2003 Act included a relevant savings provision, s 119, which provided that despite the repeal of the 1998 Act, that Act continued to apply from 1 November 2003 to a retail premises lease entered into on or after 1 July 1998;

(c) accordingly, notwithstanding its repeal, the 1998 Act continued to apply to the plaintiff’s two Leases, subject only to the further amendment effected by Part 12 of the 2003 Act;

(d) by operation of s 107 of the 2003 Act, from 1 November 2003, a Landlord of a retail premises lease had an obligation of maintaining in good repair. This obligation was imposed on it by s 25 of the 2003 Act. The obligation to maintain in good repair was prospective however it applied to leases which were subject to the 1998 Act. That position changed as a result of the enactment in 2005 of the 2005 Act;

(e) the 2005 Act came into operation on 22 November 2005 and by s 2(4) of the 2005 Act, s 43 of that Act, titled ‘Landlord's Liability for Repairs’, the 2005 Act was ‘deemed to have come into operation on 15 April 2003’;

(f) section 43(1) of the 2005 Act provided as follows:

43. Landlord's liability for repairs
(1) In section 107 of the Principal Act, in the proposed new section 25(2) of the Retail Tenancies Reform Act 1998 -
(a) for "good repair" substitute "a condition consistent with the condition of the premises when the retail premises lease was entered into";
(b) for "structure of, or fixtures" substitute "structure of, and fixtures";
(c) for "plant or equipment" substitute "plant and equipment";
(d) for "fittings or fixtures" substitute "fittings and fixtures";

(g) the above amendment applied retrospectively and the 2005 Act provided, by a deeming provision in s 2(4), that the amendment to the Landlord's liability for repairs came into operation on 15 April 2003;

(h) in this way the 2005 Act amended s 25 of the 2003 Act and effected a position where the relevant obligation imposed on the Landlord arose from 15 April 2003. Accordingly these amendments were retrospective, in effect backdating the operation of the Act to 15 April 2003 in relation to the Landlords’ liability for repairs;

(i) it follows that s 25 as amended, provided:

25.Landlord's liability for repairs
(1) A retail premises lease is taken to provide as set out in this section.
(2) The landlord is responsible for maintaining in a condition consistent with the condition of the premises when the retail premises lease was entered into -[63]
[63]Emphasis added.
(a) the structure of, and fixtures in, the retail premises; and
(b) plant and equipment at the retail premises; and
(c) the appliances, fittings and fixtures provided under the lease by the landlord relating to the gas, electricity, water, drainage or other services.
…
(6) This section only has effect from 1 November 2003.

(j) pursuant to s 14(2) of the Interpretation of Legislation Act 1984, the amendments to the 2005 Act reflect a ‘contrary intention’ because the language of s 25 before and after the amendments introduced by the 2005 Act. Prior to those amendments the obligation was one of maintaining premises in ‘good repair’. After the amendments, the obligation was replaced with that of maintaining the premises in ‘a condition consistent with the condition of the premises when the retail premises lease was entered into’;

(k) because the new Landlords’ obligations were operative from mid-April 2003, VCAT was likely to determine the relevant Landlords’ obligations in relation to 14 and 16 Bourke Street in a way which required the Landlords to maintain premises in ‘a condition consistent with the condition of the premises when the retail premises lease was entered into’.

It follows from the above that in my view the materially detrimental effect of the above legislative amendment on the plaintiff’s case at VCAT was probable, and at the very least arguable, and materially disadvantaged and rendered doubtful the bulk of the plaintiff’s prime claims at VCAT.[64]
[64]CB3068-3069; Rockliffe’s Report appears to record the bulk of the plaintiff’s loss and damage arising from events occurring after mid-April 2003.

In summary, therefore, the likely position in respect of the various (and overlapping) retail leases provisions is that:

(a) the lease agreements were executed in 2001. At this time, the lease agreements were subject to the 1998 Act. The 1998 Act required a landlord to maintain the premises in a state of ‘good repair’;

(b) the 2003 Act partially repealed the 1998 Act. Subject to alterations in Part 12 of the 2003 Act, from 1 November 2003 existing retail leases continued to fall under the 1998 Act. In particular, the Landlords' obligation to maintain premises in a state of ‘good repair’ survived commencement of the 2003 Act;

(c) the 2005 Act changed the obligation from ‘good repair’ to ‘a condition consistent with the condition of the premises when the retail premises lease was entered into’. This provision of the 2005 Act was deemed to have come into operation on 15 April 2003.

