Goddard Elliott v Fritsch
[2012] VSC 87
•14 March 2012 (revised 16 March 2012)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2005 8154
| GODDARD ELLIOTT (A FIRM) | Plaintiff |
| v | |
| PAUL GERHARDT FRITSCH | Defendant |
| PAUL GERHARDT FRITSCH | Plaintiff by counterclaim |
| v | |
| GODDARD ELLIOTT (A FIRM) | First defendant by counterclaim |
| NOEL ACKMAN QC | Second defendant by counterclaim |
| CLIVE ROSEN | Third defendant by counterclaim |
| KEVIN FERGUSON | Fourth defendant by counterclaim |
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JUDGE: | BELL J | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 29 September 2010 to 5 October 2010; 7 October 2010 to 29 October 2010; 3 November 2010 to 4 November 2010; 8 November 2010; 22 November 2010 to 24 November 2010. | |
DATE OF JUDGMENT: | 14 March 2012 (revised 16 March 2012) | |
CASE MAY BE CITED AS: | Goddard Elliott v Fritsch | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 87 | 1st Revision: 16 March 2012 |
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PROFESSIONAL LIABILITY – solicitors – property proceeding in Family Court of Australia – settled at door of court on terms overly generous to wife – action by husband for damages for lost opportunity – valuation, taxation and other evidence not prepared in time for hearing – instructions taken and acted on from client lacking mental capacity – whether solicitors should have known – whether breach of duty of care – whether breach of fiduciary duty – whether coercion – pre-hearing representations – whether in trade or commerce – whether misleading and deceptive conduct – advocates’ immunity – whether applicable – assessment of damages for lost opportunity – notional trial in Family Court – whether evidence of subsequent facts admissible – apportionment of damages between concurrent wrongdoers – rule in Jones v Dunkel – husband’s senior counsel not called by solicitor – whether senior counsel in camp of solicitor – affidavit of husband’s deceased father – whether admissible hearsay evidence - Fair Trading Act1985 (Vic), s 9(1) – Wrongs Act 1958 (Vic), pt IVAA – Evidence Act 2005 (Vic), s 135.
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiff and first defendant by counterclaim | Ms Aileen Ryan | Obst Legal |
| For the defendant and plaintiff by counterclaim | Dr John Bleechmore Mr Peter Batey | Mulcahy’s Solicitors |
| For the second defendant by counterclaim | Mr James Peters SC Mr Jonathan Davis | Lander & Rogers |
| For the third defendant by counterclaim | Ms Kim Knights | Lander & Rogers |
| For the fourth defendant by counterclaim | Mr Tim Walker | DLA Phillips Fox |
TABLE OF CONTENTS
INTRODUCTION............................................................................................................................ [1]
PLEADED CLAIMS.......................................................................................................................... [4]
Goddard Elliott (as plaintiff)..................................................................................................... [4]
Paul Fritsch (as defendant and plaintiff by counterclaim)..................................................... [5]
Goddard Elliott (as first defendant by counterclaim)........................................................... [15]
Noel Ackman QC and Clive Rosen (as second and third defendants by counterclaim).. [22]
Kevin Ferguson (as fourth defendant by counterclaim)....................................................... [23]
Issues for determination........................................................................................................... [24]
COURSE OF THE TRIAL............................................................................................................... [26]
Hearing and evidence............................................................................................................... [26]
Settlements between Paul Fritsch and Noel Ackman QC, Clive Rosen and Kevin Ferguson..... [29]
Evidentiary rulings.................................................................................................................... [32]
Failure of Goddard Elliott to call Noel Ackman QC......................................................... [32]
Admissibility of affidavit evidence of Arno Fritsch........................................................... [50]
Credit issues.............................................................................................................................. [70]
Paul Fritsch........................................................................................................................... [70]
Peter Walton’s letter of 17 May 1996............................................................................. [70]
Understating income and a taxation issue.................................................................... [74]
Beneficial ownership of Protoline.................................................................................. [77]
Obtaining a copy of Lianne Fritsch’s case summary.................................................... [79]
Failing to pay fees........................................................................................................... [81]
Evasive demeanour in court.......................................................................................... [82]
Paul Fritsch’s retirement................................................................................................. [84]
Fire sale of assets............................................................................................................. [85]
Peter Walton......................................................................................................................... [86]
PROPERTY SETTLEMENT PROCEEDING IN FAMILY COURT........................................... [90]
Determining property settlement applications...................................................................... [90]
Marriage between Paul and Lianne Fritsch........................................................................... [96]
Fritsch family businesses......................................................................................................... [99]
Peter Walton’s letter dated 17 May 1996.............................................................................. [102]
Lianne Fritsch’s property settlement application (September 2002)................................. [119]
Engagement of Goddard Elliott............................................................................................. [120]
Paul Fritsch removed as director of APN Nominees (September 2002)........................... [122]
Family Court interim orders (September 2002).................................................................... [124]
Lianne Fritsch seeks further discovery (December 2002).................................................. [127]
Arno Fritsch demands repayment of Protoline loans.......................................................... [129]
Family Court orders for sale of 5/7 Elm Grove, Mount Waverly (December 2002)......... [133]
Lianne Fritsch seeks further discovery (May 2003)............................................................. [135]
Goddard Elliott seeks medical report on Paul Fritsch’s mental health (May 2003)........ [137]
Paul Fritsch claims Protoline debts as liabilities (June 2003)............................................ [138]
Paul Fritsch seeks advice from Goddard Elliott on Protoline debts (July 2003).............. [141]
Lianne Fritsch’s further difficulties getting full and frank disclosure (August 2003).... [143]
Family Court makes further orders for discovery (September 2003)................................ [146]
Peter Walton’s ‘perjured’ affidavit (17 September 2003).................................................... [149]
June Wilson’s first report (October–December 2003)......................................................... [155]
Kevin Ferguson engaged by Goddard Elliott (October 2003)............................................. [156]
Family Court orders for sale of 7/7 Elm Grove, Mount Waverly (October 2003)............. [161]
$41,000 reserved for capital gains tax reserve (December 2003)....................................... [165]
Kevin Ferguson’s first report (9 December 2003)................................................................ [166]
Disclosure at mediation of Peter Walton’s letter of 17 May 1996 (11 December 2003).. [169]
Lianne Fritsch seeks indemnity costs (December 2003)..................................................... [183]
Paul Fritsch’s requests for expert tax law advice (December 2003–February 2004)....... [184]
Peter Walton’s advice about taxation status of Protoline debts (December 2003).......... [189]
Andrew Goddard’s concerns re Paul Fritsch’s mental health (from January 2004)........ [192]
Hearing given priority (February 2004)................................................................................ [197]
Offers of settlement (February-March 2004)....................................................................... [201]
Peter Walton’s further advice on taxation status of Protoline debts (5 March 2004)...... [205]
Pre-trial directions and preparing for final hearing (March-June 2004)........................... [206]
Goddard Elliott seeks co-operation of Norbert Fritsch (April 2004)................................. [209]
June Wilson’s revised report (April 2004)............................................................................ [211]
Paul Fritsch again asks Goddard Elliott to get expert taxation advice (April 2004)........ [213]
Paul Fritsch receiving psychiatric treatment (May 2004).................................................... [215]
Paul Fritsch withdraws $100,000 in superannuation (May 2004)...................................... [218]
Protoline loans conceded and taxation claimed as contingent liability (May 2004)........ [219]
Paul Fritsch’s financial statement and recasting of case (May 2004)................................ [221]
Parties’ affidavits and reports (June 2004)........................................................................... [232]
Kevin Ferguson re-engaged by Goddard Elliott.................................................................. [235]
First pre-trial conference and further preparation (30 June-28 July 2004)....................... [238]
Second pre-trial conference and final directions (29 July 2004)........................................ [250]
Preparing for final hearing on 13 September 2004 (3 August-8 September 2004)........... [258]
Dr Velakoulis’s urgent report on Paul Fritsch’s mental health (9 September 2004)....... [278]
Round table conference and Paul Fritsch’s declining health (9-10 September 2004)..... [284]
Husband’s adjournment application (13 September 2004)................................................ [307]
Further preparation for final hearing (13-15 September 2004).......................................... [323]
Ruling sought from Ethics Committee (15-16 September 2003)......................................... [336]
Kevin Ferguson’s final report (16 September 2004)............................................................ [349]
Hearing and settlement (16 September 2004)...................................................................... [351]
Kevin Ferguson reworks asset pool after settlement (16-17 September 2004)................ [364]
Noel Ackman QC’s explanatory memorandum (23 September 2004)............................... [367]
Paul Fritsch complains about settlement (September 2004 onwards)............................... [378]
Paul Fritsch seeks advice about reopening the case........................................................... [382]
Paul Fritsch accesses Protoline money to pay Lianne Fritsch (February 2005)................ [385]
Transactions intended to extinguish Protoline debts (mid- 2006)..................................... [386]
NEGLIGENT PREPARATION OF CASE.................................................................................. [399]
Plaintiff’s claim....................................................................................................................... [399]
Duty of care.............................................................................................................................. [405]
Retainer between Paul Fritsch and Goddard Elliott........................................................... [420]
Business valuation and expert taxation evidence............................................................... [425]
Parties’ submissions.......................................................................................................... [425]
Preliminary observations.................................................................................................. [436]
Business valuation evidence.............................................................................................. [443]
Expert taxation evidence.................................................................................................... [451]
Attendance of necessary witnesses...................................................................................... [462]
Correcting notation of who prepared Paul Fritsch’s financial statement......................... [469]
Lianne Fritsch’s claim for indemnity costs........................................................................... [473]
Paul Fritsch’s post-separation expenditure on maintenance and conservation............... [483]
Preparation negligence: summary......................................................................................... [490]
MISLEADING AND DECEPTIVE STATEMENTS.................................................................. [491]
Plaintiff’s claim....................................................................................................................... [491]
Trade and commerce............................................................................................................... [497]
No taxation unless ‘you put your hand up’........................................................................... [521]
Taxation reserve could be used to pay Lianne Fritsch........................................................ [527]
Other representations............................................................................................................. [534]
BREACH OF FIDUCIARY DUTY............................................................................................... [538]
PROCURING SETTLEMENT WHEN PAUL FRITSCH LACKED CAPACITY.................... [545]
Legal principles....................................................................................................................... [545]
Presumption of legal personality and capacity................................................................ [545]
Mental capacity to instruct............................................................................................... [548]
Appointing litigation guardians........................................................................................ [551]
Standard of capacity required............................................................................................ [554]
Self-represented persons.................................................................................................... [558]
Mental capacity to settle proceedings.............................................................................. [559]
Duty and powers of court.................................................................................................. [562]
Procedural implications..................................................................................................... [566]
Lawyer’s role in cases of doubt......................................................................................... [568]
Submissions of the parties..................................................................................................... [571]
Paul Fritsch......................................................................................................................... [571]
Goddard Elliott................................................................................................................... [573]
Events of 16 September 2004: evidence of main witnesses............................................... [587]
Paul Fritsch......................................................................................................................... [587]
