Duke Nominees P/L v Cosoff Cudmore & Partners

[2006] SADC 137

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

DUKE NOMINEES P/L & ANOR v COSOFF CUDMORE & PARTNERS

Judgment of His Honour Judge Robertson

21 December 2006

PROFESSIONS AND TRADES - LAWYERS - SOLICITOR AND CLIENT - DUTIES AND LIABILITIES TO CLIENT - TRANSACTIONS AND PROCEEDINGS ON BEHALF OF CLIENT - ADVISING CLIENT

Claim for breach of contract and negligence against Solicitors - allegation that Solicitors failed to advise clients of a real and genuine chance they would lose litigation - principles relevant to breach of contract and negligence - issue of causation - principles relating to causation.

Claim for breach of fiduciary duty - principles applicable - issues arising in a claim for equitable compensation.

Held : Defendants not in breach of contract or negligent nor in breach of their fiduciary duty.

Astley v Austrust Limited (1998-99) 187 CLR 1; Midland Bank v Hett, Stubbs and Kemp (1979) Ch 384; Arthur J.S. Hall & Co v Simmons (2000) 3 WLR 543; Chappel v Hart (1998) 195 CLR 232; Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603; March v Stramare (E & MH) Pty Ltd (1990-91) 171 CLR 506; Bennett v Minister for Community Welfare (1992) 176 CLR 408; Pilmer v Duke Group Limited (In Liquidation) (2001) 207 CLR 165, applied.
Sellars v Adelaide Petroleum N.L. (1992-1994) 179 CLR 332; Hospital Products Limited v United States Surgical Corporation (1984-85) 156 CLR 41; Bray v Ford (1896) AC 44; Pilmer v Duke Group Limited (In Liquidation) (2001) 207 CLR 165; New Zealand Netherlands Society "Oranje" Inc v Kuys (1973) 2 All ER 1222; Fiduciary Obligations (Finn) 203; Duke Group Limited (In Liquidation) v Pilmer (1999) 73 SASR 645; O'Halloran v R T Thomas and Family Pty Ltd (1998) 45 NSWLR 262; Brickenden v London Loan and Savings Co (1934) 3 DLR 465; Gemstone Corporation of Australia Limited v Grasso (1994) 62 SASR 239; Canson Enterprises Ltd v Boughton and Co (1991) 85 DLR (4th) 129; Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 77 ALJR 895; Swindle v Harrison (1997) 4 All ER 705; Maguire v Makaronis (1996-97) 188 CLR 449, considered.

DUKE NOMINEES P/L & ANOR v COSOFF CUDMORE & PARTNERS
[2006] SADC 137

Judge Robertson
Civil

A Brief History

1. These proceedings are the final section of a long and difficult journey which had its genesis in Duke Nominees Pty Ltd (sometimes called “Duke”) purchasing an interest in land known as Buckland Park South (“Buckland Park”) in 1990.  The purchase of the interest led to proceedings being brought in the Federal Court by Duke and the Second Plaintiff, Mr Angelopoulos, (sometimes called “Mr Angelopoulos”) in July 1992.  Mr Angelopoulos was then and remains a Director of Duke.  The Federal Court proceedings were largely settled in April 1996.  Part of the settlement involved Buckland Park Pty Ltd, O’Connor Investments Pty Ltd and Port Gawler Pty Ltd (“O’Connor Companies”) who were Respondents in the Federal Court proceedings, and Mr Henry O’Connor (“Mr O’Connor”).  Mr O’Connor was a Director and the spokesman for each of these companies.

2. Arising from the settlement of the Federal Court proceedings Mr Hurren, a Solicitor, who was then a partner in the firm of Fisher Jeffries, prepared a Deed containing the terms of the settlement between Duke and Mr Angelopoulos, on the one part, and the O’Connor Companies and Mr O’Connor on the other.  The Deed was executed and dated 21 April 1996 (“April Deed”).  Mr Hurren had, for the most part, represented Duke and Mr Angelopoulos in the Federal Court proceedings.

3. The South Australian Assets Management Corporation (“SAAMC”) was also involved in the Federal Court proceedings.  Duke and Mr Angelopoulos reached a settlement with SAAMC.  The terms of that settlement were set out in a Deed entered into by the parties and dated 7  June 1996 (“June Deed”). Pursuant to the June Deed, Duke and Mr Angelopoulos were to purchase the debts of SAAMC and, in turn, receive an assignment of the securities and rights under the various finance agreements.

4. As a result of Duke and Mr Angelopoulos failing to complete the terms of settlement pursuant to the June Deed, a further Deed was entered into by Duke and Mr Angelopoulos of the first part, the O’Connor Companies and Mr O’Connor of the second part and SAAMC of the third part, which was dated 27 September 1996 (“September Deed”).  Part of the September Deed provided for the substitution of Clauses 8, 9 and 10 of the April Deed with new Clauses 8, 9, 10 (and other clauses), which new Clauses were set out in Clause 14 of the September Deed.  Pursuant to the terms of the September Deed, Duke, in lieu of acquiring the debts owed to SAAMC, (as required under the June Deed), was to acquire the one-third interest of the O’Connor Companies and the interest of the other one-third owner of Buckland Park, namely D and S Group of Companies Pty Ltd (“D & S”).  On completing this arrangement, Duke would become the sole owner of Buckland Park.  These interests were to be acquired through SAAMC as a Mortgagee exercising power of sale as a result of default by the Mortgagors under the Mortgage.  Settlement pursuant to the September Deed took place in October 1996 and Duke became the sole proprietor of Buckland Park.  It will be necessary to return to the terms of each of these Deeds in more detail shortly.

5. I pause here to mention that in the pleadings in these proceedings and, occasionally, in documents, the new Clause 8 has been alternatively referred to as Clause 14 of the September Deed and, at times, Clause 8 of the April Deed.  The terms of the September Deed affirmed that the April Deed remained on foot and was only altered by substituting Clauses 8, 9 and 10 of the April Deed with Clauses 8, 9, 9A, 10, 10A, 10B and 10C as set out in Clause 14 of the September Deed.  Accordingly, the better approach is to refer to the new Clause, as Clause 8 of the April Deed. That is what I will do in these Reasons.

6. In May 1998, Buckland Park was sold by Duke.  Pursuant to the terms of the new Clause 8.5 of the April Deed, Duke and Mr Angelopoulos were required to make a distribution of the balance of the net proceeds of sale (after making certain specified payments referred to in Clause 8.5) as to two- thirds, thereof, to themselves and as to one-third to O’Connor Investments, one of the O’Connor Companies.

7. At the time of the distribution in May 1998, a dispute arose regarding the entitlement of Duke and Mr Angelopoulos to deduct the expenses involved in purchasing the respective one-third interests of the O’Connor Companies and D & S in Buckland Park in October 1996 under the terms of the September Deed.  O’Connor Investments asserted that Duke and Mr Angelopoulos were not entitled to deduct and retain the 1996 purchase expenses and a sum representing interest on those expenses, before making the distribution of two-thirds and one-third from the net proceeds of sale.  The sum in dispute amounted to $107,022, which comprised:

   ·$42,037, being stamp duty paid by Duke on the purchase of the interests of the O’Connor Companies and D & S in Buckland Park pursuant to the terms of the September Deed;

   ·$51,025, which was said to include legal and conveyancing costs claimed to be associated with the transfer of the interests in 1996 and other expenses;

   ·       $13,959, being interest on those two amounts.

   I have rounded the amounts to the nearest dollar.  I will adopt this practice when referring to sums of money in these Reasons.

8. I mentioned that the total amount in dispute was $107,022.  However, as O’Connor Investments was only entitled to one-third of the final amount for distribution, it claimed that it had been underpaid on the distribution by one-third of the total amount of $107,022, which was calculated to be $35,674.

9. The dispute was not resolved and on 1 December 1998, O’Connor Investments instituted proceedings in the District Court of South Australia seeking to recover from Duke and Mr Angelopoulos the sum of $35,674 (“1998 proceedings”).  The essence of the claim was that the relevant Clause, being 8.5, did not entitle Duke and Mr Angelopoulos to deduct the 1996 purchase expenses and the interest thereon before apportioning the balance of the proceeds of sale of Buckland Park.  The central issue was the correct interpretation of Clause 8.5 of the April Deed.

10. I pause here to mention that from this point in these Reasons, when it is necessary to refer to Duke and Mr Angelopoulos, together, I will refer to them as the “Duke Interests”.

11. Mr Angelopoulos instructed Mr Hurren to act for the Duke Interests in the 1998 proceedings.  A Defence was filed on behalf of the Duke Interests by Mr Hurren, who was by then a partner in Cosoff Cudmore & Partners (“Cosoff Cudmore”), the Defendant in these proceedings, having moved from Fisher Jeffries.  Mr Hurren continued to represent the Duke Interests in the 1998 proceedings until December 1999.  In late November, O’Connor Investments filed an amended Reply in the 1998 proceedings, alleging that Mr Hurren had, in September 1996, misrepresented the effect of the September Deed when discussing its terms.  As a result of this amendment, it became apparent that Mr Hurren might be called as a witness in the proceedings.  In those circumstances, Mr Hurren considered that it was no longer appropriate for him to continue to represent the Duke Interests in the 1998 proceedings.

12. In early January, Mr Angelopoulos instructed Mr Colovic, a Solicitor and a partner in the firm of Solicitors, Kelly & Co, to represent the Duke Interests in the 1998 proceedings.  Some time later, on the advice of Counsel, Mr Ross-Smith, the Duke Interests brought Third Party proceedings against Fisher Jeffries, the firm of Solicitors of which Mr Hurren was a member when he prepared the September Deed, alleging that Mr Hurren had been negligent in his drafting of Clause 8.5.  It was alleged that Mr Hurren had not followed the instructions of Mr Angelopoulos to ensure, through the terms of Clause 8.5, that the Duke Interests would be entitled to deduct the 1996 purchase expenses of the other interests in Buckland Park before the balance of the proceeds of the sale was apportioned.

13. The 1998 proceedings were to be heard in the District Court on 18 June 2001.  On 16 June 2001, those proceedings were settled by the payment to O’Connor Investments of the sum of $60,000, which included interest and costs.  Of that sum, the Duke Interests contributed $27,000.  The remaining $33,000 was paid by Fisher Jeffries.  The 1998 proceedings were then discontinued.

14. This is a very brief description of the history of events prior to the commencement of the current proceedings.  It will be necessary to revisit parts of that history in more detail as these Reasons proceed.  The brief history is required, at this early stage, in order that the nature of the current proceedings can be understood.  I now turn to the nature of these proceedings.

    Nature of the Proceedings

15. I mentioned earlier that the 1998 proceedings involved the interpretation of the new Clause 8.5 in the April Deed, which provided for the application of any proceeds of sale of Buckland Park.  I need to pause to again briefly mention two other aspects of history before discussing the nature of the proceedings.

16. After the dispute arose regarding the interpretation of Clause 8.5, on 26 November 1998, O’Connor Investments, through its Solicitors, offered to accept $30,000 in full and final satisfaction of its total claim of $35,674.  The Duke Interests did not respond to that offer.  On 1 December 1998, O’Connor Investments issued proceedings in this Court to recover the disputed amount.  On 28 January 1999, O’Connor Investments, pursuant to Rule 41 of the District Court Rules, filed a formal Offer to Consent to Judgment for $30,000, together with interest and costs (“Rules Offer”).  The Duke Interests did not accept that offer.

17. The Duke Interests in these proceedings claim that the Defendants, Cosoff Cudmore and Partners (sometimes called “Cosoff Cudmore”), a firm of Solicitors, through their partner Mr Hurren, were negligent and in breach of the retainer contract as a result of his conduct of the 1998 proceedings on behalf of the Duke Interests.  They claim that Mr Hurren negligently failed to advise them that there was doubt or uncertainty regarding the interpretation of the new Clause 8.5 of the April Deed.  The essence of the Duke Interests’ claim is that Mr Hurren failed to advise them that there was a real and genuine risk that the Duke Interests might lose the proceedings because a Court may interpret the Clause in the manner contended by O’Connor Investments.  The Duke Interests also claim that not only did Mr Hurren fail to give them that advice, but he negligently advised them that they had a good defence to the claim.