The plaintiff commenced its VCAT Proceeding on 6 November 2003. At this time, the Landlords’ obligation was to maintain the premises in a state of ‘good repair’. In 2005, while the VCAT Proceeding was ongoing, the Landlords' obligation was reduced, retrospectively to April 2003, to maintain the premises in a state ‘consistent with the condition of the premises when the retail premises lease was entered into’. This reduction of the Landlords' obligation likely resulted in an attendant reduction on the value of the plaintiff's claim because the bulk of the relevant plaintiff’s claim at VCAT and associated loss and damages arose, or at least arguably so, after 15 April 2003.[65]
[65]Ibid.

Section 14(2)(e) of the Interpretation of Legislation Act 1984 (Vic) creates a presumption that the repeal or amendment of an Act does not affect accrued rights, obligations or liabilities. The presumption can be displaced by a ‘contrary intention’ that ‘expressly appears’ from the legislation. Here, s 2 of the 2005 Act expressly deemed s 43 of the 2005 Act and associated amendments to the 2003 Act and 1998 Act came into operation on 15 April 2003. Those provisions deal explicitly with the rights of tenants and obligations/liabilities of Landlords. Thereby, the presumption preserving accrued rights was probably displaced in these circumstances, at least arguably so.

The Effect of Amendments to the 2003 Act

The impact of the legislative changes on the plaintiff’s case at VCAT was that the bulk of the claims brought against the Landlords for loss and damage caused as a result of the Premises being subject to water ingress, rising damp and similar problems, were claims which arose after the effective date of the amendments to the 1998 Act (by reason of the 2005 Act), that is probably from mid-April 2003. Such claims were probably therefore to be evaluated by reference to a materially lower or diminished standard from a good repair obligation earlier imposed upon the Landlord, namely an obligation to repair the Premises to a condition consistent with the condition of the Premises at the time of entry into the relevant lease.

Significantly, most of the claims advanced by the plaintiff at VCAT were made in connection with the plaintiff’s business interruption and consequential loss and damage after 15 April 2003.

Connor also expressed the view that the plaintiff’s case against the Landlords’ Agent at VCAT was weakened because, irrespective of whether the plaintiff was able to establish the alleged representations against the Agent in connection with guaranteeing further terms of the relevant Leases, the plaintiff would have exercised the renewal options in any event. The plaintiff was committed to those Leases as a result of the significant moneys it had spent on the demised premises.[66]
[66]T1050.21–31.

Cain’s evidence also explained the way in which the plaintiff’s claim at VCAT was broken into components and the impact of the legislative changes on the plaintiff’s case, including how those changes limited the plaintiff’s claim for damages at VCAT to urgent repairs in the sum of $5,000.[67]
[67]T990–992.

Ultimately, the above changes to the retail tenancies legislation probably effected a materially reduced standard of Landlords’ obligation from 15 April 2003. This also probably resulted in the plaintiff’s prime and principal claim, that is its claims against the Landlords at VCAT, being at least materially disadvantaged as a result of those legislative changes.

In my view, this resulted in it being probable, and therefore at least arguable, that most of the plaintiff’s loss and damage claimed against the Landlords in relation to the Premises, given that the bulk of the events causing the plaintiff’s loss and damage claimed at VCAT, and the loss and damage itself, had arisen after 15 April 2003, was unrecoverable against the Landlords at VCAT. Furthermore, as outlined above, it is also probable, and therefore at least arguable, that the said legislative amendments would cut across what might otherwise have been the plaintiff’s accrued rights in relation to its lease related causes of action (if any) against the Landlords, in respect of events and loss and damage in relation to the Premises’ repair associated obligations, after 15 April 2003.

In the result, the defendant was, I consider, substantially correct in advising the plaintiff in about March 2006 and at the Conference, that the plaintiff’s position against the Landlords in the VCAT Proceeding had been materially disadvantaged by the legislative changes outlined above. Accordingly, I am not persuaded that the defendant was in any way careless of, or lacking in skill or diligence, in giving the RTRA Advice.

I therefore reject the plaintiff’s claim that in giving the RTRA Advice relied on by the plaintiff in paragraph [8(a)] of its Statement of Claim, the defendant was negligent in that regard, and in breach of its retainer by the plaintiff.