Hans Norbert Fritsch......................................................................................................... [610]
Peter Walton....................................................................................................................... [628]
Arno and Sofie Fritsch........................................................................................................ [630]
Florence Plumridge............................................................................................................. [636]
Andrew Goddard................................................................................................................ [638]
Clive Rosen......................................................................................................................... [676]
Kevin Ferguson................................................................................................................... [701]
Evaluating certain evidence................................................................................................... [715]
Paul Fritsch’s medical condition....................................................................................... [715]
Noel Ackman QC’s concerns about Paul Fritsch’s capacity........................................... [724]
Goddard Elliott’s capacity evidence................................................................................. [733]
Andrew Goddard......................................................................................................... [733]
Clive Rosen................................................................................................................... [735]
Events of 10-15 September 2004............................................................................................ [741]
Events of 16 September 2004................................................................................................. [745]
Capacity negligence: summary.............................................................................................. [768]
ABUSE OF PROCESS AND ADVOCATES’ IMMUNITY....................................................... [769]
Introduction.............................................................................................................................. [769]
Abuse of process..................................................................................................................... [774]
Advocates’ immunity.............................................................................................................. [790]
General scope...................................................................................................................... [790]
..... Negligent omission and remoteness................................................................................. [793]
..... Settled cases....................................................................................................................... [798]
Preparation negligence........................................................................................................... [817]
Capacity negligence................................................................................................................ [818]
Misleading and deceptive conduct........................................................................................ [834]
DID PAUL FRITSCH SUFFER ANY LOSS OR DAMAGE?................................................... [840]
Causation and preparation negligence................................................................................. [840]
Legal principles....................................................................................................................... [845]
Valuing a lost opportunity in a notional trial.................................................................. [845]
Admissibility of evidence of subsequent facts................................................................. [852]
Property settlement proceedings in the Family Court......................................................... [861]
Making just and equitable property settlement orders.................................................... [861]
Preferred four-step approach............................................................................................. [862]
Taking trust assets into account....................................................................................... [864]
Taking contingent liabilities into account........................................................................ [868]
Waste and dissipation........................................................................................................ [877]
Estimation of percentage contributions of parties........................................................... [881]
Reporting offences to Australian Taxation Office........................................................... [889]
Obligation of full and frank disclosure............................................................................. [891]
Costs.................................................................................................................................... [896]
Setting aside consent orders.............................................................................................. [900]
Submissions of the parties..................................................................................................... [905]
Paul Fritsch......................................................................................................................... [905]
Goddard Elliott................................................................................................................... [912]
Identifying issues in notional trial........................................................................................ [919]
Expert evidence....................................................................................................................... [921]
For Paul Fritsch.................................................................................................................. [921]
Honourable Eric Baker................................................................................................. [921]
Keith Harvey................................................................................................................ [952]
For Goddard Elliott............................................................................................................ [966]
Honourable Joseph Kay............................................................................................... [966]
Darryn Hockley (for Goddard Elliott)......................................................................... [992]
Determination of issues in notional trial............................................................................. [999]
Value of Paul Fritsch’s interest in Fritsch family businesses......................................... [999]
Taxation liability on Protoline money............................................................................ [1005]
Loan from Arno Fritsch.................................................................................................... [1021]
$41,000 capital gains tax liability.................................................................................. [1024]
$108,500 further capital gains tax liability.................................................................... [1029]
$145,000 taxation liability on use of $552,000 Protoline reserve................................. [1036]
$225,000 post-separation contribution of Paul Fritsch................................................. [1046]
$65,670 personal debt contribution of Paul Fritsch....................................................... [1054]
Expression in percentage terms of contribution of parties............................................ [1058]
Adjustment for s 75 (2) factors........................................................................................ [1070]
Overall assessment.......................................................................................................... [1075]
..... Indemnity costs of Lianne Fritsch................................................................................... [1082]
Other considerations............................................................................................................. [1090]
Costs of going to trial...................................................................................................... [1090]
Failure to mitigate loss.................................................................................................... [1093]
Conclusion.............................................................................................................................. [1100]
APPORTIONMENT OF LIABILITY......................................................................................... [1104]
Issues for determination....................................................................................................... [1104]
Assessing proportionate liability: governing principles................................................... [1111]
Assessing proportionate liability: present case................................................................. [1120]
OUTSTANDING FEES OF GODDARD ELLIOTT................................................................ [1127]
CONCLUSION............................................................................................................................ [1136]
HIS HONOUR:
INTRODUCTION
When Goddard Elliott agreed to act for Paul Gerhardt Fritsch in a property settlement proceeding in the Family Court of Australia, it knew the proceeding raised complex commercial and taxation issues and he was mentally ill. Despite nearly two years of preparation and not due to any fault on his part, Mr Fritsch’s case was not ready to proceed at the commencement of the trial, which was adjourned for three days.
On the return date, the proceeding settled at the door of the court on terms which were overly generous to the wife. At that time, Mr Fritsch was very ill; soon afterwards, he was admitted to a psychiatric hospital. He contends the settlement resulted from the negligence (and other wrongs) of Goddard Elliott, particularly by taking and acting on instructions which he did not have the mental capacity to give. In this court, he seeks as damages the alleged extra amount (said to be $1.6 million) he would have received in a just and equitable settlement by order of the court.
Mr Fritsch also sued his barristers Noel Ackman QC and Clive Rosen and his accountant Kevin Ferguson. During the hearing, he settled his claims against all three. Goddard Elliott did not settle. It contends Mr Fritsch had mental capacity to instruct and voluntarily settled the case to avoid significant forensic, taxation and other risks. Mr Fritsch had repented after-the-fact at his own bargain. There was no negligence (or other wrong). If there was, it is covered by an ancient principle, surviving in Australia, which immunises solicitors and barristers against liability for loss and damage caused by court-related negligence.
PLEADED CLAIMS
Goddard Elliott (as plaintiff)
The proceeding in this court began when Goddard Elliott made a claim against Paul (as he was referred to by all parties) by way of amended statement of claim dated 5 October 2005. This was a straightforward claim for outstanding legal fees in the sum of $103,931.61, plus interest or penalty interest and costs.
Paul Fritsch (as defendant and plaintiff by counterclaim)
Paul conceded Goddard Elliott’s claim for outstanding legal fees, subject to the resolution of an issue of detail about the amount owing.
Paul’s claim was set out in his second further amended defence and counterclaim dated 1 October 2010. He pleaded his case in contract (against Goddard Elliott, Mr Ackman, Mr Rosen and Mr Ferguson), negligence (against all of them), breach of fiduciary (against the lawyers) and misleading and deceptive conduct contrary to ss 4 and s 9 of the Fair Trading Act1985 (Vic) (against all of them but in different specified respects).
In the contractual claim, Paul alleged there were contractual terms of his engagements with Goddard Elliott, Mr Ackman, Mr Rosen and Mr Ferguson that they would each exercise all reasonable care, skill, diligence and competence as solicitors, counsel and expert accountant respectively (paragraph 15D). He also claimed there were implied terms that the lawyers would always act in his best interests and refrain from bringing improper pressure to bear on him (paragraph 15E). He alleged Andrew Goddard of Goddard Elliott breached those terms of the firm’s engagement by failing to prepare for the scheduled final hearing in particularised respects (paragraph 19(a)). In summary, it failed to obtain proper valuation and tax liability evidence (paragraph 19(a)(i)-(vi)), failed to ensure the availability of witnesses (paragraph 19(a)(vii)), failed properly or adequately to brief or instruct counsel and failed properly to draw and file the husband’s financial statement (paragraph 19(a)(ix)). In the running of the case, Paul also relied on Goddard Elliott’s failure to prepare a response the wife’s comprehensive affidavit on the question of costs and on its failure to seek, obtain and file proper evidence of Paul’s post-separation contributions to the maintenance and conservation of the matrimonial assets.
In this contractual context, Paul also relied on the lawyers’ imposition of improper pressure and procuration of a coerced settlement (paragraph 21(a) and (b)) and the making of the representations (Goddard Elliott, Mr Ackman and Mr Rosen) and further representation (Goddard Elliott, Mr Rosen and Mr Ferguson) referred to below (paragraph 27A(a) and (b)(i)).
In the negligence claim, Paul alleged Goddard Elliott, Mr Ackman, Mr Rosen and Mr Ferguson owed him a duty to take reasonable care in their respective professional capacities (paragraph 16(a)). It was clear from the way Paul conducted the case that, in relation to the negligence claim, he generally relied on the conduct and failures alleged in respect of the contractual and fiduciary duty claims. On that basis, he claimed the duty which the lawyers owed him was breached. In this negligence context, he also relied on the making of the representations (Goddard Elliott, Mr Ackman and Mr Rosen) and further representation (Goddard Elliott, Mr Rosen and Mr Ferguson) referred to below (paragraph 27A(a) and (b)(ii)).
In the breach of fiduciary duty claims, Paul pleaded that the duty arose out of his professional relations with his lawyers. He alleged that, in breach of this fiduciary duty, the lawyers procured him to enter a grossly unfair and inappropriate settlement and in circumstances where he had no or insufficient mental capacity to do so (paragraph 20(a) and (b)). His case was that, by reason of his major depression and chronic post stress disorder, which were aggravated by stress, he was unable to make decisions in his own best interests or properly instruct his lawyers (paragraph 20(b)). It was implicit in claim that the lawyers knew or should have known this and breached their fiduciary duty towards him by procuring the settlement in the circumstances. He expanded the claim in the running of the case to include the contention that the lawyers breached their fiduciary duty by coercing into the settlement.
In the misleading and deceptive conduct claims, Paul alleged the lawyers told him on 16 September 2004 that he would only have to meet a certain tax liability if he made voluntary disclosure or in the unlikely event of a tax audit (in paragraph 22(a)), that if the proceeding went to trial the judge would refer the papers to the Australian Taxation Office and there would likely be a tax investigation (paragraph 22(b)), that if Paul did not settle the case he would probably have to pay the wife’s entire costs of about $200,000 (paragraph 22(c)) and that the judge’s hostility towards Paul would be likely to have adverse consequences for him (paragraph 22(d)). These allegations were called ‘the representations’. He made one other allegation of this kind against these defendants which he did not press (paragraph 22(e)).
Paul also alleged a further misleading and deceptive statement against Mr Goddard, Mr Rosen and Mr Ferguson. He alleged they told him on 16 September 2004 that he could use certain monies standing in a family company account to pay the wife without having to pay tax on that sum (paragraph 23). This was called ‘the further representation’.
