Gattellaro v Spencer

[2010] NSWSC 1122

CITATION:	Gattellaro v Spencer [2010] NSWSC 1122
HEARING DATE(S):	15-31 March 2010
JUDGMENT DATE :	6 October 2010
JURISDICTION:	Common Law Division
JUDGMENT OF:	Hislop J
DECISION:	1. Judgment for the defendants. 2. Plaintiff to pay the defendants' costs.
CATCHWORDS:	COMMON LAW - professional negligence - solicitors - litigation - alleged failure to properly conduct case - immunity.
LEGISLATION CITED:	Contracts Review Act 1980 Trade Practices Act 1974 Supreme Court Rules 1970 Civil Liability Act 2002 Real Property Act 1900
CASES CITED:	Marston v Charles H Griffith & Co Pty Limited (1982) 3 NSWLR 294 Heydon v NRMA Limited [2000] NSWCA 374; (2001) 51 NSWLR 1 Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 Garcia v National Australia Bank Limited [1998] HCA 48; (1998) 194 CLR 395 Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543 D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1 Keefe v Marks (1989) 16 NSWLR 713 Biggar v McLeod [1978] 2 NZLR 9 Lai v Chamberlains [2005] 3 NZLR 291
PARTIES:	Yolanda Gattellaro (Plaintiff) Keith Spencer (1st Defendant) William S Whitby (2nd Defendant) David J Adams (3rd Defendant)
FILE NUMBER(S):	SC 2005/269546
COUNSEL:	D. Elliott (Plaintiff) P. Morris (Defendants)
SOLICITORS:	Julie A Orsini (Plaintiff) Yeldham Price O'Brien Lusk (Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HISLOP J

Wednesday 6 October 2010

2005/269546 YOLANDA GATTELLARO v KEITH SPENCER

JUDGMENT

Introduction

1 This is a claim brought by the plaintiff, Mrs Gattellaro, to recover damages from the defendants, a firm of solicitors, who acted on behalf of the plaintiff and her husband in relation to litigation with the Westpac Banking Corporation (Westpac). The plaintiff alleges the defendants were negligent and in breach of retainer in respect of the conduct of the litigation, causing her to sustain significant losses.

Background

2 Mr and Mrs Gattellaro were born in Italy in 1935. They came to Australia in the 1950s. In 1959 they married. They have a son (Anthony, born in 1961) and a daughter (born in 1970).

3 They purchased land at Chiswick, NSW in 1965 in their joint names. In 1969 a mortgage was taken out with the Commercial Banking Co. of Sydney to finance construction of the family home on the land. That mortgage was discharged upon repayment of the loan.

4 The plaintiff is a dressmaker by occupation. Mr Gattellaro was a builder. For a time Mr Gattellaro carried on business through a company, Falgat Constructions Pty Limited (“Falgat”), with the plaintiff’s brother. In 1972 the plaintiff’s brother ceased his involvement in Falgat and the plaintiff became a director and secretary of the company, Mr Gattellaro being the only other director.

5 On about 12 occasions the plaintiff and Mr Gattellaro purchased properties in their joint names and employed Falgat to renovate them, the properties then being resold at a profit. The funds for these transactions were generally obtained by bank mortgage to the plaintiff and Mr Gattellaro. Falgat also built houses and home units.

6 In June 1977 the plaintiff and Mr Gattellaro purchased a property at Marrickville with the intention of renovating and reselling it. They mortgaged the property to The Commercial Bank of Australia Limited (“CBA”). CBA also took a mortgage over the Chiswick property securing the personal indebtedness of the plaintiff and Mr Gattellaro to the bank. This mortgage contained a clause to secure, among other things, all moneys that Mr Gattellaro and the plaintiff, or either of them, had then guaranteed to CBA or thereafter guaranteed to CBA (or its successor, Westpac)

7 In 1978 the Marrickville property was sold and the mortgage over it discharged. The mortgage over the Chiswick property was not discharged at that time.

8 The plaintiff, Mr Gattellaro and Falgat were indebted to CBA. Following a merger between the CBA and Westpac in October 1982, a statutory novation took place substituting Westpac for CBA in its contractual relationships with Falgat, the plaintiff and Mr Gattellaro.

9 In the mid 1980s difficult economic times were encountered. The plaintiff and Mr Gattellaro were unable to sell the renovated properties and some home units which had been built by Falgat. The indebtedness to the bank increased.

10 In 1985 Westpac moved to secure the advances to Falgat by seeking a guarantee signed by the plaintiff and Mr Gattellaro. There was an issue whether any such guarantee was signed by the plaintiff and/or Mr Gattellaro.

11 At the beginning of June 1986 the accounts of Falgat at the Goulburn Street branch were in debit to a total of approximately $195,000 and the accounts of the plaintiff and Mr Gattellaro at that branch were in debit to a total of approximately $187,000. The indebtedness of the plaintiff and Mr Gattellaro was secured by the 1977 mortgage over their home at Chiswick.

12 On 2 June 1986 the accounts of Falgat, the plaintiff and Mr Gattellaro at the Goulburn Street branch were closed. New accounts were opened at the Westpac Plaza branch. The debts were consolidated. A bill acceptance line of credit in favour of the plaintiff and Mr Gattellaro was arranged. This was used to pay out the indebtedness of Falgat, the plaintiff and Mr Gattellaro at the Goulburn Street branch.

13 The plaintiff and Mr Gattellaro entered into a mortgage with Westpac over the Chiswick property to secure the advance of $450,000 on 2 June 1986. The 1977 mortgage was discharged at this time.

14 These measures afforded the plaintiff and Mr Gattellaro time which enabled them to sell some properties and significantly reduce the total indebtedness to Westpac. In January 1989 Westpac sought repayment of the outstanding indebtedness by serving a notice pursuant to s 57(2)(b) of the Real Property Act 1900 on the plaintiff and Mr Gattellaro. The plaintiff and Mr Gattellaro refused to pay. They alleged CBA in 1977 had failed to credit $30,000 to their account and in 1980 had improperly debited the account with $42,873.99. It was asserted that these sums, together with the interest that had been charged in consequence, exceeded the sum claimed by Westpac.

15 In about February 1989 Mr Gattellaro retained the defendants, on behalf of the plaintiff and himself, to act for them in respect of the dispute with the bank.

16 The first and second defendants acted for the plaintiff and Mr Gattellaro at various times. The third defendant did not personally act for Mr Gattellaro at any time. I have referred in this judgment to the defendants generally rather than to the individual defendants, save when necessary.

The litigation

17 Westpac, by summons filed on 30 May 1990, as mortgagee under the 1986 mortgage over the Chiswick property, sought judgment for possession of that property and judgment for the outstanding amount due on the mortgage. The amount due at that time was $197,378.09. This was the commencement of lengthy litigation leading to the High Court, resulting in significant loss to the plaintiff and Mr Gattellaro, including the loss of their home.

18 On 19 April 1991 the summons was superseded by a statement of claim which recited the default of the plaintiff and Mr Gattellaro and sought the relief as claimed in the summons.

19 On 26 June 1991 the plaintiff and Mr Gattellaro filed a defence in which they admitted they entered into the mortgage dated 2 June 1986 but denied they were indebted to Westpac as CBA had failed to credit $30,000 to their account and had improperly debited the account with $42,873.99. The plaintiff and Mr Gattellaro also cross claimed against Westpac in respect of those moneys together with interest thereon.