Neither, in my view, was the defendant in any way negligent in failing to give advice in the ways alleged by the plaintiff in paragraphs [12(ii)-(iii)] of its Statement of Claim dated 3 September 2015.

I add that my views in relation to the effect of the 2003 Act and relevant amendments, including those which appear to have been affected by the 2005 Act, significantly inform my finding that the defendant was not negligent in giving the RTRA Advice it did in March 2006 and at the Conference. However, I note that I have analysed these matters in the context of a claim asserting a failure to exercise all due care, skill and negligence on the part of the defendant and concluded, for the reasons I have outlined, I am not satisfied that the defendant perpetrated any of the alleged failures.

I have not, however, in considering the provisions and operation of the relevant retail tenancies legislation, sought to make findings or statements which decide the proper construction or operation of the subject provisions or Acts of Parliament.

Accordingly, notwithstanding that the defendant gave the RTRA Advice to the plaintiff, that advice was correct, or at least arguably correct, and the provision of that advice by the defendant was not negligent or in any respect in breach of the defendant’s retainer requiring the exercise of all due care, skill and diligence on its part.

Key Evidence on the Determinative Issues
Tony Hachem

In relation to advice received from the defendant on changes to the retail tenancy laws and their effect on the plaintiff’s case at VCAT, Hachem says at no time before an urgent conference which was called in early 2007 was he ever advised by the defendant that his claims in the VCAT Proceeding were weakened.[68]
[68]T221–222.

The Conference

As to the Conference attended by Cain, Rothfield, Connor, Joe Hachem, Batsakis, Gallo and Neophitou, Hachem’s evidence was in part as follows:

I believe it was Chris Connor that walked us through it, basically saying that the amendment of the 2005 Act changed by way of the landlords - it changed from the landlords being totally responsible for structural repairs to the landlords needed to bring the repairs back in the position where the tenant entered into the lease. Then Darren came and stepped in and basically said, "Unfortunately, this has weakened your claim, Tony." I was in shock. I said to Darren Cain, "How can this be? What do you mean it's affected my claim?" He basically said that the merits of the case, or the case - yeah, basically wasn't as strong as it was before this amendment came through. Because at the time our claim was worth over $3 million plus interest, plus costs and that was told to me via what Nigel Rockliffe reported which we relied on, it was a quantum report.
Did they give you any estimate as to what they then thought your claim might be worth at that time?---Yes.[69]
Did any one of the parties, any of the people at the meeting, give you any estimation at that meeting of what they thought your claim might be worth then, after it had been allegedly weakened?---Yes. Darren Cain basically said the claim would be worth around $800,000. I was in shock - - -
Don't worry about whether you were in shock. Can I then ask you had you ever in any of your earlier meetings with Kligers been given an estimate of what they thought the claim was worth?---Yes. They thought the claim would be worth - - -
Just a moment. One question at a time?---Yes.
Approximately when was that?---When I first engaged with them back in early 2006. Even in the meeting of April 2006 they had also said that my claim - - -
When you say "they", who do you mean?---Chris Connor and both Savas and Darren Cain. They were referring to the Nigel Rockliffe quantum report where my quantum amount was over $3 million plus interest plus costs.[70]

[69]T243.26–31; T244.1–13.

[70]T244.29–31; T245.1–16.

Hachem’s evidence was:

I understand the question. Mr Wilson, the only time that I knew that the claim had weakened, so to speak, was in that meeting on or about 20 February 2007. Prior to that it was guns blazing, so to speak.[71]

[71]T246.27–31.

Hachem was adamant that between about March 2006 and the Conference which he initially referred to in evidence as occurring on 20 February 2007, later agreed by the plaintiff and the defendant to have occurred on 31 January 2007, no person at the defendant, including Cain or Rothfield, nor Connor, advised or indicated in any way that the plaintiff’s claim had been weakened.[72]
[72]T247.1–12.