18. It is the Duke Interests’ claim that if they had received the advice that there was a real and genuine risk that they might lose the 1998 proceedings, then by the time of the informal offer to settle for $30,000 inclusive of costs, which was made on 26 November 1998, they would have attempted to reach a settlement of the claim for a lesser amount or, if that was not possible, then they would have settled the claim by paying to O’Connor Investments the sum of $30,000.  Furthermore, the Duke Interests claim that if they had received that advice at the time of the Rules Offer, which was filed on 28 January 1999, then they would have attempted to settle the claim for less than the Rules Offer or, if that was not possible, then they would have settled the claim by accepting the Rules Offer.  It is the Duke Interests’ case that as a result of the negligence and breach of contract by the Defendants they lost the opportunity to settle the claim at the time of the informal offer in November 1998 or, alternatively, at the time of the Rules Offer in January 1999 or at any time thereafter whilst it remained on foot.

19. The Duke Interests claim that the Defendants’ negligence and breach of contract caused them to suffer damages amounting to $100,391, which amount comprises:

    ·the sum of $26,278, being costs which the Duke Interests paid to the Defendants, Cosoff Cudmore, including the costs of Counsel, for the period that the Defendants acted as the Duke Interests’ Solicitors in the 1998 proceedings;

    ·the sum of $27,000, being the contribution made by the Duke Interests to the settlement of the 1998 proceedings;

    ·the sum of $47,113, being the costs of Kelly & Co, including Counsel’s fees, for the period they acted as Solicitors for the Duke Interests in the 1998 proceedings.

20. The Duke Interests also seek compensation in equity alleging that the Defendants, through Mr Hurren, were in breach of their fiduciary obligations owed to the Duke Interests during the time they represented the Duke Interests in the 1998 proceedings.  The Duke Interests allege that there was a conflict between Mr Hurren’s personal interest and his duty to his clients, the Duke Interests.  In the first instance, the Duke Interests claim that the personal interest of Mr Hurren, which conflicted with his fiduciary duty, was the potential claim for professional negligence if a Court found that the correct interpretation of Clause 8.5 was that which was asserted by O’Connor Investments.

21. The Duke Interests also assert, with respect to the claim for breach of fiduciary duty, that, in any event, as Mr Hurren was the draftsman of Clause 8.5 and its construction was the subject of the 1998 proceedings, he could not have brought an objective or independent mind to bear in advising the Duke Interests in the 1998 proceedings.  It is claimed that the personal interest of Mr Hurren which conflicted with his fiduciary duty was his desire to protect his own work and reputation as a draftsman.

22. It is the Duke Interests’ case that as a result of the conflict between personal interest and fiduciary duty, the Defendants should not have acted for the Duke Interests in the 1998 proceedings.

23. The Duke Interests claim that as a result of the Defendants’ breach of fiduciary duty, through Mr Hurren, they are entitled to equitable compensation.  The amount of the compensation sought, and its composition, is similar to the amount claimed by way of common law damages for negligence and breach of contract claim.

24. Having described the nature of the present proceedings before this Court, it is now necessary to return to where this journey all began, namely, the proceedings in the Federal Court in 1992.

    The Federal Court Proceedings

25. In January 1990, D & S acquired a half interest in a large piece of land at Port Gawler, which I have called “Buckland Park” in these proceedings, from the O’Connor Companies.  It was the intention of the O’Connor Companies and D & S to develop the land and subdivide it into residential allotments.  Shortly after acquiring its interest, the Directors of D & S invited Mr Angelopoulos, who was known to them, to purchase an interest in Buckland Park.  In September 1990, Duke purchased a one-third interest in the land from the O’Connor Companies and D & S.  As a result of the acquisition, the O’Connor Companies, D & S and Duke each owned one-third of Buckland Park.  At the time of the acquisition, a new finance facility agreement was entered into by all of the parties, with the State Bank, and a Mortgage was granted over the land.  Mr Angelopoulos also provided a Guarantee to the State Bank.

26. In July 1992, Duke commenced proceedings in the Federal Court against the O’Connor Companies, D & S and a Director of D & S.  In late 1993, Mr Angelopoulos was joined as an Applicant in the Federal Court proceedings alongside Duke, and the State Bank was joined by the Duke Interests as a Respondent.  Duke alleged that misrepresentations had been made to it at the time of the purchase of its interest in Buckland Park and it sought to set aside the purchase of its interest or, alternatively, sought to recover damages.  Duke also alleged in the proceedings, unconscionable conduct on the part of the State Bank regarding the entering into of the finance facility.  Various cross-claims were brought by each of the Respondents, including the O’Connor Companies and the Bank against Duke.  There were other claims which were also introduced by the parties.  Mr Hurren acted as Solicitor for the Duke Interests in the Federal Court proceedings.  He was, at the time, a member of the legal firm of Fisher Jeffries.

27. The proceedings were listed for Trial in the Federal Court in mid-April 1996, but it was postponed for a week and set to commence about 22 April 1996.  A short time before Trial, the Duke Interests received advice from Counsel that they should not proceed to Trial and that they should settle the proceedings.  The advice was that they were likely to lose the proceedings.  Junior Counsel for the Duke Interests in the Federal Court proceedings was Mr Steven Roder.  Mr Hurren said in his evidence, which I accept, that in the last week or two before the action was to come on for Trial, intensive negotiations were undertaken to try and settle the proceedings against all but D & S.  It was intended that the proceedings would continue against D & S.  By this time, the State Bank had ceased business and had transferred some of its interests to SAAMC, including the financial agreements and securities associated with Buckland Park.  The settlement negotiations involved SAAMC and the O’Connor Companies.

28. Settlement with the O’Connor Companies culminated in a Deed being entered into on 21 April 1996 between the Duke Interests, on the one hand, and the O’Connor Companies and Mr O’Connor on the other.  I have earlier referred to this Deed as the “April Deed”.  The settlement between the Duke Interests and SAAMC culminated in a Deed being entered into by those parties in June 1996.  I have earlier referred to this Deed as the “June Deed”.

    The April Deed

1. Mr Hurren stated that this Deed was the culmination of intensive last-minute negotiations with Mr O’Connor, in which Mr O’Connor was being quite difficult in agreeing to a settlement.  He said that at the same time, there were negotiations being undertaken between the Duke Interests on the one hand and SAAMC on the other, with the object of resolving the claim of the Duke Interests and the cross-claim of SAAMC.  I accept this evidence.  The agreement reached with SAAMC was that the Duke Interests would pay out SAAMC’s loan and take an assignment of the debt and a transfer of the Mortgage and other securities, to the effect that the Duke Interests would then be the creditor for the loan made by SAAMC to the O’Connor Companies, D & S and Duke in relation to Buckland Park.  The Duke Interests would then stand in the shoes of SAAMC as the Mortgagee over Buckland Park.  The total amount required to be paid by the Duke Interests to SAAMC was $3.15 million, and that upon receiving that sum SAAMC would assign to the Duke Interests its title and interest in the Mortgage and other securities.

2. With the terms of the settlement between the Duke Interests and SAAMC in mind, Mr Hurren said that he, on behalf of the Duke Interests, required the inclusion into the April Deed of Clause 8, which Clause had been drafted by Mr Hurren.  The Clause, in general, set out the terms of the arrangement between the Duke Interests on the one hand, and the O’Connor Companies on the other, premised upon the Duke Interests purchasing SAAMC’s Debt and receiving an assignment of the Debt, the Mortgage and other securities.  Clause 8.5 is particularly relevant to these proceedings and provided:

   8.In the event that the Duke interests or any nominee being an associated Corporation of Duke within the meaning of the Corporation Law thereof (“the Mortgagee”) purchase the Debt and Securities, it is agreed that:

   …

   8.5     The net proceeds of any sales of any part of the land referred to in paragraph 7 of the said Statement of Claim, whether settled prior to or after 30 November 1996, are to be applied:

   8.5.1firstly, in repayment of any costs, charges or expenses reasonably incurred by the Mortgagee and recoverable pursuant to the provisions of the Facility Agreement, the Mortgages or the Guarantees;

   8.5.2secondly, in payment of all interest accrued due under the terms of the Facility Agreement remaining due and unpaid;

   8.5.3thirdly, in reduction of the Debt;

   8.5.4fourthly, equally to the O’Connor interests and the Duke interests by way of reimbursement of the interest and expenses and interest thereon paid by them for and on behalf of the D & S Group of Companies Pty Ltd;

   8.5.5fifthly, as to one-third to the O’Connor interests and as to two-thirds to the Duke interests.

   …

   The June Deed

3. The June Deed, between the Duke Interests on the one part, and SAAMC on the other, was dated 7 June 1996.  Mr Hurren was not able to explain why the Deed recorded a June date.  His evidence was that the agreement with SAAMC was reached at a similar time to the agreement reached with the O’Connor Companies and which culminated in the April Deed.  In any event, nothing turns on the fact that the Deed was dated nearly two months later than the April Deed.  It seems completely plausible that the terms of each settlement, which eventually found expression in the terms of each of the Deeds, were reached at a similar time.  The terms of the settlement with the O’Connor Companies depended upon settlement by the Duke Interests with SAAMC.

4. Paragraph 11 was an important paragraph in the June Deed.  It provided that if the Duke Interests failed to settle in accordance with the terms of the Deed, then SAAMC could enter Judgment in the Federal Court proceedings against the Duke Interests for the total amount of the Debt then owing to SAAMC, together with interest thereon, and with the further provision that the Duke Interests were obliged to pay SAAMC’s costs of the Federal Court proceedings.  If the Duke Interests settled in accordance with the terms of the June Deed, then they were not required to pay the total debt and were not obliged to pay SAAMC’s Federal Court costs.

   Events Leading to the September Deed

5. The Duke Interests had intended to borrow funds from the National Australia Bank (“NAB”), the banker of Mr Angelopoulos and his companies, (including Duke), to settle with SAAMC in accordance with the terms of the June Deed.  When NAB was approached to provide the necessary funds, it refused.  The reason for its refusal was that it was not prepared to take as part of its security a mortgage over the Mortgage which the Duke Interests would receive by way of transfer from SAAMC.

6. As a result of the refusal of NAB to lend to the Duke Interests, they could not complete settlement with SAAMC under the June Deed.  This caused them to default.  As a result, SAAMC became entitled to enter Judgment in the Federal Court proceedings against the Duke Interests for the total amount of the debt due to SAAMC.  The amount owing had been $3,929,403.  However, some of the land at Buckland Park had been sold and the proceeds applied to reduce the debt.  At the time of default by the Duke Interests, the debt had been reduced to $3,503,769.

7. The effect of all of this was that the liability of the Duke Interests to SAAMC would increase significantly from what they had agreed to pay under the June Deed.  Not only were they now liable for the entire debt then owing, in lieu of the discounted amount which SAAMC had been prepared to accept under the June Deed, but they were also liable for interest and the Federal Court party and party costs.  Whilst there was no evidence of the precise amount of those costs, it can be inferred from the evidence that those costs would have been quite substantial.

   The September Deed

8. It became apparent that the only way in which the Duke Interests could obtain the finance from NAB was to acquire the remaining two-thirds of Buckland Park being held as to one-third by the O’Connor Companies, and the other third by D & S.  If they did this, they could then secure the loan from NAB with a Mortgage over Buckland Park.  After default had occurred, negotiations were entered into with SAAMC in an attempt to retrieve the position.  Mr Hurren was involved in these negotiations.  It was proposed that the interests of the O’Connor Companies and D & S in Buckland Park be purchased by the Duke Interests from SAAMC, exercising its power of sale as a Mortgagee, resulting from default under the Mortgage and other securities.  The Duke Interests needed to involve the O’Connor Companies in the resolution of the problem with SAAMC, because SAAMC required as a condition of any agreement that it be released by the O’Connor Companies from any potential liability as a result of it exercising its power of sale as a Mortgagee.  I accept the evidence of Mr Hurren on these matters.

