Edwards v Legalese P/L T/A Peter Scragg & Associates - [2014] SASCFC 58

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
EDWARDS & ORS v LEGALESE P/L T/A PETER SCRAGG & ASSOCIATES
[2014] SASCFC 58
Judgment of The Full Court
(The Honourable Justice Vanstone, The Honourable Justice Bampton and The Honourable Justice Parker)
6 June 2014
TORTS - NEGLIGENCE - ESSENTIALS OF ACTION FOR NEGLIGENCE - DUTY OF CARE
PROFESSIONS AND TRADES - LAWYERS - DUTIES AND LIABILITIES - SOLICITOR AND CLIENT - NEGLIGENCE
Appeal from decision of Judge dismissing claim for damages for alleged breach of duty by solicitor – clients claimed that breach arose as a consequence of negligent advice given by solicitor – whether Judge erred in finding alleged advice not given and concluding that there was no breach of duty in tort – whether Judge erred in finding that had any such breach been proved clients failed to establish that such breach was causative of their losses – whether Judge erred in approach to determining question of damages.
Held: appeal dismissed – evidence supported conclusion that the advice allegedly given was not in fact given – evidence justified a conclusion that even had the alleged advice been given clients had failed to establish they could or would have done anything to save the company – Judge’s approach to determining question of damages not in error.

PROCEDURE - COSTS - APPEALS AS TO COSTS - DISCRETION
Respondent sought permission to cross-appeal against Judge’s refusal to certify costs fit for two counsel.
Held: permission to appeal granted – no basis to interfere with the exercise of the Judge’s discretion as to costs.
Austrust v Astley (2000) 197 CLR 1; Bristol & West Building Society v Mothew (1996) All ER 698; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Stanley v Phillips (1966) 115 CLR 470, considered.

EDWARDS & ORS v LEGALESE P/L T/A PETER SCRAGG & ASSOCIATES
[2014] SASCFC 58
Full Court: Vanstone, Bampton and Parker JJ

VANSTONE J. I have had the opportunity to read the reasons of Bampton J in draft. I agree with the conclusions her Honour has reached.
I would only add that in my view the judgment under appeal was extremely thorough and carefully reasoned. The conclusions reached by the judge on each issue are amply justified. Indeed, the closer the examination of the oral evidence, the contemporaneous documents and the chronology of events, the more compelling is the conclusion that the advice the plaintiff, Mr Edwards, claims Mr Scragg gave him in April 1999 was not in fact given. The reasons which dictate that conclusion are clearly set out in the judgment under appeal.
In relation to the issue of reliance, again the judge’s conclusions seem to me to be unassailable. The company was insolvent. Mr Edwards was alive to the insurmountable challenges it faced. Even had the disputed advice been given, it was not demonstrated that the plaintiffs could or would have done anything to save the company.
In my view it is to be regretted that the case has proceeded this far and that so much effort and expense has been fruitlessly expended over such a long period of time.
I would dismiss the appeal and the cross-appeal.
BAMPTON J.
The appeal
This is an appeal against a dismissal of a District Court action. In that action the appellants had claimed damages as a consequence of alleged negligence and/or breach of retainer by the respondent solicitors.
The first and second appellants, Kenneth Edwards (Mr Edwards) and Raelene Edwards (Mrs Edwards) acquired shares in the third appellant, Falzon Brick Co Pty Ltd (Falzon Brick) and a related entity Falzon Investments Pty Ltd (Falzon Investments) in 1989.
The claim arose out of the failure of Falzon Brick, a clay brick and paver manufacturing business (the business).
The appellants alleged in the District Court proceedings that Mr Edwards was given negligent advice by the respondent regarding the rights of the Commonwealth Bank of Australia (CBA) to act upon any breaches by them of the terms of their loan agreement with the CBA.
At the time of the alleged advice the respondent was an incorporated law firm employing solicitors including Peter Scragg (Mr Scragg) and Peter Caporaso (Mr Caporaso).
The appeal raises two principal issues. First, whether the trial Judge erred in his approach to determining the question of whether negligent advice had been given as alleged by the appellants. The second issue is whether the trial Judge erred in his approach to determining the question of damages in light of his failure to refer and apply the decision in Sellars v Adelaide Petroleum.[1]
[1] (1994) 179 CLR 332.
In my view the Judge’s conclusion that the alleged advice was not given and that there was no breach of the respondent’s duty of care to the appellants should be sustained. In these circumstances, it is necessary to deal only briefly with the appellant’s complaints with respect to the question of damages.
Background Facts
Falzon Brick operated the clay brick and paver business (the business) on land in St Agnes owned by Falzon Investments.
