Lavars v Gillis and Ors

[2022] NSWSC 13

Supreme Court

New South Wales

Medium Neutral Citation:

Lavars v Gillis and Ors [2022] NSWSC 13

Hearing dates:

5, 6, 7, 8, 9, 13, 14, 16, 19, 20, 21, 22 August 2019; 11, 12, 13, 14, 15 November 2019; 23 May 2020 (further written submissions)

Date of orders:

25 March 2022

Decision date:

25 March 2022

Jurisdiction:

Common Law

Before:

Campbell J

Decision:

(1) Judgment for each of the defendants against the plaintiff; and

(2) The plaintiff to pay the defendants’ costs;

(3) Liberty to apply on short notice.

Catchwords:

TORTS – professional negligence – legal advice relating to accepting or rejecting offers to compromise proceedings for recovery of employee entitlements and damages – advice to bring proceedings involving fraud and related issues – plaintiffs ultimately successful at trial on limited issues – judgment entered less than offers made – adverse costs orders where fraud claims unfounded – whether advice accorded with standard of reasonable care – quantum of loss – loss of opportunity

Legislation Cited:

Civil Liability Act 2002 (NSW) ss 5B, 5D, 5E

Federal Court Rules 2011 (Cth) rr 1.35, 25.01, 25.05, 25.14

Federal Court Rules (Cth) Ord 23

Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (NSW), r 7.1

Trade Practices Act 1974 (Cth), ss 52, 82

Cases Cited:

Astley v Austrust Limited (1999) 197 CLR 1; [1999] HCA 6

Attwells v Jackson Lalic Lawyers Pty Ltd (2016) 259 CLR 1; [2016] HCA 16

Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1; [1999] NSWCA 408

Berry v British Transport Commission [1962] 1 QB 306

Breen v Williams (1996) 186 CLR 71; [1996] HCA 57

Calderbank v Calderbank [1975] 3 All ER 333

Coles Supermarkets Australia Pty Ltd v Bridge [2018] NSWCA 183

Donnellan v Woodland [2012] NSWCA 433

Farrington v Rowe McBride & Partners [1985] 1 NZLR 83

Giannarelli v Wraith (1988) 165 CLR 543; [1988] HCA 52

Harvey v Phillips (1956) 95 CLR 235; [1956] HCA 27

Kendirjian v Lepore (2016) 259 CLR 275; [2017] HCA 13

Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721

Mal Owen Consulting Pty Ltd v Ashcroft (2018) 97 NSWLR 1163; [2018] NSWCA 135

Merost Pty Ltd v CPT Custodian Pty Ltd (No 2) [2014] FCA 594

Murphy v Westpac Banking Corporation [2014] FCA 1104

Murphy v Westpac Banking Corporation (No 2) [2015] FCA 266

Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 WLR 215

Roads and Traffic Authority (NSW) v Dederer (2007) 234 CLR 330; [2007] HCA 42

Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4

Studer v Boettcher [2000] NSWCA 263

Talacko v Talacko [2021] HCA 15

Vairy v Wyong Shire Council (2005) 223 CLR 422; [2005] HCA 62

Voli v Inglewood Shire Council (1963) 110 CLR 74; [1963] HCA 15

Westpac Banking Corporation v Wittenberg (2016) 242 FCR 505; [2016] FCAFC 33

Texts Cited:

Nil

Category:

Principal judgment

Parties:

Danielle Lavars (Plaintiff)
Michael Joseph Gillis (First Defendant)
Gana Holdings Pty Ltd (Second Defendant)
Gana Holdings Pty Ltd as trustee for Gana Holdings Trust trading as Gillis Delaney Lawyers (Third Defendant)

Representation:

Counsel:
T Faulkner SC with N Roucek (Plaintiff Lavars)
L Gyles SC with A Cameron (Defendants)

Solicitors:
Laxon Lex Lawyers (Lavars)
Kennedys (Defendant)

File Number(s):

2017/00077032

Publication restriction:

Nil

Judgment

1. This is one of five matters heard together by me. Each plaintiff is a former employee of St George Bank (“SGB”) who lost his or her job as a result of SGB’s merger with Westpac Banking Corporation (“Westpac”) in the period 2008/2010. They each instructed the defendant legal practice to act for him or her in what were essentially actions for the recovery of employment benefits due on termination of employment, damages for wrongful dismissal and, in three of the five cases, damages for deceit, misleading or deceptive conduct, or negligent misstatement. This is putting it broadly. From the legal practice, Mr Michael Gillis was the partner primarily responsible for the conduct of each client’s case on which he worked in conjunction with other lawyers in the practice.

2. Proceedings on behalf of the five plaintiffs were brought separately in the Federal Court of Australia as part of a suite of proceedings involving initially as many as 24 plaintiffs and were case-managed together, primarily by Jagot J. At first, SGB was named as respondent in each matter, but later Westpac, which had assumed SGB’s liabilities as part of the merger, was substituted. During 2011, 16 of the 24 former employees accepted offers made by Westpac to settle their cases. The five plaintiffs in the present proceedings were part of a group of eight employees who had been unable to settle despite negotiations. Each of them rejected an offer of compromise made by Westpac in December 2011. One of the eight, a Mr Bechelli, settled his case before trial in 2012.

3. The Federal Court proceedings were heard by Griffiths J. Although each plaintiff was successful (Murphy v Westpac Banking Corporation [2014] FCA 1104), the result was not all any of them hoped for. No one succeeded on every head of claim advanced and all for various reasons, which it is unnecessary to detail at this stage, suffered adverse costs orders either at first instance (Murphy v Westpac Banking Corporation (No 2) [2015] FCA 266 (“Murphy (No 2)”) or on appeal (Westpac Banking Corporation v Wittenberg (2016) 242 FCR 505; [2016] FCAFC 33).

4. I repeat, of the seven former employees who went to hearing, and on appeal, in the Federal Court, five have sued the solicitors for professional negligence, breach of fiduciary duty, and in some cases misleading or deceptive conduct under statute. Although there are nuances, particularly in relation to the circumstances said to demonstrate the breach of fiduciary duty, the central plank of the case of each plaintiff is that the act or omission constituting negligence or breach of retainer is the failure of the legal practice, and in particular, Mr Gillis, to advise him or her to accept the offer to compromise in December 2011. Again, this is stating it broadly. Each plaintiff also contended that had they been properly advised about prospects of success in the litigation they would have had the opportunity, which they would have taken then to negotiate a somewhat more favourable outcome than represented by the offer to compromise. The central contention in each case is that the advice that ought properly have been given would have led to a settlement and the adverse outcome which befell each of them after the contested hearing in the Federal Court, and appeal to the Full Court, would have been avoided.

5. Although heard together each case is essentially different. All emanate from the same matrix and involve similar claims, but the outcome in each depends upon its own facts. For this reason, I have decided to deal with each matter in a separate judgment. In this first judgment, that is in Ms Lavars’s case, I will state the principles of law which are equally applicable to each case and identify other general facts which form the context common to all, but I will focus solely upon my decision in Ms Lavars’s case. I will deal with the case then of each of Mr Lawson, Mr Wittenberg, Ms Murphy and Mr Moore in separate judgments. I will refer to the principles of law which I state and apply here without reciting them in the subsequent judgments. As evidence in one case stands as evidence in the others, so far as is relevant to them individually, I will also incorporate by reference findings made in this first judgment without re-evaluating the evidence supporting them.

Principles of law

6. The legal principles governing the duty owed by a legal practitioner to his or her client are not in dispute and no complex analysis or exposition is called for in the circumstances of the case. I have derived the statement of the principles I will apply largely from the analysis of Beazley JA (as she then was) in Donnellan v Woodland [2012] NSWCA 433 (“Donnellan”) at [88] – [97]. I acknowledge that to the extent to which Donnellan held that advice about settlement of litigation was covered by a legal practitioner’s immunity from suit (Giannarelli v Wraith (1988) 165 CLR 543; [1988] HCA 52), it was disapproved of in Kendirjian v Lepore (2017) 259 CLR 275; [2017] HCA 13 at [25] – [27]. As Edelman J (with whom the other members of the Court agreed) there explained (at [32]), Attwells v Jackson Lalic Lawyers Pty Ltd (2016) 259 CLR 1; [2016] HCA 16 establishes that legal practitioners’ immunity does not apply because “the giving of advice either to cease or to continue litigating does not itself affect the judicial determination of a case”. For this reason it cannot be said that “the particular work” involved in a legal practitioner advising on settlement is “so intimately connected with the conduct of the cause in court that it can fairly be said to be a preliminary decision affecting the way that cause is to be conducted when it comes to a hearing”: Giannarelli v Wraith at 559 – 560. However, no criticism was made of her Honour’s distillation of the legal principles governing the duty owed by a legal practitioner advising a client on an out of court settlement of litigation.

7. As Beazley JA explained, a legal practitioner owes a duty to a client to take reasonable care to exercise “due care, skill and diligence”, bringing to the task required to be performed “the competence and skill that is usual among [practitioners] practising their profession”. Her Honour referred, inter alia to Voli v Inglewood Shire Council (1963) 110 CLR 74; [1963] HCA 15 (“Voli”) at 84. Voli concerned, inter alia, the legal liability of an architect to third parties to his retainer who were injured as entrants to a building he had negligently designed. But the formulation is generally applicable to all learned professions and others who undertake skilled work.

