Falcon v Makin & Kinsey Solicitors Pty Ltd
[2021] VSC 171
•9 April 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROFESSIONAL LIABILITY LIST
S ECI 2019 02021
| JACK FALCON | Plaintiff |
| v | |
| MAKIN & KINSEY SOLICITORS PTY LTD (ACN 159 976 735) | First Defendant |
| and | |
| RONALD FREDERICK MAKIN | Second Defendant |
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JUDGE: | FORBES J |
WHERE HELD: | Melbourne |
DATES OF HEARING: | 22–25 March 2021 |
DATE OF JUDGMENT: | 9 April 2021 |
CASE MAY BE CITED AS: | Falcon v Makin & Kinsey Solicitors Pty Ltd & Anor |
MEDIUM NEUTRAL CITATION: | [2021] VSC 171 |
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PROFESSIONAL NEGLIGENCE – Lawyers ceasing to act for plaintiff in claim for professional negligence against architect – Whether negligence resulting in loss of opportunity to successfully conclude action on foot – Loss caused by client instructions to conclude proceeding given after lawyers ceased to act – Whether solicitor breached retainer – Whether plaintiff compelled to withdraw claim without an opportunity to go to trial – Loss of opportunity to recover damages –Prospects of success – Quantification of lost opportunity - Jones v Dunkel [1959] 101 CLR 298 – Rosa v Galbally & O’Bryan (2013) 42 VR 382.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | In person | |
| For the Defendants | Ms R Matson | Colin Biggers & Paisley |
HER HONOUR:
Mr Falcon retained a firm of solicitors, Makin & Kinsey, to represent him in a dispute with an architect he had engaged for a property development in Frankston. He now sues that firm and its principal, Mr Makin for negligence. The solicitors had issued proceedings for professional negligence against the architect in the Supreme Court in 2016 and the matter had progressed to a mediation. Central to his complaint against the solicitors is the fact that after the mediation they filed a Notice of Ceasing to Act and did not notify him that they were doing so until after he had left Australia. As a result of him having left Australia, he says he was unable to engage alternative representation. This compelled him to end the proceeding against the architect without recovering any damages. He says he has lost the opportunity of obtaining damages against the architect by the timing of his solicitors’ notice of ceasing to act. For the reasons that follow, he has not made out his claim.
The retainer between Mr Falcon and Makin & Kinsey
Mr Falcon and a friend of his, Mr West, had conferred with a barrister in January 2016 to obtain some advice about the prospects of success of a claim against the architect for professional negligence. At this conference, they had provided the barrister with some folders of relevant documents and left the documents with him. The barrister informed Mr Falcon that he would need to instruct a firm of solicitors to act on his behalf in the proposed proceeding.
In approximately March 2016 Mr Falcon attended the law offices of Makin & Kinsey. At that time Mr West had commenced working as a solicitor in the firm. Mr Falcon described the initial meeting with the solicitors as being between Mr Makin, Mr West and himself. Mr Falcon engaged Makin & Kinsey to represent him in proposed proceedings against the architect he had engaged, George Batsakis. Mr Falcon told Mr Makin that the barrister had agreed that his fees would be payable at the conclusion of the case. He said that he was told by the barrister that the prospects for success of the litigation were good.
Mr Falcon said that Makin & Kinsey agreed to take on his case on the same basis as Counsel, namely that fees would be charged at the conclusion of the case. Mr Falcon said the agreement was all verbal. Although the pleadings refer to an agreement constituted by a written costs agreement and costs disclosure statement, those documents were not in evidence.
After retaining Makin & Kinsey a second conference with Counsel was arranged so that further instructions could be provided to prepare the statement of claim. Mr Falcon then left Australia in July 2016.
In due course a statement of claim was prepared by Counsel and proceedings were issued in the Supreme Court of Victoria on 21 December 2016 (the Batsakis proceeding). Initially it was only commenced against Mr Batsakis personally. During 2017, an amended writ and statement of claim was prepared, initially dated 2 May 2017, joining as a second defendant, George Batsakis Architecture. This was the company with which Mr Falcon contracted for the services of Mr Batsakis. A further pleading dated September 2017 was also drawn. Ultimately on 8 December 2017 the Court gave leave to file and serve amended pleadings, which included the joinder of a second defendant (collectively the Batsakis defendants).