Mr and Mrs Edwards borrowed heavily from the CBA and the Commonwealth Development Bank (CDB) to invest in Falzon Brick. The purchase of the business was also facilitated by vendor finance. The CBA held various securities, including a mortgage debenture dated 28 August 1989 in respect of Falzon Brick. There was also a charge over the land owned by Falzon Investments.
It is apparent that Falzon Brick was in financial difficulty almost from the date of acquisition. During the ten years that followed the Edwards’ had repeated negotiations with their bankers arising out of their financial difficulties in meeting their commitments.
On 17 August 1994, Falzon Brick and the CBA entered into an amended loan agreement secured by equitable mortgages over the assets of Falzon Brick and Falzon Investments (the 1994 loan agreement).
Following negotiations in August 1995 the large debt owed to the CDB was written off. In February 1997 and again in November 1997 Falzon Brick fell into arrears with respect to its loan to the CBA. On 3 November 1997 the CBA served a Notice of Demand alleging arrears of $25,445.
In February 1998 the CBA purported to increase the monthly repayments under the terms of the 1994 loan agreement. Falzon Brick challenged the right of the CBA to do so and in April 1998 with the respondent acting as its solicitor issued District Court proceedings (the construction proceedings).[2] The construction proceedings did not deny that Falzon Brick was indebted to the CBA or that Falzon Brick was obliged to make monthly repayments of $4,000. Rather, Falzon Brick asserted that all it had to pay was $4,000 per month for the term of the loan to meet its obligations and discharge the loan.
[2] DCCIV-98-471.
On 25 September 1998, shortly before the trial of the construction proceedings, Falzon Brick paid several months’ accumulated arrears, bringing the loan balance to $358,971.91.[3] In November 1998, the CBA indicated that it would accept $280,000 in full settlement of the loan (then standing at $364,830). The CBA agreed to the appellants having time to consider the offer on condition that monthly repayments of $4270 were made. The offer was not taken up. Mr Edwards made no attempt to pay or refinance, preferring to keep the benefit of the CBA loan.[4]
[3] The appellant made no further payments to the CBA until May 1999.
[4] Edwards v Legalese Pty Ltd [2012] SADC 95, [92]-[94], [98].
In February 1999 the CBA advised Mr Edwards that it intended to enforce its securities in respect of the 1994 loan agreement.
On 16 April 1999, the CBA issued the first of three notices of demand to the appellants and Falzon Investments indicating its intention to either appoint a receiver and manager or to enforce its securities. The notice of demand for 4 loan instalments plus interest totalled $18,480.
On 22 April 1999, Mr Edwards met with Mr Scragg in relation to the first notice of demand. The allegation which formed the basis of the appellants’ case at trial, and now the primary contention on appeal, was that on 22 April 1999, at this meeting, Mr Scragg advised Mr Edwards that the CBA could not act upon its notice of demand and enforce its securities until the construction proceedings had been determined (the alleged advice).
Following the meeting of 22 April 1999, Mr Edwards, wrote to the CBA. The letter did not make any suggestion to the effect that the CBA could not act on its securities until finalisation of the construction proceedings.
In May 1999 and June 1999 the appellants made payments to the CBA of $4,270. However, further notices of demand dated 11 May 1999 and 9 July 1999 were served on the appellants.
On 22 July 1999, following Falzon Brick’s failure to clear arrears in response to the notices of demand, the CBA appointed Mr Bruce Carter of Ferrier Hodgson receiver and manager of Falzon Brick.
Mr Kidman and another person on behalf of Mr Carter took possession of the assets of Falzon Brick and Falzon Investments on 22 July 1999. Mr Edwards was not at the brickyard when they attended. His son Paul Edwards who was on site rang him and asked him if he wanted to pay the $18,000. Paul Edwards’ evidence as to the conversation with Mr Edwards was as follows, “…because of the lateness in the day the ads [that Falzon Brick was in receivership] could not be withdrawn, and Dad [Mr Edwards] said ‘Well, the damage has already been done, so no need to pay the $18,000’.”
Paul Edwards also spoke to Mr Caporaso of Mr Scragg’s office on 22 July 1999 who made the assertion that receivers should not be there. Mr Caporaso, following a request by Paul Edwards for something in writing, faxed a letter that was received by Mr Kidman at 4.30pm on 22 July 1999. The letter, addressed to Paul Edwards, stated:
“We understand that the Commonwealth Bank has entered the premises of the Falzon Brick Co, purportedly under the mortgage between the company and that bank. We confirm our advice that the indebtedness of the company to the bank is in dispute. We refer there to District Court action 471 of 1998 between the company as plaintiff and the bank as defendant.
We confirm our advice that the company is entitled to re-enter the premises of the company, and to use whatever reasonable force is necessary to do so. We also confirm that you are entitled to request that the officers of the bank leave the premises.”