It was alleged that the representations and the further representation were made in trade and commerce and were misleading and deceptive contrary to s 9 of the Fair Trading Act and that s 4 of that Act applied to them (paragraphs 24 and 25). What made the representations and further representation misleading and deceptive was particularised (paragraph 26). He alleged he agreed to enter into the settlement in reliance on them (paragraph 27).
Paul alleged he had suffered loss and damage by reason of the civil wrongs done to him for which the defendants were liable (paragraph 28). He particularised his loss in this manner (rounded to the dollar):
Asset pool (Paul’s calculation) $3,517,578 Paid to wife in the settlement (90%) $3,154,948 Paid to Paul in the settlement (10%) $362,630 Wife should have received (Paul’s case) (45%) $1,582,910 Paul should have received (in his case) (55%) $1,934,680 Difference claims as damages $1,572,038
This amount of $1,572,038 (plus interest and costs) was claimed as damages for breach of contract or in negligence, or equitable compensation for breach of fiduciary duty or pursuant to s 159(1) of the Fair Trading Act.
Goddard Elliott (as first defendant by counterclaim)
As the first defendant by counterclaim, Goddard Elliott admitted the retainer with Paul (paragraph 3) and the implied contractual terms, the duty of care and the fiduciary obligations which arose in consequence (paragraphs 4D and 5). In summary, it pleaded it had not breached those terms or that duty or obligation.
Goddard Elliott denied the allegation that it had breached the terms of its engagement by failing to exercise all reasonable care, skill, diligence or competence (paragraph 8). It denied the breach of fiduciary duty alleged to have occurred in relation to the settlement (paragraph 9) and the reliance on that breach in reference to the contractual claim (paragraph 10). It denied the allegations of misleading and deceptive conduct based on the representations and the further representation (paragraphs 11 and 12).
Goddard Elliott alleged it had arranged for all witnesses who were intended to give evidence to be present at the proceeding in the Family Court (paragraph 8(a)-(d)). Counsel were properly briefed and conferences were conducted (paragraph 8(d)(ii) and (iii)). Mr Ferguson had prepared a valuation report which was updated on Paul’s direct instructions (paragraph 8(a), (b)). Any difficulties encountered by Paul resulted from the provision of those instructions (paragraph 8(e)). As to taxation matters, Paul was being advised by his own accountant (paragraphs 8(f) and 12). The statement of financial circumstances was in fact prepared by Paul with the assistance of that accountant, not by Goddard Elliott (paragraph 8(j)).
As to the alleged coerced settlement, Goddard Elliott alleged Paul agreed to enter into that settlement although the barristers did not recommend it (paragraph 8(h)) and only after giving authority in writing (paragraph 8(i)). Goddard Elliott relied on a letter dated 9 September 2004 from Paul’s treating psychiatrist (which did not say he lacked capacity) (paragraph 9(b)).
Goddard Elliott admitted giving certain advice to Paul in relation to overdue taxation and the calculation of the asset pool (paragraphs 11(a) and (b)), as well as in relation to other matters (paragraphs 11(c)-(e)), but denied making the representations and the further representation (paragraphs 11 and 23). It denied that the representations and the further representation constituted conduct in trade or commerce that was misleading or deceptive within s 9 of the Fair Trading Act. Relying on s 4 of that Act (paragraphs 13, 14 and 26), it alleged the representations which were made to Paul (as set out in paragraphs 11(a)-(e)) were reasonable expressions of present opinion and not made in trade or commerce (paragraph 14A). It denied the allegation of reliance on the part of Paul and alleged he entered into the settlement on the basis of advice which was properly given by Goddard Elliott and the barristers (paragraph 16). If the further representation was made, it was so done by Mr Ferguson or Mr Rosen, not by Goddard Elliott (paragraph 12A(a)).
In reference to Paul’s claims based on breach of contract, negligence and breach of fiduciary duty, Goddard Elliott alleged it was immune from suit because any alleged negligent acts or omissions constituted work out of court leading to a decision or decisions affecting the conduct of a case in court and constituting work intimately connected with work in court (paragraphs 9(c) and 10). It also alleged these claims were contrary to public policy for being a collateral attack on the consent orders of the judge of the Family Court (paragraphs 9(d)). It relied on the immunity in reference to the representation (by implication) and the further representation (paragraph 12A(b)) as well.
It was denied by Goddard Elliott that Paul had suffered any loss or damage by reason of the wrongs alleged (paragraph 19). It alleged any loss or damage was caused or contributed to by his own negligence (paragraph 18) and that he had failed continually to mitigate his loss (paragraph 20). Finally it alleged that Mr Ackman, Mr Rosen and Mr Ferguson were each liable for any loss or damage as concurrent wrongdoers with the result that, under Part IVAA of the Wrongs Act 1958 (Vic), the liability of Goddard Elliott was limited to that provision of loss or damage which the court considered just having regard to the extent of its responsibility for the loss or damage (paragraph 21-23).
Noel Ackman QC and Clive Rosen (as second and third defendants by counterclaim)
In accordance with the settlement reached between Paul and Mr Ackman and Mr Rosen, his claims against those defendants by counterclaim were dismissed with no order as to costs. However, by reason of the reliance by Goddard Elliott as the first defendant by counterclaim on the proportionate liability provisions of pt IVAA of the Wrongs Act, they were retained as nominal parties to the proceeding. In that context it will later be necessary to give consideration to the terms of settlement.
Kevin Ferguson (as fourth defendant by counterclaim)
In accordance with the settlement reached between Paul and Mr Ferguson, his claims against that defendant by counterclaim were dismissed with no order as to costs. As with the second and third defendants by counterclaim, Mr Ferguson was retained as a nominal party to the proceeding by reason of the potential application of the proportionate liability provisions of the Wrongs Act. In that context it will also later be necessary to give consideration to the terms of settlement.
Issues for determination
On the pleadings I have just summarised, the issues raised for determination were:
· did Goddard Elliott, Mr Ackman and Mr Rosen breach their duty of care towards Paul
· did Goddard Elliott, Mr Ackman and Mr Rosen breach their fiduciary duty towards Paul
· did Goddard Elliott, Mr Ackman, Mr Rosen and Mr Ferguson make misleading and deceptive statements
· did Goddard Elliott, Mr Ackman and Mr Rosen procure the settlement by coercion or when Paul lacked capacity
· does the advocates immunity apply to the negligence, coercion and misleading and deceptive statements
· did the negligence, coercion or misleading and deceptive statements cause Paul Fritsch any loss
· what orders for apportionment of liability should be made
· what amount of fees are outstanding as between Paul and Goddard Elliott
As Paul settled his claims against Mr Ackman, Mr Rosen and Mr Ferguson, the issues which I must determine are those issues but only in relation to Goddard Elliott.
COURSE OF THE TRIAL
Hearing and evidence
The trial was conducted over 25 sitting days in October and November 2010. The transcript numbers 2,450 pages.
Evidence was given by:
For the plaintiff (Paul Fritsch)
·Paul Fritsch
·Hon Eric Baker (former judge of Family Court of Australia)
·Arthur Velakoulis (Paul’s treating psychiatrist)
·Keith Harvey (independent taxation lawyer)
·Hans Norbert Fritsch (Paul’s brother)
·Peter Walton (Fritsch family accountant)
·Sofie Fritsch (Paul’s mother)
·Florence Plumridge (Paul’s former mother in law)
·Arno Fritsch (Paul’s father) (affidavit evidence only)
For the defendant (Goddard Elliott)
·Andrew Goddard
·Hon Joseph Kay (former judge of Family Court of Australia)
·Clive Rosen
·Darren Hockley (independent tax accountant)
·Kevin Ferguson.
The court book initially numbered 13 volumes. It was reduced to seven volumes by the end of the trial. The Family Court file was received into evidence, along with a large number of other exhibits. Where possible, I have based the findings of fact on the documentary evidence.
Settlements between Paul Fritsch and Noel Ackman QC, Clive Rosen and Kevin Ferguson
During the trial and before Goddard Elliott opened its case, Paul settled his claims against Mr Ackman and Mr Rosen. As the settlements were relied on by Goddard Elliott’s in its proportionate liability defence, the terms were received into evidence. The material terms were as follows:
RECITALS
A.By proceeding No 8154 in the Supreme Court of Victoria at Melbourne, the plaintiff (Goddard Elliott) commenced legal proceedings against the defendant (Fritsch) (the proceedings).
B.Fritsch counterclaimed in the proceedings against Goddard Elliott and later against the second defendant by counterclaim (Ackman) the third defendant by counterclaim (Rosen) and the fourth defendant by counterclaim (Ferguson).
C.In the interests of avoiding the further expense and inconvenience of litigation, and with a denial of liability Ackman and Rosen wish to settle the proceedings on the terms hereof.
NOW IT IS AGREED:
1.Ackman shall pay to Fritsch $90,000 on or before 15 November 2010 towards Fritsch’s legal costs in full and final settlement of Fritsch’s claims in the proceedings including his claim for interest and costs.
2.Rosen shall pay to Fritsch $90,000 on or before 15 November 2010 towards Fritsch’s legal costs in full and final settlement of Fritsch’s claims in the proceedings including his claims for interest and costs.
3.Fritsch hereby releases and forever discharges each of Ackman and Rosen from all claims (including claims or complaints which he might otherwise make to professional disciplinary bodies), causes of action, suites, demands, costs (including any costs orders already made in the proceedings) arising out of or incidental to the proceedings or the facts giving rise thereto.
4.Ackman and Rosen hereby release and forever discharge Fritsch from all claims, causes of action, suites, demands, costs (including any costs orders already made in the proceedings) arising out of or incidental to the proceedings or the facts giving rise thereto.
5.If either of:
(a)Ackman; or
(b)Rosen;
fail to pay the sum which respectively by clauses 1 and 2 they agreed to pay to Fritsch, by the time prescribed by such clause, then the party in default consents to judgment against them in the proceedings for the balance outstanding of the sum which they agreed to pay.
6.Fritsch hereby agrees forthwith to take all steps reasonably necessary to have orders made in the proceedings as follows:
(a)that the proceedings between Fritsch and Ackman and Rosen be dismissed (although the parties acknowledge that Ackman and Rosen will remain named as defendants by counterclaim for the purposes of allegations of proportionate liability made in the defences of Goddard Elliott and Ferguson); and
(b)there be no order as to costs.
During the trial and after Goddard Elliott went into evidence but before it closed its case and before Mr Ferguson opened his case, Paul settled his claim against Mr Ferguson. This settlement was also relied on by Goddard Elliott in its proportionate liability defence. The material terms are
RECITALS
A.By proceeding No 8154 in the Supreme Court of Victoria at Melbourne, the plaintiff (Goddard Elliott) commenced legal proceedings against the defendant (Fritsch) (the proceedings).