9. Important issues arise in the present proceedings relating to the events which preceded the entering into the September Deed.  There is considerable conflict on the evidence between Mr Angelopoulos and Mr Hurren.  However, before I consider that evidence, it is necessary to refer to the relevant terms of the September Deed.

   Terms of the September Deed

10. The Deed was dated 27 September 1996.  It was made between the Duke Interests of the first part, the O’Connor Companies (including O’Connor Investments) and Mr O’Connor of the second part and SAAMC of the third part.  Included in the Recitals of the Deed is a reference to the Duke Interests being in default under the June Deed and SAAMC willing to forebear in exercising its right to enter Judgment if the Duke Interests carried out the terms of the September Deed on or before the settlement date, which was 4 October 1996.  There was also a Recital which stated that the Duke Interests had requested the O’Connor Companies and Mr O’Connor to agree to SAAMC selling their one-third interest in Buckland Park in the exercise of its power of sale as Mortgagee under the Mortgage and to their waiving of all claims which may arise against SAAMC which may arise from SAAMC selling their interest in the land.

11. The September Deed provided that the total amount to be paid to SAAMC, in final settlement of its claim, was $3,150,000.  The Duke Interests were to pay $1,395,811 as the purchase price for the respective interests of the O’Connor Companies and D & S in Buckland Park.  The Duke Interests were to pay to SAAMC a further sum of $1,340,216.  The balance remaining of the sum of $3,150,000 was satisfied by receipt by SAAMC of the net proceeds of sale of parts of the Buckland Park land which had been sold since June 1996.

12. The terms of the Deed are quite complex.  For the purpose of these proceedings, the most relevant Clause is Clause 14.  This provided that the Duke Interests, the O’Connor Companies and Mr O’Connor, acknowledge and agree that the terms of the April Deed continued to subsist save for Clauses 8, 9 and 10 of the April Deed, which were no longer to be in force.  Further, that new Clauses 8, 9 and 10 of the April Deed were to be substituted in the April Deed, together with new Clauses 9A, 10A, 10B and 10C.

13. It is the change from the proposed purchase of SAAMC’s debt by the Duke Interests in the April Deed, to the purchase by them of the interests of the O’Connor Companies and D & S in Buckland Park under the September Deed and the substitution of the new Clause 8, and, in particular, the new Clause 8.5 in the April Deed, which are particularly relevant to these proceedings.

14. I now set out hereunder the relevant parts of the new Clause 8 of the April Deed, which, as I said, was set out in Clause 14 of the September Deed.  Mr Hurren was responsible for the drafting of the September Deed as he had been for the April Deed.

    8.In the event that the Duke interests or any nominee thereof (“the Owner”) being an associated corporation of Duke within the meaning of the Corporations Law, purchases the O’Connor and D & S Land and the Shortfall Debt, it is agreed that:

    8.1     Subject to Clause 8.2 hereof, the Owner is to be entitled to exercise, as against the O’Connor Companies, all of the rights, powers and remedies previously existing in favour of SAAMC with respect to the Shortfall Debt other than in respect of the O’Connor Investments Debenture which shall be discharged;

    8.2     Subject to the O’Connor interests complying with Clause 8.3 hereof, the Owner will not demand any part of the Shortfall Debt from any of the O’Connor Companies until all of Buckland Park South has been sold, settled upon and the proceeds of sale received;

    8.3     The O’Connor interests will pay to the Owner:

    8.3.1every month until all of Buckland Park has been sold, an amount of interest equal to one third of one percent of the sum of the NAB Debt and the Shortfall Debt; and

    8.3.2one half of the rates and taxes assessed from time to time on Buckland Park South.

    8.4     Subject to paragraph 13A of the September Settlement Deed, upon sale of all of Buckland Park South, or upon any default under Clause 8.3 hereof:

    8.4.1the full balance of the then outstanding Shortfall Debt shall be due and payable by the O’Connor Companies to the Owner; and

    8.4.2all interest accrued on the Shortfall Debt plus an amount equal to one half of all interest paid or payable in respect of the NAB Debt less interest paid under Clause 8.3 hereof will be due and payable by the O’Connor interests to the Owner.

    8.5     The net proceeds of any sales by the Owner of any part of Buckland Park South are to be applied:

    8.5.1firstly, in repayment of the NAB Debt;

    8.5.2secondly, in payment to the Owner of any amounts referred to in Clause 8.4 hereof which remain unpaid;

    8.5.3thirdly, equally to O’Connor Investments and the Duke interests by way of reimbursement of the interest and expenses (including rates and taxes) and interest thereon paid by them for and on behalf of D & S Group of Companies Pty Ltd whether before or after Settlement;

    8.5.4fourthly:

    8.5.4.1as to two-thirds to the Owner: and

    8.5.4.2as to the remaining one third thereof, to O’Connor Investments by way of a management fee in consideration for the assistance to be rendered by O’Connor Investments to the Duke interests and/or the Owner in the development and sale of Buckland Park South.

    …

15. The reference to the “Duke interests” is a reference to Duke and Mr Angelopoulos.  The reference to the “O’Connor interests” is a reference to the O’Connor Companies, including O’Connor Investments.

16. The reference to the “NAB Debt” in Clause 8.5.1 is a reference to the loan which was advanced by NAB to the Duke Interests to enable settlement to be completed pursuant to the terms of the September Deed.

17. Whilst the Duke Interests agreed to purchase the interests of the O’Connor Companies and D & S so that they would become the sole owners of Buckland Park, the terms of the September Deed provided that on a sale of Buckland Park the O’Connor Companies would be entitled to one-third of the net proceeds of sale after the deduction of the liabilities identified in Clause 8.5 had been made.

18. There is only one further Clause that has particular relevance to these proceedings, and that is Clause 12 of the September Deed.  That Clause provided (inter alia) that conditional upon the terms of the September Deed being carried out, the O’Connor Companies and Mr O’Connor were required to consent to the sale of the O’Connor Companies’ interest in Buckland Park, and that the O’Connor Companies and Mr O’Connor would release SAAMC in respect of SAAMC’s exercise of its power of sale as a Mortgagee.

    Settlement under the September Deed

19. Settlement took place under the September Deed in October 1996.  The Duke Interests paid the total amount of money they were obliged to pay to SAAMC and, in turn, received a transfer of the O’Connor Companies’ one-third interest and the one-third interest of D & S in Buckland Park.  NAB financed the Duke Interests in order that they could complete the transaction.  Pursuant to the provisions of Clause 12 of the September Deed, the O’Connor Companies entered into a Deed of Release with SAAMC whereby they released and discharged SAAMC from any claims arising from the exercise of SAAMC of any power as Mortgagees.  The Deed of Release went further than I have stated, but it is unnecessary, for the purpose of these proceedings, to make any further reference to the terms of the Deed of Release.

    Sale of Buckland Park

20. It had always been the intention of the Duke Interests and the O’Connor Companies to develop Buckland Park and sell it.  This was the objective prior to the April Deed.  However, there was no further development of the land after the Duke Interests acquired the remaining two-thirds of Buckland Park in October 1996.

21. Eventually, Buckland Park was sold for $4,750,000.  Settlement took place on 8 May 1998.  As I mentioned a moment ago, whilst the Duke Interests purchased the O’Connor Companies’ one-third interest in Buckland Park from SAAMC, the agreement reached with the O’Connor Companies was that they were entitled to one-third of the net proceeds of sale after the deduction of various liabilities identified in Clause 8.5 of the September Deed.

22. A short time after settlement, Mr Angelopoulos and Mr O’Connor met to calculate the amount due to each party.  A handwritten document entitled “Summary” was prepared identifying the various deductions which were to be made from the balance of $4,743,176 due at settlement.  The sum of $143,292, being described in the “Summary” as “Duke’s Costs”, was included in the calculation.  It was deducted from the proceeds of sale before any apportionment was made.  It was part of this amount, namely the sum of $107,022, which Mr O’Connor asserted Duke was not entitled to deduct from the proceeds of sale.  It appears, in any event, that Mr O’Connor agreed to the deduction being made in order that the distribution process could be completed, but reserved his right to seek to recover the O’Connor Companies’ portion of the sum in dispute at a later date.

    Evidence at the Trial

23. I have, to this point, referred to factual matters arising from the evidence which were largely uncontroversial.  In other words, there was not any significant dispute in the evidence of each of the witnesses.  The stage has now been reached where I need to refer to some of the evidence which was in conflict.  However, before doing so, I should refer generally to the evidence which was introduced during the course of the Trial.  I also need, in general terms, to evaluate the evidence of Mr Angelopoulos and Mr Hurren, who were the main witnesses who gave evidence relevant to issues on liability.

24. The only other witness was Mr Colovic.  He gave evidence, for the most part, regarding the issue of common law damages and equitable compensation.

25. In addition to this evidence, there were an enormous number of documents introduced into evidence.  The documents were grouped into three parts.  First, there was the April Deed, the June Deed and the September Deed.  There were also other Deeds associated with the September Deed and some correspondence leading up to the April Deed and the September Deed.  The pleadings and some of the other Court documents relevant to the 1998 proceedings were also included in the first group.  The second part, and by far the largest, were the contents of the files of the Defendants pertaining to the conduct by Mr Hurren of the 1998 proceedings on behalf of the Duke Interests.  The final group were the contents of the files of Kelly & Co arising from that firm acting for the Duke Interests in the 1998 proceedings.  These documents were, for the most part, relevant to the issue of damages and equitable compensation.

26. Having briefly described the nature of the evidence in the Trial, it is now appropriate to say something about the evidence of Mr Angelopoulos and Mr Hurren.

    Evaluation of the Evidence of Mr Angelopoulos

27. Before commencing the evaluation of Mr Angelopoulos, I should recount a brief history of him.

28. At the time of the Trial, Mr Angelopoulos was seventy two years of age.  He was born in Greece and came to Australia in 1956.  This would make him about twenty years of age when he arrived.  His occupation is that of a Developer and Investor.  He commenced business as a Developer in the sixties.  He first developed residential homes.  Then, in the late seventies or early eighties, he began to develop commercial properties.  He is the driving force behind a group of companies which can loosely be described as the “Duke Group”.

29. Not only did Mr Angelopoulos through the Duke Group develop properties, he also invested in commercial properties.  In particular, the Duke Group owns the Unley Shopping Centre and the North Park Shopping Centre.  It also owns shops at Glenelg and at Hyde Park.  Mr Angelopoulos, in his evidence, said the Duke Group owns a number of show rooms within the City of Adelaide precinct.  The Duke Group have bought and sold properties over the years.  It was clear from the evidence that Mr Angelopoulos has been, and remains, an extremely astute and successful businessman.

30. Mr Angelopoulos’ first language is not English.  As a result, he is not as fluent in speaking English as a person whose first language is English.  There were occasions when he had some difficulty in expressing himself clearly.  However, overall, I thought he had a reasonably good command of English.  I also thought he displayed a reasonably good command of the written word.  In assessing his evidence, I have taken into account that English is not his first language and that there were occasional difficulties in understanding the question and expressing himself clearly.

31. I found Mr Angelopoulos to be an unimpressive witness.  He displayed a poor memory.  This was partly explained by the passage of time.  But I also felt that he was a person who did not have a good memory.  Having formed that view, what I found disturbing was his evidence indicating that he could recall the contents of important conversations which occurred many years ago.  I thought that in most, if not all of those cases, he did not have a memory of the contents of those conversations.  I felt he was reconstructing in giving that evidence.  I was initially troubled in determining whether the reconstruction was deliberate or unconscious.  In the end, I decided it was unconscious reconstruction but, nevertheless, it was reconstruction of the impermissible kind.