Mr Kidman made a hand written file note in respect of the events that took place on 22 July 1999. The note records that Mr Edwards arrived at the brickyard, spoke to Mr Kidman and challenged the enforcement of the securities in light of the ongoing construction proceedings. Mr Kidman’s independent file note is the first documentary evidence of Mr Edwards attempting to assert that the construction proceedings prevented the CBA enforcing its securities.
Mr Scragg, who was on holiday in the Flinders Ranges, rang in to the office at about 5.00pm on 22 July 1999, after the letter was sent. Mr Scragg’s evidence was that very little was said and that Mr Caporaso said that he “was able to deal with it”.
In response to the appointment of Mr Carter, Falzon Brick, on 23 July 1999, unsuccessfully sought an injunction restraining the CBA from acting on its securities while the construction proceedings were ongoing. Mr Caporaso appeared on behalf of Falzon Brick at the hearing of the application. The injunction was refused on the basis that the issue for determination in the construction proceedings was the identification of the appropriate rate of interest as opposed to whether the amount demanded was owed. $18,480 was owed to the bank pursuant to the 1994 loan agreement and that entitled the bank to act and enforce its security.
The appellants contend that as a result of relying upon the alleged advice, they lost the chance to make payments between April 1999 and 22 July 1999 to avoid the appointment of a receiver. In other words they assert they would have made more effort to obtain the funds needed to satisfy the Notice of Demand and an application for an injunction to prevent the appointment of a receiver may have been made.
The appellants commenced proceedings in respect of the alleged advice in July 2005.
The arguments on appeal
The appellants contend the Judge erred in:
-failing to find the respondent had a duty to the appellants regarding the risk that the CBA would enforce its securities and the steps that should be taken to mitigate that risk.
-failing to find that the alleged advice was given when the available contemporaneous evidence overwhelmingly supports the conclusion that the alleged advice was given and as a result, failing to find that the respondent breached its duty to the respondents.
-finding that if the respondent was negligent in giving the advice, the appellants were negligent in relying on that advice.
-failing to find the appellants suffered losses by reason of their reliance on the respondent’s inaccurate advice.
Evidence surrounding the alleged advice of 22 April 1999
The 22 April 1999 meeting was the subject of a brief file note by Mr Scragg and was addressed in evidence at trial in some detail. The Judge considered these issues, particularly the meeting of 22 April 1999 together with the advice of Mr Caporaso.[5]
[5] Edwards v Legalese Pty Ltd [2012] SADC 95, [290].
I now turn to addressing the specific complaints made by the appellants regarding the Judge’s findings concerning the alleged advice.
Negligence by omission – duty to advise
The trial Judge found that had Mr Edwards sought advice from Mr Scragg on 22 April 1999 he was under a duty of care to provide adequate advice. The appellants argue that Mr Scragg was obliged to advise of the possible consequences of non-payment irrespective of any request from Mr Edwards.
The Judge rejected the appellants’ claim on negligence by omission based on the finding that in October 1998, upon adjournment of the construction proceedings, Mr Scragg informed Mr Edwards that the construction proceedings would not prevent the CBA from proceeding on its securities.[6] The Judge encapsulated his reasons on this issue in the following passage:[7]
Mr Scragg had made it clear to Mr Edwards in October 1998 that the construction proceedings would not prevent action by the CBA. He was not obliged to remind Mr Edwards of that advice. Mr Edwards is an astute businessman. In his evidence he said at all times that he was aware of the consequences of failing to pay the CBA. He also acknowledged the letter, from the CBA in July 1999 warning of the possible appointment of a Receiver.
[6] Edwards v Legalese Pty Ltd [2012] SADC 95, [353].
[7] Ibid, [357].
This finding by the trial Judge was unchallenged on appeal. Further, it is inconsistent with the alleged advice in April 1999.
The Judge did not reject the case based on negligence by omission because he rejected that the duty owed by the respondent was broad enough to cover the effect of non-payment of admitted ongoing payments by Falzon Brick. The Judge found that in October 1998 upon adjournment of the construction proceedings Mr Scragg informed Mr Edwards that the construction proceedings would not prevent the CBA from acting on its securities.
The evidence Mr Edwards gave at trial indicates that, in the period prior to 22 April 1999, he was aware that if he did not pay at least the $4,270 per month, as per the 1994 loan agreement, the CBA could act on its securities. This is supported by the fact that Mr Edwards, not Mr Scragg, wrote to the CBA on 2 March 1999 stating, “I am very conscious of my debt” and that he accepted that that was so in cross-examination. In cross-examination Mr Edwards also said, in relation to the notice of demand of 16 April 1999, that upon reading the demands he understood that it looked to him that he had to reach some agreement with the bank or it might move on its securities. It is clear that, having regard to Mr Edwards’ evidence, prior to 22 April 1999, he knew that he was not excused from paying $4,270 per month, the alleged negligent omission cannot be found to be causative, in the absence of any positive contrary advice being given.