A defence and counterclaim dated 13 February 2018 was then filed. The Batsakis defendants counterclaimed for professional fees of $89,390.50, said to remain outstanding of total work invoiced of $121,390.50.
A Reply and Defence to the counterclaim dated 16 March 2018 was filed by Makin & Kinsey on behalf of Mr Falcon. Thereafter a mediation was arranged. Mr Falcon said initially it was to be held in April 2018 but was rescheduled a number of times.
Mr Falcon, who had been overseas since July 2016, returned to Australia on 1 April 2018 for the purpose of attending the mediation. The mediation occurred on 18 May 2018 but failed to resolve the dispute. A directions hearing was listed on 15 June 2018. The notification from the Court advised the parties that at that directions hearing, the Court expected to set the matter down for trial in the first half of 2019.
Following the mediation Mr Falcon again left Australia on 20 May 2018, having advised his solicitors that he would be gone for some considerable time.
On 23 May 2018 Mr Makin sent an email to Mr Falcon. That email said
Dear Jack,
Thank you for your email.
The mediation last week was disappointing and left little doubt that the matter will have to go to court. A further Directions Hearing has been set down for Thursday 14th June 2018.[1]
Your case is going to be limited by the lack of documentation in our possession. Until such time as we have access to the complete files you will have great difficulty progressing your case.
Regards
[1]For reasons not presently relevant this directions hearing was moved to 15 June 2018.
There was after that correspondence about Makin & Kinsey ceasing to act with solicitors for the Batsakis defendants and with the Court. The solicitor for the Batsakis defendants wrote on 7 June 2018 regarding the proposed amendments and said ‘obviously we press you to drop the claim entirely but in particular against Mr Batsakis.’ On 7 June Makin & Kinsey replied to the solicitor: ‘I understand your concern that Mr Batsakis has not been removed as a Defendant but can only put it to my client and advise him of potential outcomes’.
There is no record of anything being put to Mr Falcon about Mr Batsakis as a defendant or the potential outcomes of him remaining so. On 7 June 2018 Mr Falcon was advised by email that his solicitors had ceased acting for him. Mr Falcon’s complaint is that he was given no warning that this step was to be taken before he left Australia. As a result he was put at a significant difficulty in engaging alternative legal representation.
Before outlining what next transpired in the conduct of the Batsakis proceeding, I will set out the events behind the Notice of Ceasing to Act that was filed.
The costs dispute
The court book, which was tendered in its entirety by agreement of the parties contained a number of email exchanges variously between Mr Falcon, Makin & Kinsey personnel and Counsel briefed in the matter. The thrust of those emails was an increasing level of dissatisfaction with both the timeliness and the quality of the pleadings prepared by Counsel. Both Mr Makin and Mr Falcon were angry about this but nevertheless continued to chase Counsel for an amended statement of claim. A period of twelve months elapsed before the pleadings in the case could be progressed so that a defence was filed. This may in part explain the events that followed.
The barrister thereafter began chasing payment of fees for work undertaken between January 2016 and October 2017, ultimately issuing a Magistrates’ Court complaint against Makin & Kinsey on 20 February 2018 to recover fees of $34,481. Makin & Kinsey filed a defence on the basis that (i) Mr Falcon directly engaged the barrister at the two meetings that occurred in January and May 2016, and (ii) the agreement was that fees were payable at the conclusion of the proceeding and so were not yet due and payable.
Mr Falcon obviously knew that Counsel was chasing fees from Makin & Kinsey. He had sent an email in January 2018 referring to his understanding that all the legal practitioners were to be paid at the conclusion of the proceeding. He described himself as feeling dejected. In part he said:
Just on 2 years now and we have just managed to lodge. Everyone decides to chase their bill now but no one wants to do anything about my matter…
He agreed in cross-examination that Mr Makin had told him that Counsel was chasing his fees and that Mr Makin would have difficulty paying it.[2]
[2]Transcript of proceedings, Falcon v Makin & Kinsey Solicitors Pty Ltd (ACN 159 976 735) & Ors (Supreme Court of Victoria, S ECI 2019 02021, Forbes J, 22 March 2021) (‘T’) 82.