8. It is well established that concurrent liabilities in both contract and tort may arise in cases of professional negligence. There is implied by law in every contract for the supply of professional services a term of reasonable care which conforms with the standard I have set out by reference to the language of Windeyer J in Voli: Astley v Austrust Limited (1999) 197 CLR 1; [1999] HCA 6 at [47] – [48]. Unlike the duty of care imputed by the law of negligence, the contractual duty can be bargained away or limited if the parties so choose. But there is no suggestion that that has occurred in any of the cases at hand.

9. Questions of breach of duty are governed by the common law as modified by the provisions of Part 1A Civil Liability Act 2002 (NSW), particularly s 5B. The principles stated by Gummow J in Roads and Traffic Authority (NSW) v Dederer (2007) 234 CLR 330; [2007] HCA 42 at [18] are to be applied:

“First, the proper resolution of an action in negligence depends on the existence and scope of the relevant duty of care. Secondly, whatever its scope, a duty of care imposes an obligation to exercise reasonable care; it does not impose a duty to prevent potentially harmful conduct. Thirdly, the assessment of breach depends on the correct identification of the relevant risk of injury. Fourthly, breach must be assessed prospectively and not retrospectively. Fifthly, such an assessment of breach must be made in the manner described by [s 5B Civil Liability Act].”

10. In the cases at hand there can be no question that the duty exists and has the scope I have described by reference to Voli. It is important to emphasise however that the duty is to exercise reasonable care. It does not rise to the stringent level of preventing harm befalling the client.

11. As Beazley JA described in Donnellan (at [93]) in the context of the discharge of the solicitor’s duty to advise on settlement, the risk of harm is the risk that the client will suffer economic loss by failing to compromise on available terms before the hearing due to the client’s claim failing, or notwithstanding the recovery of some damages, the circumstances are such that the client incurs an adverse order for costs. In accordance with the compensatory principle in tort the measure of damages will be the sum necessary to restore the plaintiff to the position she would have been in had the defendant not been negligent. In contract, it is the sum necessary to put the plaintiff in the position he or she would have been in had the contract been performed in accordance with its terms. These principles will operate to the same practical effect where there is concurrent liability in tort and contract. In most cases the quantum of damages will be the difference between the net proceeds of the foregone settlement and the net proceeds of the judgment and other orders, which may involve liability for wasted and adverse costs.

12. It is well to bear in mind that the correct identification of the risk of harm involved requires “hindsight, in the sense … that the legal analysis [is] framed so as to encompass the risk which is claimed to have materialised and caused the damage of which the plaintiff complains”: Coles Supermarkets Australia Pty Ltd v Bridge [2018] NSWCA 183 at [20] – [22], Leeming and Payne JJA. The particular “harm” suffered by each of the present plaintiffs is not necessarily the same for all and therefore will be discussed separately in each case, save and except that each case involves a species of economic loss. But all suffered an adverse costs result either at first instance, or after the appeal. All involved a combination of risks familiar to litigators, including less success on their claims than anticipated, failing to better an offer of compromise, and, as I have said, in the case of three of the present plaintiffs, the consequences of pleading and pursuing a case in deceit, misleading or deceptive conduct and negligent misstatement which Griffiths J held to be without foundation.

13. In every case and especially in a case like this where the very adverse outcome of the litigation is known, Gummow J’s fourth principle about assessing breach prospectively is fundamental. Section 5B Civil Liability Act requires the court to consider whether the risk of harm identified was, at the time of the alleged breach, foreseeable and not insignificant. If these questions are answered in the affirmative, the question then becomes, by reference to the non-limiting considerations in s 5B(2), whether a reasonable practitioner in the defendant’s position would have taken the precautions against the identified risk of harm for which the plaintiff contends. In Vairy v Wyong Shire Council (2005) 223 CLR 422; [2005] HCA 62 at [126], Hayne J said:

“[The] inquiry must attempt, after the event, to judge what the reasonable person would have done to avoid what is now known to have occurred. Although that judgment must be made after the event it must seek to identify what the response would have been by a person looking forward at the prospect of the risk of injury.” (Original emphasis.)

As his Honour pointed out, if this inquiry is undertaken “looking back on what is known to have happened, the tort of negligence becomes separated from standards of reasonableness” ([128]). The inquiry must be undertaken looking forward from the time when the breach is said to have occurred as though the subject harm has not befallen the plaintiff, and without knowledge that the risk will materialise, even if it may.

14. It is also important to bear in mind when approaching the analysis of breach, that all litigation is to a greater or lesser extent intrinsically risky because its outcome is inherently uncertain. As it was put in Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 at 725 (by the Court), “[l]itigation is inescapably chancy”. A nearly vanishingly small proportion of court cases are either so strong, or so weak, that the outcome can be predicted with confidence. When the outcome depends upon contested questions of fact or contentious questions of law, as is almost always the case, a less favourable outcome than hoped for, or even anticipated, is the risk that every litigant who rejects an offer of settlement and proceeds to hearing takes.

15. Moreover, negotiation of a favourable settlement is not the only means by which a legal practitioner seeks to obviate the risk of an adverse outcome for his or her client. The legal practitioner will also seek to gather cogent proofs and devise sound arguments to minimise or reduce the risk of an adverse outcome of the type I have referred to. Preparation of that type is likely to be covered by the immunity because it is intimately connected with the presentation of the case in court: Giannarelli v Wraith at 559 – 560.

16. As Beazley JA pointed out at Donnellan at [96], “The authorities are … clear that the decision whether or not to settle a claim is the decision of the client”. In Harvey v Phillips (1956) 95 CLR 235 at 242, a unanimous High Court of Australia said:

“It is hardly necessary to say that, be the compromise wise or unwise in [the client’s] interest, it was a matter for [the client] to decide in the exercise of a judgment formed upon an appreciation of the advice of her counsel and solicitor, but under no sense of coercion.” (My emphasis.)

17. In Studer v Boettcher [2000] NSWCA 263, by reference to the dictum from Harvey v Phillips, Sheller JA said (at [58]):

“I agree with Fitzgerald JA that it is never the function of the legal adviser to coerce the client into settlement … The degree to which the legal adviser may seek to persuade the client to compromise the claim and the way in which that may be done can, I believe, only be resolved having regard to the circumstances of the case in question. A great deal will turn upon the capacity of the client.” (My emphasis.)

18. Fitzgerald JA said (at [74] – [75]):

“Although it is in the public interest for disputes to be compromised whenever practical, a lawyer is not entitled to coerce a client into a compromise which is objectively in the client’s best interests, at least when the client alone must bear the consequences of the decision. The client, not the lawyer, is entitled to decide whether to compromise or to litigate.

Broadly, and not exhaustively, a legal practitioner should assist a client to make an informed and free choice between compromise and litigation, and, for that purpose, to assess what is in his or her own best interests. The respective advantages and disadvantages of the courses which are open should be explained. The lawyer is entitled, and if requested by the client obliged, to give his or her opinion and to explain the basis of that opinion in terms which the client can understand. The lawyer is also entitled to seek to persuade, but not to coerce, the client to accept and act on that opinion in the client’s interests. The advice given and any attempted persuasion undertaken by the lawyer must be devoid of self-interest. Further, when the client alone must bear the consequences, he or she is entitled to make the final decision.” (My emphasis.)

19. Handley JA, who gave the leading judgment in Studer v Boettcher, pointed out that it was necessary for the client to establish that the legal practitioner “had given bad or incorrect advice” about settlement “and then to establish that he had been negligent in doing so” (at [54]). His Honour, on his analysis of the available evidence and the law, was of the opinion that the solicitor’s “advice… to settle on the best terms then available was good advice” (at [53]). In all the circumstances, the solicitor “acted professionally and properly in the interests of [the client]” even though he brought “considerable pressure to bear on [the client] to settle on the best terms then available” (at [53]).

20. Clearly then there may be cases where the client’s position in the litigation is untenable enough to justify, if not require, his or her lawyer to bring significant pressure, but not coercion, to bear, to persuade the client in his or her own interests to accept the best terms on offer. Even so, there is a line that may not be crossed. It is not for the legal practitioner to dictate terms to his or her client; insist that the client accept an offer; or, as it is sometimes put, “tell the client to take” the offer. The line I have referred to is identified by the aphorism, “the lawyer advises, the client decides”. Naturally, as the judgments in Studer v Boettcher make clear advising may include a recommendation, even a strong recommendation, that the client accept or reject the offer as the case may be. If the client asks for the lawyer’s opinion as to whether he or she should accept the offer, the legal practitioner is bound to give it, if he or she has one, explaining the basis of it. Some offers will fall into a grey area where it may be difficult on reasoned grounds to recommend its acceptance or rejection. In such cases the matter must be left to the client’s own good judgment to act in his or her own best interests. But however it is expressed, the decision is for the client and not the legal practitioner. It is the client who must live with the consequences of the settlement, and the client who is entitled to make the decision whether to accept or reject the offer (Studer v Boettcher at [75]).