1. I pause to give an example.  This is but one example where he gave evidence of recalling a conversation where I formed the view that he was reconstructing and did not have any independent recollection.  His evidence was that he could specifically recall the instructions he gave Mr Hurren regarding the recovery of expenses prior to the preparation of the April Deed.  Indeed, he said that he recalled he gave these instructions, he thought, at Mr Abbott QC’s office and that Mr Steven Roder and Mr Anders of Fisher Jeffries were also present.  The evidence of Mr Angelopoulos was that he instructed Mr Hurren to make sure there was provision in the April Deed for the expenses he paid for the land at Buckland Park to be deducted before the division of any sales proceeds between the O’Connor Companies and the Duke Interests [T155.15; T385.7]. He also said he gave those same instructions to Mr Hurren regarding the September Deed [T391.5].  I understood him to be referring to the purchase of the one-third interest of the O’Connor Companies and the one-third interest of D & S in Buckland Park.

2. I earlier mentioned that it was only the September Deed which involved the Duke Interests in the purchase of the interests in the land at Buckland Park.  The April Deed was concerned with the Duke Interests acquiring the debt of SAAMC.  This fact was directed to his attention in cross-examination, but he insisted that with respect to both Deeds he instructed Mr Hurren to ensure the acquisition costs of the land were to be deducted before apportionment [T385.9; T391.2].  I should mention that at one point during his cross-examination on this topic, he altered his position and said that he could not remember if the April Deed only provided for the taking over of SAAMC’s debt [T385.11].

3. I formed the view that Mr Angelopoulos did not have any recollection regarding any instructions he said he gave to Mr Hurren.  He was reconstructing in giving his evidence.  As I said, this is but one illustration of a number of occasions in his evidence when he said he could recall a specific conversation when I formed the view that he was reconstructing the evidence.  This evidence, and the other instances, were evidence which went directly to supporting his case.  In the example I have given he was confused about a fundamental fact, namely, that the April Deed did not involve him in acquiring any interest in Buckland Park, but still insisted he had a memory of the instructions given.

4. Regrettably, I found Mr Angelopoulos to be disingenuous at times.  I also thought there were occasions when he was evasive.  Mr Angelopoulos’ evidence was also, at times, self-contradictory.  He shifted ground on some occasions.  An example of this was his evidence regarding the advice he said Mr Hurren gave him on his case in the 1998 proceedings.  In some parts of his evidence he appeared to be suggesting that Mr Hurren told him he could not lose, and on another occasion he said he was told he had a good prospect or a good chance.

5. Mr Angelopoulos, on many occasions, would not answer questions directly, particularly where I felt he perceived that the questions may present some difficulty for him.  Examples of his failure to respond directly to questions are found at T326.27; 327.7; 330.10; 330.19; 331.13.  Indeed, on many occasions throughout his evidence, apart from whether I felt he had the perception I referred to or not, Mr Angelopoulos would not directly respond to the question.

6. I have concluded that, generally, I cannot rely on the evidence of Mr Angelopoulos on important issues such as conversations with Mr Hurren.  As will become apparent, I prefer the evidence of Mr Hurren when it is in conflict with the evidence of Mr Angelopoulos.

   Evaluation of the Evidence of Mr Hurren

7. As I mentioned earlier, Mr  Hurren is a legal practitioner.  He is currently a partner in the legal firm of Cosoff Cudmore and Partners, the Defendants in these proceedings.  At the time of the hearing, he was forty two years of age.

8. Mr Hurren was admitted to practise the law in December 1987.  He commenced practising with Fisher Jeffries shortly after his admission.  He became a partner in that firm in 1994.  In 1998, together with four other legal practitioners, he established the legal firm of Cosoff Cudmore and Partners and he has carried on legal practice with that firm since that time.

9. I found Mr Hurren to be a frank witness.  He freely admitted that due to the passage of time his memory of events and conversations was not good.  At times, he was loquacious in answering questions.  I felt that in those cases the cause of his loquacity was his anxiety to fully explain his position.  There were odd occasions when he failed to answer questions directly.

10. In answering some questions he engaged in reconstruction.  On most occasions when this occurred, he indicated to the Court that he was reconstructing.  When he gave an answer which contained an element of reconstruction he would explain the reconstruction process he was undertaking.  In many cases, it was done using documents contained in his files.  On occasions, I thought he engaged unconsciously in impermissible reconstruction.

11. Generally, he confronted questions, the answers to which may have disadvantaged his case and, in those circumstances, gave frank answers even though I thought he recognised that the answers may have been to his disadvantage.

12. I concluded that I could rely upon his evidence provided I made allowance for time dimming his memory, and being alive to situations where he was impermissibly reconstructing.  Where his evidence conflicted on important issues with Mr Angelopoulos, I preferred the evidence of Mr Hurren.

    Documentary Evidence

13. The most assistance I gained in evaluating the evidence in the Trial was from the documents.  As I have stated, there were a plethora of documents contained in Mr Hurren’s files.  He made many file notes of meetings and telephone conversations.  On occasions, these were used to refresh memory.  On other occasions, it was clear that even a reference to a note or other record did not refresh memory.  The file notes were made contemporaneously with the event recorded, or shortly afterwards, be it a telephone call or a meeting.  On some occasions, the telephone call or meeting was followed up by a confirming letter.  Nearly the entire contents of Mr Hurren’s files relating to the 1998 proceedings were tendered by Mr Ross-Smith, Counsel for the Duke Interests, quite early in the case of the Duke Interests.

    Analysis of the Evidence

14. The point has now been reached in these Reasons where it is necessary to give consideration to the evidence which was in conflict.  A substantial amount of the evidence given by Mr Angelopoulos was challenged by Mr Hurren when he gave his evidence.  Whilst I have said that I prefer the evidence of Mr Hurren where it conflicts with the evidence of Mr Angelopoulos, it is necessary to give consideration to the evidence given by both of them on the various issues in conflict.

    Two Events Before the 1998 Proceedings

15. It will be seen shortly that the instructions given by Mr Angelopoulos to Mr Hurren to represent the Duke Interests in the 1998 proceedings were in about October 1998.  However, there are two events which took place prior in time which are relevant to the 1998 proceedings and, in particular, to the outcome of the present proceedings.  The first is the drafting of the September Deed in 1996 and the conversations which took place between Mr Hurren and Mr Angelopoulos at that time.  The resolution of this conflict in the evidence is relevant to the Duke Interests’ claim in both breach of contract/negligence and breach of fiduciary duty.

16. The second event is the apportionment and distribution of the proceeds of sale in May 1998 following completion of the sale of Buckland Park.  The resolution of the conflict in the evidence relating to a meeting between Mr Angelopoulos and Mr Hurren about 8 May 1998 is also relevant to both heads of the Duke Interests’ claim.  Indeed, the resolution of the conflict is indirectly also relevant to the outcome of the September Deed conflict.

17. I now turn to consider the first of those issues, namely, the conflict relating to the September Deed.

    Drafting of the September Deed

18. Before discussing the evidence relating to the September Deed, it is necessary to mention some of the evidence pertaining to the April Deed.

    (i)     Evidence Relating to the April Deed

19. I stated earlier in these Reasons that it was imperative that the Duke Interests settle the Federal Court proceedings.  Mr Angelopoulos had received a very pessimistic opinion from his Senior Counsel.  The opinion was that the Duke Interests were likely to lose.  Mr Hurren said there was great pressure, because of the time constraints, to achieve a settlement.  I accept this evidence.  I also accept the evidence that the Duke Interests were not in a good bargaining position.  Mr Hurren said that he had to negotiate the terms of the April Deed delicately.  The Trial was to commence within a day or two.  It was important for the Duke Interests that a settlement was achieved.

20. I am satisfied that Mr Birchall, who appears to have been one of the Counsel representing the O’Connor Companies, made it clear to Mr Hurren that if the Duke Interests were to acquire the SAAMC debts that the O’Connor Companies would not settle if they were to end up in a worse position than they were currently with SAAMC.  I am also satisfied that Mr Hurren confirmed with Mr Birchall that the Duke Interests were prepared to enter into an agreement to ensure that the O’Connor Companies were not disadvantaged beyond their present position. This attitude of Mr O’Connor, on behalf of the O’Connor Companies, is also relevant to the circumstances at the time of drafting the September Deed.

21. The April Deed was premised on the basis that the Duke Interests were to acquire the SAAMC’s debt and receive a transfer of the Securities so that the Duke Interests would stand in the shoes of SAAMC.  Clause 8 of the April Deed dealt with the arrangements between the O’Connor Companies and the Duke Interests on that event occurring.  As mentioned, Clause 8.5 commenced with the words “The net proceeds of any sales of any part of the land …” (Buckland Park) and dealt with the manner of the application of those proceeds.

22. During his evidence, Mr Angelopoulos said that at the time of the preparation of the April Deed by Mr Hurren he instructed him to make sure that he received all the expenses which he paid for (the purchase of) Buckland Park, and then the moneys remaining were to be distributed two-thirds to the Duke Interests and one-third to the O’Connor Companies [T155.15].  I mentioned this evidence earlier. I also mentioned that even when this evidence was challenged in cross-examination on the basis that the April Deed did not provide for the purchase of land, he insisted that Mr Hurren had explained to him that the April Deed was to buy the land and any out-of-pocket expenses relating to buying the land were deductible from the net proceeds [T385.9].  Shortly after this evidence, he said he did not know what the difference was between the April Deed and the September Deed.  He said it really surprised him why a second Deed was needed [T.385.30].  I also need to state that in cross-examination he agreed with the proposition that the effect of the April Deed was that the debt was taken over  [T.384.30].  He also agreed with the proposition that the purchase of the land did not come until the September Deed [T.384.36].

23. Mr Hurren denied that he had received instructions from Mr Angelopoulos that at the time of the April Deed that he needed to ensure that he allowed for the deduction of all expenses, including the cost of land purchase expenses.  He frankly admitted he did not have a memory of any discussion with Mr Angelopoulos regarding recovery of expenses, at the time of drafting the April Deed.  He said his answer was a reconstruction based upon the fact that the April Deed dealt with the acquisition of a debt, not the acquisition of land.

24. When I was evaluating the evidence of Mr Angelopoulos generally, earlier in these Reasons, I criticised this evidence.  I formed the opinion regarding his evidence that he did not have any recollection of those instructions and that he was reconstructing.  Furthermore, this evidence demonstrates his state of confusion regarding the April Deed and the September Deed. It reflects poorly on his ability to recall.  The evidence is also poor.  He shifted his position on two occasions.  I am satisfied that Mr Hurren discussed the terms of the April Deed with Mr Angelopoulos at the time he prepared it [T.387.36].  However, Mr Angelopoulos clearly had little or no memory of it, yet insisted that he could recall his instructions.  I thought the evidence was most unsatisfactory and unconvincing.

25. I am satisfied that there was no discussion between Mr Hurren and Mr Angelopoulos, in which Mr Angelopoulos instructed Mr Hurren to ensure that the purchase expenses for Buckland Park were covered when he drafted the April Deed.  There were no purchase expenses relating to Buckland Park at that time.  The focus of the April Deed was the acquisition by the Duke Interests of the debts and securities of SAAMC.

    (ii)    Evidence Relating to the September Deed

26. With respect to the September Deed, Mr Angelopoulos was not asked in examination-in-chief whether he gave Mr Hurren any instructions regarding the recovery of expenses relating to the purchase of the remaining interests in Buckland Park.  Indeed, he did not mention any conversation with Mr Hurren regarding the terms of the September Deed.

27. Mr Angelopoulos mentioned giving instructions, in cross-examination, but the evidence was given only in passing.  It was included in an answer to a question not associated with the September Deed.  I set out the question and answer [T.346.9]:

    Q.Do you understand what I am driving at when I ask you what level of risk of losing would have caused you to pay Mr O’Connor $30,000, which he offered to accept on 26 November 1998.

    A.I could not see any risk to lose because I had legal document signed from both parties, and it had been explained well from Tony Hurren.  That’s the way it works, the deed, as I instruct him.  So I had a legal written document, I could not see I had a risk.

    He also stated in cross-examination, shortly after this evidence, that he was surprised why he needed a second Deed.  He said it was explained to him when the Deed was prepared that any out-of-pocket expenses relating to the land was to be deducted out of the net proceeds [T.386.1].  This evidence was also not directly responsive to the question.