However, Mr Falcon said that he was not told that he might be joined as a party to the costs dispute.[3] He said that had he been told that and understood it, he would have been able to arrange alternate legal representation while in Australia in 2018. He was asked about a meeting with Mr Makin on 18 January 2018. He said he was overseas at that time. It was suggested that on that day Mr Makin told Mr Falcon that, if sued for the fees, Mr Makin would join Mr Falcon as a party. Mr Falcon denied this.
[3]Ibid 88.
Ms Matson put her questions on instructions and based upon a handwritten file note contained in the Court Book. Mr Falcon disputed the file note as he had denied the conversation. It was one of the matters Mr Falcon anticipated cross-examining Mr Makin about. The defendants elected not to call Mr Makin. Mr Falcon made a submission to me that this demonstrated that the defendants had something to hide. I took this in effect to be a submission that I should draw an adverse inference from the failure to call Mr Makin, inferring that evidence he might give about what was or was not said to Mr Falcon on the issue of joinder to the costs dispute and ceasing to act in the Batsakis proceeding, would not have assisted the defendant’s case.[4]
[4]Jones v Dunkel [1959] 101 CLR 298.
In circumstances where there are no letters of advice or other documents to demonstrate confirmation of any oral advice given I would expect the practitioner to give evidence about the nature of any oral advice that was given. In its absence, I can place no weight on the file note. The absence of sworn testimony to the contrary, where it was available and might be expected, means that I may more readily accept Mr Falcon’s evidence on the question of what he had been told about being joined to the costs dispute prior to leaving Australia on 20 May 2018. I accept he was not told that he might become a party to that dispute.
More importantly perhaps, it also follows that if he was not told of the prospect of joinder, he was also not informed of or likely to appreciate the consequences of joinder, one of which was that because of a conflict of interest Makin & Kinsey would cease to act in the Batsakis proceeding. Given the mediation had not concluded the matter, it would have been clear that the question of the costs dispute and any joinder of Mr Falcon and its consequences needed to be addressed by Makin & Kinsey. For reasons left unexplained by the evidence, this did not occur prior to Mr Falcon’s departure from Australia.
Ultimately, the costs dispute proceeding was resolved at some form of settlement conference between the barrister, the solicitors and Mr Falcon on 12 April 2019. The settlement terms were that a proportion of the barrister’s fees were paid by the solicitors in two instalments in exchange for which all outstanding claims were dismissed. The effect of those terms of settlement were that the solicitors agreed to meet the barrister’s fees and waived any entitlement they had to fees payable otherwise by Mr Falcon. Mr Falcon was not required to pay any legal costs in respect of his representation in the Batsakis proceeding. Resolution would have released any documents held by Counsel.
Concluding the Batsakis proceeding
Upon learning that the solicitors were ceasing to act for him, Mr Falcon contacted his friend Mr West to act for him in the interim. Mr West had by that time left employment at Makin & Kinsey. Mr Falcon said that he only intended Mr West to act in an interim capacity and was not engaging him to prepare and run the trial. Mr West was called and his evidence confirmed that his retainer was for a limited purpose of concluding the Batsakis matter.
Mr Falcon had given Mr West a Power of Attorney some time earlier. When contacted, Mr West advised that he could attend on behalf of Mr Falcon at the listed directions hearing on 15 June 2018. A solicitor from Makin & Kinsey also attended the directions hearing on that date notwithstanding the fact that Makin & Kinsey had ceased to act. The orders of the Court on that day gave leave to the plaintiff to file a further amended statement of claim and a timetable for any application if the amendments were opposed by the defendant. It is apparent from the material that these were amendments foreshadowed at the mediation and were not substantial. It otherwise listed the matter for further directions on 20 July 2018.
I infer from the Order that the Court at that time was well aware that the plaintiff had recently become unrepresented and would need an opportunity to engage new lawyers. This is evident from the fact that the solicitor from Makin & Kinsey sought leave to appear and was granted leave. In addition, Mr West was present at court at the time. Subsequent to the directions hearing, Mr West filed a Notice of Change of Practitioner and R E West & Associates became the plaintiff’s solicitors of record on 3 July 2018.
Mr West thereafter acted on Mr Falcon’s instructions, which were to conclude the Batsakis proceeding and agree to a dismissal of the proceeding on the basis that he and the Batsakis defendants each walked away bearing their own costs. In accordance with those instructions, the terms of settlement were signed on 19 July 2019 and thereafter a Notice of Discontinuance was filed.[5]
[5]Although a Notice of Discontinuance was filed, the terms of settlement clearly indicated that the agreement was to dismiss the proceeding.