Hachem’s evidence was that at the meetings with the defendant up to early 2007 he was told that the plaintiff had a strong arguable case against the Agent and against the Landlords of the Premises the plaintiff had been occupying.[73] Hachem’s evidence is also that in February 2007 the defendant had advised his claim at VCAT had been weakened and, in addition, there were advices given to the following effect:

Yes, there were. Darren Cain basically said due to the change in the legislation in the Retail Tenancies Act that it was in our best interest to settle the VCAT claim and to go after Brian McMahon because all along I have always said - and I said this to Savas when I first met him - when I went to Kligers after Slater & Gordon, I said, "Why can't we just go after everybody that we believe were negligent, including the landlords, the agent, Brian McMahon" and he also mentioned that we would go after Slater & Gordon -
When you say "he mentioned"?---Sorry, Darren Cain. My apologies.
Can you precisely any particular words that were said in the context of the recommendation that you go after Brian McMahon?---Yes. Darren Cain - sorry?
Who said them?---Darren Cain basically said that, "Your case against Brian McMahon was very strong. It was more of a slam dunk case with his failure of the section 146 notice and to try and settle the VCAT claim." I jumped in and said the amendment in the Retail Tenancies Act applied to the landlords. What about the agent? Darren Cain turned around and said they are all in one. If I may. The other witnesses, being George Batsakis, Lou Gallo, my brother, Joe, Neophitou, that were present, clearly Roger Rothfield - my brother Joe said, "What does this mean for the case?" Roger Rothfield lent over, basically said to my colleagues and my brother that, "We couldn't foreshadow the amendment to the Act and it's weakened Barfly's' case against the landlords" and they thought it was in my best interests to settle a claim that they had advised, based on the Nigel Rockliffe report, that my quantum amount for loss and damages was over $3 million plus interest, to try and get it settled for $800,000. Then Darren Cain turned around and said, "You had an offer of $300,000 when you went to mediation with Slater & Gordon", some 14 to 18 months prior - I can't recollect the actual month or date but it was late 2005 and I basically turned around and said to Darren, "Why would I want to settle for $300,000, Darren?" That's when he said, "Well, your best case now, due to the change in the law, is to go after Brian McMahon."
Did he say anything concerning going after Brian McMahon, as to either the potential quantum or anything else?---Yes. He said, "Your best case is against Brian McMahon", the quantum amount that he still relied upon in Nigel Rockliffe's report - I think it was $3.1 million plus interest, plus costs.[74]

[73]T248.6-14.

[74]T248.23–31; T249–250.1–9.

Hachem’s evidence was, repeated on a number of occasions, that Cain had told him at the Conference that the plaintiff’s case against its former solicitor McMahon should be pursued because that case was a ‘slam dunk’. I note, however, that Hachem several times varied the words he said Cain had used.[75]
[75]T251.14–17.

In relation to the Conference, Hachem’s evidence was at that Conference Gallo commented on the fact that Hachem had spent a lot of money on renovations and asked what the legislative changes meant to his case. Cain apparently responded saying that the plaintiff’s claim had been materially weakened and that the windfall or gain was in the McMahon claim because of all of the renovations and costs.[76]
[76]T264.22–31; T265.1–2.

Further, Hachem’s evidence was that his brother, Joe Hachem, asked Rothfield at the Conference what the legislative changes meant to his case. Cain apparently responded to Joe Hachem’s question that the plaintiff’s case had been materially weakened and its best chance was to go after McMahon because that was where the real windfall gain was. Hachem also stated that Cain, at about the same time, said the plaintiff’s case at VCAT would be lucky to yield $800,000.[77]
[77]T265.10–29.

Hachem’s evidence was that Cain stated the real windfall gain would be in the case against McMahon and in that case the plaintiff would claim the difference between whatever it settled for at VCAT and go after McMahon for a ‘pot of gold’.[78] Hachem’s evidence was also that Cain stated to him that McMahon’s professional indemnity insurance cover would be worth over $5 million and Rothfield said that McMahon would have professional indemnity insurance cover and private cover as well.[79]
[78]T267.29–31; T268.1–5.
[79]T268.20–26.

Although Hachem’s recollection of what was said by Cain and Rothfield at the Conference purports to be substantially on a word-for-word basis, on another occasion in his evidence Hachem made it clear that because of the lapse of nearly ten years between the key events upon which the plaintiff bases its case, and the time he was giving evidence at trial, his recollection was imperfect.[80] This evidence, coupled with Hachem’s varied and inconsistent evidence in relation to the plaintiff’s pleaded case that at the Conference he was told by Rothfield or Cain that the plaintiff’s case against McMahon was ‘where the real windfall lay’, considerably diminished the credibility and reliability of Hachem’s evidence, the same way many other aspects of Hachem’s evidence, referred to below, cumulatively diminished the credibility and reliability of his evidence generally. In relation to being told that pursuing McMahon was where the real windfall lay, Hachem variously and inconsistently gave evidence that at the Conference Cain said the case against McMahon was a ‘slam dunk case’, a ‘pot of gold’ and ‘where the real windfall gain was’.
[80]T271.8–13.