20 The cross claim was amended in 1999. In addition to the sum sought to be set off, the amended cross claim sought relief pursuant to the Contracts Review Act 1980 on the basis the mortgage dated 2 June 1986 was unenforceable as to the indebtedness of Falgat because the plaintiff and Mr Gattellaro had been given no explanation that the mortgage of 2 June 1986 would secure against properties owned by them the previous debts of Falgat. Claims under the Trade Practices Act 1974 were also included.

21 Westpac filed an amended defence to the amended cross claim. It alleged, inter alia:

“10. In further answer to the allegation made in the Claim to the effect that prior to 2 June 1986 the moneys advanced by the Bank to Falgat Constructions Pty Limited (‘Falgat’) had been unsecured, the Bank:
(a) denies the allegation;
(b) says that by mortgage dated 17 June 1977 and registered number Q283741 (‘the 1977 mortgage’) the cross-claimants mortgaged the property referred to in paragraph 2 of the Statement of Claim to the Bank (by its predecessor the Commercial Bank of Australia Limited) to secure, among other things, all moneys that the cross-claimants, or either of them, had then guaranteed to the Bank (or its predecessor) or thereafter guaranteed to the Bank (or its predecessor).
Particulars
Paragraphs 2 and 27 of the 1977 Mortgage
(c) says that by a guarantee made in or about November 1985 the first cross-claimant guaranteed to the Bank payment of all moneys owing to the Bank by Falgat.
Particulars
The Bank is not able to produce a copy of the guarantee. Its existence is to be inferred from the entries made in the Bank’s diary notes of 27 November 1985 and 21 February 1986 (2) and from item 22 in the defendants’ List of Documents dated 7 March 1991 in these proceedings.”

22 The amended defence was served shortly before the original hearing date, which was vacated to permit the defendants, counsel, the plaintiff and Mr Gattellaro to consider the amended defence. The plaintiff and Mr Gattellaro impliedly joined issue on that pleading as they did not file a reply thereto.

Hulme J

23 The proceedings came on for hearing before Hulme J on 1 November 1999.

24 His Honour rejected the defence of set off. He was not persuaded that the plaintiff and Mr Gattellaro had not received the full credit to which they were entitled. As to the claim for $42,873.99, he concluded the debit was one with which Mr Gattellaro was content at the time and thus one which was authorised and the bank entitled to make. He observed that counsel for the plaintiff and Mr Gattellaro did not address any of the claims alleged to support the set-off. However, as they had not been formally abandoned his Honour dealt with the substance of them.

25 As to the contracts review defence in respect of the 1986 mortgage, his Honour concluded that the 1986 transaction considered as a whole, or looking at the mortgage separately, was not unjust. It was conceded that on the pleadings his Honour was not entitled to interfere with the interest rate payable.

26 His Honour, although he considered it was strictly unnecessary for him to pursue the defence based on the guarantee of Falgat’s indebtedness, concluded that at the time of the mortgage of 2 June 1986 the bank had, even if it could not find the document, an unlimited guarantee from Mr Gattellaro guaranteeing Falgat’s liability to it. His Honour was not persuaded the bank held a guarantee from the plaintiff.

27 His Honour found there was nothing in the evidence which supported pleadings that the bank had been guilty of misleading or deceptive conduct under s 52 of the Trade Practices Act or had negligently misstated the effect of the mortgage.

28 Accordingly, his Honour found that all of the defences to Westpac’s claim failed. He ordered that the plaintiff and Mr Gattellaro give possession of the Chiswick property to Westpac. He ordered the plaintiff and Mr Gattellaro pay the sum of $983,339.02.

29 His Honour in his judgment said, as regards Mr Gattellaro:

“There was nothing in Mr Gattellaro’s demeanour which told against his reliability, indeed rather the contrary…On the other hand, the content of what Mr Gattellaro had to say was nowhere near as impressive. It is clear from a consideration of the documents that Mr Gattellaro was quite confused when cross examined about his complaint concerning the sum of $30,000…Mr Gattellaro was also disposed to deny the undeniable when to admit may have harmed his cause…Furthermore, I am unable to accept that Mr Gattellaro was as ignorant of what was occurring as he would have me believe.”

30 His Honour in his judgment said, as regards the plaintiff:

“So far as appearance in the witness box is concerned, Mrs Gattellaro also seemed honest. However her answers were to the effect that there was a great deal – and I think too much to be believable – she did not know or recall.”

The Court of Appeal

31 The plaintiff and Mr Gattellaro appealed from the decision of Hulme J to the Court of Appeal. The appeal was limited to the Contracts Review Act issue. It was heard on 15 December 2000. Judgment was given on 6 April 2001.

32 In essence, the plaintiff and Mr Gattellaro alleged the 1986 mortgage was unjust in that, without adequate explanation and without them so understanding they became personally liable for the previous indebtedness of Falgat for which they had not been personally liable and made their home security for that indebtedness when it had not previously been security for it. Westpac, in a notice of contention, contended that the indebtedness on the accounts at the Goulburn Street branch was secured by an unlimited guarantee given by the plaintiff and Mr Gattellaro, or at least by Mr Gattellaro, and that the obligations under the guarantee were secured by the 1977 mortgage of their home.

33 Westpac submitted that, in that situation, there was nothing unjust about the 1986 mortgage because it did not make the plaintiff and Mr Gattellaro liable for any amounts for which they were not previously liable and did not make their home security for any indebtedness for which it was not previously security.

34 Westpac was unable to produce the signed guarantee, and relied on other materials to prove its existence. The majority of the Court of Appeal held that the documents produced by the bank provided a sound basis for finding that a guarantee had been given, at least by Mr Gattellaro, and on the probabilities that it was unlimited and secured by the 1977 mortgage. The 1977 mortgage secured Mr Gattellaro’s obligations as guarantor, and included a personal covenant by the plaintiff whereby she undertook liability to pay the amount it secured. Although with the modification that the plaintiff’s personal obligation was under the 1977 mortgage rather than the guarantee, Westpac’s contention had been made out.

35 In Marston v Charles H Griffith & Co Pty Limited (1982) 3 NSWLR 294 at 300 it was held that if a guarantee is drawn up for two guarantors and only one signs, then the signatory is not bound, because the only promise he made was to join with the other to guarantee, and if the other does not join, then he is not bound (absent a clause in the guarantee to the contrary).

36 It was submitted, pursuant to the principle in Marston, that the guarantee given by Mr Gattellaro might not have become operative in the absence of signature by the plaintiff as co-guarantor. However the Court of Appeal, having regard to a printed form of guarantee, took judicial notice that the bank used standard form guarantees and concluded that the guarantee given by Mr Gattellaro would have been in the same form. The form provided that the guarantee was binding on each signatory notwithstanding that one or more of the persons named as guarantor did not execute it. Accordingly, the Court of Appeal, Priestley JA dissenting, rejected the defence pursuant to the Contracts Review Act and dismissed the appeal.

The High Court

37 The plaintiff, by application filed on 3 May 2001, sought special leave to appeal to the High Court. The principal ground relied upon was that the majority in the Court of Appeal had erred in taking judicial notice as to the form of the guarantee signed by Mr Gattellaro.