Has Mr Falcon established that the defendants were negligent or in breach of their retainer?
The statement of claim pleads a cause of action in negligence and breach of contract. It alleges that Mr Falcon was ‘unjustly and unfairly deprived of an opportunity to properly defend himself in the [Batsakis] proceeding because he was overseas’. Makin & Kinsey were not retained to act on behalf of Mr Falcon in the costs dispute. Makin & Kinsey determined a conflict of interest in the costs dispute because there was a dispute over who had retained the barrister, and so they could not continue to act in the Batsakis proceeding. I accept that the manner of notification to Mr Falcon did make it more difficult for him to arrange alternate representation and was not optimal from a client management perspective. Mr Falcon does not allege that he should have been told prior to the mediation of the possibility that the solicitor might cease to act, only that he should have been told while he was in Australia.
The action of the solicitor did not compromise the Batsakis proceeding. It was not accompanied by any failure to advise of a deadline or the need to take action to preserve rights that might amount to negligence. No rights of Mr Falcon were lost by the cessation of representation. Appropriately a solicitor from Makin & Kinsey attended the next court directions so that the court was aware that new solicitors would need to come onto the record. Makin & Kinsey’s action did not jeopardise the likelihood that on 20 July 2018 the Court would set a timetable for preparation for trial and a trial date for an appropriate time in 2019. In short, I do not accept that by ceasing to act the solicitors did deprive Mr Falcon of the opportunity to pursue his claim.
The actions of Makin & Kinsey did not cause loss
Importantly, even if the timing of the Notice of Ceasing to Act was negligent rather than merely poorly managed, it was not an action that caused the loss complained of by Mr Falcon. Any loss was directly caused by his instructions to Mr West to conclude the Batsakis proceeding on the terms agreed to by him and by entering into the Deed of Settlement. Mr Falcon it seems provided instructions to compromise the Batsakis proceeding believing, erroneously, that once concluded he was able to commence and maintain an action for negligence against Makin & Kinsey. There is no evidence that he sought or received any legal advice about this course of action.
Mr Falcon said that he instructed Mr West to conclude the Batsakis proceedings because he faced a big risk that the defendants’ lawyers in that case were going to make an application to throw his case out of court and seek that he pay a large amount of costs as a consequence. This step was imminent and Mr Falcon felt that without solicitors retained to conduct the proceeding to trial and without the documents, which remained with Counsel who was holding a lien over them for the outstanding fees, his case would quite likely be thrown out as was threatened.
There is no doubt in my mind that Mr Falcon believed that lawyers for the Batsakis defendants were threatening such action and that he felt at risk of an adverse costs order were they successful in throwing out his case. However, the source of that belief is difficult to identify and the evidence did not explain a basis for that belief. There is no correspondence from the solicitors for the Batsakis defendants threatening such a step. Makin & Kinsey had noted difficulties while documents were withheld by Counsel’s lien, but made no reference to any application by the defendants. Mr Falcon told me he had looked for documents and asked Mr West for documents that he thought may exist on this issue.[6] Mr West although he gave evidence of acting on Mr Falcon’s instructions did not take matters any further as to the source of Mr Falcon’s belief.
[6]T 164, 165.
Mr Falcon’s case is that he was left with no choice but to enter into such a settlement by reason of Makin & Kinsey ceasing to act on his behalf. He understood, he thought by being told by Mr West, that:
‘they’re going to go in there and ask the Supreme Court to throw it out. And believe me, … they move. They don’t muck around. Russell Kennedy would have had this case thrown out with a big fat bill from me’.[7]
[7]T 174.
The difficulty facing Mr Falcon though is that, despite his belief as to the urgency and vulnerability of his claim to any threat of dismissal, there is simply no evidence that this was so. The available documents support the opposite conclusion. There was no recording in the court orders of 15 June 2019 of any anticipated application that might arise on 20 July directions. When lawyers for the Batsakis defendants were informed that Makin & Kinsey were ceasing to act, they noted that amendments as proposed to the statement of claim were anticipated and that at the forthcoming directions hearing the timetable originally ordered on 8 December 2017 would need to be extended. That indicated a co-operative approach to the orderly progression of the proceeding to a hearing on its merits in 2019. At most it seems they were pressing for the removal of the first defendant.