The appellants’ case on negligence by omission does not assist the primary ground of appeal relating to the alleged advice on 22 April 1999.
Alleged advice 22 April 1999
The Judge accepted that a meeting between Mr Edwards and Mr Scragg occurred on 22 April 1999. The meeting occurred shortly after Mr and Mrs Edwards received the letters and notices of demand from the CBA dated 16 April 1999. Mr Scragg denies advising Mr Edwards that the CBA could not act to enforce its securities. In his reasons for judgment, his Honour stated:[8]
I simply do not accept that Mr Scragg did advise Mr Edwards on 22 April 1999 that the CBA could not take any action in respect of its securities until the construction proceedings had been determined.
[8] Edwards v Legalese Pty Ltd [2012] SADC 95, [350].
The appellants challenge this finding and contend that the conclusion of the Judge in respect of the meeting on 22 April 1999 is unsustainable taking into account the evidence that was before him.
The Judge gave inappropriate weight to Mr Scragg’s evidence in circumstances where important aspects of his evidence had not been accepted he was found to be (at best) unreliable
The appellants criticise the limitations of Mr Scragg’s evidence and point to the Judge’s negative findings regarding his evidence.[9] The appellants complain that the Judge accepted Mr Scragg’s evidence as to the advice Mr Scragg claimed to have given to Mr Edwards in October 1998, despite criticising the reliability of Mr Scragg’s evidence on other matters.[10]
[9] The appellant pointed to the fact that the Judge found that Mr Scragg was not a reliable witness (at [223]), engaged in an exercise of reconstruction (at [168] and [216]) and there was “vagueness and a lack of detail” in his recollection of instructions received and advice given (at [218]). The appellant also noted that the Judge did not accept Mr Scragg’s evidence that he advised Mr Edwards to seek an injunction in October 1998 (at [354]).
[10] The Judge also rejected Mr Scragg’s account of his reaction to the letter written by Mr Caporaso.
In particular, the appellants contend that because the Judge was unable to find that Mr Scragg had given advice in October 1998 regarding an injunction,[11] the Judge’s finding with respect to the October 1998 advice (that the construction proceedings “would not prevent the CBA from proceeding on its securities”)[12] is unsustainable and should be overturned.
[11] Despite Mr Scragg’s evidence that he did give such advice.
[12] Edwards v Legalese Pty Ltd [2012] SADC 95, [353].
Given the extensive passage of time between the alleged advice and trial it is clear that the Judge’s findings did not, and could not, turn exclusively on the reliability of Mr Scragg’s evidence. The trial Judge had regard to the adverse effect that the long delay of about 11 years had had on the memories of Mr Edwards and Mr Scragg. He had no doubt the long delay had caused each of them to unwittingly construct some of their evidence and that in some respects both were unreliable witnesses. His Honour describes with particular detail his fact finding methodology that involved a consideration as to the reliability and credibility of Mr Edwards and Mr Scragg. He was aware that in the context of the absence of proper records it fell to him as the decider of fact to resolve the specific conflicts as to the detail of the oral advice which Mr Scragg deposed to having provided to Mr Edwards in October 1988 and of the alleged advice in April 1999 Mr Edwards says he was given.

The Judge had “doubts as to their respective recollections of events and the partiality of the principal witnesses” he “placed the most significant weight on the reliable contemporaneous documentation and the inferences” he could properly draw from them. In other words the dispute quite rightly required resolution by reference to the oral evidence, the documents and inherent likelihood of the advice asserted by the appellants. The trial Judge undertook a process of reasoning, carefully analysing the oral evidence in the context of the contemporaneous documentary evidence before proceeding to findings. [13]
[13] Ibid, [220]-[225].
In my view the Judge’s finding that he does not accept that the alleged advice was given is open on the evidence.
The Judge applied circular reasoning to find that as a competent solicitor would not have given the alleged advice, Mr Scragg must not have
The appellants submit that the Judge rejected the appellants’ evidence in relation to October 1998 and 22 April 1999, not because of any deficiency in the appellants’ evidence, but by giving overwhelming weight to what would be expected of a hypothetical competent solicitor.
In respect of the October 1998 discussion between Mr Scragg and Mr Edwards, the Judge commented that “it was the very time that such a discussion would take place”.[14] In respect of the 22 April 1999 discussion, the Judge suggested that it “defies belief in the context of what was occurring in March and April 1999 that Mr Scragg would or did give the suggested advice to [Mr Edwards]”.[15]
[14] Ibid, [353].