B.Fritsch counterclaimed in the proceedings against Goddard Elliott and later against the second defendant by counterclaim (Ackman) the third defendant by counterclaim (Rosen) and the fourth defendant by counterclaim (Ferguson).
C.In the interests of avoiding the further expense and inconvenience of litigation, and with a denial of liability Ferguson and Fritsch wish to settle the proceedings on the terms hereof.
NOW IT IS AGREED:
1.Ferguson agrees to pay to Fritsch $60,000 on or before 26 November 2010 as a contribution towards Fritsch’s legal costs in full and final settlement of Fritsch’s claims in the proceedings including his claim for interest and costs.
2.Fritsch hereby releases and forever discharges Ferguson from all claims (including claims or complaints which he might otherwise make to professional disciplinary bodies), causes of action, suites, demands, costs (including any costs orders already made in the proceedings) arising out of or incidental to the proceedings or the facts giving rise thereto.
3.Ferguson hereby releases and forever discharges Fritsch from all claims, causes of action, suits, demands, costs (including any costs orders already made in the proceedings) arising out of or incidental to the proceedings or the facts giving rise thereto.
4.If Ferguson fails to pay the sum which by clause 1 he agrees to pay to Fritsch by the time prescribed by such clause, then Ferguson consents to judgment against him in the proceedings for any amount outstanding of the sum which he agrees to pay.
5.Fritsch and Ferguson agree to orders by consent in the proceedings as follows:
(a)that the proceedings between Fritsch and Ferguson be dismissed (although the parties acknowledge that Ferguson will remain named as fourth defendant by counterclaim for the purposes of allegations of proportionate liability made in the defence of Goddard Elliott); and
(b)there be no order as to costs.
On one view, the settlements affected the amounts which Goddard Elliott could recover against Paul. On that issue and with the leave of the court, Goddard Elliott made supplementary submissions dated 20 April 2011 and 20 May 2011 and Paul made supplementary witness submissions dated 10 May 2011. I will consider this issue later.
Evidentiary rulings
Failure of Goddard Elliott to call Noel Ackman QC
Mr Ackman was not called by any party to give evidence. It was submitted for Paul that the rule in Jones v Dunkel[1] should be applied in his favour on the basis that it was reasonably to be expected that Goddard Elliott would call Mr Ackman to give evidence on its behalf. Goddard Elliott strongly contested that submission.
[1](1959) 101 CLR 298 (‘Jones’).
As we have seen, there were four defendants by counterclaim in the proceeding: Goddard Elliott, Mr Ackman, Mr Rosen and Mr Ferguson (in that order). The solicitors for Goddard Elliott were Obst Legal and its counsel was Aileen Ryan. The solicitors for Mr Ackman and Mr Rosen were Landers & Rogers and their counsel were (separately and respectively) James Peters QC (with Jonathan Davis) and Kim Knights. The solicitors for Mr Ferguson were DLA Phillips Fox and his counsel was Tim Walker.
The settlement of the claims between Paul as the plaintiff by counterclaim and Mr Ackman and Mr Rosen as the second and third defendants by counterclaim was by the single document 12 October 2010 which I have already set out. It was signed by those parties. In accordance with that settlement, the claim against Mr Ackman and Mr Rosen was dismissed.
The settlement was reached while evidence was still being led on behalf of the plaintiff. The defendants had not yet opened their case. After the settlements and consequential orders, Goddard Elliott was the one remaining active lawyer defendant by counterclaim. After Goddard Elliott opened it case, it called a number of witnesses to give evidence, including Mr Rosen and Mr Ferguson (the latter by then had also settled his case with Paul). Goddard Elliott did not call Mr Ackman. No explanation was offered, besides the explanation that it was not obliged to call him. It was not submitted Mr Ackman was not available. He obviously was available, being present at court on a number of occasions during the trial. My invitation to rule on whether Mr Ackman was in Goddard Elliott’s camp before it closed its case was declined.
In a case like the present, the rule in Jones v Dunkel will apply where ‘it might reasonably have been expected’[2] or ‘it would be natural’[3] for one party to call or produce the witness. It has been held the rule applies in a case where there has been an ‘unexplained failure by a party to call a witness who is in the camp of that party’.[4] That was the principal matter at issue in the present case.
[2]Ronchi v Portland Smelter Services Ltd [2005] VSCA 83 (15 April 2005) [32] (Eames JA, Buchanan JA agreeing) (‘Ronchi’).
[3]Payne v Parker [1976] 1 NSWLR 191, 201 (Glass JA) (‘Payne’).
[4]Ronchi [2005] VSCA 83 (15 April 2005) [32] (Eames JA, Buchanan JA agreeing); Warren CJ has laid stress on this requirement in CGU Insurance Ltd v CW Fallow and Associates Pty Ltd [2008] VSC 197 (6 June 2008) [12].
Goddard Elliott submitted Mr Ackman was not ‘in the camp’ of Goddard Elliott. There was no basis for contending Goddard Elliott had better access to Mr Ackman’s knowledge than Paul. Mr Ackman was a co-defendant who was separately represented by solicitors and counsel. Mr Ackman had settled with Paul but Goddard Elliott had not. There was no basis for contending Goddard Elliott had the greater confidence of Mr Ackman. Mr Ackman was not an employee of Goddard Elliott, but was retained independently. Even in that capacity, Mr Ackman was entirely independent of Goddard Elliott. The retainer had ended and Mr Ackman had no continuing relationship with Goddard Elliott.
It was further submitted that, even if Mr Ackman could be seen to have been in Goddard Elliott’s camp while he was retained by that firm, this was no longer the situation. The retainer having ended, Mr Ackman, could not be regarded as someone who was more likely to give evidence favourable to Goddard Elliott. The interests of Goddard Elliott and Mr Ackman and Mr Rosen in the proceeding brought by Paul did not coincide. The proportionate liability legislation made the individual liability of each defendant highly relevant to the liability of the other. It was not unrealistic to expect Paul to call Mr Ackman as a witness.
It was finally submitted that there was already a great body of evidence on the issues of fact about which Mr Ackman could have spoken. The rule in Jones v Dunkel does not require a party to give cumulative evidence which would add little to the evidence which had already been given on a subject.[5] Mr Rosen gave evidence in the present case. Although he was not the senior counsel, he was the one who was more constantly present on 16 September 2004 when the critical events happened. Mr Ackman had to be absent late in the day for medical reasons.
[5]Ronchi [2005] VSCA 83 (15 April 2005) [30] (Nettle JA).
I do not accept these submissions. This proceeding arises out of a property settlement proceeding in the Family Court in which Paul was represented by Goddard Elliott, Mr Ackman and Mr Rosen. Paul’s independent expert accountant was Mr Ferguson. In this proceeding, he alleges negligence and other causes of action against them. On the one side and in one camp on his own is Paul as the plaintiff by counterclaim and on the other side in the one camp as a group there is Goddard Elliott, Mr Ackman, Mr Rosen and Mr Ferguson as the defendants by counterclaim. After Mr Rosen and Mr Ferguson settled with Paul, they were called to give evidence on behalf of Goddard Elliott, as was natural and reasonably to be expected. It was only Mr Ackman who was not so called. The settlement of the claim as between Paul and Mr Ackman did not take Mr Ackman out of the defendants’ camp and put him in Paul’s camp or in no camp.
It is true that Mr Ackman is not and never was Goddard Elliott’s employee. Mr Ackman was the retained, independent senior counsel. Mr Ackman was a co-defendant. Goddard Elliott and Mr Ackman might be liable in different proportions for any damages. All of these matters are relevant when determining whether it was reasonably to be expected that Goddard Elliott would call Mr Ackman to give evidence and I have taken them into account.
What is more important, however, is the nature of the case which has been brought by Paul against the defendants. In the negligence and other claims which have been made, and in the factual basis of what has been alleged, the nature of that case puts all of the defendants by counterclaim in the one camp. While there is a significant difference between what has been alleged against Goddard Elliott, Mr Ackman and Mr Rosen on the one hand and Mr Ferguson on the other, even that does not put any of them in a different camp to the other. I take into account that those defendants were represented by separate counsel (although Mr Ackman and Mr Rosen had the same solicitors) and their litigious interests were not conterminous. But they were still all united in their defence, on legal and factual grounds, against the plaintiff’s claim. I reject the submission that, after the settlement between Paul and Mr Ackman, Paul should have treated Mr Ackman as a witness in whom he could have had as much confidence as Goddard Elliott. It defies the nature of the case which Paul had brought and the history of the participation of the parties in the proceeding.
I also reject the submissions that Mr Ackman’s evidence would have been cumulative. He was the senior counsel briefed by Goddard Elliott to represent Paul. There were not many witnesses to the important events which happened. The question of Paul’s mental capacity, about which Mr Ackman had significant and informed views, was a fundamental issue in the proceeding. Despite his absences on 16 September 2004, Mr Ackman was present for substantial periods on that day and allegedly played an important part in what occurred. Mr Ackman played the central role in seeking a ruling from the Ethics Committee in the previous days. The settlement agreement contains his handwriting. The circumstances surrounding that agreement are central factual issues in the case. Mr Ackman was the sole author of the memorandum dated 24 September 2004. In his evidence, Paul made factual allegations about Mr Ackman. Far from Mr Ackman’s evidence being cumulative, I consider him to be a witness of substantial importance.
In my view, Mr Ackman was a witness whom Goddard Elliott could reasonably have been expected to call to give evidence. None of the authorities relied on by Goddard Elliott[6] persuade me otherwise and the principles which they state tend only to confirm my conclusion.
[6]Payne [1976] 1 NSWLR 191; Earl v Castlemaine District Community Hospital [1974] VR 722; Ronchi [2005] VSCA 83 (15 April 2005); Shum Yip Properties Development Ltd v Chatswood Investment and Development Co Pty Ltd (2002) 166 FLR 451.
What use may be made of the unexplained failure by Goddard Elliott to lead evidence from Mr Ackman whom they could reasonably have been expected to call? The general principle which is stated in Blatch v Archer[7] is that ‘all evidence is to be weighed according to the proof which it was in the power of one side to have produced and in the power of the other to have contradicted’. It was held by Newton and Norris JJ in O’Donnell v Reichard[8] (which was followed by Buchanan, Eames and Nettle JJA in Ronchi)[9] that, in so weighing the evidence, the unexplained failure of the party to call the evidence may be taken into account against that party for two purposes:
(a)in deciding whether to accept any particular evidence, which has in fact been given, either for or against that party, and which relates to a matter with respect to which the person not called as a witness could have spoken; and (b) in deciding whether to draw inferences of fact, which are open to them upon evidence which has been given, again in relation to matters with respect to which the person not called as a witness could have spoken.[10]
[7](1774) 98 ER 969, 970 (Lord Mansfield); followed and applied in Weissensteiner v The Queen (1993) 178 CLR 217, 225 (Mason CJ, Deane and Dawson JJ).