Settlement of the VCAT Proceeding

Hachem’s evidence was that he discussed the settlement of the plaintiff’s VCAT Proceeding with Rothfield on 14 March 2007. In their telephone conversation about the quantum of the proposed settlement of the VCAT Proceeding, Rothfield informed Hachem that there was an offer of $325,000 from the respondents. Hachem’s instructions were to decline that offer. Hachem’s evidence was that at the same time he told Rothfield:

I reject the plaintiff’s contention. In my view, the Connor Advice did provide relevant advice as to the main and most significant claims the plaintiff was at that time pursuing at VCAT, and the Advice constituted clear unequivocal advice at that time to the plaintiff that its claims against the Landlords were materially disadvantaged.[267]
[267]Statement of Claim, 3 September 2015, [8(a)].

In also find the defendant had, principally via Cain, carefully considered the legislative amendment issues upon which the advice the defendant did give at the Conference was based, including seeking and considering the Advice of Counsel on those issues and after seeking and considering Hachem’s instructions and ensuring that Hachem was acquainted with the defendant’s advice and Connor’s Advice on those issues.[268]
[268]CB1295; T761.19–24; T885.13–19.

In my view, the advice provided by the defendant at the Conference, namely the RTRA Advice, reflected the standard expected of a reasonably competent Australian lawyer. The defendant’s advice in that regard at the Conference exhibited a sufficient knowledge, analysis and understanding of the matters the subject of the defendant’s advice to the plaintiff.

In my view, the RTRA Advice in relation to which the plaintiff alleges a want of due care, skill and diligence by the defendant was not lacking in due care, skill or diligence in that it did not specifically deal with the plaintiff’s claims against the Agent and the construction and effect of certain other clauses of the Leases.

The RTRA Advice was in relation to the plaintiff’s position ‘against the Landlords’ at VCAT and the advice given as to ‘material disadvantage’ remains correct or at least arguably so notwithstanding the existence of less prominent claims at VCAT including the claims against the Agent.

I have also come to the same view for the same reasons in relation to the Admitted Settlement Advice provided by the defendant in mid-March 2007. The provision of that advice by the defendant did not reflect a failure by the defendant to meet the standard expected of a reasonably competent Australian lawyer. Ultimately, the defendant’s Admitted Settlement Advice of mid-March 2007 to the plaintiff amounted to no more than a recommendation that the plaintiff endeavour to settle its VCAT Proceeding on commercial terms acceptable to the plaintiff on the basis that it received a sum acceptable to the plaintiff. No advice was given in relation to the prospects of success at VCAT, nor in relation to an appropriate sum for which the plaintiff might settle its VCAT Proceeding.

Further, in my view, in the circumstances so far as they can be evaluated, the plaintiff’s settlement of its VCAT Proceeding against the Landlords and the Agent were not unreasonable, and certainly not so unreasonable as to suggest or establish that the defendant was in any way negligent in relation to its advice concerning the plaintiff’s settlement of the VCAT Proceeding.

Furthermore, I have found that the defendant did not advise the plaintiff to settle its claims at VCAT and sue its former solicitor, McMahon. I have also found that at no stage the defendant advised that the plaintiff’s ‘real windfall’ lay in claims against McMahon.

For the above reasons I also reject the plaintiff’s argument that s 52 of the 2003 Act applied only to leases entered into after 1 May 2003 and did not apply to the plaintiff’s Leases.[269]
[269]Barfly’s Nominees Pty Ltd v Manthos [2003] VCAT 1941 [10]–[11]; see also Mega Byte Baby Pty Ltd v WJH Pty Ltd [2005] VCAT [1391].

Likewise, for the above reasons, I reject the plaintiff’s apparent contention that any contractual cause of action under the covenants of the Leases arose prior to the introduction at the relevant amendments and that therefore such causes of action would not be affected by the amendments in the 2005 Act.[270] I reject this contention establishes that the defendant’s RTRA Advice was negligent because, as I have earlier found, the majority of the plaintiff’s relevant loss and damage claimed at VCAT arose after April, and at the latest November 2003 and the legislation also probably, at last, arguably, affected accrued rights of the plaintiff from mid-April 2005.
[270]Defendant’s Closing Submissions, [37].