28. A short time later, in cross-examination, Mr Angelopoulos said that he made it clear to Mr Hurren, “with both Deeds”, that to make sure that any expenses involved with the land that it has to be taken out of the net proceeds [T.391.5]; [See also T.392.8].

29. With respect to the September Deed, Mr Hurren said the Duke Interests were in a difficult position.  They needed to obtain the funds from NAB necessary to settle with SAAMC.  He said the Duke Interests were in default under the June Deed.  If they could not settle with SAAMC, then their liability to SAAMC would increase significantly as a result of default provisions in the June Deed.  As I have already mentioned, I accept that the Duke Interests needed the cooperation of Mr O’Connor.  Mr Hurren said the Duke Interests needed to acquire the remaining interests in Buckland Park so they could use the land as part of the security to obtain finance from the NAB.  He further said SAAMC was concerned about the proposal and reluctant to exercise its power of sale under the Mortgage because it was not certain that the O’Connor Companies were in default.  SAAMC, therefore, required the O’Connor Companies to be part of the arrangement because it required the O’Connor Companies to release it from any potential liability if it exercised its power of sale and sold the O’Connor Companies’ interest to the Duke Interests.

30. All of this evidence was mentioned earlier in these Reasons.  I have repeated it because it needs to be considered in the context of the drafting of the September Deed issue.  I accept the evidence.

31. Mr Hurren said that at the time of the negotiations following default by the Duke Interests under the June Deed, he was mindful of Mr O’Connor’s attitude at the time he drafted the April Deed that Mr O’Connor did not want to be disadvantaged beyond his present position (at that time) by entering into the April Deed.  This was the environment in which the terms of the September Deed were being negotiated with Mr O’Connor.  Evidence of that environment is found in a letter from Fisher Jeffries to Clelands, the O’Connor Companies’ Solicitors, dated 18 September 1998.  In that letter, Mr Hurren confirmed, with respect to that part of the September Deed relevant to the O’Connor Companies that it would be in substantially the same terms as the April Deed, to the intent that as between the O’Connor Companies and the Duke Interests, that they would both be in substantially the same positions as they would have been if the Duke Interests had purchased the Debt and Securities of SAAMC as foreshadowed in the April Deed.  The letter stated, after that confirmation, “In short, there would be no change in the essence of the relationship between the Duke and the O’Connor interests”.

32. I pause here to mention that at one point in his evidence Mr Angelopoulos agreed that he was aware of Mr O’Connor’s position with respect to the April Deed, that he did not want to be worse off if the Duke Interests took over the SAAMC debt [T390.28].  He also agreed that he knew that it was Mr O’Connor’s position all along, including at the time of the September Deed, that Mr O’Connor did not want to be in a worse position if the land was acquired by the Duke Interests [T.390.4].  Later, he denied that Mr Hurren had informed him that Mr O’Connor’s stance was that if the April Deed was changed, then he did not want to be in a worse position because of the change [T.1143.11].  This is another illustration of the inconsistencies which often appeared in the evidence of Mr Angelopoulos.

33. I do not accept the denial by Mr Angelopoulos that Mr Hurren did not tell him of the position taken by Mr O’Connor.  I am satisfied that he was informed.  Mr Angelopoulos understood he was in a difficult position and that he needed Mr O’Connor’s cooperation.  He was, as I said, aware of the position taken by Mr O’Connor.

34. Mr Hurren said that a deliberate decision was taken by Mr Angelopoulos, on his advice, during the drafting of the September Deed not to alter the words, “The net proceeds of any sales” at the commencement of Clause 8.5 in the April Deed when drafting the terms of the new Clause 8.5 which was to be substituted for the old Clause 8.5.  As a result, the new Clause 8.5, as contained in Clause 14 of the September Deed, contained the same words.

35. Mr Hurren said that this decision was brought about by two circumstances.  First, there was the necessity of obtaining Mr O’Connor’s cooperation to restructuring the SAAMC settlement, as laid down in the June Deed, in what was a desperate situation for the Duke Interests in September 1996.  Secondly, in seeking his cooperation it needed to be borne in mind the attitude of Mr O’Connor, who did not want to be placed in a worse position if he took part in the arrangement by SAAMC and the Duke Interests and entered into the September Deed.

36. Mr Hurren said, that at the time of drafting the September Deed that he was aware that there would be more expenses incurred by the Duke Interests when they acquired the remaining interests in Buckland Park.  He understood that the Duke Interests would wish to recover those expenses.  However, he said that it was decided that in view of the circumstances I have just outlined, there would not be included in the Deed a Clause specifically providing that those expenses were to be recovered before apportionment under Clause 8.5.  Mr Hurren said the decision was to leave the words as they were and later argue that the words permitted such costs to be recovered by the Duke Interests.

1. Mr Angelopoulos denied that Mr Hurren discussed the question of leaving the commencing words of the new Clause 8.5 as they were originally in the April Deed.  He denied that Mr Hurren discussed with him the necessity of obtaining Mr O’Connor’s cooperation and that if an attempt was made to include a clause in the Deed providing for the recovery of the purchase expenses, that Mr O’Connor may refuse to cooperate and refuse to enter into the September Deed.  He denied that he decided to leave the words in Clause 8.5 as they were and argue when the time came, that the words permitted the deduction of the purchase expenses.

   (iii)Evidence Relating to the NAB Debt

2. Mr Hurren said a further decision was taken regarding the purchase expenses.  He said he advised Mr Angelopoulos to borrow the expenses associated with the purchase of the interests in the land from the NAB.  He said that he gave this advice because he devised a fall-back position for arguing later that the words in Clause 8.5 allowed for the deduction of the purchase expenses before apportionment.  Clause 8.5 set out the order of priority for the application of the sales proceeds of Buckland Park.  Clause 8.5.1 provided that the first priority was the payment of the NAB Debt.  He said that in borrowing the purchase expenses, it could be later argued that the expenses were part of the NAB Debt and, therefore, could be repaid to the Duke Interests as part of the payment of the NAB Debt.

3. Mr Angelopoulos said, in his evidence, that Mr Hurren had told him to borrow all of the expenses from the NAB.  He said that he did borrow the expenses from the NAB.  However, he said that he did so because he did not have the funds to meet the expenses.  He denied that the borrowing of the expenses was part of a “fall-back” plan devised by Mr Hurren.

   (iv)    Mr Hurren’s Evidence

4. With respect to his evidence on the subject of the negotiating and drafting of the September Deed, Mr Hurren said that he was relying partly on his memory.  He said he was partly giving the evidence by way of reconstruction.  When he said that, I understood him to be relying on some facts he could recall (which he did) and then reconstructing some of his evidence from those facts.  His main evidence on this topic is found at pages 594-605, 604-686 and 755-760 of the Transcript.

   (v)     Conclusion Regarding the Evidence

5. I do not accept the evidence of Mr Angelopoulos that he gave instructions to Mr Hurren, with respect to the September Deed, to ensure that the purchase expenses could be deducted before the apportionment was to be made.  I felt that the scant evidence he gave on this subject was a reconstruction.  The same refrain, which appears in other parts of his evidence, was repeated during his evidence on this topic, namely, that Mr Hurren always told him that he was entitled to deduct the purchase expenses before apportionment.  I will come to that evidence again, later.  In my opinion, he clearly had no memory of giving those instructions.  His evidence was most unconvincing.

6. For the most part, I found the evidence of Mr Hurren on this topic to be plausible.  His evidence regarding the approach to be taken in the drafting of the September Deed has to be seen against the background of the need to obtain the cooperation of Mr O’Connor, the attitude of Mr O’Connor regarding being disadvantaged and the absolute necessity for the Duke Interests to ensure that they could acquire the remaining interests in the land so they could finance the settlement made with SAAMC.  I accept Mr Hurren’s evidence on all of these matters.

7. In evaluating the evidence of Mr Hurren, one of the matters I needed to consider was the criticism by Mr Ross-Smith, Counsel for the Duke Interests, that throughout the 1998 proceedings, Mr Hurren did not at any time raise or remind Mr Angelopoulos of the decisions he said were made regarding the drafting of the September Deed and the instructions given by Mr Angelopoulos.  Mr Ross-Smith said that it would be expected that Mr Hurren would have raised it in discussions with Mr Angelopoulos.

8. Mr Hurren said, in his evidence, that he did not see any reason to raise with Mr Angelopoulos the earlier decision regarding the drafting of the September Deed.  He said the dispute with Mr O’Connor focused upon the interpretation of Clause 8.5 as it stood.  He said that throughout the time when he acted for Mr Angelopoulos in the 1998 proceedings, Mr Angelopoulos did not suggest that he failed to follow instructions or that he had let him down with the drafting of Clause 8.5.

9. I will need to say more regarding this latter point shortly.  For the present, I accept that there did not appear to be any reason for raising the subject.  The point made by Mr Ross-Smith would be stronger if Mr Angelopoulos had complained to Mr Hurren that he had not followed instructions or complained that he had let him down in his drafting of the September Deed.  In those circumstances, it would be expected that Mr Hurren would have responded by referring to the decision taken in September 1996.  As that factor did not arise, I do not see why the failure to raise the subject should cause serious inroads into the credit of Mr Hurren.

   (vi)            Expenses Borrowed From NAB

10. In considering the issue of the drafting of the September Deed, the conflict in the evidence regarding the purpose of the Duke Interests in borrowing the expenses from the NAB also needs to be resolved.  The evidence of both Mr Hurren and Mr Angelopoulos is that it was Mr Hurren who suggested to Mr Angelopoulos that he should borrow the expenses associated with the purchase of the interests in the land from the NAB.  It would seem unusual for the Solicitor to become involved in advising Mr Angelopoulos to borrow the expenses if, as Mr Angelopoulos suggested, the only reason for borrowing the money was that he did not have the funds at the time.  If that was the case, it would be expected that Mr Angelopoulos did not need to discuss the matter with Mr Hurren.  Mr Angelopoulos was the businessman.  It was a business decision.  It is also difficult to accept that Mr Angelopoulos needed to borrow the expenses as he was short of funds.  He was a very wealthy person.  The level of expenses was not high.

11. I find the evidence of Mr Hurren regarding the fall-back strategy with the NAB also plausible.  It sits comfortably with the other evidence of Mr Hurren regarding the strategies relating to the drafting of Clause 8.5.  There would be no reason for Mr Hurren to suggest that Mr Angelopoulos borrow the expenses from the NAB if it was simply a question of the Duke Interests being short of funds.  That was a business decision which would not require his attention.

12. There is some support for the evidence of Mr Hurren on this subject.  In the Defence filed in the 1998 proceedings by the Duke Interests on 22 January 1999, it is pleaded in paragraph 4.6 that the expenses formed part of the NAB Debt and was, therefore, payable to the Duke Interests.  This plea is consistent with the strategy which Mr Hurren said was adopted.

13. I accept the evidence of Mr Hurren regarding the purpose of borrowing the expenses from the NAB.  It follows that I reject the evidence of Mr Angelopoulos on that subject.

    (vii)  Conclusion on the Drafting of Clause 8.5

14. I am satisfied that Mr Hurren gave advice to Mr Angelopoulos that it would be better not to alter the words in Clause 8.5 for fear of losing Mr O’Connor’s cooperation.  I am satisfied, as I said earlier, that he devised a fall-back position with the NAB Debt and he discussed that with Mr Angelopoulos.  I am also satisfied that Mr Angelopoulos accepted that advice and agreed with the strategy of leaving the opening words in Clause 8.5 as they stood in the April Deed, and instructed Mr Hurren accordingly.  The NAB arrangement of borrowing the expenses was part of the overall strategy.

    (viii) Other Relevant Factors

15. Whilst I am satisfied, for reasons I have given, that Mr Angelopoulos accepted the advice of Mr Hurren and agreed to the strategies relating to the drafting of the new Clause 8 of the April Deed and instructed him accordingly, there are two other matters which give support to those findings.