The opportunity to recover damages from the Batsakis defendants was lost when Mr Falcon, instructed his new legal representative to enter into an agreement to dismiss the proceeding on the basis that both parties walked away without recovering or paying damages, loss or costs. It cannot be said that Makin & Kinsey advised this course to him, nor does Mr Falcon allege that they did.
The evidence does not demonstrate that Mr Falcon was compelled to take the course of action that he did. There are a number of reasons for this:
(i)Mr Falcon did in fact obtain alternate representation albeit on a limited basis;
(ii)Mr West was a legal practitioner familiar with the matter and one in whom Mr Falcon had confidence generally;
(iii)At the directions hearing before Associate Justice Daly on 15 June, the Court was aware of the plaintiff’s need to obtain alternate representation. During the mediation further amendment of the statement of claim was apparently foreshadowed. The court set a timetable for that to occur and the matter otherwise listed for further directions in a month’s time. At that time, the proceedings had not yet been allocated a trial date;
(iv)There was no evidence of any steps taken by Mr Falcon or Mr West on his behalf to attempt to arrange alternate representation between May and July 2018. I have no doubt that exercise was made more difficult by Mr Falcon’s departure from Australia. However as Mr Falcon had been able to provide instructions from overseas from July 2016 to April 2018 and continued to have confidence in Mr West who was representing him, arrangements could have been made or time sought from the Court to make those arrangements;
(v)Given Mr West’s familiarity with the matter and the fact that he held a Power of Attorney for Mr Falcon, it would have been possible for Mr West to take steps to engage alternate representation for the purpose of preparing the matter for hearing or to seek a trial timetable and date from the Court that would to allow time for Mr Falcon to do so;
(vi)The deed of settlement was entered into the day prior to the adjourned directions hearing of 20 July. It might be inferred that this date had some unexplained significance in Mr Falcon’s sense of urgency in concluding the proceeding.
There is simply no evidence to support the assertion that an imminent application was to be being made to the Court let alone any evidence that might suggest that Mr Falcon, being overseas but having a legal representative in Australia, would not be afforded an opportunity to resist such an application if it was made. It is clear that Mr Falcon, when he instructed Mr West to enter into the deed of settlement and avoid the risk that he perceived, understood that his decision brought to an end any ability to recover damages for the negligence of the architect. He said of his retainer of Mr West:
“What I asked him to do was stop the Batsakis matter.”[8]
and when asked:
“You’d accept, wouldn’t you, that it’s at this point of signing the deed that you give up your right to sue Batsakis? --- Yes I had no choice. Either that or Russell Kennedy were going to do it for me”.[9]
[8]T 154.
[9]T 164.
That decision, whether made on good information or poor information, brought about the loss of any opportunity to recover damages against the Batsakis defendants for professional negligence. That decision was not made on advice or information from Makin & Kinsey. Mr Falcon believed that in bringing the Batsakis proceeding to an end it would allow him to then commence an action against his former solicitors.
What opportunity was lost?
I will make some brief observations about the way in which the loss was quantified by Mr Falcon, even though it is not strictly necessary to do so. During the trial, Mr Falcon frequently became frustrated that so much of the evidence was focused on the underlying claim against the Batsakis defendants. The reason for that was not some misdirection by the present defendants but because the nature of Mr Falcon’s claim is one for negligence resulting in the loss of an opportunity to successfully conclude that claim.
In cases like this of professional negligence where what is lost is an opportunity to take action to recover damages, the damages that flow from that professional negligence are not the same as the damages that are assessed in the underlying proceeding. What is being compensated is the lost chance.
As the Court of Appeal said in Rosa v Galbally & O’Bryan:
With respect to the issue of quantification of loss the [trial] judge observed that it was necessary to consider what Rosa would have been expected to obtain as an award of damages at a hypothetical …trial:
Quantification of loss, when it involves loss of a chance, involves particular considerations. Whether she [the Plaintiff] has lost anything of value turns on whether the right of action had more than non-negligible value at the point in time when it was lost. The value of what she has lost depends, at least in the first instance, upon the combined evaluation of her prospects of success on liability and of the award of damages she could have expected to obtain at a hypothetical …trial.”[10]
[10](2013) 42 VR 382, [33] (emphasis in original).