38 In May 2002 the application for special leave to appeal was dismissed for failure to prosecute the appeal. The application was subsequently restored to the list on 23 September 2002.

39 On 14 February 2003 the application for special leave to appeal was upheld, leave being granted to both the plaintiff and Mr Gattellaro.

40 Following the grant of special leave the plaintiff and Mr Gattellaro filed a notice of appeal asserting, inter alia, error in the application of the principle of judicial notice.

41 Westpac filed a notice of contention contending that the Court of Appeal should have decided the issue of the form of the guarantee on the evidence and without regard to any fact judicially noticed.

42 At the hearing in the High Court Westpac sought leave to amend the notice of contention by adding the following:

“[T]he decision below should be affirmed on the ground that the [Gattellaros] did not plead or prove that the guarantee given by [Mr Gattellaro] was subject to [the plaintiff] also giving such a guarantee or that [Mr Gattellaro] had such a belief, induced by the form of the guarantee, and did not plead or prove that [the plaintiff] did not give such a guarantee.”

The plaintiff and Mr Gattellaro opposed Westpac’s application for leave to amend its notice of contention to rely on this ground. The majority of the High Court permitted the notice of contention to be amended.

43 The High Court, by majority:

(i) did not uphold the decision of the majority in the Court of Appeal that judicial notice could be taken that Westpac used the standard form of guarantee and the contents of that standard form;

(ii) rejected the first matter raised in the notice of contention that the evidence established the guarantee would have included a clause that the guarantee would bind the signatories thereto notwithstanding that one or more of the persons named therein as the guarantor may never execute the same;

(iii) upheld the second ground of contention (being the ground of contention added on the day of the hearing) and concluded:

“Mr Gattellaro’s contention that he is not bound by the November 1985 guarantee fails. Since it obliged him to pay to Westpac the debts owed by the company, the 1977 mortgage applied. The 1977 mortgage made [the plaintiff] liable for, and secured against her home, all moneys for which Mr Gattellaro might be held liable to Westpac. In consequence the 2 June 1986 mortgage did not increase the Gattellaros’ liability and the appeal in this Court must be dismissed.”

44 The reasoning of the majority of the High Court, in short, was as follows:

(a) The Gattellaros’ success on the judicial notice point did not affect the concurrent finding of the trial judge and the Court of Appeal that Mr Gattellaro gave the guarantee of November 1985 in an unlimited amount;

(b) The Gattellaros bore the onus of nullifying the guarantee signed by Mr Gattellaro;

(c) If the Gattellaros wished to rely on a Marston defence, Pt 15 r 13(2) of the Supreme Court Rules obliged them to file a reply to Westpac’s amended defence to the amended cross claim which they did not do;

(d) The failure of the Gattellaros to plead the facts necessary to make good the Marston contention was not necessarily fatal to any intention they had of relying on it. It was open to the parties by their conduct of the trial to consent to a widening or narrowing of the issues defined by the pleadings. Demonstration to an appellate court of how a trial was conducted depends upon proof by affidavit, or on an admission, or on clear evidence in the transcript or in some other part of the record of proceedings or on an inference from the record. Here there was no affidavit. There was no admission: neither of the counsel for Westpac who appeared before this court had appeared at the trial, and though leading counsel for the Gattellaros had, he could not recall what had happened more than 3½ years earlier. There is no clear evidence in the transcript;

(e) It may be possible to draw the inferences from passages in the reasons for judgment of the trial judge and of the majority of the Court of Appeal, and in various written submissions, that the Marston contention had been in issue. Even if it was in issue, it was not dealt with by either the trial judge or the Court of Appeal. There is no utility in this court remitting the matter to one of the courts below for the Marston contention to be decided, since if it has to be decided this court is in as good a position as they were;

(f) It is not necessary to reach a conclusion on whether the Marston contention was in issue, since even if it was, the Gattellaros must fail;

(g) The onus on the Gattellaros would have been to prove:

(a) that there was a term, express or implied, of the arrangements pursuant to which the November 1985 guarantee was executed, that Mrs Gattellaro was to be a co-surety; or
(b) that the November 1985 guarantee was drawn in a form showing Mrs Gattellaro as an intended joint and several surety;

(h) The Gattellaros must fail as they did not prove proposition (b)

“that is because Westpac lost its copy of the guarantee, and because although the Gattellaros may have given discovery of the guarantee (which their solicitor denied was in signed form), they too lost their copy. Since the form of the guarantee is not in evidence, no inference can be drawn from it. Further, the Gattellaros did not prove proposition (a). The internal Westpac documents reveal that Westpac expected Mrs Gattellaro to sign a guarantee, but they do not prove any relevant term of the arrangements.”


(i) It rejected a submission by the Gattellaros that Westpac took no point at the trial that the onus of proof lay on the Gattellaros and was thereby deprived from relying on the location of the onus in the High Court and hence had to fail.

(j) It was held:

“ [50] One difficulty in this argument is that just as it is difficult to conclude that the Marston contention was advanced at trial because of the absence of any relevant affidavit, admission, express indication in the record or inference from the record, for the same reasons it is difficult to conclude that the validity of the Marston contention was common ground, or to conclude that the question of the burden of proof in relation to the Marston contention was not argued at trial or was assumed by Westpac.
[51] If in truth Westpac did not take the onus of proof point below, that points to the conclusion that the Marston contention was not put below by the Gattellaros and hence cannot be relied on now. In any event, the question of where the onus of proof on the Marston contention lies (as distinct from the question whether it was satisfied) is an issue of pure law. If the Gattellaros wished to rely on the Marston contention at any stage, it was in their interests to ensure that evidence was called to support it, wherever the onus lay. Either the Marston contention was advanced at trial or it was not. If it was, the Gattellaros had an opportunity to call evidence about it, but failed to do so to a degree sufficient to permit them to discharge their onus of proof. If the Gattellaros did not advance the Marston contention at trial, but wished to do so for the first time in the Court of Appeal or this court, it was for them to make it good on the existing evidentiary material: any deficiency in the evidentiary material flows from their failure to call more evidence about it at trial. The Gattellaros did not call one item of evidence which it was within their power to call, namely evidence from Mr Gattellaro, including evidence as to his state of mind, as to any relevant term in the arrangements. And the Gattellaros did not cross-examine a relevant witness called by Westpac in that regard.”

(k) The court concluded Westpac was not debarred from relying on the fact that the onus of pleading and proof rests on the Gattellaros and from pointing out that the evidence called at trial did not satisfy the onus of proof. The ground added by the amendment of the notice of contention should be upheld.

45 Kirby J, who dissented, said:

“ [74] The majority decided to permit new arguments to be advanced by Westpac, based on its notice of contention. Indeed, the majority has gone further. It has permitted Westpac, in this court and for the first time, to add a second contention although it was not pleaded in the Court of Appeal in resistance to the Gattellaros’ unsuccessful appeal to that court.
[75] By its notice of motion the respondent sought this court's leave to rely on an amended ground in its notice of contention. But it was not filed until 18 June 2003. That was one day before the hearing of this appeal. To say the least, this was a last minute attempt by Westpac to rescue the appeal from the looming jaws of defeat. Prior to the amendment, the notice of contention raised only one relevant issue. This was the issue of evidentiary inference. The joint reasons explain why the argument concerning that inference must be rejected. The motion to amend was opposed by the Gattellaros. For reasons that I will explain, the motion should be dismissed. In this court, Westpac should be confined to the substantive issues fought and argued at trial and in the Court of Appeal.”