[8][1975] VR 916 (‘O’Donnell’).
[9][2005] VSC 83 (15 April 2005) [32].
[10][1975] VR 916, 929, approved in Brandi v Mingot (1976) 12 ALR 551, 559 (Gibbs ACJ, Stephen, Mason and Aiken JJ).
The unexplained failure of the party to call the witness cannot be used to reason that the evidence of the witness would not have been favourable to the party. The trier of fact cannot allow the inference which may (not must) be drawn to be elevated that high. It is limited to the inference that, if called, the evidence would not have assisted the case of the party failing to call the witness.[11] As was held in Weissensteiner v The Queen,[12] that inference is available when evaluating all of the evidence which is before the court, including the evidence given by witnesses whose credibility and reliability has been attacked. As applied in the case of evidence of that kind, Mason CJ, Deane and Dawson JJ held this to be the principle:
Doubts about the reliability of witnesses or about the inferences to be drawn from the evidence may be more readily discounted in the absence of contradictory evidence from a party who might have been expected to give or call it.[13]
That is of some importance in this case as Paul’s credit and reliability has been attacked.
[11]O’Donnell [1975] VR 916, 929 (Newton and Norris JJA); R v Buckland [1977] 2 NSWLR 452, 458 (Street CJ), approved in Azzopardi v R (2001) 205 CLR 50, 23 (Gaudron, Gummow, Kirby and Hayne JJ).
[12](1993) 178 CLR 217 (‘Weissensteiner’).
[13]Ibid 227-228.
That principle was applied in a case like the present by the Full Court of the Supreme Court of South Australia in Meegan v Shore.[14] It too was a case where the plaintiff had brought an action in negligence against her lawyers. She too alleged the lawyers had failed properly to advise and represent her in relation to a settlement of legal proceedings. As was Paul’s evidence in the present case, the reliability of the plaintiff’s evidence about what had occurred in critical meetings was hotly contested. The defendant relied on the plaintiff’s failure to call her companion to give evidence. He was present at one important such meeting. The reliability of the plaintiff’s evidence was in question. Nyland, Gray, Vanstone JJ overturned the verdict of the trial judge in favour of the plaintiff. One ground of doing so was the trial judge should have taken into account the plaintiff’s failure to call the witness, who was in her camp, in evaluating the plaintiff’s evidence, both as to what happened at the meeting and generally.[15] The facts of the present case are very similar, except that it was the defendant, Goddard Elliott, who failed to call a witness. The same principle applies.
[14][2010] SASCFC 21 (12 August 2010) (Nyland, Gray, Vanstone JJ).
[15]Ibid [72] (Gray J, Nyland J agreeing).
In conclusion, it was within the power of Goddard Elliott to call Mr Ackman as a witness in relation to important issues of fact in the case, particularly Paul’s mental capacity and what occurred when the proceeding in the Family Court was settled on 16 September 2004. As Mr Ackman was in Goddard Elliott’s camp, it was reasonably to be expected that it would call him to give evidence on its behalf. For reasons which were not explained, it failed to do so.
The unexplained failure of Goddard Elliott to call Mr Ackman gives rise to an inference that his evidence would not have assisted Goddard Elliott’s case. That inference may be taken into account against Goddard Elliott in evaluating the whole of the evidence in the case, including the evidence of Paul. By reason of Goddard Elliott’s failure to call Mr Ackman, I might more readily resolve any doubts I have about the reliability of Paul’s evidence.
Admissibility of affidavit evidence of Arno Fritsch
It was submitted for Paul that the court should receive into evidence the affidavit of Arno dated 10 December 2008. Arno died on 14 December 2008 and was therefore unavailable to give evidence.
The circumstances of the signing of the affidavit were set out in Norbert’s affidavit dated 4 October 2010. Arno was diagnosed with prostate cancer in 2005 but was in good health until September 2008. His health then deteriorated. His health improved, but then deteriorated again. He was in and out of hospital. In late November 2008, he was given two to three months to live.
While his condition then deteriorated further, he was lucid until near the end. On Arno’s suggestion, Paul’s solicitor, Brian Mulcahy, took the affidavit from Arno on 10 December 2008. At that time, Arno was ‘weak but mentally alert’. His condition deteriorated rapidly on 12 December 2004 and he died on 14 December 2004.
Arno’s affidavit adopts (as substantive content) his short unsworn affidavit of about 14 September 2004 with a correction about a $387,000 loan which he made to Paul. The correction was that the loan had been repaid and was not outstanding on 16 September 2004. The unsworn affidavit otherwise deals mainly with the Fritsch family business structure. The sworn affidavit explains that structure in more detail and gives evidence of Paul’s state of mental ill-health and Arno’s version of the days leading up to and the events of 16 September 2004. It is his evidence of what occurred on 16 September 2004 that is most controversial. Arno’s evidence is set out more fully later in this judgment.
By reason of s 59(1) of the Evidence Act2008 (Vic), Arno’s evidence would not be admissible, although plainly relevant, because it contains previous representations.[16] This is the hearsay rule.
[16]See the definition of ‘previous representation’ in pt 1 of the dictionary to the Evidence Act.
There are exceptions to the hearsay rule. Paul relies on the exception in s 63, which materially provides:
(1)This section applies in a civil proceeding if a person who made a previous representation is not available to give evidence about an asserted fact.
(2)The hearsay rule does not apply to:
(b)a document so far as it contains the representation …
By s 62(1), the ‘previous representation’ to which s 63(1) refers is a reference to a previous representation ‘that was made by a person who had personal knowledge of an asserted fact’. The contents of Arno’s affidavit fall into this category. In my view, in that affidavit he swears to facts within his personal knowledge.
By s 63(2)(b), the hearsay rule does not apply to a document in so far as it contains the previous representation. Therefore the hearsay rule does not apply to the whole of Arno’s affidavit and, being entirely relevant, it is admissible subject to discretionary exclusion. Section 67 imposes notice requirements in relation to the application of s 63. These have been complied with in the present case. By cl 4(1) of pt 2 of the dictionary, Arno was taken to be unavailable to give evidence because he is dead.
The court has a general discretion to exclude evidence. It is specified in s 135:
The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might:
(a) be unfairly prejudicial to a party; or
(b) be misleading or confusing; or
(c) cause or result in undue waste of time.
On behalf of Goddard Elliott, it was submitted the court should refuse to admit Arno’s evidence under s 135(a) and (b), particularly the former. It was submitted Arno was not a disinterested witness. His evidence could not be tested by cross-examination. He was personally involved in the factual controversy. In parts, his evidence was highly prejudicial to Goddard Elliott. The reliability of the evidence could not be tested by cross-examination. Arno could have given the evidence on commission or in a de bene esse examination, though he did not do so. Moreover, parts of the affidavit were misleading and confusing.
In exercising the discretion to refuse to admit evidence under s 135, the starting point must be that the evidence is admissible. That the evidence was made admissible by the operation of s 63 is not, in my view, a relevant consideration. Evidence is either admissible or it is not. To refuse to admit the evidence, a case for the exercise of the discretion under s 135 must be established. The exercise of that discretion is not to be an indirect way of defeating the policy of the Evidence Act in favour of the admission of certain hearsay evidence under s 63. Thus I begin my examination of the question from the starting point that Arno’s evidence was admissible.
Section 135 allows the evidence to be refused if ‘its probative value is substantially outweighed’ by the specified dangers. I think it is sensible first to identify the probative value of the evidence and then to consider whether it would be outweighed by those dangers.
‘Probative value’ is defined in pt 1 of the dictionary as meaning ‘the extent to which the evidence could rationally affect the assessment of the probability of a fact in issue’. The probative value of Arno’s evidence is high. In particular, he was personally present at the Family Court on 16 September 2004 and gives evidence about what occurred on that day. He gives evidence of Paul’s state of mind on this day (and previous days), what his lawyers said to him and how they acted towards him, all of which are important factual issues in the proceeding.
I then turn to whether the probative value of this evidence is substantially outweighed, particularly by the danger that the evidence might ‘be unfairly prejudicial’ to Goddard Elliott as a party. What is required is not just that the probative value is outweighed, but that it is ‘substantially outweighed’. Furthermore, it is not prejudice itself which must be established, but the danger that the evidence might be ‘unfairly prejudicial’ to the party.
A significant kind of unfair prejudice at which s 135(a) is aimed is the potential misuse of evidence. However, in considering the potential for misuse to occur, the court must take into account the mode of the trial. In the present case, I am conducting the trial as a judge alone. It is generally accepted that judges sitting in cases alone do not misuse evidence. Therefore this is not a consideration in this case.
Because it is unfair prejudice which must be established, it is not enough that the evidence will assist one party and damage the other party in the case,[17] as Arno’s evidence does here. It is in the nature of such evidence that it is prejudicial to the case of the other party. The question is whether it is unfairly prejudicial.
[17]Ainsworth v Burden [2005] NSWCA 174 (21 June 2005) [99] (Hunt AJA, Handley and McColl JJA agreeing).
The authorities discuss whether the inability of a party to cross-examine the witness can be taken into account as unfair prejudice.[18] There is a concern that taking this consideration into account might defeat the policy of admitting certain hearsay evidence. It seems inevitable, however, that this is a consideration which must be taken into account. In the final analysis, it will usually be necessary to determine whether the risk of unfair prejudice to the other party can satisfactorily be addressed by taking the absence of cross-examination into account when considering what weight should be given to the evidence.
[18]See Stephen Odgers, Uniform Evidence Law (8th ed, 2009) 683-84.
In cases like the present, that is how judges have approached the matter. In Lane v Jurd (No 2),[19] a party sought to rely on the statement of a witness who had died. Despite the partiality of the witness, McClelland CJ in Eq admitted the statements after taking the absence of cross-examination into account:
Counsel for the plaintiff has asked me, if I should come to that conclusion, to refuse to admit the evidence under s 135 on the ground that it would be unfairly prejudicial to the plaintiff to do so. There is some substance in that submission in that Mr Major was not an entirely disinterested person. He was the father of the second defendant, and the plaintiff, by reason of his unavailability, is unable to cross-examine him with a view to testing the accuracy of what is asserted in his statement. I recognise the weight of those considerations but they do not persuade me that admission of this statement would be unfairly prejudicial to the plaintiff. Clearly they limit its probative value, but that can be assessed in the light of all the evidence.[20]
[19][1996] NSWSC 5 (8 January 1996).