[15] Ibid, [352].
As to the October 1998 comment, the Judge observes that it would be natural on the adjournment of a trial (of the construction proceedings) that there might be a discussion about what would happen during the period of adjournment, he does not presume what advice was given.
In my view the Judge’s remark in relation to 22 April 1999 is simply the stating of a conclusion reached by reference to the context, to which his Honour expressly referred, which also included the October 1998 advice and the evidence that Mr Scragg’s understanding from Mr Edwards was that Mr Edwards could not pay.
The Judge made contradictory findings that the Notices of Demand issued by the CBA were a topic of discussion at the meeting on 22 April 1999 but that Mr Scragg did not give Mr Edwards advice about the consequences of those notices
The appellants contend that there are inconsistencies in the Judge’s findings relating to the meeting of 22 April 1999. The Judge made findings as to what topics he was satisfied were discussed. The question was whether he was satisfied, on the balance of probabilities that the alleged advice was given. The Judge was not obliged to make specific findings on all possible issues.
The Judge misunderstood the significance of the conduct of Mr Edwards and Falzon Brick after 22 April 1999, which can only be explained by the advice having been given
The appellants’ complaint on this issue relates to the Judge’s finding that “Mr Edwards’ position did not change after 22 April 1999”.[16] The appellants’ argument, based on the Judge’s reasoning that as Mr Edwards did not change his position after the 22 April 1999 meeting, he did not receive the alleged advice, ignores the logic of the appellants’ position as they understood it after 22 April 1999 and the significance of their conduct when that understanding changed.
[16] Ibid, [352]
In finding that Mr Edwards’ position did not change after the meeting on 22 April 1999 the Judge was referring to Mr Edwards’ belief and understanding at all relevant times that he was obliged to pay at least $4,270 per month and, as the bank had clearly indicated in its letter of 10 February 1999, if Falzon Brick failed to do so (and meet the arrears), it would, at the end of February 1999, take action.[17]
[17] Ibid, [104].
Although Mr Edwards did make some payments in the period following 22 April 1999 he did not address the arrears that had been accrued since December 1998. In this sense Mr Edwards’ position did not change. The only sense in which Mr Edwards changed was that he made subsequent payments shortly following the 22 April 1999 meeting. In my view this point is against the inference the appellants seek to draw.
The Judge failed to give any, or appropriate, weight to apparently reliable pieces of contemporaneous documentary evidence and instead drew unsupportable inferences which conflicted with that evidence
As the Judge found that Mr Edwards and Mr Scragg were unreliable witnesses, he placed significant weight on contemporaneous documents. The appellants argue that against the background of contemporaneous evidence, the finding by the Judge that the advice was not given cannot stand. The appellants contend that the Judge failed to draw the obvious available inferences from relevant contemporaneous documents.
The documentation relied on is the cost entry / file note 22 April 1999, the letter of 23 April 1999, the cost entry/file note dated 22 July 1999, the letter of 22 July 1999, the note of David Kidman 22 July 1999 and the court documents. In support of this proposition the appellants referred to the High Court’s decision in Fox v Percy where the majority (Gleeson CJ, Gummow and Kirby JJ) stated:[18]
In particular cases incontrovertible facts or uncontested testimony will demonstrate that the trial judge's conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings.
[18] (2003) 224 CLR 118, [28].
I turn first to the respondent’s file note of the meeting 22 April 1999. The trial Judge found that the subject of the meeting was the Notice of Demand.[19] Mr Scragg’s evidence on this topic, accepted by the Judge, makes it clear that on 22 April 1999 Mr Scragg did advise Mr Edwards that the bank was becoming unsettled and discussed “how to stop the bank taking further recovery action” against a background of Mr Edwards being unable to pay the CBA or his legal fees. This evidence about that meeting is consistent with what Mr Edwards did thereafter.
[19] Edwards v Legalese Pty Ltd [2012] SADC 95, [351].
Mr Edwards then wrote to the CBA on 23 April 1999 (the second document). He informed the bank of his dire financial circumstances and inability to pay the $18,480 sought in the Notice of Demand. He states that it has always been his intention to meet the bank’s requirement to pay the $4,270 per month but “to date I have not been able to”. Significantly, he does not assert in the letter that the bank is unable to act on it securities until the construction proceedings have been determined. If he had been given the alleged advice the day before then surely when writing to the bank, having just received the Notice of Demand, he would have made that assertion to the CBA to warn it off.
The third document relied on is the respondent’s cost entry/file note dated 22 July 1999 (the day on which the CBA appointed receivers and managers took possession of the company’s assets). The document records that a letter was sent to the respondent’s client with a note “Re: Tell CBA to leave”. That record post dates the alleged advice by three months and was made by Mr Caporaso who had not had previous involvement in the matter. Its contents give rise to no inference in any event.