His Honour would have remitted the matter to the Court of Appeal for determination.

46 The plaintiff, having failed in the primary proceedings, now seeks to recover damages from the defendants for alleged negligence and breach of retainer in respect of the advice and conduct of the proceedings by the defendants. Mr Gattellaro is not a party to these proceedings.

General principles

47 “Both barristers and solicitors owe a duty of care to those whom they advise or for whom they act…The standard of care and skill is that which may be reasonably expected of practitioners. In the case of practitioners professing to have a special skill in a particular area of the law, the standard of care required is that of the ordinary skilled person exercising and professing to have that special skill…In each case the duty is to apply the relevant degree of skill and exercise reasonable care to carry out the task. There is no implied undertaking that the advice is correct, but only that the requisite degree of professional skill and care has been exercised in the giving of advice…in the case of solicitors the liability remains a concurrent liability in contract and in tort.” – Heydon v NRMA Limited [2000] NSWCA 374; (2001) 51 NSWLR 1 at [146]-[147].

(The defendants did not profess to have a relevant “special skill”.)

48 “There is an aspect of such a question which may form an important part of the context in which a trial judge considers the issue of causation. In the way in which litigation proceeds, the conduct of the parties is seen through the prism of hindsight. A foreseeable risk has eventuated, and harm has resulted. The particular risk becomes the focus of attention. But at the time of the allegedly tortious conduct, there may have been no reason to single it out from a number of adverse contingencies, or to attach to it the significance it later assumed. Recent judgments in this court have drawn attention to the danger of a failure, after the event, to take account of the context, before or at the time of the event, in which a contingency was to be evaluated. This danger may be of particular significance where the alleged breach of duty of care is a failure to warn about the possible risks associated with a course of action, where there were, at the time, strong reasons in favour of pursuing the course of action.” - Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 at [16].

49 The statement of claim was filed on 9 December 2005 after the commencement of the Civil Liability Act 2002. However, the parties did not rely upon the provisions of that Act.

Overview

50 The ascertainment of the facts in this matter was rendered difficult by the passage of time (eg, it is 33 years since the signing of the 1977 mortgage). The memories of all witnesses were affected, at least to some degree, by a genuine failure of recollection. In some cases recollection was able to be refreshed by reference to contemporaneous notes or correspondence. However, often the notes were scant and were but a few lines recording an event, such as a conference which may have lasted for a substantial time and which included other matters now rendered important by the events subsequently occurring. In other cases, there was no note as to an event which may have been thought at the time to be unnecessary to record but now, in hindsight, having some importance.

51 The genuine failure of recollection was compounded by, on occasions, dubious claims of inability to recall. His Honour Hulme J commented on this in relation to the evidence given before him by the plaintiff. The same was apparent in the evidence the plaintiff gave before me particularly when a recollection may have been unhelpful to the plaintiff’s case. There were also occasions where evidence was given by the plaintiff and Mr Gattellaro which seemed highly improbable, eg in relation to the origin of the letter dated 30 December 2003; where clear evidence was given in cross examination and was sought to be resiled from when the implications became apparent and where the evidence of the plaintiff and Mr Gattellaro was influenced by hindsight.

52 I found the evidence of the defendants more acceptable but it too was subject to problems of recollection, and there were important areas where evidence was less than complete, eg the extent to which the defendants relied upon counsels’ advice, the taking of instructions after the bank amended its defence etc.

The issues

53 Counsel for the plaintiff identified the issues which were ultimately pressed on behalf of the plaintiff. They were:

(a) the defendants negligently failed to differentiate and identify the plaintiff’s instructions and to act on those instructions;

(b) the defendants were negligent in not advising the plaintiff that she should have met the bank’s claim and stood over or set to one side for later development the claim by Mr Gattellaro for failure to properly debit his accounts and the like;

(c) the defendants were negligent in that a Marston defence and/or an Amadio defence (in respect of the 1977 mortgage) was not pleaded, was not developed in the evidence and there was no explanation to the plaintiff about it;

(d) the defendants were negligent in failing to advise in respect of the bank’s offer of $650,000, and other offers on the way through.

54 Those issues are considered hereunder against a background that plaintiff’s counsel expressly did not seek to disturb Hulme J’s findings at any point. He did not challenge those findings except to the extent that he speculated as to what might have been had the matter been framed differently.

The failure of the defendants to differentiate and identify the plaintiff’s instructions and to act on those instructions

55 The plaintiff’s submission was essentially that at least until 5 June 2001 the defendants took their instructions from Mr Gattellaro and generally corresponded with him rather than with the plaintiff. It was contended that the defendants should have sought and obtained instructions directly from the plaintiff, and that, had they done so, the defence may have been better prepared and possibly the claim may have settled at an early stage without loss of the family home.

56 I do not agree. The services of the defendants were retained by Mr Gattellaro on behalf of himself and the plaintiff. He and the plaintiff had been happily married for many years. The plaintiff gave evidence she customarily left money matters to Mr Gattellaro. Mr Gattellaro gave instructions to the defendants on behalf of himself and the plaintiff. He did so with the plaintiff’s concurrence. Initially the only defence being pursued was one of set-off of moneys allegedly misdirected by the CBA. The plaintiff and Mr Gattellaro were in the same interest in this regard and the plaintiff, like Mr Gattellaro, was of the opinion that the set-off should be pursued.

57 The defendants assumed that the information provided by them to Mr Gattellaro would be conveyed to the plaintiff. In my opinion, the defendants were entitled to make that assumption, there being no indication of conflict between the plaintiff and Mr Gattellaro. The plaintiff, in evidence, conceded Mr Gattellaro would tell her of developments if asked, or if she needed to know. She said she would not have read letters addressed to Mr Gattellaro and herself.

58 On 17 July 2000 the plaintiff conferred with counsel retained on behalf of herself and Mr Gattellaro. She made no complaint and gave no instructions additional to those given by Mr Gattellaro. There were subsequent conferences with the plaintiff and she signed an affidavit verifying the defence. It may be the defendants conferred with the plaintiff prior to 17 July 2000. The second defendant had a recollection of conferring with the plaintiff shortly after instructions were obtained from Mr Gattellaro. However, as this was denied by the plaintiff and was not the subject of a file note, I make no finding on this aspect.

59 When the defendants were originally instructed there was no suggestion that the plaintiff or Mr Gattellaro was unaware of the nature of the mortgage or, in general terms, its effect. The only issue was whether the plaintiff and Mr Gattellaro were entitled to a set-off which equalled or exceeded the bank’s claim. In those circumstances, I do not consider that the defendants had a duty to go further than to seek relevant documents from Mr Gattellaro and the bank, a statement from Mr Gattellaro and to submit the matter to accountants for expert advice and to counsel for advice, all of which they did.

60 In my opinion, there was no breach of duty by the defendants in accepting and acting upon the instructions of Mr Gattellaro on behalf of himself and the plaintiff or in assuming that their advice to Mr Gattellaro would be available to the plaintiff.

61 The defendants ceased to act for the plaintiff and Mr Gattellaro from 15 March 1994 to 20 March 1997 (see [91](i) hereof). At that time the defendants, in my opinion, were entitled to assume Mr Gattellaro would have informed the plaintiff that the defendants had ceased to act for them. On 20 March 1997 Mr Gattellaro contacted the defendants and they agreed to resume acting for him and the plaintiff. New counsel, Mr McVay, was engaged.