19. Returning to the decision in Maitland Hospital v Fisher [No 2] (see [14] above), the Court said the following about a legal practitioner’s professional obligations in the context of offers to compromise made in accordance with applicable rules of court (at 725):

“The rule does no more than to oblige litigants, and those advising them, to consider realistically, upon the best information available to them, the prospects of success and the likely outcome of the litigation. Where, in the particular circumstances, the litigant or [its, his or her] advisers mis-judge the prospects of success or mis-calculate the outcome, their mistake may be warranted on the material which they had available. Alternatively, it may be no more than a mis-calculation in a case with large imponderables where the course they took was nonetheless perfectly reasonable. Litigation is inescapably chancy. The purpose of the rule is to put a premium on realistic assessment of cases. It is not to demand perfect foresight which is denied even to the judges. That is why a discretion is retained, under the rule, for the Court to order otherwise than as the rule provides. But the ordinary provision is expected to apply in the ordinary case. It has added a new duty to the functions of legal practitioners advising litigants. It is a duty which is both protective of the interests of litigants and of the public interest in the prompt and economical disposal of litigation.”

As the last sentence quoted makes clear this statement is primarily directed to a practitioner’s general professional duties as an officer of the Court. The statement is not focussed on the content of the practitioner’s duty of care in contract or tort. Nonetheless the statement is instructive in that regard also. Notably it admits of the possibility of miscalculation or other error in an “inescapably chancy” context. “Perfect foresight”, which in reality would be akin to hindsight, is not required. Reasonable foresight is the standard imposed by the law of negligence whether in contract or in tort.

22. It is necessary for each plaintiff to prove that the harm suffered by him or her was caused by the legal practitioner’s negligence. The relevant law of causation is stated in s 5D Civil Liability Act. The onus of proof on the balance of probabilities “always” lies on the plaintiff: s 5E. As Handley JA said in Studer v Boettcher, at a practical level this requires each plaintiff to establish that the legal practitioner had given bad or incorrect advice, negligently. It also requires the client to prove what advice a reasonable practitioner in the position of the defendant would have given, that the client would have accepted the advice and would have settled on terms at least more favourable than the outcome of the contested litigation.

23. Insofar as a client’s case is based upon acceptance of an offer actually made by the opposing party he or she rejected, no complexities of fact may arise in relation to causation. But the question is otherwise when, as was argued here, the counter-factual put was that reasonable care required the solicitor to continue to negotiate, and by that means an offer even more favourable than the offer of compromise would have been elicited which the client would have accepted. On that case, as Beazley JA pointed out in Donnellan at [158], to satisfy the “but for” test implicit in s 5D(1)(a) Civil Liability Act, it is necessary for the client to prove that Westpac would have made another higher offer, the terms of it and that the client would have accepted those terms. Notwithstanding the hypothetical nature of the question, given that the client, to prove causation, must establish these matters on the balance of probabilities, there may be little scope for the approach to the assessment of damages countenanced by Sellars v Adelaide Petroleum NL (1994) 179 CLR 349; [1994] HCA 4 (“Sellars”); Mal Owen Consulting Pty Ltd v Ashcroft [2018] NSWCA 1163. To the extent that these questions involve proof of what the client would have done had the legal practice not been negligent, the provisions of s 5D(3) Civil Liability Act apply requiring the application of a subjective standard and the exclusion of statements of the client made after the harm materialised about that topic except if they constitute evidential admissions.

24. Finally, it should not be overlooked when considering the counter-factual that the law of compromise is a branch of the law of contract involving the rules of offer and acceptance. Each counter-offer operates as a rejection of the offer in response to which it is put. Once rejected, there can be no guarantee that the offer will be re-put by the other side. As a practical matter only, often it may. But the point is that a party is not legally entitled to accept an offer once rejected. This consideration needs to be borne in mind when assessing an argument that further negotiation would probably have produced a result acceptable to both parties.

Ms Lavars’s employment with SGB

25. Ms Lavars commenced employment with SGB in or about September 1998 as an account manager in margin lending. Her letter of appointment provided for termination on 4 weeks’ notice or payment in lieu. She enjoyed a successful career with SGB and from 2005 she was a senior manager in the institutional sales section of the Treasury Division of SGB.

26. In addition to her salary Ms Lavars was paid an annual bonus under what was referred to as the Treasury Incentive Plan (“TIP”).

27. In May 2008 SGB and Westpac announced their proposed merger. They agreed on a scheme of arrangement which was approved on 17 November 2008 and the merger was completed on 1 March 2010. The new entity thereafter operated as a single institution, even if at the retail level, two banks appeared to continue operation.

28. Following the announcement of the merger proposal, by letter dated 18 June 2008, key staff including Ms Lavars and each of the other plaintiffs were promised a retention incentive payment (“RIP”) if certain market performance targets were met by SGB for its corporate financial year ending 30 September 2008 and each employee concerned remained in their employment with SGB as at 13 November 2008. The market performance target, or Earnings per Share Target (“EPS”), stated to the employees concerned was 8% to 10%. In fact, the SGB Board had set the target at 10.1%. About 8.3% was achieved, which was, obviously, within the range stated to the employees, but below the target fixed by the Board. SGB declined to pay the RIP because the EPS achieved was less than 10.1%.

29. As the name suggests, the RIP was offered to retain key staff during the merger process. Otherwise it was natural to expect those employees may look elsewhere to better secure their future careers. It must have been obvious to executives in the Treasury Division, like the plaintiffs, that a single institution would not require two treasuries. To assuage these natural concerns, Westpac also promised each SGB executive would be permitted to “contest” the equivalent position with Westpac.

30. The discrepancy between the Board’s EPS position and the stated position, when it came to light while the Federal Court litigation was pending, led to the amendment of the claims brought on behalf of the former treasury employees to claim additional damages for lost opportunity and exemplary or punitive damages based on causes of action framed in deceit, negligent misstatement and under ss 52 and 82 of the Trade Practices Act 1974 (Cth) for misleading or deceptive conduct. Ms Lavars initially joined in these claims but later withdrew them (as did Mr Moore) sometime during 2012. I will make further mention of this topic when dealing with the claims of those employees who persisted with that claim, Mr Wittenberg, Mr Lawson and Ms Murphy.

31. Ms Lavars was interested in pursuing a career with Westpac, but she was unsuccessful in obtaining her “contested” position or another permanent position with Westpac with a fixed contract. On 1 December 2008 she was seconded to Westpac under SGB’s secondment policy. While working at Westpac she was assessed as entitled to a bonus (TIP) in accordance with Westpac’s policy, which she believed was considerably less than she was accustomed to receiving from SGB.

32. During her secondment, Ms Lavars continued to attempt to secure a satisfactory permanent placement with Westpac. She was aware of her SGB entitlements and when nothing satisfactory to her was forthcoming from Westpac, she purported to return to her position in SGB’s Treasury upon the completion of the maximum 12 month period which SGB’s secondment policy permitted. Westpac took the view which it maintained in the litigation that she had been permanently appointed to a position at Westpac, albeit, and perhaps euphemistically, of indefinite duration. That is to say, she was susceptible to dismissal on notice at any time. It instructed her to report for work at Westpac after 1 December in the position she was then occupying. When Ms Lavars refused, by letter dated 8 December 2009, SGB purported to summarily dismiss her.

33. After her dismissal, Ms Lavars was able to secure a position with the Commonwealth Bank of Australia. Interest had also been expressed in her services by the National Australia Bank. She was a well presented, articulate witness but of whom it may be accepted had no experience of litigation. She was, however, as befits a successful banker, financially savvy and understood, so far as I could tell, the components of her claim.

Ms Lavars Claim at mediation in 2010

34. After consulting Gillis Delaney, proceedings were commenced on Ms Lavars’s behalf in the Federal Court on 15 January 2010. Ms Lavars and Westpac engaged in mediation on 24 May 2010, as did other SGB employees for whom the legal practice was acting. The mediations took place at the offices of Westpac’s solicitors. Ms Lavars was represented by senior and junior counsel and solicitors from the legal practice. It’s necessary to record that Ms Lavars’s claim at that stage was made up of the following components:

A notice period of 6 months calculated by reference to base salary and bonus:    $177,500

Redundancy (or severance pay) calculated in accordance with SGB’s policy for a total of 49 weeks at base salary plus bonus:   $334,519

Bonus for 2008/2009 period calculated at SGB rates less the assessed Westpac bonus   $70,000

RIP    $24,000

TOTAL   $606,019

Once interest and costs were added the total was:          $684,809

35. In response, Westpac maintained: it had been entitled to dismiss Ms Lavars for refusing to accept a lawful direction; that the SGB secondment policy would not apply to her as she had been appointed to a position at Westpac; reasonable notice could not extend beyond 6 February 2010 when she commenced her new employment; that she had received a Westpac bonus while working there and that exhausted her rights to a bonus; and that the target for the RIP of 10.1 percent earnings per share had not been achieved. Alternatively, it was Westpac’s position that Ms Lavars was not entitled to an additional six months’ notice given that the redundancy, if applicable at all in the circumstances, provided for six weeks’ pay in lieu as a component of the redundancy package to which an employee may be entitled. Westpac contended that “pay” in context meant base salary and not entitlements under applicable SGB incentive or bonus schemes. On a Calderbank v Calderbank [1975] 3 All ER 333 basis, Westpac offered Ms Lavars the sum of $85,000 plus costs.

36. The mediation was unsuccessful and on 26 May 2010 “final offers” of $385,000 inclusive of costs was made on behalf of Ms Lavars. On 3 June 2010 under Order 23 of the Federal Court Rules then in force a formal offer of compromise was made on her behalf in the sum of $430,000 including interest, plus costs.