[20]Ibid [15].
A similar case was DJZ Constructions Pty Ltd v Pritchard.[21] This was a negligence action brought by a client against his lawyers. The plaintiff sought to admit statements from witnesses who were not available. Schmidt J admitted the statements, giving these reasons:
It is settled that ‘unfair prejudice’ in s 135 of the Evidence Act means a risk that evidence will be misused in some way. That was not a possibility in this case. The lack of any opportunity to cross-examine had to be weighed in the balancing exercise which the section requires, but was not decisive of the question of whether the statements should be admitted (see for example Ordukaya v Hicks[22]). I came to the conclusion that in this case this difficulty was one which went to the weight to be given to the statements, once received, rather than to their admissibility.[23]
[21][2010] NSWSC 1024 (10 September 2010) (‘DJZ Constructions’).
[22][2000] NSWCA 180 (19 July 2000) [35]-[40].
[23]DJZ Constructions [2010] NSWSC 1024 (10 September 2010) [13].
That is the approach which should be adopted in the present case. I am not satisfied the inability of Goddard Elliott to cross-examine Arno will result in unfair prejudice such that the probative value of Arno’s evidence is substantially outweighed by the danger of the evidence being unfairly prejudicial to that party. However, Arno’s affidavit must be given less weight because he was not able to be cross-examined. In that regard I take into account that Paul and Norbert were strenuously cross-examined by counsel for Goddard Elliott. In relation to Arno’s evidence, that is the testing of which Goddard Elliott and the court have been deprived.
There is nothing ‘misleading or confusing’ (s 135(b)) about Arno’s evidence. This is not a ground for discretionary exclusion in this case.
Credit issues
Paul Fritsch
Peter Walton’s letter of 17 May 1996
On a number of bases, Goddard Elliott made submissions attacking Paul’s credit.
It was first submitted the contents and non-disclosure of Mr Walton’s letter of 17 May 1996 should be taken into account against Paul in terms of his credit. I accept that submission.
As will be seen in next section of this judgment, the letter shows a purpose of the restructure of the Fritsch family businesses was to protect Paul’s interest in those businesses from the wife. Paul was a party to that restructure. He kept the letter and the restructure secret from the wife. In the proceeding in the Family Court, he failed to disclose the restructure and the letter to Mr Goddard, the court and the wife, which cannot be excused. These matters reflect adversely on his credit. On this basis, I would be cautious before accepting Paul’s evidence generally, but especially in relation to financial issues.
However, this needs to be seen in perspective. Paul’s explanation for these matters was not entirely without merit and I do not accept he was generally an untruthful witness. The evidence established Arno and Norbert were intimately involved, for reasons of their own, with obtaining and considering Mr Walton’s advice. Paul was dominated by his father, who controlled his income. The letter had legitimate purposes, as well as the purpose of protecting Paul’s interest in the Fritsch family businesses from the wife. As the trial judge said in the proceedings in the Family Court, people are entitled to obtain advice of this kind and they do. Having listened to the whole of Paul’s evidence, and seeing him survive a vigorous cross-examination, I do not think he fully appreciated the significance of the advice in the letter and the consequences of its non-disclosure. I do not conclude that the doubts about Paul’s credit which have been established are as strong as have been submitted.
Understating income and a taxation issue
Goddard Elliott submitted Paul had deliberately under-declared his income in his financial statement dated 10 June 2004. The weekly income figure of $122 was compared with the yearly income declared in the taxation return for 2004 of $202,902 and a facsimile transmission from Paul to Mr Ferguson dated 15 September 2004 saying his total yearly income was about $66,000.
Paul was heavily cross-examined about this issue and I am satisfied with the evidence he gave. As submitted for Paul, the 2004 taxation return did not necessarily undermine his evidence. I regard the income figure of $122 in the financial statement as opportunistic but not a deliberate under-declaration.
I do not accept Paul’s failure to lodge a taxation return since 2005 reflected poorly on his credit. The transactions after the case was settled show he has been trying to deal with his taxation problems. That process has not come to an end.
Beneficial ownership of Protoline
Goddard Elliott submitted Paul was a director of APN Nominees until shortly after the wife’s property settlement application was commenced. He had the Protoline cheque book and could and did sign cheques in his own favour. Company documents were kept in the family home. In the light of that and other evidence, Paul’s denials that Protoline was his entity should count against his credit.
I accept that submission with a similar reservation to the one I expressed in relation to the letter of 17 September 1996. The evidence showed Arno (who in law beneficially owned Protoline) allowed Paul to treat the company as his own (so the company was Paul’s alter ego for family law purposes). But Arno did beneficially own APN Nominees and retain ultimate control, including control of the distributions. Further, the evidence shows Paul was dominated by Arno, who was intent on protecting the family wealth at all costs. By reason of these matters, I would be careful about accepting Paul’s evidence generally and especially in relation to financial matters, but his evidence still warrants consideration.
Obtaining a copy of Lianne Fritsch’s case summary
Goddard Elliott submitted Paul behaved ‘dishonourably’ in removing the wife’s case summary from her computer and sending a copy to Goddard Elliott, which should count against his credit.
I reject this submission. The parties were separated under one roof in the family home at the time. They had access by default to each other’s papers, which access the wife had utilised on an earlier occasion. What Paul did on this occasion was a product of the situation, however unfortunate it was.
Failing to pay fees
Goddard Elliott relied on certain failures of Paul to pay fees. There were explanations for these failures and these matters are not relevant to his credit.
Evasive demeanour in court
Goddard Elliott submitted Paul’s demeanour in court was evasive and he persistently gave long-winded, convoluted and unconvincing answers to questions and also sought to look into the court book before answering some questions.
Having listened to and observed Paul give evidence over several days, I reject this submission. Making due allowance for his state of health, the medication he was taking, the passage of time since 2004 and the stress of giving evidence, I did not find his responses to be evasive or persistently long. Several witnesses (including Mr Goddard) looked into the court book when a volume was left in front of them. That is quite natural. Far from being unconvincing, much of Paul’s evidence was very convincing, even after examining it with the additional caution which was due (especially in relation to financial matters).
Paul Fritsch’s retirement
Goddard Elliott submitted senior counsel for Mr Ackman had established that Paul had given false evidence about retiring. No such thing was established. The burden of the evidence was that Paul had done no real work for many years. He did not give a self-serving explanation of why he went to Bowrings occasionally.
Fire sale of assets
Goddard Elliott submitted it was to Paul’s discredit that he told Mr Ferguson that he wanted to conduct a fire sale of all the matrimonial assets and split the proceeds with the wife. As Mr Goddard said in evidence, a lot of husbands think like that under the pressure of a marriage breakdown and property settlement proceedings. This is hardly a matter going to credit.
Peter Walton
On several bases, Goddard Elliott submitted Mr Walton lacked credit. It referred to his evidence about the origins of the letter of 17 May 1996, his failure to produce the letter, the affidavit of 17 September 2004 (the ‘perjured affidavit’) which referred to the restructure of being due to a ‘feared insolvency’, his evidence about how long he had acted for Paul and his incorrect evidence that you cannot lodge a correcting document with ASIC.
The evidence shows that Mr Walton was the loyal accountant of the Fritsch family, and especially Arno and Norbert. He was not an independent witness and did not pretend to be one. I take that into account generally.
On the whole of the evidence, I accept Mr Walton’s evidence that the driving force of the letter of 17 May 1996 was Arno and possibly Norbert. The contents of the letter, read as a whole, support that finding. The surrounding circumstances, the nature of the relationship between Arno, Norbert and Paul and the evidence about what was occurring at the time also support that finding.
Although I was concerned that Mr Walton had not produced the letter of 17 May 1996 in response to the subpoena issued by the Family Court, I do not find that he did so deliberately. Having listened to his evidence and seen him being cross-examined, his explanation that the letter, which was eight years old, had been archived is plausible. Mr Walton’s affidavit of 17 September 2003 was, on the other hand, not full and frank. It did not tell the whole story of why the 1996 restructure was carried out. That does go to his credit and makes me cautious about accepting his evidence generally. The other matters relied on by Goddard Elliott do not.
PROPERTY SETTLEMENT PROCEEDING IN FAMILY COURT
Determining property settlement applications
This is the main factual part of the judgment. In it I will make some findings of fact. But my purpose is to set out what occurred in the property settlement proceeding in the Family Court as the foundation for the principle findings of fact which will I will make later.
[443]Zoukra v Lowenstern [1958] VR 594.
[444](1985) 59 ALJR 492, 493-94 (‘Podrebersek’).
[445]Pennington v Norris (1956) 96 CLR 10, 16.
[446]Stapley v Gypsum Mines Ltd [1953] AC 663, 682 (‘Stapley’); Smith v McIntyre [1958] Tas SR 36, 42-49 (‘Smith’); Broadhurst v Millman [1976] VR 208, 219.
[447]Podrebersek (1985) 59 ALJR 492, 494 (Gibbs CJ, Mason, Wilson, Brennan and Deane JJ).
So, what is required is a consideration of both the culpability of the departure from the standard of reasonable care and the relative importance of the acts of the parties which caused the damage. An apportionment which has been ‘driven by causation’[448] will not be in conformity with the principles. The concept of culpability which is applied is not ‘moral blameworthiness but [the] degree of departure from the standard of care of the reasonable man’.[449] It is accepted that there may be ‘some merger or overlap of the questions of culpability and importance of the wrongful acts to the injury’.[450]
[448]Moore [2004] VSCA 152 (1 September 2004) [15] (Callaway JA, Buchanan JA and Dodds-Streeton AJA agreeing).
[449]Pennington v Norris(1956) 96 CLR 10, 16 (Dixon CJ, Webb, Fullagar and Kitto JJ) (‘Pennington’); Kakouris v Gibbs Burge & Co Pty Ltd [1970] VR 502, 512 (Winneke CJ, Pape and Adam JJ); Broadhurst v Millman [1976] VR 208, 219 (Gowans and Menhennitt JJ, Dunn J agreeing).
[450]Alcoa (2007) 18 VR 112, 137 [87] (Chernov JA, Neave JA agreeing).