62 Subsequently, a Contracts Review Act defence was pleaded. This was the result of a conference between counsel and Mr Gattellaro. This defence was pleaded and argued on hearing before Hulme J. No loss resulted from this issue not being pleaded at an earlier time.

63 The defendants, on 17 April 1991, suggested to Mr Gattellaro that settlement at, say, $100,000 should be considered. This suggestion was rejected by Mr Gattellaro. In my opinion, there was no acceptable evidence the plaintiff, if individual advice had been given to her, would have instructed the defendants to make an offer.

64 In this regard both the plaintiff and Mr Gattellaro at that time believed that the defence and cross claim were meritorious and would result in their success in the litigation. They were strengthened in this conclusion by advice from counsel that there were good prospects of success at least as to the set off of the $42,873.99 plus interest. A second counsel described their case as “easy”. Additionally, they would have needed to borrow to pay part of any such settlement as they had only $43,669 in their investment account as at December 1990.

65 Similarly, I do not accept the plaintiff’s evidence that in July 1992 she would have been prepared to settle had she known her house was at risk and had she been told of an offer of $280,000. I accept the defendants’ submission that the plaintiff well knew at this time that her house was at risk and she had so known since January 1989 when served with the Real Property Act notice. She conceded this in her evidence, only to later resile from it. Moreover, I do not accept that Mr Gattellaro, who was notified of the bank’s offer, would have sanctioned any such settlement or that the plaintiff would have settled at that time contrary to his wishes. The plaintiff’s evidence to the contrary was, in my opinion, the product of reconstruction with the benefit of hindsight. After Mr McVay was briefed he conferred with the plaintiff and Mr Gattellaro on a number of occasions prior to the hearing by Hulme J. The plaintiff and Mr Gattellaro were advised by Mr McVay that they were unlikely to succeed in resisting the bank’s claim. Despite this advice, the plaintiff took no steps to attempt to settle the matter. One cannot infer from the fact the plaintiff made offers of settlement after Hulme J’s judgment was published that she would have made offers prior thereto if she was separately advised by the defendants.

66 In my opinion, the plaintiff has not established any breach of duty or retainer or that the plaintiff suffered loss as a result of the defendants’ acts or omissions in not taking instructions directly from the plaintiff.

Meet bank claim and pursue Mr Gattellaro’s claim separately

67 The plaintiff submitted that the defendants should have advised the plaintiff that the claim by Westpac should be paid as it was indefensible and the claim by Mr Gattellaro should be separately pursued, thus preventing the accumulation of interest liability.

68 In the defendants’ opinion, settlement was the preferable course as it was likely to result in the plaintiff and Mr Gattellaro being afforded a credit for the set off in an overall compromise with the bank, particularly as the bank did not have documents to directly disprove the plaintiff’s and Mr Gattellaro’s set off claim.

69 Whilst taking the action suggested by the plaintiff would have halted the accretion of interest, it would have involved a number of detrimental aspects including:

(a) having to sue the bank and prove mis-crediting when the onus of proof was on the plaintiff and Mr Gattellaro and the absence of the bank file created an evidentiary difficulty;

(b) payment of the bank’s claim would indicate the plaintiff and Mr Gattellaro had little confidence in the set off argument;

(c) loss of the right to assert the Contracts Review Act defence which, if successful, may have resulted in the plaintiff not being liable for that part of the debt attributable to Falgat;

(d) the possibility the bank may use limitation defences;

(e) incurring additional legal costs;

(f) the need to raise the amount claimed by Westpac which may not have been possible at that time;

(g) the plaintiff and Mr Gattellaro would have had to borrow the greater part of the $280,000 in circumstances where if the set off had succeeded they would have had to borrow nothing as the bank would not have secured judgment against them if, as the plaintiff and Mr Gattellaro believed, the set off in fact equalled or exceeded Westpac’s claim.

70 The defendants did not seek instructions from the plaintiff and Mr Gattellaro on this issue. If the defendants had given advice to the plaintiff and Mr Gattellaro on this aspect it would have been not to follow that course but to settle all aspects of the matter together. It was probable the instructions from the plaintiff and Mr Gattellaro at that time would have been in accordance with that advice for the reasons set out above. Any suggestion to the contrary, in my opinion, is simply a reflection of hindsight reasoning.

71 It was submitted by the defendants, and I accept, that as the course suggested by the plaintiff was obvious and could have been followed by the plaintiff had she wished, it was not a breach of duty on the part of the defendants not to raise the issue with the plaintiff unless the plaintiff sought advice in that regard. This is particularly so as there was evidence the plaintiff and Mr Gattellaro were aware of the availability of this course of action and that there was evidence that the plaintiff and Mr Gattellaro were aware interest would continue to accrue until the debt was repaid (though the plaintiff later resiled from that concession).

72 In my opinion, the plaintiff has not established breach by the defendants in this regard or that the defendants’ acts or omissions were causative of loss.

The Marston defence and/or an Amadio defence in respect of the 1977 mortgage was not pleaded, was not developed in the evidence and there was no explanation to the plaintiff about it

73 It was not until after Mr McVay was briefed that a possible defence under the Contracts Review Act was considered. Mr McVay’s initial conference did not indicate that any such defence was available but following the conference Mr Gattellaro provided different information following which the defence was pleaded. The evidence in support of this defence was to come from the plaintiff and Mr Gattellaro. No additional evidence was required to be sought.

74 Additional issues were raised when Westpac, by its defence to the amended cross claim, contended that the Contracts Review Act defence in respect of the 1986 mortgage must fail as far as the plaintiff was concerned by reason of Mr Gattellaro’s guarantee being “picked up” by the all moneys clause in the 1977 mortgage with the consequence that any liability of the plaintiff and Mr Gattellaro for Falgat’s debts already existed and was not increased by the 1986 mortgage.

75 This development raised for consideration the signing of the guarantee, a possible Marston defence or an Amadio type claim in respect of the 1977 mortgage.

Signing the guarantee

76 There was an absence of objective proof as to whether the guarantee was signed by the plaintiff and/or Mr Gattellaro, and its terms, as the original guarantee could not be found and all copies had apparently been lost.

77 The plaintiff gave evidence that she did not sign the guarantee. She gave evidence that insofar as she had knowledge, Mr Gattellaro had not signed the guarantee. Mr Gattellaro gave evidence he had not signed the guarantee and had so informed the defendants.

78 There was some evidence from a handwritten note of the defendants that both Mr Gattellaro and the plaintiff may have signed a guarantee. There was some evidence in documents discovered in 1991 by Westpac that Mr Gattellaro had signed a guarantee. The defendants had inspected the bank’s documents on 2 April 1991.

79 At the time the defendants would have had the denials of the plaintiff and Mr Gattellaro in circumstances where there was some evidence which suggested the possibility the evidence may not be accepted. However, there was nothing more the defendants could reasonably do by way of preparation to establish that Mr Gattellaro had not signed the guarantee.

80 No breach of any duty to prepare this aspect of the matter is apparent.

The Marston defence

81 Although the proceedings were adjourned because of the amended defence to the amended cross claim, there was little evidence as to what occurred by way of consideration of this aspect of the matter during the adjournment. There were conferences with counsel but the second defendant’s evidence was that he had little recollection of the steps taken by him.