16. The first relates to a File Note made by Mr Hurren [Vol. 2.595-596].  I accept the evidence of Mr Hurren that he prepared the note in preparation for the forthcoming conference with Mr Angelopoulos and Mr Roder set for 19 August 1998.  I find that it was prepared in close proximity to that date.  From its position in the Cosoff Cudmore file, either on 17, 18 or 19 August 1998.

17. I pause here to indicate that the File Note was tendered by Mr Ross-Smith in the course of the Duke Interests’ case. It was part of the Cosoff Cudmore’s files relating to the 1998 proceedings which were tendered by Mr Ross-Smith. During the course of the Trial no submission was made regarding the basis of its admissibility or its status. I suppose the starting point is that it is part of the evidence and made so by Counsel for the Plaintiffs. The note was probably admissible, in any event, as a business record under Section 45A of the Evidence Act1929.

18. In paragraph 4 of the File Note, Mr Hurren wrote, “I clearly recall the wording  re NAB debt and whether we could borrow the $ for stamp duty and therby sneak it in  We thought it was worth a try …”.  In paragraph 8 of the File Note he wrote, “At the time, we used general expressions to capture as much as we could.  Look at it on the basis that 2 people looking at a property to buy, develop and sell but only one can buy it. Clearly net proceeds should also include incidentals to the purchase …”.

19. Mr Hurren said in his evidence that he could not recall whether any of the contents of the File Note were discussed at the conference with Mr Roder and Mr Angelopoulos on 19 August 1998 and, in particular, whether these two matters were discussed.

20. Both notes in the Memorandum lend some support to the evidence given by Mr Hurren on these topics.  What is important in evaluating the contents of the File Note is that at the time the notes were made, there had not been any suggestion by Mr Angelopoulos, or anyone, that Mr Hurren had not followed instructions in preparing the new Clause 8 or that he had failed by his drafting to ensure that the purchase expenses could be recovered.

21. The other matter is one which I have mentioned earlier.  From the time when the dispute between O’Connor Investments and the Duke Interests arose in May 1998, until the time Cosoff Cudmore ceased acting in the 1998 proceedings in December 1999, Mr Angelopoulos never suggested to Mr Hurren that he had failed to follow his instructions to ensure that the September Deed contained a provision enabling the recovery of the purchase expenses.  Furthermore, Mr Angelopoulos did not at any time during that period indicate to Mr Hurren that he failed in his duty as his Solicitor to include a clause in the September Deed which provided that the purchase expenses were recoverable by the Duke Interests prior to the apportionment of the remaining proceeds of sale.

22. I formed the view that Mr Angelopoulos was then, and remains, an intelligent, astute and successful businessman.  I have also formed the view that he is a person who is aware of his rights and is a person who is prepared to enforce those rights.  His extensive history in litigation lends some support to the proposition that he is a man who is prepared to enforce his rights or defend his rights.  I have little doubt that if he felt that Mr Hurren had failed to follow his instructions or failed to protect him in the drafting of the September Deed, then he would have raised it with Mr Hurren.  He did not.  The fact that he did not lends support to Mr Hurren’s evidence that he agreed with and instructed Mr Hurren not to alter the words at the commencement of Clause 8.5 of the September Deed.  He was aware that at some time in the future he may have to argue that the purchase expenses were permitted by the terms of Clause 8.5.

    (ix)   Findings in Relation to the September Deed

23. As a result of the evidence, which I have accepted, I make the following findings of fact:

    ·that at the time of the preparation of the September Deed, the Duke Interests, through Mr Angelopoulos, agreed that Mr Hurren should not alter the words “The net proceeds of any sales …” contained in Clause 8.5 of the April Deed when drafting the new Clause 8.5 in September 1996;

    ·that, as a result, the Duke Interests, through Mr Angelopoulos, instructed Mr Hurren at the time of drafting the September Deed that the words “The net proceeds of sale” were to be included in the new Clause 8.5;

    ·that, following those instructions, Mr Hurren included the words “The net proceeds of sale” in the new Clause 8.5, which was set out in Clause 14 of the September Deed;

    ·that, as a result of those instructions, the Duke Interests, through Mr Angelopoulos, were aware that Clause 8.5 did not ensure that the purchase expenses could be recovered at a later date, when Buckland Park was sold;

    ·that the Duke Interests, through Mr Angelopoulos, were aware that those words in Clause 8.5 could only provide an argument for allowing the purchase expenses to be paid to the Duke Interests prior to the apportionment of the remaining proceeds of the sale of Buckland Park.

    May 1998 Meeting after Settlement of Buckland Park

24. There was a meeting between Mr Angelopoulos and Mr Hurren after the settlement of the sale of Buckland Park.  This is not in dispute.  Settlement appears to have taken place on 8 May 1998 and it is likely that the meeting was held on the same day.  In terms of time, settlement was about eighteen months after the Duke Interests had acquired the remaining interests in Buckland Park under the September Deed.  It seems that the meeting was initiated by Mr Angelopoulos because he wanted to discuss the apportionment of the balance of the purchase price between the Duke Interests and the O’Connor Companies under the September Deed.  It is probable that Mr Angelopoulos brought to the meeting the settlement statement for sale of the land prepared by the Land Broker who attended to the settlement and a letter from the NAB addressed to Mr Angelopoulos, which was dated 21 October 1996.

25. The NAB letter was sent to Mr Angelopoulos following settlement of the purchase of the remaining two-thirds interests in Buckland Park in October 1996.  The letter contained details of costs associated with the purchase of those interests.  In particular, it contained two references to costs, which became the subject of the dispute between O’Connor Investments and the Duke Interests regarding the latter’s right to deduct them before apportioning the proceeds.  I set out hereunder the two relevant items contained in the letter:

    ·   Stamp Duty on transfers  $42,037-50

    ·   Legal and conveyancing costs per your advice  $35,542-61

    Bank Application Fee  $4,000-00

    Bank Legal Costs  $3,150-60

    Stamp Duty on Mtge  $6,687-50

    Bank Stamping/Registration Fees  $   160-00

    Bank Settlement Fee  $   150-00

    Search Fees – LTO  $   360-00

    LTO Registration Costs  $   975-00

    TOTAL  $51,025-71

    It was these two amounts of $42,037 and $51,025, and a claim for interest on these sums amounting to $13,959, which were the amounts disputed.

26. Mr Angelopoulos said he had calculated the amount he was intending to deduct and brought the calculations to the meeting.  The total amount was $143,292, which included the three amounts to which I have just made reference.  Mr Angelopoulos said Mr Hurren did his own calculations whilst he was with him and then checked it against calculations Mr Angelopoulos had done.  He said both calculations agreed.  Mr Angelopoulos also said that Mr Hurren, in the course of the meeting, closely studied the Deed.

27. It was the evidence of Mr Angelopoulos that he could recall specifically during the meeting that Mr Hurren said that the Deed said that he was entitled to take out all the out-of-pocket expenses, and the amount remaining was to be divided one-third to the O’Connor Companies and two-thirds to himself [T.161.25].  [Also see: T.162.11 and 166.12].

28. Mr Hurren said he had a hazy recollection of a meeting held with Mr Angelopoulos after the settlement of Buckland Park.  Mr Hurren said that he had a vague memory that Mr Angelopoulos came to the meeting and said he was going to make the deductions, and he agreed that such a course should be adopted.

29. Mr Hurren said he did not undertake any detailed calculations of deductions to be made from the proceeds of sale [T.613.10].  He said he would not have been in a position to do so at that time.  He said that the $142,000 which Mr Angelopoulos intended to deduct from the sale proceeds comprised a number of items, some of which were made up of a number of component parts.  He cited as an example the sum of $35,542, which was contained in the sum of $51,025 set out in the NAB letter of 21 October 1996.  At that time, the components making up that sum were not known.  He said he could not have determined whether all the components of that sum were valid purchase expenses.

30. I do not accept the evidence of Mr Angelopoulos that he can recall the words used by Mr Hurren at the meeting.  The effect of his evidence is that Mr Hurren said that the Deed authorised his entitlement to deduct all out-of-pocket expenses and the amount remaining was then to be apportioned.  To say he can recall the words defies credulity.  His evidence needs to be seen against the background that throughout his evidence he demonstrated he had a poor memory.  The only constant throughout his evidence was his repeated assertion that he could recall Mr Hurren advising him that he was entitled to deduct the purchase expenses.  The evidence also conflicts with my finding that he was aware that the words in Clause 8.5 only provided him with an arguable case that he could deduct the purchase expenses.

31. There is a further factor which leads to the conclusion that the evidence of Mr Angelopoulos cannot be accepted.  Mr Hurren did not have the necessary information to make an evaluation regarding whether each of the amounts claimed were associated with the purchase of the remaining interests in Buckland Park.  There were some amounts that Mr Hurren would have been aware were associated with the purchase.  The stamp duty is one such amount.  However, as I said, he was not aware at that time of the component amounts which made up the sum of $35,542.

32. There is a further matter which also supports the rejection of the evidence.  Mr Angelopoulos deducted the sum of $13,959 representing interest on the other two amounts.  There was no legitimate basis for the interest deduction, either pursuant to the September Deed or from anywhere else.  In those circumstances, it is difficult to see how Mr Hurren would have advised that it was a legitimate deduction under the September Deed.

33. In the course of considering the evidence regarding the May meeting, it became necessary to give consideration to a Facsimile written by Mr Angelopoulos on 30 November 1998.

34. By that time, the Duke Interests had instructed Mr Hurren to act for them in the dispute with O’Connor Investments.  In a letter dated 27 November 1998, Mr Hurren sought instructions from Mr Angelopoulos regarding the composition of the sum of $35,542 which was part of the sum of $51,025 included in the deductions made by Mr Angelopoulos.  Mr Hurren said he needed that information so he could properly give advice at that time.  Mr Angelopoulos responded by a Facsimile dated 30 November 1998 [Vol.2.724] in which he set out the components of the $35,542.  Included in those components was $22,695 for a Fisher Jeffries’ account and an amount of $4,885 paid to Andersons, a firm of Solicitors.  Andersons acted for SAAMC in the Federal Court litigation and in matters arising in relation to the June Deed and the September Deed.

35. In that Facsimile, Mr Angelopoulos stated that Mr Hurren had told him “many times” that he had to deduct that amount (the $35,542) before apportionment.  This was the first occasion that Mr Hurren became aware of the component items which comprised the sum of $35,542.  It was because of the “many times” assertion that I felt it necessary to consider the Facsimile when dealing with this issue.

1. It was submitted by Mr Ross-Smith that if Mr Angelopoulos had received advice from Mr Hurren from the outset that the chances were 50/50, then he would never have sought the opinion from Mr Roder [R.897.1].  Mr Ross-Smith said that Mr Angelopoulos, in those circumstances, would have approached Mr O’Connor and settled the claim either by negotiating payment of a lesser amount or, if unsuccessful, by paying the sum that O’Connor Investments was seeking.

2. The first point to be made about this submission, as I have expressed before, is that it has never been the Duke Interests’ case that Mr Hurren was negligent in not advising that the Duke Interests’ chances were 50/50.  I mentioned, when considering the pleaded case, that Mr Ross-Smith acknowledged that the Duke Interests’ case was that Mr Hurren was negligent because he failed to inform them that there was a real and genuine risk that they would lose the case.  However, for the purpose of this submission, I will assume it is the Duke Interests’ case.

3. I have stated before that Mr Angelopoulos was always desirous of obtaining Mr Roder’s advice.  As I have found, it was only the advice of Mr Roder upon which he might rely.  If he had received the 50/50 advice from Mr Hurren, he would have still sought the advice from Mr Roder.  As I have also earlier stated, it was only if Mr Angelopoulos was told that his case was weak, that Mr Anglopoulos would have considered entering into negotiations with Mr O’Connor.  Advice of a 50/50 chance would never have been a catalyst for him to enter into negotiations.

4. Even if it is accepted that the advice given by Mr Hurren was negligent, for all the reasons I have expressed, I am not satisfied that the advice caused the Duke Interests to suffer damages arising from a loss of opportunity to resolve the O’Connor Investments’ claim by settling for less than the amount sought or, if that was unsuccessful, by accepting any offer.