Mr Falcon at times thought that the focus of the conduct of Makin & Kinsey was lost by some misdirection of focus to the Batsakis proceeding. Both were relevant. Makin & Kinsey’s conduct was relevant to establish liability. The factual matters underlying the Batsakis proceeding were relevant to establish the value of the lost opportunity. The relative strengths and weaknesses of that underlying Batsakis proceeding are relevant because they inform what has been lost.
In Mr Falcon’s case, he had at least two pieces of conflicting advice about the prospects of success of his claim. He gave evidence that he told Makin & Kinsey that the barrister had advised him at the first conference that he had an 85% chance of success in the claim. Makin & Kinsey admitted they were told this. Later advice from the same barrister as to what might be reasonable offers of settlement[11] departed substantially from what was said to be the initial advice given. Reasonable settlement offers that would warrant consideration were said to be in a range reflecting a modest fraction of the total amount of approximately $13,000,000 as claimed. This had a bearing on the prospects of recovering damages and on the amount that might be recovered. Finally, Mr Falcon also said he understood there was a real risk that the case was going to get thrown out before it could get to trial and be determined on its merit. If this was so, it might be inferred that his prospect of success was poor.
[11]Robert West, ‘Affidavit sworn 10 April 2018’, SCI 2016 05218, p. 3 (court book page 363).
The underlying facts relied on by Mr Falcon are these:
(a) He signed a written contract of sale of land in Frankston as purchaser on 8 February 2013 (the first contract of sale). There was a thirteen month settlement period.[12] It was a term of the contract that Mr Falcon could apply for town planning permission for the construction of dwellings on the land prior to settlement.
[12]As specified in the first contract of sale, although there is also a letter from Mr Falcon’s conveyancer dated 26 February 2013 noting settlement on 8 March 2013, which for present purposes I will assume to be in error.
(b) He engaged the Batsakis defendants in August 2013 to review an earlier planning application submitted to Council, and to finalise the Council permission.
(c) In the course of acting for Mr Falcon, the Batsakis defendants advised withdrawal of the pending application to avoid the risk of refusal and to submit a revised application addressing Council’s identified concerns. Mr Falcon instructed them to withdraw and resubmit.
(d) In December 2013 Mr Falcon entered a further written contract for sale of the land as vendor to a Chinese corporate purchaser (the second contract of sale). He signed the second contract of sale as director of the vendor Falcon Finance Pty Ltd. The contract provided for payment of a 10% deposit of $2,300,000 on 25 January 2014.
(e) The purchaser did not pay the deposit on 25 January 2014 and did not proceed with the contract.
(f) Mr Falcon was relying on funds from the deposit for the second contract of sale to settle the purchase in respect of the first contract of sale. Mr Falcon did not settle the first contract of sale.
Mr Falcon’s pleadings in the Batsakis proceeding allege that:
(i) It was a term of the oral agreement with George Batsakis Architecture made on or about 24 August 2013 that plans were to be prepared and submitted to Council on or before 24 January 2014.
(ii) It was a term of the agreement with the Chinese corporate purchaser of the land that the planning application for the townhouse development would be lodged by 24 January 2014 in order for payment of the deposit to be made. This was said to be an oral agreement and is not reflected as a special condition in the written contract.
(iii) That the Batsakis defendants were on notice that Mr Falcon would lose, or was at risk of losing the sale agreement if plans were not submitted by 24 January 2014.
The Batsakis defendants deny any agreement in August 2013 that they were engaged by Mr Falcon and say that in July 2013 they were engaged by a company, Pearl Hill Pty Ltd to perform work as outlined in a letter dated 29 July 2013. They said subject to agreement from Pearl Hill Pty Ltd and payment of fees as agreed, they would act on instructions from Mr Falcon and began so acting in September 2013. The Batsakis defendants also denied that Mr Falcon was the vendor of the land in the second contract of sale.
The negligence claim against the Batsakis defendants turned upon the retainer requiring them to have submitted plans to council by 24 January 2014, the day before payment of the deposit by the purchaser was due. Alternatively it relied on establishing that the Batsakis defendants were on notice that the second contract of sale was at risk if plans weren’t submitted by the time the deposit fell due. Mr Falcon’s evidence was that it was in turn a term of the second contract of sale that the plans be lodged with Council by the time the deposit was to be paid.