The other document is the letter sent by the Mr Caporaso to Falzon Brick on 22 July 1999. Again, the letter is dated three months after the alleged advice and was given by Mr Caporaso. As became clear during the injunction hearing Mr Caporaso knew very little about the construction proceedings. The inference that the appellants attempt to draw, that Mr Caporaso’s letter supports the giving of the alleged advice, is unfounded.
Fourthly, the appellants refer to the discussion between Mr Edwards and Mr Kidman, and the hand written note of Mr Kidman in respect of the events that took place on the premises of Falzon Brick upon the receivers and managers taking possession on 22 July 1999. That note records:
At approximately 11.30 Ken [Mr Edwards] turned up and did not wish to sit down and discuss the matter “he preferred to stand”.
He was extremely pissed off with me and the CBA and could not see how this could have occurred given the current litigation in place.
That document does not dictate an inference that the position espoused by Mr Edwards was based on advice. Furthermore, the evidence of Paul Edwards as to the discussion with his father is silent on the issue.
The fifth contemporaneous documents that the appellants rely on are the affidavit of Mr Caporaso sworn 23 July 1999 and the transcript of oral submissions made by Mr Caporaso on behalf of Falzon Brick on 23 July 1999. [20] At that hearing Mr Caporaso adopted the position that the construction proceedings meant that the CBA could not act on its securities because to do so would circumvent the proceedings. The same finding can be made about the affidavit and transcript as those made in relation to the letter of 22 July 1999; that is, Mr Caporaso had not had any previous involvement in the matter and the documents post date the alleged advice by three months.
[20] On the application by Falzon Brick for an injunction.
There is no basis for the argument that the documents and evidence to which the appellants refer give rise and require the inference to be drawn in favour of the appellants’ case. In my view, the documents and evidence relied upon by the appellants overwhelmingly supports the findings of the Judge.
Before I leave the topic of documents I refer to two further documents that in my view support the Judge’s findings. The first is the cost entry/file note of a telephone conversation Mr Scragg had with Mr Edwards on 5 July 1999. In the note Mr Scragg records a comment he ascribes to Mr Edwards that he should tell the CBA “not to appoint receiver and he would make an offer”. Mr Edwards denied giving this instruction.
The second document is the memorandum from Mr Kidman to Mr Carter dated 16 June 1999. It was during June 1999 that Mr Kidman of Ferrier Hodgson was communicating with Mr Edwards regarding Mr Kidman’s request for documentation for the purpose of his report for the CBA. The Judge stated that he had no doubt that Mr Kidman’s notes of his conversations with Mr Edwards were an accurate account. In the memorandum Mr Kidman states, “Ken said as a director he was not willing to incur any non-operating debts…if the CBA was to in any event appoint a Receiver … I advised Ken that the sooner he provided the relevant information the sooner a report can be issued to the CBA and a decision can be made by the CBA on the future of Falzon.”
Finally, a review of payments on the loan account for the period July 1997 to June 1999 demonstrates how sporadic those payments were.
The Judge considered the evidence with respect to these matters. His Honour did not reject Mr Scragg’s denial that he gave advice that the CBA could not act. The circumstances surrounding 22 July 1999 were quite different, and Mr Caporaso’s incorrect understanding of the construction proceedings and the issue is inconsistent with any suggestion he was repeating Mr Scragg’s advice.
The Judge failed to draw appropriate inferences from the failure of the respondent to call a highly material witness (Mr Caporaso)
The Judge declined to draw an inference adverse to the respondents from the failure to call Mr Caporaso given that Mr Caporaso could not “give any evidence as to any of the critical meetings between Mr Edwards and Mr Scragg”.[21]
[21] Edwards v Legalese Pty Ltd [2012] SADC 95, [300].
The central issue in dispute is whether Mr Scragg gave the alleged advice on 22 April 1999. The evidence did not support any suggestion that the assertions made by Mr Caporaso in the letter of 22 July 1999 were made at Mr Scragg’s instruction or in the knowledge of advice previously given by Mr Scragg. Mr Scragg was out of the office in the Flinders Ranges. He rang into the office at 5pm that day and spoke to Mr Caporaso. Mr Scragg was cross‑examined about his communications with Mr Caporaso and denied that he informed Mr Caporaso that he had given advice in terms of the alleged advice. The letter written by Mr Caporaso confirmed the oral advice he had given Paul Edwards. It is the first document suggesting that the appellants had an argument that the construction proceedings were a shield against the CBA acting on its securities. Mr Caporaso appeared at the hearing of the injunction application the next day and put the same argument. Once it was made clear by counsel for the CBA that the construction proceedings concerned only the question of the applicable interest rate the application was refused. It follows that any earlier attempt to obtain an injunction against the bank on the ground that the construction proceedings were on foot would have also failed.