5. As a result, even if I am wrong in my conclusion that the Defendants were not in breach of contract and not negligent, the Duke Interests cannot prove that the breach of contract and negligence by the Defendants were the cause of the loss and damage alleged to have been suffered by them.

6. In view of my findings, I do not propose to proceed to assess damages.  There are some difficult issues arising in the assessment.  I do not see any real benefit in undertaking that difficult exercise in light of the conclusions I have reached.

   Breach of Fiduciary Duty Claim

   (i)     Nature of the Claim

7. Early in these Reasons, I briefly referred to this claim.  The essence of the claim is that the Defendants, through Mr Hurren, owed fiduciary duties to the Duke Interests with respect to the 1998 proceedings arising out of the solicitor/client relationship.  It is claimed that the Defendants breached their fiduciary obligations by acting as solicitors for the Duke Interests, when Mr Hurren had personal interests which conflicted with his duty to represent the Duke Interests as their solicitor.

8. The Duke Interests claim that Mr Hurren was instructed by Mr Angelopoulos in September 1996 to ensure that all expenses, both purchase and sales, with regard to Buckland Park were to be recovered by the Duke Interests prior to any apportionment.  Mr Hurren had drawn the new Clause 8.5 of the April Deed (included in Clause 14 of the September Deed).  Further, that the meaning of the Clause was the subject of the 1998 proceedings in which it was alleged by O’Connor Investments that the Clause only permitted the deduction of the sale expenses.

9. The claim by the Duke Interests of breach of fiduciary duty has two limbs.  The first is that Mr Hurren’s personal interest, being a potential claim against him in negligence by the Duke Interests for failing to draft Clause 8.5 to ensure the purchase expenses were also recoverable, conflicted with his duty to represent and advise the Duke Interests in the 1998 proceedings.  It is alleged that as a result of the conflict the Defendants, through Mr Hurren, should not have acted for the Duke Interests in the 1998 proceedings.  In so doing, it is alleged that the Defendants were in breach of their fiduciary duty.

10. The Duke Interests also claim that the Defendants, through Mr Hurren, were in breach of their fiduciary duty, apart from the question of any issue of negligence.  This claim alleges that as Mr Hurren was the draftsman of Clause 8.5, and as its construction was the subject of the 1998 proceedings, that he could not have brought an objective or independent mind to bear in advising the Duke Interests in the 1998 proceedings.  The personal interest of Mr Hurren, which is said conflicted with his duty, was his desire to protect his own work and reputation as a draftsman.  As a result, he could not bring an independent and objective mind to bear in advising the Duke Interests in the 1998 proceedings [T.1099.27-1100.16; 1101.2-1101.14].

11. It is also claimed that in those circumstances, Mr Hurren should not have acted for the Duke Interests in the 1998 proceedings.  As a result of the Defendants, through Mr Hurren, acting for the Duke Interests they breached their fiduciary duty.

12. Mr Abbott, Counsel for the Defendants, submitted that the second limb of the Duke Interests’ claim for breach of fiduciary duty should not be entertained because it was not pleaded in the Statement of Claim.  I accept that it was not pleaded.  However, it was raised from time to time by Mr Ross-Smith during the Trial.  I gained the impression he was developing and refining this claim in his own mind as the hearing proceeded.  By the time of his address, Mr Ross-Smith presented the second limb of the claim in the manner which I have described.  I indicated I was prepared to entertain the submission as part of the Duke Interests’ case.  However, I required the re-call of Mr Angelopoulos for further cross-examination to overcome any prejudice perceived by Mr Abbott by allowing the second limb of the claim to proceed.

    (ii)    Legal Principles Regarding the Duties of a Fiduciary

13. It is settled law that a solicitor retained by a client to act as a solicitor is a fiduciary who owes fiduciary duties in equity to the client.  In Hospital Products Limited v United States Surgical Corporation[10], Mason J described the nature of a fiduciary relationship in the following terms:

    The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (cf. Phipps v. Boardman), viz., trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners.  The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense.  The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position.  The expressions “for”, “on behalf of”, and “in the interests of” signify that the fiduciary acts in a “representative” character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal.

    [10] (1984-85) 156 CLR 41 at 96-97

14. Equity imposes duties on a fiduciary.  One of those duties of a solicitor, as a fiduciary, is not to allow a personal interest or interests to conflict with the duty owed to the client.  The classical statement of the duty was that by Lord Herschell in Bray v Ford[11] when he said:

    It is an inflexible rule of a Court of Equity that a person in a fiduciary position … is not allowed to put himself in a position where his interest and duty conflict.  It does not appear to me that this rule is, as has been said, founded upon principles of morality.  I regard it rather as based on the consideration that, human nature being what it is, there is danger, in such circumstances, of the person holding a fiduciary position being swayed by interest rather than by duty, and thus prejudicing those whom he was bound to protect.

    [11] (1896) AC 44 at 51

15. In Pilmer v Duke Group Limited[12] the High Court highlighted the distinct character of the fiduciary obligation:

    It is important also to recognise the distinct character of the fiduciary obligation, which sets it apart from contract and tort.  In Norberg v Wynrib (157) McLachlin J said:

    “The foundation and ambit of the fiduciary obligation are conceptually distinct from the foundation and ambit of contract and tort.  Sometimes the doctrines may overlap in their application, but that does not destroy their conceptual and functional uniqueness.  In negligence and contract the parties are taken to be independent and equal actors, concerned primarily with their own self-interest.  Consequently, the law seeks a balance between enforcing obligations by awarding compensation when those obligations are breached, and preserving optimum freedom for those involved in the relationship in question.  The essence of a fiduciary relationship, by contrast, is that one party exercises power on behalf of another and pledges himself or herself to act in the best interests of the other.”

    [12] (2001) 207 CLR 165 at 196 [71]

16. It is this duty which the Duke Interests allege was breached by Mr Hurren when he accepted instructions to act for them and continued to act for them in the 1998 proceedings.

17. Where a solicitor is in a position that if he or she acts for a person, and his or her personal interests may conflict with the duty owed to the client, then the only way to avoid committing a breach of that duty is to make full disclosure of the conflict and obtain that person’s consent to so act.  The solicitor must disclose every relevant detail regarding the conflict so that the person can be fully informed if the consent is given to the solicitor continuing to act (New Zealand Netherlands Society “Oranje” Inc v Kuys[13].

    [13] (1973) 2 All ER 1222 at 1227

    (iii)           Identifying the Conflict between Interest and Duty

18. In Pilmer v Duke Group Limited (In Liquidation), the High Court stated that it is necessary to identify the conflicting duty or interests (para.83).  With respect to identifying the conflicting duty or interests, the majority said[14]:

    In particular, the fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is “a conflict or a real or substantial possibility of a conflict” between personal interests of the fiduciary and those to whom the duty is owed.  That is how the matter was put by Mason J in Hospital Products.  Similar reasoning applies where the alleged conflict is between competing duties, for example, where a solicitor acts on both sides of a transaction.

    The division in the House of Lords in Phipps v Boardman respecting the application of principle to the facts in that case indicates that different minds may reach different conclusions as to the presence or absence of a real or substantial possibility of conflict between duty and interest or between duty and duty.  However, in Hospital Products, Mason J quoted with approval a statement by Judge Learned Hand in Phelan v Middle States Oil Corporation.  That statement included the following:

    “[I]f the doctrine be inexorably applied and without regard to the particular circumstances of the situation, every transaction will be condemned once it be shown that the fiduciary had such a hope or expectation, however unlikely to be realised it may be, and however trifling an inducement it will be, if it is realised … We have found no decisions that have applied this rule inflexibly to every occasion in which the fiduciary has been shown to have had a personal interest that might in fact have conflicted with his loyalty.  On the contrary in a number of situations courts have held that the rule does not apply, not only when the putative interest, though in itself strong enough to be an inducement, was too remote, but also when, though not too remote, it was too feeble an inducement to be a determining motive.”

    Reference to citations omitted.

    [14] (2001) 207 CLR 165 at 199 [78-79]

19. This passage in Phelan as adopted in Pilmer makes it clear that not all personal interests are of a nature which equity would say conflicts with the duty of a fiduciary.  It is accepted that some personal interests do not conflict with duty where such interests were too remote or, if not too remote, are “too feeble an inducement to be a determining motive”.  The personal interest of the fiduciary needs to be of such a nature that it would, in reality, conflict with the fiduciary’s duty in that “ … there was a real or substantial possibility of a conflict between duty and interest …”[15].

    [15] Pilmer (2001) 207 CLR 165 at 199 [78]

20. On the question of what is an “interest”, for the purpose of the rule that a fiduciary’s personal interest must not conflict with the duty to the client, Mr Abbott, Counsel for the Defendants, cited the following passage in Professor Finn’s (now Justice Finn) text entitled “Fiduciary Obligations”[16]:

    The sheer variety of transactions to which the conflict rule applies makes it impossible to give anything like a comprehensive definition of an “interest” for its purposes.  In rudimentary terms it signifies the presence of some personal concern of possible significant pecuniary value in a decision taken, or transaction effected, by a fiduciary.  That concern may be a direct and immediate one as where an agent sells his own property to his principal.  It may be indirect as where an agent has a large shareholding in a company dealing with his principal, or it may be contingent as where a trustee uses a trust shareholding to vote himself to the board of directors in which position he is likely to receive directors’ fees.  The pecuniary dimension of the fiduciary’s concern may take the form of an actual, prospective, or possible profit to be made in, or as a result of, the decision he takes or the transaction he effects.  Or it may take the form of an actual, prospective, or possible saving, or a diminution of a personal liability.  Beyond these generalities one can only talk of “interests” in the contexts of the many distinctive subrules of the general conflict rule.

    [16]       Fiduciary Obligations (Finn) at 203 [472]

21. Justice Finn expresses the interest as being “ … the presence of some personal concern of possible significant pecuniary value in a decision taken or a transaction effected by a fiduciary”.  He also mentions that the personal concern “ … may take the form of an actual prospective or possible saving or diminution of personal liability”.

22. Whilst Justice Finn does not support these propositions by reference to the authority, they appear to be consistent with the observations of the High Court in Pilmer (supra).

    (iv)    Was There a Breach of Fiduciary Duty?

    (a) The First Limb

23. I have found that in September 1996, Mr Angelopoulos instructed Mr Hurren not to alter the words “The net proceeds of any sale …” in Clause 8.5 of the April Deed when he was drafting the new Clause 8.5.  Mr Angelopoulos understood that the words did not make it certain that the purchase expenses could be deducted.  On the contrary, Mr Angelopoulos understood that it was only arguable that the words would allow for the deduction of the purchase expenses.  As a result of these findings, I concluded that Mr Hurren had not been negligent in the drafting of the new Clause 8.5.

24. Whilst it is not specifically relevant to this issue, I accept Mr Hurren’s evidence that it never passed through his mind that he might be negligent in the drafting of the new Clause 8.5 during the time he was acting for the Duke Interests in the 1998 proceedings.  Furthermore, it was, as expressed earlier, never suggested by Mr Angelopoulos that Mr Hurren had not followed his instructions and, as a result, left him exposed to the proceedings brought by Mr O’Connor in 1998.

25. There was never a potential negligent action against Mr Hurren.  He followed the instructions of Mr Angelopoulos.  As a result, there was never any interest of the nature alleged by the Duke Interests which conflicted with his duty owed to them as his clients.  To adopt the words used in Pilmer[17], there was no “real or substantial possibility of a conflict” between a personal interest of Mr Hurren and his fiduciary obligations as the solicitor for the Duke Interests.

    [17] Pilmer (2001) 207 CLR 165 at 199 [78]

26. It was submitted by Mr Ross-Smith that even if I found that there was no negligence on the part of Mr Hurren in drafting Clause 8.5 and, therefore, the potential for a negligence claim was not present, that was not the end of the matter.  He submitted that Mr Hurren had an obligation to fully inform Mr Angelopoulos, by reminding him of what transpired between them in September 1996 when Clause 8.5 was being drafted.  Further, said Mr Ross-Smith, Mr Hurren would need to raise with Mr Angelopoulos the possibility of bringing Third Party proceedings against his old firm, Fisher Jeffries, albeit that the strategy of leaving Clause 8.5 in the original form was agreed to by Mr Angelopoulos.  Mr Ross-Smith submitted that this was necessary because Mr Hurren was the draftsman of the new Clause 8.5 (although it was left in its original form) and if in the 1998 proceedings the Court agreed with the contention of O’Connor Investments, there remained a possibility that Mr Hurren could be open to a negligence claim.