82 The High Court acknowledged that as a matter of law the plaintiff and Mr Gattellaro bore the onus of establishing that the Marston defence applied to exclude liability in Mr Gattellaro for the guarantee with the consequence the plaintiff and Mr Gattellaro had to prove that there was a joint promise in the guarantee.

83 In the absence of the guarantee document, these matters could not be established except by oral evidence. However, such evidence could not be given by the plaintiff or Mr Gattellaro, each of whom denied seeing the guarantee document. There was no evidence available to the plaintiff and Mr Gattellaro to establish this matter unless through cross examination of the bank’s witnesses.

84 The plaintiff alleges the defendants were negligent in not pleading this defence. The plaintiff submitted that it was negligent of the defendants in these circumstances not to plead a “fallback” position and to lead from Mr Gattellaro evidence such as

“The bank said you did sign a guarantee, accepting that you don’t recall it, what would your attitude have been if your wife was expected to sign that guarantee and did not sign it?”

85 The defendants’ counsel submitted that a husband would not want his wife to be also caught by a guarantee and thus he would not make it a condition that she sign. Additionally, as, on the evidence of the plaintiff and Mr Gattellaro, there was no guarantee, such evidence could not be credibly led from Mr Gattellaro. In my opinion, there was no failure to take further steps to prepare the matter in this regard. In any event, no loss was suffered by the plaintiff or Mr Gattellaro by reason of not pleading a Marston defence as the High Court determined that issue notwithstanding the absence of an appropriate pleading.

Amadio type defence

86 It was submitted that the plaintiff and Mr Gattellaro in respect of the 1977 mortgage should have relied upon the equitable principles which provide relief against unconscionable dealings as expounded in such cases as Commercial Bank of Australia Limited v Amadio (1982-83) 151 CLR 447 and Garcia v National Australia Bank Limited [1998] HCA 48; (1998) 194 CLR 395.

87 The evidence did not establish there was any unconscionability in the transaction. It may be accepted the plaintiff’s English was less than perfect and her occupation was that of a dressmaker. However, she was not unintelligent. She had previously entered into mortgages for the purpose of gain to herself and her husband and insofar as the relevant transaction was concerned a solicitor, Mr Caruana, acted for both the plaintiff and Mr Gattellaro. Mr Gattellaro gave the following evidence:

“Q. And can I, just stopping there, ask you whether Mr [Caruana] gave you any advice as to the terms of the second mortgage, that is, the mortgage over your house at Chiswick prior to the completion of the purchase of the Marrickville property?
A. Yes.

Q. Did he give you advice as to the terms of the second mortgage?
A. I don't remember. I don't remember.

Q. He might have given you some advice, might he?
A. Probably, yes.

Q. And you're saying he probably would have given you some advice about the CBA bank second mortgage; is that right?
A. Yes.”

The plaintiff gave evidence she did not see Mr Caruana. There was no evidence of untoward conduct by the bank or that an all moneys clause was unusual for a transaction of that type. In my opinion, the plaintiff has not established she would have succeeded in such a defence if it had been pleaded and relied upon.

88 The purpose of the bank’s amended defence was to defeat the plaintiff’s and Mr Gattellaro’s Contracts Review Act claim by establishing that the liability of the plaintiff and Mr Gattellaro was not increased by the 1986 mortgage, thus avoiding the need to determine the factual issues as to whether the plaintiff and Mr Gattellaro were entitled to relief under the Contracts Review Act.

89 The sole purpose in submitting that the guarantee had not been signed, in relying upon a Marston defence, or in seeking relief in respect of the 1977 mortgage was to ensure that the Contract Review Act basis upon which the plaintiff and Mr Gattellaro sought to avoid liability in respect of the Falgat indebtedness remained open to be argued.

90 The factual basis for the Contract Review Act defence had been argued before Hulme J. It had failed. I have had the advantage of reading the material and hearing the plaintiff and Mr Gattellaro give evidence. In my opinion, Hulme J’s conclusion was correct. It is thus irrelevant whether the defendants should, or could, have taken any further action in respect of any of the three matters raised as no loss was caused by any act or omission of the defendants in this regard. I note also that the plaintiff does not challenge the findings of Hulme J.

Failure to advise in respect of Westpac’s offer of $650,000 and other offers

Settlement offers prior to the grant of special leave to appeal in the High Court

91 During the period between February 1989 when the defendants were retained and the delivery of judgment by Hulme J on 11 August 2000 the following offers of settlement were made or discussed:

(a) on 17 April 1991 the defendants wrote to Mr Gattellaro advising of counsel’s opinion that they would probably succeed in their claim for the $42,873.99 but that interest was running on the money claimed by the bank and suggesting making a settlement offer to the bank of say $100,000;

(b) on 4 September 1991 Mr Gattellaro instructed the defendants to make an offer that each party pay their own costs but on 6 September 1991 Mr Gattellaro instructed the defendants not to make that offer;

(c) on 25 September 1991 Mr Gattellaro instructed the defendants to inform Westpac he would take $50,000 in settlement;

(d) on 27 September 1991 an offer was put to Westpac’s solicitors of settlement for a verdict in favour of Mr Gattellaro in the sum of $50,000, each party to pay their own costs;

(e) in July 1992 Mr Gattellaro rejected a counter offer by Westpac to settle for $280,000, inclusive of costs and on 3 August 1992 a letter was sent to Westpac’s solicitor rejecting the offer;

(f) on 8 October 1992 the defendants suggested Mr Gattellaro should consider the matter carefully so that the defendants might arrange a conference to formalise a final attempt at settlement;

(g) on 15 July 1993 the defendants raised with Mr Gattellaro the question of independent commercial arbitration;

(h) on 6 December 1993 Mr Gattellaro suggested the bank should pay him $20,000-30,000;

(i) on 15 March 1994 a settlement conference took place between Mr Gattellaro, the defendants and counsel with the representatives of Westpac at the Westpac solicitors’ office. Mr Gattellaro was not prepared to contribute to any settlement and left the meeting after being abusive to his legal representatives. On the defendants’ evidence, which I prefer to Mr Gattellaro’s on this point, the defendants ceased to act for the plaintiff and Mr Gattellaro from that time until 20 March 1997 when Mr Gattellaro contacted the defendants and they agreed to resume acting for him and the plaintiff. It was agreed that new counsel, Mr McVay, should be briefed;

(j) on 11 August 1997 the defendants wrote to Mr Gattellaro stating it was in everyone’s interest if some satisfactory settlement could be arranged;

(k) on 30 September 1997 the defendants wrote to Mr Gattellaro informing him of Mr McVay’s advice that they were most unlikely to be successful in resisting the bank’s claim and urging instructions to endeavour to settle the matter on the best terms reasonably obtainable.

92 During the period from the date of Hulme J’s judgment of 11 August 2000 to the date of judgment of the Court of Appeal (6 April 2001) the following offers of settlement were made or discussed:

(a) on 30 August 2000 the defendants in a letter to the plaintiff and Mr Gattellaro confirmed there were no grounds for appeal. They suggested the plaintiff and Mr Gattellaro attempt to negotiate with the bank to sell the house and retain an amount of, say, $300,000 to purchase an alternative residence. This suggestion was rejected by the plaintiff and Mr Gattellaro;

(b) on 31 August 2000 instructions were received from Mr Gattellaro to offer to settle for $200,000. The plaintiff indicated she did not consider that offer would be accepted and later gave instructions to put $250,000 which was offered to Westpac.