The Batsakis defendants alleged that the retainer between themselves and Mr Falcon was contained in a fee proposal dated 17 September 2013 and that the plaintiff failed to pay fees in a timely manner pursuant to that agreement. They deny that it was a term of the agreement between them and Mr Falcon that the plans had to be submitted on or before 24 January 2014. If it were a contractual term, then Mr Falcon was on notice from November 2013 that non-payment of agreed fees would impact on the ability to lodge plans. Mr Falcon said that he began slowing on the payment of fees because the work was not being done as promised.
It can be seen from this summary of the pleadings that there was a substantial dispute about the contractual terms and the reasons why plans were not ready to be lodged until around 14 February 2014. This substantial factual dispute would depend on viva voce evidence from the various witnesses involved in order to assess prospects of success. It is impossible to do so simply on Mr Falcon’s evidence alone.
It was not explained why a contract in August 2013 contained a deadline that then became a term of another contract entered into four months later in December 2013. However, the larger difficulty is that both the contractual terms were oral and the only evidence that they were contractual terms was Mr Falcon’s assertion. Leaving aside whether or not the deadline was a contractual term, the documents that might inform the question of a 24 January 2014 requirement for submission of planning documents does not support such a deadline.
The documents included email exchanges and memorandums by the Batsakis defendants, including on or about 16 December 2013 at which time there was a promise by Mr Falcon to pay all or part of the outstanding fees by 14 January 2014. It was alleged that some were paid but other fees outstanding were not paid until 4 February 2014. Following payment of agreed outstanding amounts, the plans were proposed to be lodged on 14 February 2014 and a cheque or funds transfer was requested for payment to Council for lodgement. Mr Falcon emailed an intention to meet at Council offices and bring a cheque for payment of the lodgement fee. Nowhere in the exchanges between December 2013 and February 2014 was there mention of any importance attributed to 24 January 2014, of any deadline at all or of the calamitous consequences that Mr Falcon now alleges.
As to quantifying damages, Mr Falcon firmly believes that evidence of the written second contract of sale ($23 million) and an estimate of building costs (approximately $9.5 million plus GST) prepared and provided to the architect are sufficient to prove the loss occasioned by any negligence of Batsakis and the loss of opportunity occasioned by Makin & Kinsey. He assumed that as a mathematical matter the contract price less the estimate of building costs was sufficient to prove the quantum of his lost opportunity.
The evidence contained in these two documents, the second contract of sale and the Elemental Cost Plan No 1 provided by Slattery, is not sufficient to do so. Even if it were capable of quantifying the actual loss caused by Mr Batsakis’s negligence, the task for the Court in this proceeding is to value that lost opportunity. That is, Mr Falcon was not guaranteed to win the case he was bringing against the Batsakis defendants and any damages he may be entitled to in this case can only reflect his likely prospects of success.
If, as he feared, the case could be thrown out prior to trial, its prospects of success at trial would necessarily be slim. If, as he was advised at the commencement of the action, his prospects were good (85% chance of success on initial instructions) he would still need to demonstrate that this remained the barrister’s view of a realistic outcome once defences, counterclaims and documentary evidence in total were considered. No independent evidence of the prospects of success was available.
Finally, there was no evidence of any effort to mitigate any loss. Assuming a loss, Mr Falcon had lost the opportunity to make a profit from the resale of a property that he intended to purchase with the part of the deposit from the second contract of sale. There was no evidence of attempts to settle the first contract of sale on the due date or to negotiate an extension, which would still have left Mr Falcon with the land and the opportunity to resell to another purchaser, with or without plans submitted or approved. Mr Falcon said in his evidence that he let it all go as his health was suffering and it was too stressful. He had paid a deposit on the first contract of sale and expended fees in the planning process thus far. I accept that he was substantially out of pocket at the time the purchaser under the second contract of sale failed to pay.
It is not possible on the limited evidence to quantify any loss beyond those amounts actually paid. Even with those more modest amounts, it remains impossible to assess the chance that Mr Falcon could have recovered some or all of those amounts from the Batsakis defendants. Had it been necessary for me to do so, the evidence did not permit an assessment of the value of the chance lost by Mr Falcon concluding the Batsakis proceeding as he did.
I will hear from the parties as to the appropriate orders.