For the above reasons, I also reject the plaintiff’s contention that upon commencement of the VCAT Proceeding in November 2003 it was entitled to have its claims determined by reference to ‘good repair’ obligation, namely the repair obligation contained in s 25 of the 1998 Act.[271]
[271]Ibid [38].

Plaintiff’s Resolution of its VCAT Proceeding

I do not consider that the plaintiff’s settlement of its VCAT Proceeding between about early May and early June 2007, culminating in the plaintiff and the respondent parties at VCAT executing terms of settlement on 7 June 2007, was in any way caused by a failure on the part of the defendant to exercise all due care, skill and diligence in relation to its retainer by the plaintiff.

Firstly, this is because I have found that the defendant’s Admitted Settlement Advice to the plaintiff was not lacking in care, skill or diligence on the part of the defendant as I have sought to explain.

Furthermore, I have found that the defendant did not advise the plaintiff to settle its claims at VCAT and sue its former solicitor McMahon and I have also found that the defendant at no stage advised that in respect of its claims it would be in litigation against McMahon that the plaintiff’s real windfall lay.

Secondly, I am unpersuaded that Hachem and the plaintiff decided to settle the plaintiff’s claims against McMahon on the terms the plaintiff did in reliance upon advice from the defendant. At no time before about the end of 2007, if at all, about then or thereafter, did the defendant advise the plaintiff as to the likely quantum it would recover from McMahon, nor in relation to what recovery or range of recovery it could expect in respect of its claims at VCAT. There is no evidence that the plaintiff sought such advice from the defendant.

Further, I am not satisfied that the plaintiff at any point sought advice in respect of a settlement sum or a settlement range in relation to the settlement of the plaintiff’s VCAT Proceeding.

I am satisfied for the reasons outlined above that what ultimately happened was that Hachem took it upon himself to deal with these settlement negotiations and it was Hachem who fixed upon what he considered an appropriate settlement sum to justify the plaintiff’s resolution of its VCAT Proceeding.

Furthermore, in my view, the settlement reached by the plaintiff with the respondents to the plaintiff’s VCAT Proceeding was not an abandonment, but rather an agreed compromise for a substantial sum, namely $341,500.

That compromise of its VCAT Proceeding was not so unreasonable as to in any way reflect a lack of reasonable care, skill and diligence on the part of the plaintiff’s legal advisers, even if, contrary to my findings, the defendant’s advice had been sought in relation to that settlement.

Impossible in this Proceeding to Evaluate Prospects of Success

In any event, in this proceeding, it is not possible to sufficiently, accurately or safely evaluate the plaintiff’s prospects of success at VCAT because:

(a) it is likely the bulk of the determinative evidence at VCAT would have comprised expert evidence exchanged by both the claimant and the respondents, but by mid-2007 no such evidence had been exchanged or filed at VCAT;

(b) if the plaintiff’s VCAT Proceeding had progressed to trial, the plaintiff’s evidence may well have included many or most of its experts and consultants engaged since 2003 in respect of the plaintiff’s alleged defects and damages to the Premises, including architect George Batsakis, Professional Damp Proofing, Perry Setford of Coghlan Lorich & Associates, Stephen Zsembrey, Darrell Juncho of Everlast Plumbing, Steve Phillips of Phillipou Holdings Pty Ltd, Duro Builders, Beck & Sons and engineers from the City of Melbourne;

(c) the content and probative effectiveness of expert evidence from most of the potential experts referred to in the last preceding paragraph cannot be evaluated because their reports had not been finalised nor filed in the VCAT Proceeding by the time those proceedings were settled;

(d) the respondents at VCAT would in all probability also have engaged numerous experts to respond to the applicant’s technical case. However, by the time the plaintiff’s VCAT Proceeding was settled in about early June 2007, the respondent’s expert evidence had not been finalised and were therefore not exchanged or filed;

(e) similarly, at the end of January 2007, the plaintiff had only just filed its Eighth Amended Points of Claim in the VCAT Proceeding. This amended pleading contained a number of substantial amendments. At the time the plaintiff settled the VCAT Proceeding, the respondents at VCAT had not pleaded their responses to the claimant’s Eighth Amended Points of Claim. The pleaded case, it appears, was not closed at the time the plaintiff’s VCAT Proceeding was settled in early June 2007;[272]
[272]Cain’s evidence at T900.21-T901.1 was that pleadings at VCAT had closed. However no pleading in response to the Applicant’s Eight Amended Points of Claim had been filed at VCAT; see also CB176-190.