37. Preparation of the matter for trial continued and when reporting to Ms Lavars on 13 August 2010, Mr Gillis stated, “[Westpac] continues to express an interest in settlement of matters. However, there is no guarantee they will make any significant advance on the offer they have previously made to you”.

38. In response to a request from Westpac’s solicitors, Mr Gillis made further offers in outstanding cases including $490,000 inclusive of costs and interest in Ms Lavars’s matter. The offer was presumably made on Ms Lavars’s instructions. By letter dated 10 December 2010, counter-offers were made in 14 cases, not including Ms Lavars’s. Of Ms Lavars’s case and the other cases in which no counter-offer had been made by Westpac, its solicitors said:

“In relation to the remaining five claims, settlement offers by those applicants were never requested by our client. Although Westpac may at some future time be prepared to enter into settlement discussions in relation to those claims, any settlement figure must reflect the significant legal problems that attend those claims.”

A comment on the conditions of settlement

39. On a somewhat different note, I wish to record that each of the settlement offers made on 10 December 2010, which were not made to the five plaintiffs in this Court, was expressed to be subject to a condition that each of the partners of the legal practice covenant by deed, “not to bring or otherwise aid, abet, counsel or procure the bringing of any claims against … Westpac on behalf of” any former SGB Treasury employee or any SGB former employee whose employment is terminated at any time before the disposition of the claims then current. I fully appreciate that neither Westpac nor its solicitors are parties to or involved in this litigation. They have not had the opportunity to be heard. I can also appreciate Westpac’s desire from a purely commercial point of view to bring the litigious fallout of the merger with SGB to an end to avoid being vexed by ongoing employment related claims from former employees for a period of years. However, in my experience, such a stipulation as a condition of compromising litigation is extraordinary. I have been 44 years in the legal profession in one capacity or another. During the whole of my professional life before my appointment as a judge, it is no exaggeration to say, I was involved in some aspect of negotiating the settlement of litigation each working day, frequently involving more than one case. I have never ever been involved in a negotiation where such a demand was made. To say the least, to seek to put such a restraint upon the practice of their profession by solicitors, who are, after all, officers of this Court, is contrary to the public interest in that aspect of the open justice principle concerned with access to justice. As there may be special or exceptional circumstances, of which I cannot conceive, which may have justified such an extraordinary stipulation, I will say nothing more of the matter.

The events of 2011

40. By December 2010, senior counsel had apparently advised on the prospect of amending the Statements of Claim in the various matters to allege the “deceit” causes of action in relation to the discrepancy in the EPS target condition of the RIP involving a claim for exemplary damages. As I have said, initially Ms Lavars was a party to that claim. By email dated 18 February 2011, Mr Gillis advised Ms Lavars that he had consulted with Mr Robert Goot SC, a leading Sydney industrial silk, who considered “on the evidence there was a good prospect of an award for exemplary damages”.

41. In May 2011 the suggestion of another attempt at mediation of the outstanding claims was raised, although there seems to have been initial disagreement about the selection of a mediator. In the middle of June, in consultation with counsel, Mr Gillis prepared a schedule of damages for a renewed mediation. It was broadly similar to that prepared for mediation in 2010 with some variation including the reduction of the notice component from six to three months. A claim of $500,000 in exemplary damages and costs in the sum of $115,000 were added bringing the total claim to $1,304,419. There was a delay in the dates for mediation being fixed because Westpac, through their solicitors, wished to put on their evidence before mediation in the expectation that the remaining plaintiffs including Ms Lavars would then be prepared to put “a more realistic offer”.

42. In late October 2011, it was agreed that the mediator would be the Honourable Tony Fitzgerald QC and that the mediations would take place over two to three days in early December. The dates were later fixed for 30 November, 1 December and 8 December. Ms Lavars’s mediation was listed on the first day. Ms Lavars was represented at the mediation by Mr Goot SC and Mr David O’Dowd of counsel. Mr Gillis and Mr David Collinge from the legal practice also attended to instruct counsel. In total eight matters were to be mediated including the claims for each of the five plaintiffs. The schedule of damages attached to the position paper served for Ms Lavars increased her claim to a little over $2m. Of this, $1m was for exemplary damages and costs had risen to $205,000. Otherwise the components remained more or less the same as the May 2011 figures.

43. In its position paper, Westpac continued to assert that: Ms Lavars had not been seconded, rather she had been allocated a full time permanent position, as I have said, of indefinite duration; the bank was entitled to summarily dismiss Ms Lavars because she repudiated her contract of employment in December 2009; alternatively, any payment due in lieu of notice was included in any redundancy payment, “pay” in context meaning base salary; the conditions for the payment of the RIP, including satisfaction of the EPS had not been met; and the “deceit” claims were bound to fail. Indeed, the only concession from Westpac was that, perhaps contrary to its assertion, only the retention incentive payment had any prospects of success.

The mediation

44. Ms Lavars conferred with Mr Goot SC, Mr O’Dowd, Mr Gillis and Mr Collinge at Mr Goot’s chambers at 4:45 p.m. on 29 November 2011. According to Mr Collinge’s notes there was a general discussion about the schedule to damages to which I have already referred. There was also a discussion of mediation procedure. Ms Lavars was advised that it was necessary “to play it by ear” at the mediation. Advice would be given as necessary during the day. Ms Lavars recalls Mr Gillis mentioning a figure of around $190,000 for her legal costs. Mr Gillis recalls Mr Goot, who was not called by any party to give evidence, advising Ms Lavars that she had “a very good case”. He said that Mr Goot advised Ms Lavars that Westpac had repudiated the contract which she had accepted, and she should be entitled to her redundancy payment and unpaid bonuses including pro rata bonuses for 2008/2009 on the same basis as an SGB employee. Mr Goot said, “I can see no reason why you should not receive your retention incentive and a period of reasonable notice had they complied with their contractual obligations to you”. He also advised that the claim for exemplary damages could be included due to what appeared to be SGB “deliberately withholding the true [EPS] target”.

45. Mr David O’Dowd of counsel gave evidence but could not recall the substance of the discussion at the conference.

46. Mr Collinge kept what is accepted to be an accurate note of the mediation itself. After Mr Goot outlined Ms Lavars case, counsel for Westpac opened by saying it is an “all or nothing claim”, putting the RIP to one side. He described the argument that Ms Lavars was not within SGB’s secondment policy as “a reasonably good argument”. If that was so, Ms Lavars had clearly repudiated the contact and had no entitlements. The value of the RIP was already covered by the offer previously made. It was strongly contended that there was no fraud involved in the misstatement of the EPS. If the 10.1% target had not been communicated, this was merely a mistake. Counsel insisted that the prospect of the former SGB employees establishing fraud was “negligible” and Westpac would not countenance the payment of hundreds of thousands of dollars for exemplary damages. Counsel for Westpac stated, “We think the fight is over three to four hundred thousand dollars”.

44. I have recounted these details to put in context what was said about the issues in the presence of Ms Lavars by her senior counsel and counsel for Westpac. Her awareness of these matters is clearly relevant to her appreciation of her prospects and her assessment of the reasonableness of offers made.

45. Offers seem to have been conveyed through the mediator rather than directly between counsel. Mr Fitzgerald conveyed Westpac’s first offer of $125,000 plus costs as agreed or assessed. It was common ground between Ms Lavars and the legal practice that Westpac were working on the basis that it would agree to party and party costs of no more than $150,000. A break-down of the components of the offer was given. The mediator spoke directly to Ms Lavars. According to Mr Collinge’s summary he said words to the effect (CB 11; Tab 482, p. 3846):

“It’s about choice.

[There is a] tendency to overestimate reputational issues.

They won’t give you any exemplary damages.

Don’t know [how much] they’ve got.

Think about how a response will be received.

Assess risks realistically.”

I take the reference to “reputational issues” to be to the deceit issues.

49. Following a discussion in the absence of the mediator, an offer in the sum of $1,034,000.00 plus costs was relayed to Westpac through him. After a delay, Westpac responded with an offer of $450,000 inclusive of costs. Following a further discussion between Ms Lavars and her legal team, Ms Lavars counter-offered with $740,000 inclusive of costs, being calculated as $550K and costs on a solicitor and client basis of $190K. Westpac then put what was said to be a “final” offer of $475,000 inclusive of costs. Ms Lavars was advised, “[this would give her] under $300,000”, being $475K less $190K for her solicitor and client costs. Mr Goot advised Ms Lavars of her options, being acceptance, rejection or counter-offer. He advised her to consider the offer. Ms Lavars raised a pertinent question about tax as Westpac regarded the offer as an eligible termination payment (“ETP”), which would be subject to income tax.

50. I infer that it was at about this point that Mr O’Dowd advised Ms Lavars using words to the following effect:

“Ultimately the decision will be a matter for you. This process is going to be expensive and difficult. Westpac are playing hardball and when they say that there will be no further offers, I tend to believe them. I may be wrong, and they may change their mind and make further offers down the track, but we can’t assume that this will happen. They have unashamedly stated that their costs will be far higher than the costs of [the legal practice] in terms of what has been incurred to date. It is more bully-boy tactics, but it is something that you should consider when making your decision. If they make their offers formal offers of compromise, if you don’t beat their offer you can be made to pay their costs from the date of their offer, even if you win”.

51. It was Mr O’Dowd’s opinion, “that the best outcome for the plaintiff is to accept the offer made to her by Westpac” (Affidavit David O’Dowd sworn May 2018, CB 2, Tab 47). He also advised her:

“Litigation is an expensive and stressful process. Principles are also an expensive commodity. Although it is not as much money as you might be hoping for, you should seriously consider their offer as that would finalise everything for you and will allow you to put all this behind you and to get on with your life.”