93 During the period from the date of judgment of the Court of Appeal (6 April 2001) to the grant of special leave to appeal the following offers of settlement were made or considered:

(a) on 6 June 2001 the defendants (at the request of the plaintiff) inquired of Westpac’s solicitors whether the matter could be settled for one-half of the value of the property;

(b) on 5 February 2002 the defendants wrote to the plaintiff confirming counsel’s advice that Mr Gattellaro had no realistic prospects in the High Court and the plaintiff had an arguable case and her prospects of gaining special leave were 50 percent. On 19 February 2002 Mr Gattellaro was admitted to hospital following a heart attack;

(c) on 12 March 2002 the plaintiff gave instructions to the defendants to settle for $250,000. That offer was conveyed to the solicitors for Westpac on 13 March 2002;

(d) on 29 April 2002 the solicitors for Westpac rejected the offer and made a counter offer of $550,000. That offer was recommended by the defendants and counsel to the plaintiff;

(e) on 21 May 2002 the defendants wrote to the plaintiff and Mr Gattellaro stating Bank’s offer [of $550,000] is extraordinarily generous. If you wish we will see if the bank will accept a lower amount but if not we unreservedly recommend accepting. Mr McVay concurs. If rejected, cannot be revived. Counter offer constitutes rejection;

(f) on 22 May 2002 an offer was made to Westpac to settle for $400,000. The offer was rejected and no counter offer was made;

(g) on 29 May 2002 the plaintiff offered $450,000 or 50 percent of the proceeds of sale of the house;

(h) on 31 May 2002 the defendants wrote to the plaintiff and Mr Gattellaro stating that the offer of $550,000 should have been accepted;

(i) on 3 June 2002 the offers were rejected. An offer of 75 percent of the net sale proceeds was made by Westpac;

(j) on 4 June 2002 the plaintiff offered $550,000;

(k) on 6 June 2002 the offer was rejected. Westpac indicated that the offer of 75 percent of sale proceeds remained on foot;

(l) on 26 June 2002 the defendants informed the solicitors for Westpac that the offer of $550,000 remained open. Alternatively, $400,000 within one month to stay the enforcement;

(m) on 26 June 2002 Westpac offered to settle for $750,000;

(n) on 26 June 2002 the plaintiff responded with $575,000;

(o) on 16 July 2002 Westpac offered to settle for $750,000;

(p) on 19 November 2002 Westpac indicated open to negotiations in the vicinity of $750,000;

(q) on 6 December 2002 the defendants had a telephone conversation with the plaintiff suggesting an offer of $650,000;

(r) on 5 February 2003 the plaintiff reoffered $550,000. On 6 February 2003 Mr Gattellaro was again admitted to hospital with heart problems;

(s) on 10 February 2003 the offer was rejected;

(t) on 11 February 2003 the plaintiff offered to settle for $600,000;

(u) on 11 February 2003 Westpac rejected the offer;

(v) on 11 February 2003 the plaintiff offered $650,000. This was rejected by Westpac on 12 February 2003.

94 It was submitted by counsel for the plaintiff that

“she had the ability to raise money and that she did, in fact, raise money through her family. We submit there’s no reason to assume then back in 1990s with – where they had a substantial amount of money to pay down a substantial proportion of their indebtedness that they could not raise the balance and I don’t think that proposition was put to her in any event.”

95 Plaintiff’s counsel conceded that the defendants’ advice given on 29 April 2002 that the plaintiff and Mr Gattellaro should settle for $550,000 was appropriate and correct. The plaintiff chose not to act on that advice but to make counter offers which resulted in the plaintiff’s counter offer of $550,000 when ultimately made on 4 June 2002 being rejected and the increase of Westpac’s offer to $750,000. The plaintiff was well aware that the making of counter offers had the effect of causing the original offer to lapse. Any loss flowing from the failure to accept the offer of $550,000 was due to the actions of the plaintiff and Mr Gattellaro. In my opinion, it has not been established the defendants failed to properly advise as to settlement.

The offer of $650,000

96 Special leave to appeal to the High Court was granted on 14 February 2003, the subsequent hearing taking place on 19 June 2003 with judgment given on 11 February 2004.

97 The only offer of settlement made after the grant of special leave was an offer made by Westpac’s solicitors who, by letter dated 15 May 2003, offered to settle for $650,000. The offer was expressed to be open until 5.00 pm on 20 May 2003. The plaintiff conceded she did not instruct the defendants to attempt to settle once the offer of $650,000 was rejected by Westpac on 12 February 2003.

98 On 19 May 2003 the defendants referred the offer to counsel for his comment. Counsel required a break-up be obtained from Westpac’s solicitors. On 19 May 2003 the defendants asked Westpac’s solicitors for a break-up of the figure of $650,000. Westpac’s solicitors responded to this request on 20 May 2003 and extended the time for acceptance of the offer to noon on 21 May 2003. On 20 May 2003 the first defendant telephoned counsel to inform him of the break-up.

99 In my opinion, the defendants owed a duty to the plaintiff to take reasonable care to inform her and/or Mr Gattellaro or Anthony of the offer within a reasonable time so as to enable the plaintiff and Mr Gattellaro to consider acceptance or rejection of the offer.

100 The first defendant gave evidence that he endeavoured to contact the plaintiff or Mr Gattellaro on 20 May 2003 but was unsuccessful. A note in his file confirmed this evidence.

101 The first defendant gave evidence he conveyed Westpac’s offer to the plaintiff’s son prior to the offer lapsing. He said he confirmed with the son that his parents would not be interested in accepting the offer.

102 The plaintiff’s son had been authorised by the plaintiff to pass and receive messages to the plaintiff from the defendants because the plaintiff was at work and Mr Gattellaro was ill.

103 The first defendant’s file note recorded the conversation with the plaintiff’s son. It was undated. It stated:

“To Gattellaro
N/a Anthony
Dad’s in hospital gain. Got to have balloon put in.
SB Bank had made an offer of $650,000 but not open for long – ran past Graham but then couldn’t get answer to your place. Didn’t think parents would be interested at that figure.
‘No, that’s right’
Cont 19/6 Virgin flight if get in early $49
Dad will try and get down – not aware
Confirmed 19/6”

104 Counsel for the plaintiff contended that that offer was not conveyed to the son until after the time for accepting the offer had expired.

105 Plaintiff’s counsel relied upon the following evidence in support of the submission:

(a) the file note was in the past tense;

(b) the plaintiff, in re-examination, denied any knowledge of the offer until the final hearing in the High Court;

(c) a discharge letter from Concord Hospital (Exhibit L) recorded Mr Gattellaro was a patient in that hospital from 23 May 2003 to 29 May 2003 complaining of chest pains;

(d) the defendants did not call Anthony to give evidence.