I am of the view that there was no relevant failure to call Mr Caporaso.
Conclusion on liability
The Judge in his detailed reasons found that the appellants failed to discharge their onus of proving the alleged advice was given.
The Judges findings of fact and inferences drawn by him were open on the evidence. In my view there is no error is demonstrated in the Judge’s reasoning regarding the alleged advice. The evidence justified a conclusion that that the alleged advice was not given and that there was no breach of duty. I would dismiss the appeal with respect to liability.
Contributory negligence, causation and damages
As the issues of contributory negligence, causation and damages only arise if a case of negligence is otherwise made out, I mention them briefly.
Contributory negligence
The Judge found that in the event that the respondent did give the alleged advice on 22 April 1999 that the appellants were guilty of contributory negligence, which he assessed at no less than 50 per cent.[22]
[22] Ibid, [360].
The appellants contend that the Judge’s finding in that regard is without foundation and reliant on a comparison to an unrelated case concerning negligent solicitor advice.[23] The appellants argue that there is no legal principle which requires a client to repeatedly check whether a solicitor maintains the accuracy of advice; to the contrary, if the solicitor’s view in that regard were to change it would only compound the solicitor’s own negligence if he or she did not correct the client’s understanding without delay.
[23] Austrust v Astley (2000) 197 CLR 1.
As the Judge found, Mr Edwards was an experienced businessman; he had negotiated for years quite astutely with his bankers on his own accord. If Mr Scragg in fact gave the alleged advice, the failure of Mr Edwards to speak with him about the threats made by the CBA in May to July 1999 is justification for the finding of contributory negligence “at no less than 50 per cent”.
Causation
The appellants cite Bristol & West Building Society v Mothew as authority for the principle that in a case of negligent advice causation is demonstrated by reliance on the negligent advice. Accordingly, the loss of opportunity alleged has to be demonstrated. [24]
[24] (1996) 4 All ER 698.
The Judge found that there was an “irresistible inference” that Mr and Mrs Edwards would not have taken steps to access their personal assets to contribute to the business of Falzon Brick and implicitly found that they would not have taken advantage of a loan which was available to them from a third party in order to finance the business.[25] The CBA, in appointing a receiver and manager, acted on Falzon Brick’s breach of its obligations to make monthly repayments under the loan agreements. It is indisputable that Mr Edwards was aware of the continuing breach and did not take steps to address it.
[25] Edwards v Legalese Pty Ltd [2012] SADC 95, [375].
It was patently clear by reference to the accounting evidence that Falzon Brick was insolvent, and was unable to pay principal or interest without further borrowings. The fact that Mr Edwards did not to try and pay the sum demanded to meet the notices of demand, before or after possession, is indicative of the true financial state of the appellants. Counsel for the appellants submitted during the appeal that there was $17,000 in an ANZ account and other assets that could have been accessed to ward off the bank. However Mr Edwards’ letter written 23 July 1999, the very day after the giving of the alleged advice, makes it patently clear that he was not able to meet his obligations and that he was in a dire financial situation.
There was evidence before the Judge that Falzon Brick had operated at a loss for at least four years prior to 30 June 1999 and was burdened with debt, difficulties with the Environment Protection Authority (EPA), legal disputes and a poor economic climate. The only funds identified to meet these burdens were the alleged willingness of a third party to provide $280,000 to pay out the CBA, and other small amounts purportedly available from Falzon Brick or associated entities.
The Judge did not accept that the appellants would have been able to satisfy the CBA debt of $370,000 in addition to the $18,000 and $7,000 per month thereafter, nor pay creditors, satisfy the EPA and improve plant and equipment. The evidence does not support the conclusion that the appellants could have, and would have rearranged their affairs in order to keep the business of the company operating beyond 22 July 1999. Rather the evidence supports the Judge’s conclusion that Mr and Mrs Edwards would not have acted any differently if the alleged advice had been given.
Damages
The appellants argue that the paucity of the Judge’s reasons on the issue of damages does not enable this court to re-assess what damages should be paid. The appellants submit the principles in Sellars v Adelaide Petroleum required the Judge to make an assessment of the probabilities and possibilities that Mr Edwards would have taken steps to have paid the amount demanded in April 1999.[26]
[26] (1994) 179 CLR 332.
The Judge found the appellants had not discharged their onus of proving that had the alleged advice not been given Falzon Brick could and would have continued to meet its obligations to the CBA and continue to operate to their benefit. The Judge found there was no loss. There is no error identified in his approach.
Falzon Brick’s claim was for loss of value of the business. The Judge found that Falzon Brick was insolvent as at July 1999. That finding is underpinned by the evidence given by four of the five accounting experts called at trial that Falzon Brick had an excess of liabilities over assets.