52. According to Mr Collinge (Affidavit sworn 18 May 2018, CB 2; Tab 48, p. 526 ff) during the course of the afternoon Mr Gillis, in his presence, had a discussion with Westpac’s solicitor about progress of the negotiations. The solicitor said:

“Westpac’s final offers today … will be as much as they are prepared to offer. If the offers are not accepted, we will serve offers of compromise effectively for the same amounts … and that will be it as far as Westpac is concerned”.

(See also Michael Gillis Affidavit, 8 June 2018: CB 2; tab 46, p. 496 [81]-[82])

53. Mr Gillis passed this information on to Ms Lavars. He explained that offers of compromise “cannot specify a figure for costs”, but Westpac would most likely use the figure of $150,000 for the costs’ component. However, Mr Gillis advised that Ms Lavars would “need to take off the $190,000 to arrive at the figure” which would be clear to her. He stated that an offer of compromise “increases your risk as to costs”.

54. Mr Collinge says that Mr O’Dowd then explained:

“Offers of compromise change [the] general rule. Essentially, unless a plaintiff winner does better after a hearing than what the offer was for, then they won’t recover from the loser any costs after the date of the offer and will have to pay the loser’s costs from that date. And that order is for costs on an indemnity basis, so it really increases the risks. Indemnity costs means the actual costs that the party has to pay, not just the seventy five percent which are recoverable normally.”

Mr Goot reinforced this advice by saying “an offer of compromise potentially puts you at risk of Westpac’s costs going forward from here”. He asked if Ms Lavars understood saying, “it is important that you do. If you don’t please say so.” Mr Collinge says that Ms Lavars answered in words which he did not recall but satisfied him that she understood. It is important to say that Mr Gillis said that Mr Goot referred to Westpac’s costs “on an indemnity basis”.

55. After receiving Westpac’s “final” offer of $475,000 inclusive and following further discussion, Mr Gillis recommended that Ms Lavars counter-offer in the sum of $675,000 inclusive of costs. In response Ms Lavars indicated that she “would be happy [with] $400,000 after deduction of [her] costs”. This generated further discussion, the detail of which is not recorded in Mr Collinge’s note, but I would infer that advice must have been proffered by either counsel or solicitor that $400,000 clear may be on the high side for it was “decided” to put the $675,000 inclusive of costs, but with an indication that Ms Lavars would accept $575,000, if offered, on the condition of costs agreed in the sum of $190,000 to be paid separately without the need to proceed to taxation. This offer was conveyed to Westpac through the mediator.

56. There is no response from Westpac recorded in Mr Collinge’s notes. I would also infer that the effect of the “indication” was to communicate that Ms Lavars was prepared to “split the difference”. I also accept that it evinces a preparedness on the part of Ms Lavars to accept somewhat less than $400,000 clear of costs, even if that was her preferred figure. After all, she had asked about and would have been aware of the tax implications of the settlement of her case.

Cross-examination of Mr Gillis

57. In cross-examination Mr Gillis initially agreed that he did not mention the particular offers made at the mediation in his affidavit because he had no “independent recollection” of them (761.26T) and he relied upon the notes taken by Mr Collinge. Mr Gillis was taken through the notes in detail. He agreed that he could not say one way or another from his memory alone whether $675K inclusive was the last offer put by either party at the mediation (764.42T). But he was prepared to agree that the “indication” accorded with his understanding at the time that while Ms Lavars would be happy with $400,000, it was not – my expression – “her bottom line” (765.37T).

58. However, when cross-examined closely about the significance of the offer of compromise served on 2 December 2011, to which I will refer in a moment, Mr Gillis said, “As I sit here today, my recollection was that the offer, the last offer from Westpac at the mediation was a lot closer to the offer of compromise” than $475,000 inclusive of costs (769.45T). However, as the cross-examination progressed I formed the very distinct impression that this was a stray and unreliable recollection based upon a reconstruction founded on what Westpac’s solicitor had said about “converting their last offer into an offer of compromise and that’s what they did” (783.15 - .50T). It was not suggested, and I am not inferring, that this apparent change in Mr Gillis’ evidence was in any way dishonest. But to my mind it was definitely a reconstruction that flowed from what was apparent from the course of the cross-examination that the offer of compromise, when it arrived on 2 December, in the sum of $375,000 plus costs represented an appreciable increase in the “final” offer at mediation as recorded in Mr Collinge’s notes.

59. Moreover, Mr Collinge’s note was obviously carefully made. It does not record any further offer after Ms Lavars’s $675K. He also struck me as a very careful solicitor while giving evidence. I do not regard it as likely that he would have entirely failed to record something so significant as a further “final” offer. Had a counter-offer been made in response to $675K, it would have been conveyed to Ms Lavars and that matter certainly would have been recorded by Mr Collinge.

60. In the upshot, although the parties had moved closer by the end of the mediation, the matter remained unresolved.

Developments in December

61. On 2 December 2011, Westpac served an offer to compromise under Rule 25.01(1) Federal Court Rules 2011 (Cth) in the sum of $375,000 in addition to costs as agreed or assessed, open for acceptance for 14 days after service (Rule 25.05). The offer was sent under cover of an email at 11:08 a.m. on 2 December 2011. On the assumption Westpac was still prepared to pay the sum of $150,000 for party and party costs, I infer that the offer was equivalent to $525K inclusive of costs and represented an increase in the “final” offer made at mediation, viz $475K inclusive. Again, working on the basis that as at 2 December 2011, only two days after the completion of the mediation, Ms Lavars’s costs on a solicitor and client basis remained the same, $190K, if accepted, the offer would have left Ms Lavars $335K “in the hand”.

62. It had been argued on behalf of Ms Lavars that the offer to compromise should in fact be viewed as effectively $546,000 inclusive of costs because Mr Gillis had advised Ms Lavars, and confirmed in oral evidence, that he was of the view that she would recover 80 to 90 percent of her solicitor and client costs on assessment (or taxation). Taking the higher proportion, recoverable costs then would have been $171K. It followed from this, as I understood the argument, that the offer to compromise was just $30K short of the indication given at the mediation that Ms Lavars was prepared to settle for $575K inclusive of costs.

63. However, I do not regard this approach as realistic. First, despite Mr Gillis’s impressive bullishness about the high rate of recovery of Ms Lavars’s actual costs on a party and party basis, I doubted, with respect, I could rely upon his assessment with appropriate confidence. Secondly, previous and subsequent events demonstrated Ms Lavars was acutely aware of the significance of the costs issue and was averse to settling on a “plus costs” basis. She would have taken a conservative approach to the costs question. Thirdly, Westpac had made its views clear through its solicitors. If Mr Gillis’s view, contrary to my pessimism, was to prevail, it probably would have been necessary to proceed to assessment or taxation, a process involving additional expense, delay and inconvenience for Ms Lavars.

64. In his affidavit of 8 June 2018 (CB 2; Tab 46, p. 497 [86]) Mr Gillis said that he telephoned Ms Lavars at 2:06 p.m. and spoke to her about the offer of compromise for nine and a half minutes. On Mr Gillis’s account he informed Ms Lavars of the offer of compromise, describing it as “a slight improvement”. He also advised Ms Lavars that he “suspected that Westpac would be prepared to negotiate further if there is an opportunity of wrapping up all matters”. He advised her the offer was open until 16 December 2011 and recommended that she attempt to negotiate an increased offer before the expiration of the offer to compromise after 8 December when the remaining matters were listed for mediation. Mr Gillis said that Ms Lavars accepted his advice.

65. Ms Lavars, on the other hand, denies that Mr Gillis telephoned her about the offer to compromise on 2 December 2011. Her evidence is that she first knew of it on 13 December 2011, (Danielle Lavars Affidavit 16 February 2018 CB 2; Tab 45, pp. 467 [89] – 469 [98]). She states that Mr Gillis telephoned her on 9 December 2011 after the remaining mediations and spoke to her about settlement without mentioning the offer to compromise but seeking instructions to put an offer on her behalf of $610K inclusive of costs and she so instructed him. She says she first heard of the offer to compromise when she received an email from Mr Gillis on 13 December 2011 providing written advice about it. From the tenor and content of the advice, Ms Lavars formed the understanding that Mr Gillis did not recommend acceptance.

66. Some of the parties’ telephone records were in evidence: Exhibit 7. They provide a reference for the timing of certain conversations. The records evidence a telephone call by Mr Gillis to Ms Lavars on 2 December 2011. The overwhelming logic of probable events suggests Mr Gillis must have discussed the offer to compromise then. However, significantly, on 6 December 2011, Ms Lavars emailed Mr Gillis asking, “Did Westpac send through the Offer of Compromise on Friday?” (CB 7; Tab 224, p. 2336). I should also say that Mr Gillis has no file note of any conversation with Ms Lavars on 2 December 2011, although he does not appear to have been an assiduous taker of such notes.

67. Telephone records indicate that Mr Gillis may also have spoken with Ms Lavars by telephone on 9 December 2011 (Exhibit 1, p. 211). In her affidavit Ms Lavars states that Mr Gillis rang her on 9 December and spoke to her about settlement without mentioning the offer to compromise. On Mr Gillis’s account he telephoned her on 8 December after the remaining mediations had been unsuccessful seeking instructions to make a further offer to Westpac that would expire while Westpac’s offer to compromise remained open. The strategy seemed to be one of hedging bets, attempting to obtain better terms while at the same time leaving acceptance of the offer to compromise as a fallback position if the client so chose.