In relation to culpability, Podrebersek cited Pennington v Norris.[451] There the appeal was allowed because the apportionment did not take sufficient account of negligence which was ‘in a high degree more culpable, more gross, than that of the plaintiff’.[452] Podrebersek also referred to the judgment in Smith v McIntyre.[453] The relevant passage contains an extensive analysis of the culpability aspect of the principle. Burbury CJ, Gibson and Crisp JJ discussed the considerations which might influence a finding of apportionment, including who created the hazard which ultimately caused the injury,[454] the age, role and position of the person causing the damage[455] and failing to take an obvious and available last opportunity to avoid the damage.[456] In a concluding passage which brought the strands of the analysis together, Burbury CJ, Gibson and Crisp JJ said a combined consideration of all the circumstances was required:
We think the true view is that there is no dichotomy between culpability and causation. A comparison of degrees of fault between two negligent actors requires an examination of the whole conduct of each in relation to the circumstances of the accident. The degree of departure from the standard of the reasonable man on the part of either should not be assessed without considering the extent to which that departure was a contributing cause of the accident. A variety of factors may enter into a judicial determination as to which party has the greater share in the responsibility for the accident. There is no single touchstone of responsibility. In one case the emphasis may be on comparative degrees of negligent conduct: it may be found that the negligence of one party is much more culpable than that of another – approaching the criminal standard of negligence – as against slight negligence on the part of the other. In another case the emphasis may be on the greater importance to be attached to the conduct of one party as a causative factor. In another case there may be little to distinguish between the conduct of each party in his departure from the standard of the reasonable man, but the negligence of one party may have brought about a hazardous situation and the negligence of the other party may have consisted in failing to avoid the consequences of that negligence. It is the whole conduct of each negligent actor in relation to the circumstances of the accident which must be subjected to comparative examination.[457]
[451](1956) 96 CLR 10 (‘Pennington’).
[452]Ibid 16 (Dixon CJ, Webb, Fullagar and Kitto JJ).
[453][1958] Tas SR 36 (‘Smith’).
[454]AV Jennings Construction Pty Ltd v Maumill (1956) 30 ALJ 100, 103 (Dixon CJ, Webb and Kitto JJ); McFarlane v Neshausen [1952] NZLR 292, 295 (Hutchison J) (‘McFarlane’); and Smith itself [1958] Tas SR 36, 50 (Burbury CJ, Gibson and Crisp JJ).
[455]Davies v Swan Motor Co (Swansea) Ltd [1949] 2 KB 291, 326 (Lord Denning).
[456]Smith [1958] Tas SR 36, 48 (Burbury CJ, Gibson and Crisp JJ).
[457]Smith [1958] Tas SR 36, 46-47 (Burbury CJ, Gibson and Crisp JJ).
In relation to the relative importance of the acts of the parties, Podrebersek cited Stapley v Gypsum Mines Ltd.[458] There the much greater immediate contribution to the cause of the damage by the acts of the negligent party brought onto it a much greater responsibility for the loss.[459]
[458][1953] AC 663 (‘Stapley’).
[459]Ibid, 682 (Lord Reid).
In Moore v Scolaro’s Concrete Constructions Pty Ltd,[460] Callaway JA (Buchanan JA and Dodds-Streeton AJA agreeing) held that ‘there is no bar to grouping defendants’ when apportioning responsibility for loss.[461] In a personal injury case involving a man who fell over a balustrade, the trial judge had grouped the builder and the other defendants and apportioned liability on that basis. The Court of Appeal dismissed the appeal, holding that grouping defendants ‘may be a convenient tool in discharging the task’ of apportioning responsibility.[462]
[460][2004] VSCA 152 (1 September 2004).
[461]Ibid [12].
[462]Ibid.
Assessing proportionate liability: present case
Applying the principles just stated, I would assess Goddard Elliott’s proportionate liability for the plaintiff’s loss and damage to be much greater than that of Mr Ackman and Mr Rosen, both in terms of the causal contribution which their negligence respectively made to that loss and damage and the extent of its relative moral blameworthiness.
Mr Goddard was the partner at Goddard Elliott who had responsibility for the conduct of the overall case. He was personally engaged by Paul for that purpose. He knew the nature of the case. He knew Paul had a mental illness. He accepted the engagement on that basis. Mr Goddard allowed his relationship with Paul to go beyond that of a client to that of a friend. He knew Paul saw him as a friend. For professional reasons, he should have ceased to act for Paul after the mediation but did not do so. Mr Goddard knew Paul and the extent of his mental illness much better that Mr Ackman and Mr Rosen. He was in a far better position than them to assess Paul’s mental capacity. Both Mr Ackman and Mr Rosen relied on Mr Goddard’s relationship with Paul during the course of the settlement negotiations and in concluding the settlement. It was Mr Goddard who commenced writing out the settlement authority and explained the consent orders and child support agreement to him. He was with Paul for most of the day from the time Paul picked him up and drove him to court to the time Paul dropped him off when he drove him home afterwards.
Mr Goddard, as the solicitor in charge of the case, and much more than the barristers, was responsible for the highly pressurised circumstances in which the settlement took place. Mr Goddard actually advised Paul to settle the case when it was manifestly not in his best interests to do so. While Mr Goddard undoubtedly cared about Paul and may well have saved his life by interrupting a possible suicide attempt, Mr Goddard did not think much about Paul’s mental capacity when it was his professional responsibility to do so. One word from Mr Goddard and Paul would almost certainly not have settled the case.
As the senior and junior counsel, Mr Ackman and Mr Rosen may be considered as a group of two. Despite their difference of approach to the issue of capacity, there is no basis for distinguishing between them in terms of proportionate liability. Neither of them knew Paul personally or very well professionally. Mr Rosen had represented Paul earlier in the case, but this did not lead to the friendship which Mr Goddard had with him. Because of Mr Ackman’s concerns about Paul’s mental health, he and Mr Rosen sought a ruling from the Ethics Committee. Mr Ackman had Paul re-examined by Paul’s treating psychiatrist. These were all positive steps to take, even if the issue was not properly followed through. They did not advise Paul to settle. They were not with him all day on 16 September 2004. They were not in as good a position as Mr Goddard to assess Paul’s mental capacity. They were entitled to and did rely to some extent on Mr Goddard’s relationship with Paul. However, they did take and act on instructions from Paul when they should have known he did not have the mental capacity to give those instructions. That negligence must be taken into account in assessing the proportionate liability of the three concurrent wrongdoers.
Mr Goddard, Mr Ackman and Mr Rosen were all negligent in taking and acting on instructions from Paul when they should have known he did not have the mental capacity to give those instructions. But the responsibility which in justice Mr Goddard on the one side should bear is not equal to that of Mr Ackman and Mr Rosen on the other side. The negligence of Mr Goddard represented a significantly greater causal contribution to the cause of Paul’s loss and damage than that of Mr Ackman and Mr Rosen. It was also morally blameworthy to a significantly greater extent.
Having regard to those considerations, it is not appropriate to break the responsibility for the loss and damage into three parts of a whole and attribute one third each to Goddard Elliott, Mr Ackman and Mr Rosen. Nor is it appropriate to break the responsibility into two parts of a whole and attribute one half to Goddard Elliott and the other half jointly to Mr Ackman and Mr Rosen. In my view it is appropriate to break the responsibility up into four parts of a whole and attribute three quarters (75 per cent) to Goddard Elliott and one quarter (25 per cent) jointly to Mr Ackman and Mr Rosen.
Goddard Elliott’s proportionate responsibility is therefore assessed at 75 per cent and Mr Ackman and Mr Rosen’s joint proportionate responsibility is assessed at 25 per cent. As I have assessed Paul’s loss and damage at $900,000, Mr Goddard’s proportionate responsibility is assessed at $675,000. If the capacity negligence was not covered by advocates’ immunity, Goddard Elliott would be liable to Paul for damages in the sum of $675,000.
OUTSTANDING FEES OF GODDARD ELLIOTT
By its amended statement of claim dated 5 December 2005, Goddard Elliott claims from Paul its fees outstanding in the sum of $103,931.61, which included amounts owing to Mr Ferguson ($14,036), Mr Ackman ($25,000) and Mr Rosen ($10,000).
As we know, Paul settled his claims against Mr Ackman and Mr Rosen. The terms of settlement included mutual releases. In those circumstances, Mr Ackman and Mr Rosen have advised Goddard Elliott that they will not be pressing that firm for payment of their outstanding legal fees. Goddard Elliott has therefore reduced its claim under the amended statement of claim by $35,000.
Mr Ferguson has not adopted the same course. He has advised Goddard Elliott that he does press his claim for payment for his outstanding fees of $14,036. On that basis, Goddard Elliott has sought this sum from Paul as part of the amount still owing by him to that firm. Goddard Elliott’s revised claim is $68,711.61.
Paul submits Mr Ferguson is not entitled to press Goddard Elliot for his fees. He relies on the terms of settlement between Mr Ferguson and himself. As we have seen, cl 3 of those terms provides that Mr Ferguson ‘releases and forever discharges Fritsch from all claims … arising out of or incidental to the proceedings’.
Goddard Elliott submits this release does not cover claims made by Mr Ferguson against that firm. I accept that submission.
The release was entered into in the circumstances of the legal proceedings in this court. Paul settled his claims against Mr Ferguson. The ensuing release between Paul and Mr Ferguson covered claims ‘arising out of or incidental to the proceedings’. Goddard Elliot was not a party to the release. The release covers only claims between Paul and Mr Ferguson. It does not cover claims between Mr Ferguson and Goddard Elliot. The question is whether the claim by Mr Ferguson against Goddard Elliott can be characterised as a claim by Mr Ferguson against Paul.
As was submitted by Goddard Elliott, whether that firm engaged Mr Ferguson directly (such that it was liable for his fees) or on behalf of Paul (such that he was liable for those fees) is a question of fact.[463] In this case, Mr Ferguson was engaged by letters from Goddard Elliott dated 2 October 2003 and 13 October 2003 to which I have referred in the factual part of the judgment. The first letter said: ‘We [Goddard Elliott] would like to retain your services …’ The second letter confirmed those ‘instructions’ from Goddard Elliott. Mr Ferguson accepted the engagement in a letter to Goddard Elliott dated 6 October 2003 in which he advised that firm of his fees.
[463]Dimos v Hanos [2001] VSC 173 (29 May 2001) [88]-[103] (Gillard J).
It is clear from this correspondence that Goddard Elliot engaged Mr Ferguson directly and not as Paul’s agent. Goddard Elliot is therefore liable for Mr Ferguson’s fees. His claim against Goddard Elliot for those fees is not covered by the release.
Paul is indebted to Goddard Elliott for outstanding legal fees in the sum of $68,711.61.
CONCLUSION
Paul Fritsch is a 64-year-old invalid pensioner with a mental illness. His marriage of 24 years broke down in 2002. In the property settlement proceeding in the Family Court of Australia, his solicitor was Andrew Goddard of Goddard Elliott, his barristers were Noel Ackman QC and Clive Rosen and his accountant was Kevin Ferguson. The proceeding settled at the door of the court on 16 September 2004 on terms which were very generous in favour of the wife. In the proceeding in this court, he has sued his lawyers and accountant in negligence (and other causes of action) for damages for lost opportunity represented (in effect) by the difference between the amount he received under the settlement and the amount he would have received under a just and equitable order of the Family Court.