106 The evidence relied on by plaintiff’s counsel is largely equivocal for the following reasons:

(a) part of the file note was in the past tense. However, the past tense was used only to describe matters then past. No tense was ascribed to the critical words “but not open for long”. They are as consistent with the offer still being open as with it having lapsed. However, if the critical words were intended to be in the present tense, it might have been expected to be accompanied by a note requiring the son to get the plaintiff’s or Mr Gattellaro’s instructions or at least to inform them of the offer;

(b) the plaintiff gave evidence in chief that she was aware of the settlement offer but chose not to accept it as she wished to proceed to the hearing in the High Court. It was only in re-examination that the version that she had not been aware of the offer until the hearing in the High Court emerged;

(c) the hospital record made no reference to a balloon being put in which suggests the conversation between the first defendant and Anthony occurred some time other than between 23 May 2003 and 26 May 2003. However, it may be Anthony was mistaken as to the treatment proposed or that some parts of the treatment actually proposed or involved a procedure that could be referred to as putting in a balloon. No other medical or hospital records were produced in evidence to establish an attendance by Mr Gattellaro at hospital on 20 or 21 May 2003;

(d) plaintiff’s counsel submitted that if the telephone conversation between the first defendant and Anthony occurred before the offer lapsed, it was to be expected the defendants would have called Anthony. However, Anthony was very much “in the plaintiff’s camp”. It could not be expected he would be called to give evidence by the defendants. However, the failure of the plaintiff to call Anthony permits a Jones v Dunkel submission to be made by the defendants against the plaintiff.

107 The above evidence must be weighed against the evidence of the first defendant which was firm on this issue. The plaintiff bears the onus of proof. However, there was no evidence Mr Gattellaro was in hospital on 21 or 22 May 2003. Accordingly, in my opinion, it is more likely than not that the telephone conversation with Anthony occurred after the bank’s offer had lapsed.

108 However, if there was a breach of a duty to inform the plaintiff of the offer in time, such breach was not causative of loss to the plaintiff as she would not have accepted the offer nor made any counteroffer at all, or at a level acceptable to the bank. I reach that conclusion for the following reasons:

(a) the plaintiff gave evidence:


“Q. You don't say ‘we want to try again and settle now that we've won the special leave application.’?
A. No, we didn't want - we want to go to the end then. We thought we've come this far, we might as well go to the High Court.

…

Q. So they offer you $650,000?
A. Yes.

Q. You wanted to go on with the hearing?
A. Yes

Q. And you didn’t want to pay them $650,000?
A. Yes.”

[In re-examination the plaintiff alleged confusion in giving this answer. I do not accept that this was the case]:


“Q. You've already told us you've got the message about this offer of 650.
A. Yes.

Q. And you've already told us you weren't interested in it.
A. At this point, yes.

Q. And you weren't interested in paying the bank $650,000 a month before the hearing?
A. No, he was prepared to pay the offer before.

Q. You told us that you had decided to let the court decide because--
A. At that stage, yes.

Q. This is four weeks before the hearing?
A. Yes.

Q. At that stage you just weren't interested in settling by paying $650,000?
A. Yes.”


(b) the plaintiff had made numerous counteroffers before ultimately offering $650,000 as the maximum offer. In making those offers she was in a position of perceived weakness. Her position was much stronger at this stage, having obtained a grant of special leave. If the plaintiff had been interested in further pursuing the question of settlement, she would have contacted the defendants to obtain their advice or to make an offer during the year between the grant of special leave and the ultimate decision of the High Court. Yet no offer or inquiry was made by her during the period after the grant of special leave up to the decision of the High Court in the substantive matter;

(c) a file note dated 30 May 2003 of a conversation between the defendants and Mr Gattellaro included:

“Sol other side offered $650,000 inclusive
He not interested ‘No way’. They pay me. I have proof 1½ M. Found docs on Petersham.”

Advocate’s immunity – general principles

109 The principles as to an advocate’s immunity may be briefly stated as follows:

(a) An advocate is immune from suit whether for negligence or otherwise in the conduct of a case in court – Giannarelli v Wraith [1988] HCA 52; (1987-1988) 165 CLR 543; D’Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1 at [85].

(b) The same immunity attaches to a solicitor acting as an advocate in court as attaches to a barrister – Giannarelli at p 559, D’Orta at [89]-[91].

(c) The immunity extends to work done out of court which leads to a decision affecting the conduct of the case in court. The protection extends to work so intimately connected with the conduct of the case in court that it can fairly be said to be a preliminary decision affecting the way that case is to be conducted when it comes to a hearing – Giannarelli at p 560, D’Orta at [86].

(d) The criterion adopted in Giannarelli accords with the purpose of the immunity. It describes the acts or omissions to which immunity attaches by reference to the conduct of the case. And it is the conduct of the case that generates the result which should not be impugned – D’Orta at [87].

(e) In Giannarelli at 559 Mason CJ said that to limit the immunity so that it ended at the court room door so that the protection does not extend to preparatory activities, such as the drawing and settling of pleadings and the giving of advice on evidence, would be artificial in the extreme.

(f) In Keefe v Marks (1989) 16 NSWLR 713 at 718 the Court of Appeal, applying Giannarelli , held that the common law immunity of barristers from liability for negligence extended to out of court work intimately connected with or ancillary to the conduct of a case in court. Such out of court work for a barrister briefed to appear at a hearing would include:

“…such matters as interviewing the plaintiff and any other potential witnesses, giving advice and making decisions about what witnesses to call and not to call, working up any necessary legal arguments, giving consideration to the adequacy of the pleadings and, if appropriate, causing any necessary steps to be undertaken to have the pleadings amended.”

(g) In Biggar v McLeod [1978] 2 NZLR 9 the New Zealand Court of Appeal held the settlement of an action during its progress in court can be regarded as work related to the conduct of litigation. [Subsequent authority – Lai v Chamberlains [2005] 3 NZLR 291 concluded advocates’ immunity was no longer part of the law of New Zealand.] Biggar was referred to, with apparent approval, by McHugh J in D’Orta at [154]-[156].

110 The defendants rely upon the advocates’ immunity in respect of their conduct of the matter.

111 The plaintiff submitted:

“Our central proposition on immunity is that while we accept that we would not be entitled to challenge the decision not to pursue the ’77 mortgage and the guarantee filed by means of the reply, if that had been the subject of cerebration and consideration by the defendants or counsel.
If they had thought that through and sought instructions on it or provided advice about it and made a forensic decision about it, then we would not be able to challenge that decision under the immunity…Certainly we say the immunity does not provide any comfort to the defendants in the circumstances of this matter and that the breaches complained of in respect to conceptualisation of the case and advising in respect of it go beyond forensic decisions but are the entire basis on which the advice was given transcend the realm of forensic decisions to bloom into the negligent failure to advise.”

112 It is clear from Giannarelli and D’Orta that the immunity attaches to omissions as well as acts by legal practitioners. An omission to consider or fully consider matters such as the extent of instructions, the defences to be pursued, the adequacy of pleadings, the seeking and interviewing of potential witnesses, the settling of the proceedings are within the immunity. The immunity is applicable in cases involving a failure by a practitioner to turn his or her mind to a particular matter – see Keefe v Marks at 718.

113 That the immunity rule should apply in a case such as the present is consistent with the finality principle which provides the primary justification for the immunity. In my opinion, the matters complained of by the plaintiff fall within the immunity rule.

Conclusion

114 In my opinion, the plaintiff has not established her claim. There will be judgment for the defendants with costs.

Orders

115 The orders of the Court are:

1. Judgment for the defendants.

2. Plaintiff to pay the defendants’ costs.

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