The claim with respect to loss of profit and income depended on the appellants demonstrating that Falzon Brick had a profitable future. They failed to do so. The evidence before the Judge clearly demonstrated that to survive the business needed “significant capital input” and “it was inevitable it would fail”.[27]
[27] Edwards v Legalese Pty Ltd [2012] SADC 95 [384]-[385].
Cross-appeal
The respondent seeks permission to cross-appeal against the refusal of the trial Judge to certify costs fit for two counsel. The respondent contends that the Judge’s discretion miscarried, because he considered the engagement of two counsel was driven by difficulties associated with the late engagement of the senior of the two counsel,[28] and because he focused upon the fact that only one counsel carried out the examination and cross-examination. Further, on the whole of the material, the exercise of the discretion was unreasonable.
[28] Edwards v Legalese Pty Ltd (No 2) [2012] SADC 110 [33] & [35].
I would grant the respondent permission to appeal pursuant to 6R 288(1)(b) but would dismiss the cross-appeal for the following reasons.
The trial occupied 16 sitting days and both parties were represented at trial by two counsel. The appellants each advanced separate claims against the respondent solicitors, totalling well in excess of $1 million. The parties were in dispute on essentially all issues, including the scope and existence of the retainer, the scope and existence of any duties of care, the facts relevant to liability and causation, loss and damage and contributory negligence.
Principles relating to multiple counsel

The question of whether the fees of two counsel should be allowed involves a consideration of the matters identified by Barwick CJ in Stanley v Phillips:[29]
The case by reason of any of its features, the volume of material to be handled, the number or character of the witnesses to be examined, the nature or extent of the cross-examination required, the anticipated length of the case, the complexity of its issues of fact or of law, the extent of the preparatory research of fact or of law to be undertaken, the involvement of charges of fraud, or other serious imputations of personal reputation or integrity, the complexity of the required preparation and so on, make it reasonably necessary or proper that the services of two counsel be engaged in order that the court may do justice between the parties.
The respondent contended that, having regard to these matters, the case plainly justified the retention of two counsel. It was long, complicated and involved the professional standing of a legal practitioner. A 300 page expert report was served during the course of the trial that would in the normal course have necessitated an adjournment but because there were two counsel it did not.
[29] (1966) 115 CLR 470, 479.
Exercise of discretion
The respondent argued that the Judge:
-departed from his own ‘provisional conclusion’ that multiple counsel were prima facie justified;
-misconstrued the circumstances in which two counsel were retained; and
-wrongly placed weight on the fact that only one counsel cross‑examined the appellants’ witnesses.
It is apparent from his reasons that the Judge recognised the discretion that he was to exercise. He acknowledged that it was proper and arguably prudent for the parties to brief two counsel. He noted that it “is not merely one of prudence but whether in the light of the brief, on taxation the unsuccessful party ought be burdened with the additional costs of two counsel on a party/party award of costs”.[30]
[30] Edwards v Legalese Pty Ltd (No.2) [2012] SADC 110, [34].
The costs of an action that has gone to trial are a matter for the trial Judge. The trial Judge has the benefit of observing the progress of the trial from opening to closing addresses. As submitted by the appellants’ counsel, without being privy to the comprehensive history of the proceedings in the court below it is unlikely that an appellate court will be in as good a position as the trial Judge to assess whether or not the case should be certified fit for two counsel.
The trial Judge had regard to the considerations identified by Barwick CJ in Stanley v Phillips.[31] He noted that the volume of evidence, the complexity and significance of the claim were matters that would suggest that the case fell within the authorities relating to the retention of multiple counsel. He also found that absent difficulties arising from a change of counsel “no application for certification of two counsel would have been made, or justified”.[32]
[31] (1966) 115 CLR 470, 479.
[32] Edwards v Legalese Pty Ltd (No.2) [2012] SADC 110, [35].
The Judge clearly stated that the task of exercising his discretion was extremely difficult and by a “short margin” he reached the conclusion that he should refuse the application to certify for two counsel.
I am satisfied there is no basis for this court to interfere with the exercise of the Judge’s discretion as to costs. No error has been identified nor has it been established that the exercise of the discretion was unreasonable or unjust. None of the matters identified by the respondent on the cross-appeal are “so unreasonable and unjust” that this court should substitute the exercise of its own discretion for that of the trial Judge.
I would dismiss the cross-appeal.
Conclusion
I would dismiss the appellant’s appeal. I would grant the respondent permission on the cross-appeal, but dismiss the cross-appeal.
PARKER J. I agree with the conclusions of Bampton J and the additional comments made by Vanstone J.
I would dismiss the appeal and cross-appeal.