68. In my judgment, more probably than not Mr Gillis did phone Ms Lavars on 2 December 2011. While he must have discussed settlement with her then, as that was the only relevant topic at the time, he may have overlooked actually mentioning physical receipt of the offer to compromise. I am of this view because of the absence of any written record of the content of the conversation, his evidence in cross-examination (at 792.18 – 793.35T) and, more importantly, the content of Ms Lavars’s email of 6 December 2011. It seems very unlikely she would have written that email if Mr Gillis had mentioned receipt of the formal offer when he spoke to her on Friday, 2 December. Although the conversation on 9 December appears to have been short, it also seems to me more likely that Mr Gillis telephoned on 9 December 2011 as Ms Lavars says, rather than 8 December 2011. On that day he was more likely to have been completely tied up with the remaining mediations. None of those remaining matters settled. It seems more likely that he was then of the view that Westpac may be prepared to offer each client something more if Westpac believed it could finalise all of the claims at once without having to incur the further costs of running any. It may have been something Westpac’s solicitor said to him, or he may have been perspicacious. Certainly, as I will recount, Westpac sought to pursue such a strategy itself in the middle of December 2011.

69. I find that Mr Gillis has fragmented into two what was in fact one conversation and all of what he says was relayed to Ms Lavars over two conversations was in fact relayed to her once on 9 December 2011. This involves a rejection of Ms Lavars’s evidence in this regard, but again I did not regard her as dishonest. These events happened in 2011 and in the meantime, she had been through, what may well have been a gruelling hearing, and an appeal, in the Federal Court with an extremely disappointing outcome. It would be surprising if her recall had not been affected and skewed somewhat by these events and the eroding effect of the passage of time on one’s power of recall.

70. Probably then Mr Gillis’s account is in substance accurate, notwithstanding the effect of the passage of time on the clarity of his own recall. It also seems to me that Mr Gillis’s version is more consistent with the contemporaneous records and the apparent logic of the events which they document. It remains, however, that Mr Gillis did not give detailed advice about the offer of the compromise made to Ms Lavars in these conversations other than to say, “it is a slight improvement”. It is important to set out the following aspects of Mr Gillis’s account. After speaking of the offer to compromise and explaining his strategy, Mr Gillis said (CB 2; Tab 46, p. 498 [89]):

“Mr Gillis   If Westpac do not accept the offers we are going to make now

… then it will still be open for any client to accept the offer of compromise which will then bring the client’s proceedings to an end.

Ms Lavars   Ok I understand. What figure should we put?

Mr Gillis   [Ms Lavars] this is a really a good time to settle your claim. This happened last year when lots of others settled. We have a hearing date in April so you should give me instructions to put the lowest figure that you would be prepared to accept in settlement of your claim.

Ms Lavars   I want $400,000 after payment of your costs.

Mr Gillis   On that basis to ensure you receive $400,000 after payment of all of your costs, we should put a figure of $610,000.

Ms Lavars   With all of the delay and increase in interest that is fine to put to them.”

I infer $210K was the figure for solicitor and client costs, or perhaps Mr Gillis was allowing a little room to move.

71. Mr Gillis was challenged about the accuracy of this account. On Ms Lavars’s account, Mr Gillis suggested she put $610K without asking what she wanted, and she accepted his recommendation. However, by then Ms Lavars had received advice about her claim from Mr Gillis, senior counsel and junior counsel. Although there is no file note of this conversation, a solicitor seeking instructions about “the lowest figure that [the client] would be prepared to accept” after all this advice had been given has an air of authenticity about it, especially given Ms Lavars’s financial sagaciousness. The figure nominated by Ms Lavars is the same figure she nominated at the mediation, although I accept that previous and subsequent events demonstrated that this was not a hard and fast “bottom line”. Still, it seems to be a figure which represented her preferred position. I am satisfied instructions were obtained in the way described by Mr Gillis. I also accept that no clear advice was given focusing upon the offer to compromise actually made during this conversation. But I accept that advice was given about the effect of offers to compromise at the mediation especially by senior and junior counsel.

72. On the same day, Mr Gillis wrote (forwarded by email) a letter to Westpac’s solicitors making a “final offer” on behalf of each client with an outstanding claim. The offer conveyed on behalf of Ms Lavars was, as discussed, $610,000 inclusive of costs on an ETP basis (CB 7; Tab 226, p. 2338). At 5:44 p.m. he wrote to Ms Lavars by email stating (Exhibit 1, p. 215):

“I confirm I have made a final offer for you today in your matter against Westpac. Based on Senior Counsel’s advice and as discussed with you, the offer of $610,000 inclusive of costs was made on an EPT basis.

The offer is open for acceptance until 4 p.m. 16 December 2011.

An offer was also made for all other applicants today as well. Those offers expire at the same time as your offer.”

Written advice on offer to compromise

73. On 13 December 2011 at 1:07 p.m. Mr Gillis wrote to Ms Lavars by email attaching a copy of the offer to compromise and providing written advice about it and other matters. In relation to the offer to compromise, Mr Gillis advised as follows (CB 7; Tab 227, p. 2340):

“Please find attached an Offer of Compromise served by Westpac in your matter.

The offer of compromise is open for acceptance by you until 5:00 p.m. on 16 December 2011 which is 1 hour after your offer expires so you could accept the offer of compromise up until 5:00 p.m.

The offer is made on a “plus costs” as agreed or assessed basis. We estimate this order would cover at least 80 – 90% of your actual costs.

The effect of the offer of compromise is that if you obtain a verdict less than Westpac have set out in the offer of compromise, you:

(i) will not recover any more of your costs incurred beyond the date of the offer; and

(ii) will have to pay Westpac’s costs incurred after the offer of compromise.

We consider the offer of compromise is at the bottom end of the range for settlement of your case. If you are found to be on secondment, the offer is not in the range.”

The expression “not in the range” should be taken as meaning “below the range.”

74. Ms Lavars wrote back on the same day at 2:28 p.m. as follows:

“Thanks Michael,

Westpac have not stated in the offer what “their agreed or assessed costs” actually are. Previously they were saying $150K but we are at $190K.

It is impossible to consider this offer without pre-agreed costs, unless of course you are going to accept the costs that they decide on.

Danielle”

Mr Gillis took the second paragraph as an attempt by Ms Lavars to obtain a discount on her costs. I do not think this is a fair reading of the email. It should be taken at face value. Ms Lavars was saying that it was impossible for her to consider the offer without knowing what Westpac would then pay for party and party costs because without that information she could not calculate the net proceeds of the settlement that would flow to her. I appreciate Mr Gillis had given his “80 – 90%” advice, but Ms Lavars was obviously seeking practical guidance about how the costs actually affected the net proceeds of the settlement. Perhaps the final clause was irony.

Cross-examination of Ms Lavars

75. Ms Lavars agreed in cross-examination that she understood that if she did not accept the offer to compromise and Westpac obtained a better result, Westpac would not be obliged to pay her legal costs after the date of the offer (182.45T). She also understood that she would have to pay Westpac’s costs after the date of the offer (182.50T). She could not agree that those matters had been covered by Mr Goot and Mr O’Dowd at the mediation because her recall was not perfect, and she did not remember the conversations she had with counsel (183.5T). I am satisfied senior and junior counsel did give this advice and she understood it when it was given.

76. When she read Mr Gillis’s advice on 13 December 2011, she knew that the offer of $610K made on her behalf “might have given [her] more than $410,000 in [her] hand” (183.22T) (my emphasis). She believed on the basis of the advice she had received that she had “a very solid claim for something in excess of $500,000 plus interest plus costs” (183.40T). But she was prepared to discount that because she knew there were risks with litigation (183.45T). She also agreed that on the assumption that her costs were $190,000, and Westpac were not prepared to pay more than $150,000, the offer of compromise was worth about $335,000 clear (183.50 – 184.1T). When she made the offer of $610,000 inclusive of costs she was not prepared to compromise as low as $335K (184.25T).

77. In her affidavit of 16 February 2018 (CB 2; Tab 45, p. 468) Ms Lavars stated that, notwithstanding what Mr Gillis had advised about the possible costs implications of refusing to accept an offer to compromise, her understanding was, based on the advice she said Mr Gillis had given her, that she only had to win on one point to negative the potential effect of the offer to compromise. She understood the RIP point was very strong. She refused to accept that that was reconstruction. However, I am satisfied that Ms Lavars is mistaken about that matter. Although advice to that effect was later given by Mr Gillis to Ms Lavars in or about April 2012, to which I will return, she could not have had that belief in December 2011 because none of the lawyers advising her had said that to her by then.

The global offer

78. By letter dated, and emailed on, 15 December 2011 (CB 7; tab 229, p. 2346), Westpac’s solicitors conveyed counter offers in each of the remaining eight claims, I would infer responding to the offers put by Mr Gillis in his 9 December 2011 letter. This was referred to as the global offer or “one in, all in” offer because among the conditions to which each offer was subject was a condition that “all other offers are accepted by the relevant applicant”. 15 December 2011 was a Thursday. How Mr Gillis dealt with the global offer was the main focus of each plaintiff’s case in relation to breach of his fiduciary obligations. It was argued by all plaintiffs, that the terms of the offer put Mr Gillis in a position of conflict as some clients may have wished to accept, and others reject, the offer so far as it was made to him or her.