(f) the claimant and the respondents’ lay evidence at VCAT was also, in my view, unlikely to be finalised at early June 2007, particularly in light of the plaintiff’s recent extensive amendments filed 19 January 2007 and the absence of the lay evidence to be relied on at trial at VCAT and the very incomplete body of expert evidence filed at VCAT at the point of settlement which impeded evaluation of the parties’ prospects at trial;

(g) the pleadings reflecting the Landlords’ defence[273] to the plaintiff’s Fifth Amended Points of Claim dated 7 June 2005, notified a number of substantial allegations upon which the Landlords based their denials of liability including defences under:
[273]Defence of the First and Second Respondents to the Applicant’s Fifth Amended Points of Claim, 12 August 2005; CB176-190.

(viii) cls 2(h), (p), (t) and (u) of the Lease relating to 14 Bourke Street, Melbourne; and

(ix) cls 3.2 and 3.3.5 and Item 22(2) of the Schedule to the Lease relating to 16 Bourke Street, Melbourne;

(h) the VCAT Proceeding included counterclaims by the Landlords of both 14 and 16 Bourke Street, Melbourne for rent allegedly payable by the plaintiff and for outgoings which were alleged to be due from the plaintiff in excess of approximately $135,000;[274]
[274]CB55.

(i) there were many obvious and substantial underlying issues in relation to the plaintiff’s claims at VCAT, including the legislative changes which materially disadvantaged the plaintiff’s claims against the Landlords and the separate need for the plaintiff to establish structural defects of the kind which it alleged would enliven the relevant provisions of the Leases, including in relation to whether damage of the Premises was such as to necessitate closure;

(j) the complexities, uncertainties and risks associated with the proper construction and effect of the various clauses of the Leases relied upon by the respondents at VCAT in connection with all related issues pleaded, including those referred to above;

(k) the plaintiff’s case against the Agent relies upon the solely oral communications said to be misleading and deceptive to the plaintiff. Those alleged misrepresentations were not communicated in writing and nor do they appear to be in any way corroborated. Accordingly, in circumstances where the Agent denies and contests every alleged representation asserted by the plaintiff, it is also not possible to evaluate with any reasonable degree of confidence a likely successful outcome for the claimant on such claims. Additionally, as Cain observed in his evidence, it appeared to be a real possibility that irrespective of the advice it received from the Agent, the plaintiff would have opted to renew the Leases because of the substantial amounts it had expended on the Premises. If so, it was likely that there would have been no relevant reliance upon the Agent’s relevant alleged representations to the plaintiff;

(l) at the date of settlement at VCAT no trial date was imminent and a number of interlocutory steps were to be completed before a trial would be listed;[275]

(m) given the nature, past duration, stage the proceeding had reached at VCAT at about the first half of 2007 and the further interlocutory steps, including unresolved interlocutory issues and preparations for trial, and the very substantial time and cost to come at trial, including in relation to many experts at the trial phase of the VCAT Proceeding, estimated to occupy approximately 20 days in total.[276]

[275]T900.21–901.1.

[276]T502.25-27.

Accordingly, I consider that the vagaries, uncertainties and complexities of the remaining interlocutory processes associated with the plaintiff’s VCAT Proceeding, including the real prospect of a further security for costs application by the Agent, and the vagaries, uncertainties and complexities which would be associated with trial at VCAT of that proceeding, result in it not being practical or safe for this proceeding to evaluate the competing positions of the parties or the likely outcome of the VCAT Proceeding, including because the expert evidence, especially in relation to the case on quantum, was incomplete at the time of the VCAT settlement.

Additionally, for these reasons, I am also not persuaded that the plaintiff’s settlement negotiation and resolution of the VCAT Proceeding was unreasonable, or that the defendant’s involvement in that process exhibits any want of due care, skill or diligence.

Proceedings against McMahon

I again note that I have earlier held that the defendant did not advise the plaintiff to settle its case against the VCAT parties and pursue its former solicitor, McMahon. I have also earlier found that the defendant did not advise or state to Hachem at the Conference, or at any other time, that the plaintiff should pursue McMahon because that was ‘where the real windfall lay’.[277]
[277]T376.17–23.

I have also concluded that I am not satisfied that the defendant’s advice in relation to the said statutory amendments caused the plaintiff to settle its VCAT Proceeding against the Landlords and Agent on the terms of settlement ultimately entered into by the plaintiff in respect of that proceeding.