During the hearing, Mr Fritsch settled his claims against the barristers and accountant, leaving Goddard Elliott as the remaining effective defendant.
I have rejected Mr Fritsch’s claims of coercion, breach of fiduciary duty and misleading and deceptive conduct (contrary to s 9(1) of the Fair Trading Act) against Goddard Elliott.
Mr Fritsch has established Goddard Elliott was negligent in two respects:
Preparation negligence
· failing to have expert business valuation and taxation evidence ready for the commencement of the hearing on 13 September 2004
· failing to prepare any answering affidavits in relation to the wife’s application for costs and indemnity costs
· failing to prepare any affidavits or other evidence in relation to the post-separation amounts spent by the husband in the maintenance and conservation of the matrimonial assets
Capacity negligence
· taking and acting on instructions from Mr Fritsch to settle the case when he did not have the mental capacity to give those instructions, which Mr Goddard should have known
On the findings I have made, the circumstances of the preparation negligence were that the business valuation, taxation, costs and post-separation expenditure by the husband were important issues in the trial. Mr Fritsch repeatedly asked for evidence of this kind to be prepared. Mr Goddard inexcusably allowed the case to drift towards trial without doing so. In consequence and on the application of Mr Fritsch’s counsel, the commencement of the hearing on 13 September 2004 had to be adjourned. The trial judge allowed three days until 16 September 2004 for the preparatory gaps to be filled. That placed enormous pressure on Mr Fritsch and his legal and accounting team.
On my findings, the circumstances of the capacity negligence were that Mr Fritsch was a Vietnam war veteran who was known to be suffering from major depression and post-traumatic stress disorder. He was being treated by a psychiatrist who had provided reports to Mr Fritsch’s lawyers which were filed in the Family Court. Mr Fritsch’s mental condition greatly deteriorated over the days leading up to the adjourned and then the final hearing. The medical opinion of his treating psychiatrist was that Mr Fritsch should be in a psychiatric hospital. The psychiatrist advised Mr Fritsch’s lawyers to take his mental condition into account in the conduct of the hearing, which they did not do. On the day when Mr Fritsch settled the case, he was very ill and suicidal. He was not in a fit mental state to be giving instructions, which his lawyers should have known.
The preparation negligence did not cause any loss or damage to Mr Fritsch. However, the capacity negligence deprived him of the opportunity to obtain a better result, which was strongly probable, by going to trial.
I have assessed the value of that lost opportunity after determining, on the evidence, what the Family Court would have decided was the pool of matrimonial assets and liabilities and the percentage share to which each party was entitled. I have found the net pool was in the amount of $4,295,117. By reason of his substantial financial contributions at the start of the marriage and other matters, Mr Fritsch was entitled to 55 per cent ($2,362,314) and Lianne Fritsch was entitled to 45 per cent (($1,932,803) of that pool. In coming to that view, I have taken into account the evidence of two eminent former judges of the Family Court. Under the settlement, Mr Fritsch actually received a net amount of $1,343,808 (31 per cent), leaving a deficiency of $1,018,506. After making certain appropriate subtractions, I have assessed the value of Mr Fritsch’s lost opportunity as $900,000.
Under pt IVAA of the WrongsAct, it is necessary to apportion responsibility for loss and damage among concurrent wrongdoers. Mr Fritsch’s barristers are concurrent wrongdoers. I have found they too were negligent in taking and acting on instructions from Mr Fritsch to settle the case when he did not have the mental capacity to give those instructions, which they should have known. I have assessed Goddard Elliott to be 75 per cent responsible and the two barristers jointly to be 25 per cent responsible for Mr Fritsch’s loss and damage. In money terms, Goddard Elliott’s proportionate responsibility is $675,000. That is the amount I would have ordered as damages against Goddard Elliott in favour of Mr Fritsch, but for advocates’ immunity.
Advocates’ immunity operates in Australia to shield solicitors and barristers from liability for negligence (and other wrongs) occurring in the course of work leading to decisions about, or intimately connected with, the conduct of a case in court. After examining decisions of the High Court of Australia which bind me, I have decided that advocates’ immunity supplies a complete defence to Mr Fritsch’s claim for damages against Goddard Elliott. Its capacity negligence (as does its preparation negligence) falls within the immunity because it occurred in the course of work leading to decisions about, or intimately connected with, the conduct of a case in court, which is a very wide test. By reason of the immunity, Goddard Elliott is not liable to pay damages for the loss which its negligence caused Mr Fritsch, a conclusion to which I am driven by the binding authorities and find deeply troubling.
Goddard Elliott must succeed in its claim for outstanding fees against Mr Fritsch. I will hear the parties in relation to the form of the final orders and costs.
Appendix
| Value/amount | Value/amount |
| Assets[464] | |
| 12 Myambert Ave, Balwyn | $1,950,000 |
| 3 Morotai St, Sorrento | $360,000 |
| 4/7 Elm Gve, Mt Waverley | $280,000 |
| Proceeds of sale of 5/7 Elm Gve, Mt Waverley | $242,691[465] |
| Proceeds of sale of 7/7 Elm Gve, Mt Waverley | $257,745 |
| Hills & Oakley capital gains tax reserve (7/7 Elm Grove, Mt Waverley) | $41,000 |
| Husband’s share in listed companies | $19,786[466] |
| Wife’s shares in listed company | $2,760 |
| Porsche motor vehicle | $32,574 |
| BMW motor vehicle | $10,050 |
| Harley Davidson motorcycle | $15,525 |
| Suzuki motorcycle | $9,250 |
| Range Rover motor vehicle | $3,500 |
| Husband’s superannuation (Colonial) | $112,000 |
| Husband’s superannuation (NAB) | $353,000 |
| Wife’s funds (Bank of Melbourne) | $15,000 |
| Husband’s funds (NAB) | $28,000 |
| Husband’s interest in Bowring Unit Trust | $116,317 |
| Husband’s interest in Chadwick Glen Trust | $544,961 |
| Husband’s interest in Mermaid Metals | $55,035 |
| Husband’s interest in Paul Fritsch Family Trust (Protoline taxation reserve) | $545,981[467] |
| Total assets | 4,995,175 |
| Liabilities | |
| Taxation on Protoline debt | $659,058 |
| Capital gains tax on 7/7 Elm Gve, Mt Waverley | $41,000 |
| Total liabilities | $700,058 |
| Net assets | 4,295,117 |
[464]Certain chattels divided between the parties are ignored, as they were in the parties submissions.
[465]In submissions, the parties adopted different ways accounting for the sale of 5 and 7/7 Elm Grove, Mt Waverley and the $41,000 capital gains tax liability. I think it is preferable to specify the actual proceeds of these two sales as an asset, and the $41,000 by way of capital gains tax as both an asset (it is a reserve) and a contingent liability (as I have found it to be). This cancels out the difference in approach between the parties and is consistent with my judgment on this issue.
[466]The parties submitted that all property and asset values had been agreed. However, there were minor differences in the values given to some items which I will here resolve. In the submissions on the husband’s shares, the husband’s value was $18,865 and the wife’s was $20,710. I have taken the average of $19,786. With the wife’s shares (the next item), the husband’s value shares was $3,110 and the wife’s was $2,410. I have taken the average of $2,760.
[467]This figure is based on the submissions for Goddard Elliott and Mr Ferguson’s report of 16 September 2004
Table 1: Pool of assets and liabilities (notional trial)
| Value/amount | Value/amount |
| Assets[468] | |
| 4/7 Elm Grove, Mt Waverley | $280,000 |
| 3 Morotai St, Sorrento | $360,000 |
| Husband’s shares | $19,788 |
| Proceeds of sale of 5 and 7/7 Elm Gve, Mt Waverley | $173,885[469] |
| Hills & Oakley capital gains tax reserve (7/7 Elm Grove, Mt Waverley) | $41,000[470] |
| Porsche motor vehicle | $32,574 |
| BMW | $10,050 |
| Harley Davidson motorcycle | $15,525 |
| Suzuki motorcycle | $9,250 |
| Range Rover motor vehicle | $3,500 |
| Husband’s superannuation (Colonial) | $112,000 |
| Husband’s superannuation (NAB) | $353,000 |
| Husband’s funds (NAB) | $28,000 |
| Husband’s interest in Bowring Unit Trust | $116,317 |
| Husband’s interest in Chadwick Glen Trust | $544,961 |
| Husband’s interest in Mermaid Metals | $55,035 |
| Husband’s interest in Paul Fritsch Family Trust (Protoline taxation reserve) | $545,981 |
| Total assets | $2,700,866 |
| Liabilities | |
| Contingent liability for taxation on Protoline debt | $659,058 |
| Contingent liability for capital gains tax | $41,000 |
| Payment to wife by court order | $650,000 |
| ‘Extra bite’ | $7,000 |
| Total liabilities | $1,357,058 |
| Net receipts | $1,343,808 |
[468]Certain chattels divided between the parties are ignored, as they were in the parties submissions.
[469]This is figure in based on the submissions made for the wife dated 22 November 2011 (#MFI9)
[470]This item is included as a receipt and a contingent liability of the husband as most of it was received by him for that purpose. The ‘extra bite’ is dealt with as a liability.
Table 2: Husband’s receipts from net asset pool (actual).
| Value/amount | Value/amount |
| Assets[471] | |
| 12 Myambert Ave, Balwyn | $1,950,000 |
| Cash payment from husband (order of court) | $650,000 |
| Wife’s funds (Bank of Melbourne) | $15,000 |
| Proceeds of sale of 5 and 7/7 Elm Gve, Mt Waverley[472] | $229,758 |
| Wife’s shares | $2,410 |
| ‘Extra bite’ | $7,000 |
| Total assets | $2,854,168 |
| Liabilities | Nil |
| Total liabilities | Nil |
| Net receipts | $2,854,168 |
[471]Certain chattels divided between the parties are ignored, as they were in the parties submissions.
[472]This is figure in based on the submissions made for the wife dated 22 November 2011 (#MFI9).
Table 3: Wife’s receipts from net asset pool (actual).
| Share | Value/amount |
| Husband 55% of $4,295,117 | $2,362,314 |
| Wife 45% of $4,295,117 | $1,932,803 |
| Net pool | $4,295,117 |
Table 4: Parties share of net asset pool (notional trial)
| Percentage entitlement/receipt/deficiency | Value/amount |
| Husband’s entitlement (notional trial): 55% of $4,295,117 | $2,362,314 |
| Husband’s net receipts (actual): 31% of $4,295,117 | $1,343,808 |
| Husband’s deficiency (notional trial): 24% of $4,295,117 | $1,018,506 |
Table 5: Husband’s deficiency in receipts from net asset pool (notional trial)
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