79. For Ms Lavars, the offer was $550,000 inclusive of costs payable on an ETP basis. Westpac’s solicitors stated:

“Where a settlement is specified to be paid as an ETP, tax will be withheld on the basis that the payment is to be treated as a non-transitional employment termination payment.”

The offer was expressed to be open for acceptance by 4 p.m. on Monday, 19 December 2011. This was of some significance because it extended beyond the life of the offers to compromise which were fixed to expire at 5 p.m. on Friday, 16 December 2011. If capable of acceptance, assuming no increase in her legal costs, the offer would have netted Ms Lavars $360K.

80. The letter from Westpac’s solicitors was received at 8:53 a.m. on 15 December 2011. Mr Gillis said he telephoned each of his clients in turn to obtain his or her instructions. His telephone records demonstrate that he called Ms Lavars at 9:40 a.m. In her affidavit of 16 February 2018, Ms Lavars denies that Mr Gillis telephoned her at all. She implies (CB 2; Tab 45, p. 469) that she was unaware of the correspondence exchanging the offer and Mr Gillis’s response to it until 12 August 2016 after she had consulted other solicitors. She states that the first time she had “heard” of an offer “in the vicinity of $550,000 inclusive costs” was during a telephone conversation with Mr Gillis on 21 December 2011 when she was then on holidays on the Gold Coast. During the conversation on 21 December 2011, Ms Lavars says she discussed with Mr Gillis whether Westpac would pay the difference between $550K and $610K. She was advised by Mr Gillis that was a “good approach”, which Mr Gillis thought would be accepted. She also says that Mr Gillis described the $550K as “a good offer”.

81. Under cross-examination, by reference to Mr Gillis’s telephone records, Ms Lavars accepted that she spoke to Mr Gillis at 9:40 a.m. on 15 December 2011 for about 7 minutes (189.36 - .40T). She accepted that her affidavit was erroneous in that respect (189.48T). However, she disputed that Mr Gillis spoke to her about an offer of $550K, “that day” (190.9T). She was insistent that she did not speak to him about an offer of $550K until 21 December 2011. Ms Lavars accepted that she was aware as at 15 December 2021 that there were two offers outstanding, being the offer to compromise and her offer of $610K inclusive (190.25T). But she strenuously denied ever being told about the “global offer” or receiving advice that it could not be accepted if even one person rejected it because of the “one in, all in” condition (190.34T).

82. Ms Lavars also accepted that she had spoken on the telephone to Ms Murphy and Mr Moore after the telephone call with Mr Gillis on 15 December 2021. Being former colleagues, I am satisfied that the plaintiffs frequently spoke to one another including about developments in the Federal Court proceedings.

83. I find that Mr Gillis did telephone Ms Lavars about the global offer at 9:45 a.m. to obtain instructions in relation to it. Ms Lavars is simply mistaken in her evidence to the contrary despite the firmness of her belief that she first heard of the $550K offer on 21 December 2011. Frankly, the contemporaneous records and the apparent logic of events tellingly establish that Ms Lavars must be mistaken. To a lesser extent I rely upon the email from Mr Gillis to Ms Lavars of Friday 23 December at 9:45 a.m. where he makes mention of the amount offered to her in the global offer and says, “I note you rejected the offer”. I am not of the view that Mr Gillis would have written that in some brazen way (CB 7; Tab 232, p. 2351). Ms Lavars’s explanation in her affidavit of 16 February 2018, (CB 2; p. 470 [111]) that she was confused by that suggestion because she had not rejected that offer should be rejected. First, the counter-offer Ms Lavars says she instructed Mr Gillis to make on 21 December and which was in fact conveyed in writing by him on that day (CB  7; tab 233, p. 2352) would have had that effect. Secondly, that statement is contrary to the version of events which I prefer on the evidence.

84. Having spoken to each client, Mr Gillis emailed Westpac’s solicitor at 9:52 a.m. on 15 December 2011 stating, “I have obtained all of my clients’ instructions to reject the offer to each of them contained in your letter”. Leaving aside the consideration that no offer had been made to “each of them” as opposed to “all of them”, Mr Gillis would not have made that statement, in my judgment, if it were not true. He confirmed that he had been instructed to leave open the offers made on 9 December 2011 in accordance with their terms until 4 p.m. 16 December 2011.

85. Sometime after sending the 9:52 a.m. email, Mr Gillis telephoned Westpac’s solicitor and had the following conversation (CB 2; Tab 46, p. 500 [101]):

“Mr Gillis:   Some of those offers were getting close to the mark. The problem is the one in all in condition.

Westpac’s Solicitor:   Westpac want all matters to settle. It does not want to have to run any of the matters. If they have to run one, they will run them all. What about if I get you a global lump sum and you divide that sum up as you see fit between your people?

Mr Gillis:   I can’t be the person dividing the sum up between my clients. I will send you a global sum for your client to pay which will bring the proceedings to an end.”

In cross-examination Mr Gillis agreed that the offer made to Ms Lavars as part of the global offer was very close to the mark (898.20T; 912.15 – .25T).

86. Obviously, Westpac choosing to put a global offer placed Mr Gillis and each of his clients in an invidious position. However, as I have said, in my judgment there is no reason to doubt Mr Gillis’s version of events about how he handled it. He acted with celerity and having explained the position to each of the eight clients then involved, obtained individual instructions from each of them to reject the offer. He rightly refused to adopt the role of a person responsible for dividing a single fund amongst his clients for settlement of the claim of each of them. He then took the only step that was realistically available to him in an attempt to meet Westpac’s requirement that “all matters … settle” and converted the offers of 9 December 2011 into “a global figure of $6.48m” (Affidavit CB 2; p. 500 [102]). Westpac’s solicitor responded promptly on 15 December 2011 in the following terms (CB 7; Tab 231, p. 2350):

“We have now taken instructions on the offer contained in your email today, of settlement at a global figure of $6.48 million.

That offer is rejected. Westpac is prepared to consider any reasonable offer that is made in the spirit of compromise, but not one that simply repeats a position that it has already stated is unacceptable to it.”

This rather confirms my own impression that the global offer was put as a counter-offer in rejection of the offers conveyed by Mr Gillis on 9 December 2011.

87. Ms Lavars and the other plaintiffs submitted that the second paragraph should be regarded as an invitation to make a counter-offer. However, that is not the only interpretation. Nothing in the letter derogates from the position necessarily implicit in the global offer and in the statement made by Westpac’s solicitor that Westpac wanted all matters to settle. One can understand from its commercial point of view that Westpac may have been prepared to pay a premium of sorts in each case to achieve that result. However, clearly it was not prepared to accept the terms offered in Mr Gillis’s letter of 9 December 2011. It is clear that the global offer was a rejection of each of those offers and Westpac was not prepared to “bid against itself”. It might be observed that Westpac’s insistence on a “one in, all in” solution was unreasonable, not least because it placed Mr Gillis in that difficult position, to say the least, vis a vis his remaining clients. Although apparently one of the then 8, Mr Bechelli, was ultimately able to settle his case, the others were not. Westpac’s preparedness to consider any reasonable offer was apparently limited to a “one in, all in” basis in which each and every offer, individually, was acceptable to it. In context it was not an invitation to treat with each outstanding claimant individually. There is no direct, precise evidence of how and when Mr Bechelli settled.

88. Mr Gillis seems to have adopted the view that the offers of 9 December 2011 remained open for acceptance by Westpac until 4 p.m. on 16 December 2011, notwithstanding that the exchange of correspondence on 15 December 2011 made it clear that they had been rejected. Based on the written advice of 13 December 2011, Ms Lavars had decided not to accept Westpac’s offer to compromise (Affidavit 16 February 2018, CB 2; Tab 45, p. 469 [103]). Although Ms Lavars said she did not recall telephone conversations with Mr Gillis between 13 and 16 December 2011, Mr Gillis states that he telephoned Ms Lavars at 4:19 p.m. on 16 December 2011, passed on what Westpac’s solicitor had said about “if they have to run one, they will run them all”, pointed out that Westpac had allowed the 4 p.m. deadline for 9 December 2011 offer to pass, and indicated that the only avenue available for Ms Lavars to resolve her case then was to accept the offer to compromise, which needed to be communicated before close of business that day. Mr Gillis says Ms Lavars said, “I’m not prepared to accept that offer”.

89. On Mr Gillis’s version which she denies, Ms Lavars said that the former SGB employees who had settled earlier had received “their redundancy and 60 percent of their other claims”. Mr Gillis says that he pointed out that all of the cases were different and although he believed there were “very good grounds of proving Westpac were in breach of the secondment letter … there is no certainty in this litigation”. He advised Ms Lavars that the only certainty was acceptance of the offer to compromise which would remove any potential risk that she may not exceed it after a hearing and be liable for Westpac’s costs from the date of the offer to compromise, “as well all of your own costs”. Ms Lavars stated, “I will not accept the amount of the offer of compromise” (Affidavit 8 June 2018, CB 2; Tab 46, p. 500 – 501 [104]).