Accordingly, I am not satisfied that the plaintiff commenced proceedings against McMahon because the defendant advised Hachem that that was ‘where the real windfall lay’. Nor am I satisfied that the defendant at any point advised Hachem as to the plaintiff’s likely success or likely ultimate recovery were it to commence proceedings against McMahon.[278]
[278]CB1378–1379.

On the contrary, between about January 2007 and late in 2007 the defendant repeatedly and consistently informed Hachem that it required access to McMahon’s file in relation to his handling of the plaintiff’s claim at VCAT to be able to evaluate McMahon’s relevant conduct and advise in respect of McMahon’s potential liability. These facts support it being most improbable that the defendant would, up to a point in time well after July 2007, advise as to the plaintiff’s prospects of succeeding in a claim for negligence against McMahon.

I am also not satisfied that at any point the defendant either gave advice about the likely level of professional indemnity cover held by McMahon or stated or suggested that recovery against him in respect of the relevant issues would be, or would be likely to be, in the order of $3 million.

Unnecessary to Determine Prospect of Success at VCAT

Further, given my ultimate findings and conclusions on the key determinative issues, I do not consider it necessary to attempt to evaluate the plaintiff’s prospects of success at VCAT. In essence, this is because I have found against the plaintiff on the foundational issue of the defendant’s liability to the plaintiff for the reasons I have earlier outlined.

Unnecessary to Determine Quantum Case

On the same basis concerning the determination of liability against the plaintiff in this proceeding, namely that the defendant is not liable in negligence to the plaintiff for the reasons outlined above, it is not necessary to address and make findings in relation to the plaintiff’s quantum case.

Summary of Findings and Conclusions

In summary, I find and conclude that:

(a) of the advices alleged by the plaintiff that were conveyed to Hachem in Conference, the only advice in fact given was the RTRA Advice;

(b) none of the other alleged components of advice which the plaintiff asserts the defendant gave at the Conference were in fact conveyed by Cain or Rothfield to Hachem or any other attendee;

(c) the defendant’s RTRA Advice to the plaintiff on the effect of recent legislative changes to the retail tenancies legislation in Victoria was not negligent;

(d) the defendant was not negligent as a result of any failure to advise as alleged by the plaintiff at paragraphs [12(ii), (iii), (iv) and (v)] of its Statement of Claim;

(e) in mid-March 2007 the defendant gave the Admitted Settlement Advice to the plaintiff;

(f) the Admitted Settlement Advice was not negligent;

(g) the plaintiff did not compromise its VCAT Proceeding against the Landlords and Agent in reliance upon the defendant’s Admitted Settlement Advice or the RTRA Advice about the effects of recent amendments to the retail tenancies legislation;

(h) the plaintiff did not compromise its VCAT Proceeding as a result of any advice it had received from the defendant in relation to the plaintiff’s prospects of recovery against its former solicitor, McMahon;

(i) the plaintiff’s settlement of its VCAT Proceeding did not amount to an abandonment of that proceeding;

(j) the plaintiff’s settlement of its VCAT Proceeding against the Landlords and the Agent for the sum of $341,500 was not unreasonable;

(k) because the settlement of the plaintiff’s VCAT Proceeding was not unreasonable it is, in my view, irrelevant as to what sum the plaintiff ultimately recovered in its proceedings against its former solicitor McMahon;

(l) the plaintiff did not commence proceedings against McMahon as a result of any statement or advice from the defendant relied upon by the plaintiff in its Statement of Claim in this proceeding;[279]

(m) the amount recovered by the plaintiff by way of settlement in the plaintiff’s proceeding against McMahon was not unreasonably or unjustifiably low. That sum was considerable, and in the amount of $950,000.

[279]Refer to footnotes 159 and 160.

As a result of my above findings and conclusions, the plaintiff’s claims in these proceedings should be dismissed.

Further, as a result of my findings and conclusions in relation to the plaintiff’s case on liability against the defendant, I do not consider it to be necessary to address and make findings in respect of the plaintiff’s loss and damage claims in this proceeding. Neither in my view is it necessary to other than dismiss the plaintiff’s alternative loss of opportunity claim.

Decision

I dismiss the plaintiff’s claims and this proceeding.

I shall provide the parties an opportunity, if necessary, to make submissions in relation to the form of final orders, including as to costs.

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[2018] VSC 315

15 June 2018