27. In my opinion, the short answer to this submission is that if there is no conflict between personal interest and fiduciary obligations, then there is no breach of fiduciary duty by the fiduciary.  On my finding, there was no potential negligence claim lingering against Mr Hurren so there was no personal interest which could conflict with his duties.

28. The obligation of a fiduciary to obtain the fully informed consent of a client only arises where a situation of conflict or a substantial possibility of a conflict is present.  It was not present here.  The submission of Mr Ross-Smith seemed to be pushing the fully informed consent principle into waters where it does not, in principle, belong.  Accordingly, I cannot accept the submission.

    (b)    The Second Limb

29. I turn to address the second limb of the claim of breach of fiduciary duty, namely, that Mr Hurren, as the draftsman of the new Clause 8.5, could not bring an independent and objective mind to the interpretation of that Clause, as he was required to do in the 1998 proceedings.  The personal interest of Mr Hurren, which it is said conflicted with his fiduciary obligations in acting for the Duke Interests in the 1998 proceedings, was his desire to protect his own work and reputation as a draftsman [T.884.18; 1099.4; 1100.11].

30. In the first instance, in my opinion, there is no conflict. It is to be remembered that the words in the Clause were left as part of the strategy adopted.  In those circumstances, there was no reputation to protect as Mr Hurren was following instructions.  Like the first limb of the claim, there was no real or substantial possibility of a conflict demonstrated.

31. Furthermore, in my opinion the personal interest of Mr Hurren, which has been identified in this submission, is not of such a nature that equity would recognise as an interest which could conflict with his fiduciary obligations as a solicitor acting for the Duke Interests.  The so-called personal interest is either too remote or “ … too feeble an inducement to be a determining motive” (Pilmer)[18].  As I said earlier, Pilmer made it clear that not every personal interest will conflict the obligations of a fiduciary.

    [18] Pilmer (2001) 207 CLR 165 at 199 [79]

32. Given that I have found that there was no conflict of interest because there was no potential claim for negligence, it would be a rather strange result to conclude that the personal interest, of the nature identified in the second limb submission, was of such a nature to cause there to be a breach of fiduciary obligations.

    (c)     Conclusion

1. For the reasons I have given, I am of the opinion that the Defendants have not breached their fiduciary duties.  The Duke Interests’ claim must fail.

   Equitable Compensation

2. As a result of my conclusion that there has not been any breach by the Defendants of their fiduciary obligations, there is no necessity to consider the relief sought of equitable compensation.  I propose to offer a few remarks regarding this head of the Duke Interests’ claim but, as will become apparent, I do not see the need to consider it in detail

3. Central to the Duke Interests’ claim for breach of fiduciary duty, is that as a result of the conflict between personal interest and his fiduciary duty to his clients, Mr Hurren was obliged to inform Mr Angelopoulos that he needed to instruct other solicitors to act in the 1998 proceedings.  It was submitted that if the Duke Interests had instructed other solicitors, then they would have advised them of the risks in the 1998 proceedings in a similar manner to that of Kelly & Co, that the claim was “line ball”, and they would have advised the Duke Interests to join Fisher Jeffries early in the 1998 proceedings.  As a result, it is claimed that an early settlement would have been achieved or, alternatively, they would have paid the amount demanded by O’Connor Investments and recovered the same from Fisher Jeffries.

4. The object of equitable compensation is restorative.  In other words, its purpose is to place the person suffering loss following a breach of fiduciary duty (or trust) in the same position (or as near as possible) as he would have been had there been no breach (Duke Group Limited (In Liquidation) v Pilmer[19];  O’Halloran v R T Thomas and Family Pty Ltd[20].

   [19] (1999) 73 SASR 645 at 242-245

   [20] (1998) 45 NSWLR 262 at 272

5. It was the submission of Mr Ross-Smith that once it was shown that the breach of duty was material to the transaction from which loss resulted, then the Duke Interests are entitled to recover their losses.  Although it was not made clear, I assume the “transaction” he was referring to was the Defendants acting for the Duke Interests in the 1998 proceedings.  Counsel submitted that it was irrelevant for a Court to speculate regarding what may have happened if Mr Hurren had informed the Duke Interests of his conflict of interest.  For these submissions he relied upon what has become to be known as “the rule in Brickenden”.  In the decision of the Privy Council in Brickenden v London Loan and Savings Co[21], Lord Thankerton said:

   When a party, holding a fiduciary relationship, commits a breach of his duty by non-disclosure of material facts, which his constituent is entitled to know in connection with the transaction, he cannot be heard to maintain that disclosure would not have altered the decision to proceed with the transaction, because the constituent’s action would be solely determined by some other factor, such as the valuation by another party of the property proposed to be mortgaged.  Once the Court has determined that the non-disclosed facts were material, speculation as to what course the constituent, on disclosure, would have taken is not relevant.

   [21] (1934) 3 DLR 465 at 469

6. There is still some uncertainty whether this is the law in Australia.  It has been adopted by a number of appellate courts in Australia as the law, including the Full Court in Gemstone Corporation of Australia Limited v Grasso[22].  However, as the Full Court in Duke Group[23] pointed out, its authority in Australia was expressly left open by the majority of the High Court in Maguire v Makaronis.

   [22] (1994) 62 SASR 239 at 243

   [23] (1999) 73 SASR 65 at 235

7. The rule in Brickenden has, in recent years, been the subject of academic criticism and judicial qualification.  The issue that is at the centre of the debate about the Rule is whether there is a need to prove some causal connection between the breach of fiduciary duty and the loss for which equitable compensation is sought.  It is accepted almost universally that the common law principles of causation have no place in equity.  However, some judicial decisions have introduced a notion of “causation” in dealing with a claim for equitable compensation arising from a breach of a fiduciary duty.

8. In O’Halloran[24] the Supreme Court of New South Wales adopted the following passage from McLachlin J (in Canada) in the decision of Canson Enterprises Ltd v Boughton and Co[25] as the law in Australia:

   In summary, compensation is an equitable monetary remedy which is available when the equitable remedies of restitution and account are not appropriate. By analogy with restitution, it attempts to restore to the plaintiff what has been lost as a result of the breach, ie, the plaintiff’s loss of opportunity.  The plaintiff’s actual loss as a consequence of the breach is to be assessed with the full benefit of hindsight.  Foreseeability is not a concern in assessing compensation, but it is essential that the losses made good are only those which, on a common sense view of causation, were caused by the breach.

   [24] (1998) 45 NSWLR 262 at 273

   [25] (1991) 85 DLR (4^th) 129 at 163

9. Recently, the High Court in Youyang Pty Ltd v Minter Ellison Morris Fletcher[26], made the following observations regarding causation in equity:

   This appeal turns upon the significance for the facts of the causal requirement expressed by Fry LJ in the phrase “by reason of”.  That serves to remind, as Mummery LJ recently put it, that “[t]here is no equitable by-pass of the need to establish causation” and that “[i]n questions of causation it is important to focus on the relevant equitable duty”.  This raises considerations having an affinity to those which determined the outcome in Target Holdings.

   Footnotes omitted.

   [26] (2003) 77 ALJR 895 at 903 [44]

10. In the passage cited by the High Court with approval in Youyang, Mummery LJ said in Swindle v Harrison[27];

    In considering the extent of liability for breach of fiduciary duty, it is not always necessary to consider all the matters which may be relevant in determining the extent of liability to pay damages for negligence.  Foreseeability and remoteness of damage are, in general, irrelevant to restitutionary remedies for beach of trust or breach of fiduciary duty.  The liability is to make good the loss suffered by the beneficiary of the duty.  It is, however, necessary to address the issue of causation.  Although equitable compensation, whether awarded in lieu of rescission or specific restitution or whether simply awarded as monetary compensation, is not damages, it is still necessary for Mrs Harrison to show that the loss suffered has been caused by the relevant breach of fiduciary duty.  Liability is not unlimited.  There is no equitable by-pass of the need to establish causation.  As was said by Lord Browne-Wilkinson in Target Holdings Ltd v Redferns (a firm) [1995] 3 All ER 785 at 798, [1996] AC 421 at 439:

    “Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests:  to make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach.”

    Although that was said in the context of a claim for breach of trust, the same considerations apply to a claim for breach of fiduciary duty:  fiduciary duties are equitable extensions of trustee duties.

    [27] (1997) 4 All ER 705 at 733-734

11. It can be seen from these brief observations that if I were to proceed to deal with the entire issue of equitable compensation, then a detailed analysis of a number of authorities would need to be undertaken to determine the principles upon which I would need to rely in determining the entitlement to equitable compensation.  In the end, I may well conclude that I am bound to adopt the rule in Brickenden as the appropriate principle because I am obliged to follow the decision of the Full Court in Gemstone[28], which accepted that the rule in Brickenden was the appropriate principle to adopt in that case.

    [28] (1994) 62 SASR 239

12. Even if it is the case that I would need to apply the rule in Brickenden, there are other issues which may need to be confronted.  In Maguire v Makaronis, Kirby J expressed the view that the rule in Brickenden was the applicable law in Australia.  With respect to the application of the rule, Kirby J said[29]:

    The rule in Brickenden has survived a long time.  It has been frequently applied, especially in recent years.  It contains within its formulation words which adequately meet the need for there to be some connection to the breach so as to exclude events which are too remote.  Thus it must be shown that any facts not disclosed by the fiduciary were “material”.  What is forbidden is “speculation”.  In my view, the rule in Brickenden can quite comfortably co-exist with the exposition of principle by Street J in Dawson.  Facts will not be “material” if the relevant loss would have happened if there had been no breach.  Both Lord Thankerton in Brickenden and Street J in Dawson were simply saying that, once a breach of fiduciary duty is shown, the inquiry is not a simple one as to what caused subsequent losses.  Equity must strive to repair the breach of fiduciary duty lest the fiduciary in default could be exonerated too easily, the beneficiary suffer a double disadvantage:  the courts being seen to wink at wrong-doing.

    [29] (1996-97) 188 CLR 449 at 492-493

13. Again, Kirby J in Maguire said[30]:

    The foregoing arguments suffice to show that adhering to Brickenden does not present the spectre, suggested for the appellants, that fiduciaries will be unfairly burdened with consequences that have no logical connection with their breach and which should properly be ascribed to other causes.  If a breach occurs which has no real consequences, the pre-condition of the Brickenden formulation, in the case of a breach constituted by non-disclosure of material facts, will not be made out.  The facts in question will not be classified as “material”.  Other remedies may lie against the fiduciary.  But they will not include relief from the transaction.  Where, however, the facts are “material”, in the sense that, but for their existence the events which followed would not have occurred, a court exercising equitable jurisdiction is not concerned at the first stage of its inquiry to sort out issues of causation.  But clearly, it will be relevant to the exercise of the discretion to provide relief at all, and if so, to determine the form of that relief, to take into account the actual impact of the fiduciary’s default.  Only in that way will be objects of the relief, principally restitution, be secured.

    [30] (1996-97) 188 CLR 449 at 494

14. If this course is adopted, then a careful analysis of the factual circumstances would be required to determine if the breach is “material” as that term was explained by Kirby J

15. I have reached the conclusion that little profit would be gained in undertaking the arduous tasks I have outlined.  Accordingly, I do not propose to proceed to determine the amount of equitable compensation to which the Duke Interests would have been entitled if the Defendants had breached their fiduciary duty to the Duke Interests.

    Conclusion

16. For the reasons I have expressed, the Duke Interests’ claim fails both in breach of contract/negligence and breach of fiduciary duty.  There will be judgment for the Defendants.  I will hear the parties on the question of costs