90. In her affidavit in reply affirmed on 2 October 2018, Ms Lavars now accepts that Mr Gillis called her after 4 p.m. on 16 December 2011. While she does not recall the details of what was said, she said that Mr Gillis did not advise her to accept the offer to compromise, or that acceptance of the offer of compromise was the only avenue of resolving her case. She denied saying “everyone else got their redundancy and 60 percent of their other claims” (CB  2; Tab 50, p. 538 [24]).

91. I accept that Mr Gillis did not tell Ms Lavars to accept the offer. He does not say so himself and such advice would be inconsistent with the view he expressed in writing on 13 December 2018. In a further supplementary affidavit sworn on 28 July 2019, Mr Gillis set out his view as at December 2011 of the appropriate range for settlement of Ms Lavars’s case (CB 2; Tab 53A, affidavit p. 3, [6](g)). If not on secondment, Mr Gillis believed the range to be $350,000 to $500,000 plus costs; and if on secondment $450,000 to $650,000 plus costs, bearing in mind that the offer to compromise would have cleared Ms Lavars $335K. Given his opinion and allowing for a deduction from the proceeds of settlement for the margin of solicitor and client costs over party and party costs, which may have been as high as $40,000, it would have been surprising if Mr Gillis sought to pressure Ms Lavars into accepting the offer. However, the somewhat more conservative advice set out at [89] concerning the uncertainty of litigation and the potential cost implications of rejecting an offer of compromise are the type of advice one would expect a solicitor to give in that context, notwithstanding having a sanguine estimation of the prospect of a more favourable outcome. It was accurate that after 4.00 p.m. on 16 December 2011, the offer to compromise was the only offer “on the table”.

Offer of 21 December 2011

92. As I have indicated above, Mr Gillis did make a further attempt to settle Ms Lavars’s claim on 21 December 2011. On that day he wrote to Westpac’s solicitors on behalf of four, of the eight, clients, including Ms Lavars, making further offers. On her behalf, he conveyed an offer of $580,000 inclusive of costs on an ETP basis. The offer was left open until 4 p.m. on 23 December 2011, which was the last Friday, and the last business day, before the Christmas break that year. Westpac did not respond, and the offer lapsed.

93. The offer represented an attempt to split the difference between Ms Lavars’s last offer of $610K inclusive of costs, and the aspect of the global offer referable to her of $550K inclusive of costs. Both Mr Gillis and Ms Lavars agree that instructions to make that offer were provided by Ms Lavars over the telephone earlier on 21 December 2011. It will be remembered that Ms Lavars was then in Queensland on holidays. There is a disagreement about what was said. It will be necessary to go over some ground covered previously.

94. Ms Lavars account is (Affidavit 16 February 2018, CB 2; Tab 45, p. 469 [109]):

“Mr Gillis:   Westpac are open to settlement negotiations; they have made an offer in the vicinity of $550,000 inclusive of costs. I think it’s a good offer.

Ms Lavars:   Okay then. Is there any further room to negotiate, maybe to get the difference between that and my $610,000 inclusive offer?

Mr Gillis:   That sounds like a good approach; I think it’ll be accepted.”

95. Mr Gillis denied the words attributed to him by Ms Lavars. His version is at (CB 2; Tab 46, pp. 503 – 4 [127]):

“Mr Gillis:   [Ms Lavars] I think it’s worthwhile making one final attempt to try and resolve your matter before Christmas. The one in all in offer to you was $550,000. Your offer of $610,000 inclusive of costs was not accepted by them. I suggest, even though $610,000 was the minimum you would accept, it would be worthwhile to try to meet in the middle, being $580,000.

Ms Lavars:   OK let’s go with that.”

96. The real significance of the differences in these accounts is not whether or not Mr Gillis advised Ms Lavars to put another offer in the sum of $580K; which she accepted and upon which instructions he acted only to have the offer ignored by Westpac. There is no dispute about any of those primary facts. The real importance of the difference between them is subsidiary. It is about whether Mr Gillis said to Ms Lavars that the $550K included in the global offer for her was “a good offer”. If he believed that and said that then on Ms Lavars case, the advice Mr Gillis gave about the offer to compromise was unreasonable. On the known facts, it represented $525K, if Westpac was still prepared to pay $150K for Ms Lavars’s costs. It was only $25K shy of “a good offer”. To put it another way, it was only 4.5 percent less than “a good offer”. If this was so, as the argument runs, Mr Gillis’s advice that the offer to compromise was at the very bottom of the range if Ms Lavars was not on secondment and below the range otherwise was questionable. And probably unreasonable.      

1. $550K was a good offer in the range for settlement;

2. it was in her interest to settle at that figure;

3. the “one in, all in” condition was not in her interest;

4. the “one in, all in” condition gave rise to a possible conflict of duty;

5. it was in her interest to have Westpac waive the condition;

6. Westpac might agree to a separate settlement with her, especially if she was separately represented;

7. she should consult another solicitor for advice; or

8. instruct the competent solicitor to attempt to settle between $610K and $550K with instructions to accept $550K if no better offer was forthcoming.

181. Mr Faulkner argued that Ms Lavars would have accepted this advice had Mr Gillis proffered it and either through him, or through separate representation, Westpac would have agreed to a separate settlement most probably in the sum of $565K. In putting Ms Lavars’s case this way, Mr Faulkner pointed out that on the face of it the second letter of 15 December 2011 expressed a willingness to continue negotiations, and the idea that Westpac, as at 15 December 2011, would only settle with Ms Lavars if it could achieve a satisfactory compromise with all eight remaining clients was posturing.

182. Learned senior counsel submitted that “settlement negotiations have their own dynamic and a particular agreement may be achieved at one point in time yet not another” (written submissions, p. 24 [103]). The “trajectory of offers” showed the parties were on a stable and predictable course to achieve agreement. I am asked to infer that an offer of $580K inclusive of costs made separately on behalf of Ms Lavars within the time limited for acceptance of the global offer would have elicited a response of $565K, which Ms Lavars would have accepted.

183. I have rejected the legal practice’s argument that Ms Lavars had adopted an inflexible bottom line of $400K in her hand. Her “indication” at the mediation and her offer of $580K of 21 December 2011 prove otherwise.

184. I have already held contingently that as at December 2011, Ms Lavars would not have accepted the offer to compromise. But she was willing to accept less than $400K clear. It is also apparent from the evidence of both of them, that Ms Lavars was prepared to listen to Mr Gillis’s advice and indeed so far as the offers of 9 and 21 December 2011 were concerned agreed generally with his approach. Having said that, on the evidence I have preferred, on 9 December 2011 in response to Mr Gillis’s request for instructions as to her “minimum” she reiterated her preferred position of $400K. She was not prepared to accept the offer to compromise even at the point of its expiration on 16 December 2011 when no other offer was on the table.

185. It needs to be borne in mind that Ms Lavars did have her own views about her entitlements. I infer that Mr Gillis was aware of that and dealt with her tactfully. He did not at any time, appropriately, seek to dictate terms to her. I also accept that she had reached a point where if not keen, certainly, she was very well disposed to the idea of settlement. But not on any terms.

186. In all the circumstances, had Westpac offered $565K inclusive of costs before Christmas 2011, subject to being satisfied, given her concerns, about the amount of her solicitor and client costs, Ms Lavars would have accepted that offer.

187. I am not satisfied that she was then prepared to accept $550K. First, she so instructed Mr Gillis on 15 December 2011, even if on her case she was not properly advised. Secondly, as I have already said, she had a limit. Probably she had not decided in her own mind what that limit was other than to say it was not $335K clear. Assuming $190K remained the figure for solicitor and client costs and disbursements, $550K would have cleared Ms Lavars $360K. This was certainly more than $335K. It was not far short of her “indication” of $575K at the mediation, which would have given her $385K in her hand. $565K inclusive of costs (on the same assumption), would have cleared Ms Lavars $375K, which I find Ms Lavars would have been prepared to accept.

188. I am not satisfied she would have accepted $550K, although she would have accepted Mr Gillis’s advice that it was an encouraging figure and “very close to the mark”. In my judgment $375K in her hand was probably “the mark” for Ms Lavars, although it is possible she would have seriously considered $550K inclusive of costs had she been satisfied that all reasonable prospects of settlement had otherwise been exhausted.

189. As I pointed out above (at [23]), to prove causation it is not enough for the client to prove on the balance of probabilities from evidence other than her ex post facto statements that she would have accepted certain terms if offered. The client must also prove, on the balance of probabilities, that Westpac would have made the further, higher offer that she was prepared to accept: Donnellan at [158], Beazley JA. That, if I may put it this way, is Ms Lavars’s difficulty in this case. Accepting everything Mr Faulkner argued about dynamics, trajectories, timing and the putative rationality of commercial entities, the hypothetical question of whether, had Mr Gillis’s advice been otherwise, Westpac would have offered $565K inclusive of costs separately to Ms Lavars, regardless of the fate of the negotiations (including the global offer) in the other remaining cases is a question of fact to be determined on the balance of probabilities: s 5E Civil Liability Act. While matters such as dynamics, trajectories, timing and an assumption that parties to litigation will act rationally in their own commercial interests are all circumstances which may tend to prove the fact in issue, they are counter-balanced in this case by the consideration that Mr Gillis did try to have the “one in, all in” stipulation removed, and he did continue separate negotiations along the same lines suggested now by Ms Lavars during the critical period of December 2011. That the second letter of Westpac’s solicitor of 15 December 2011 was more likely a rebuke than the invitation to treat suggested by its terms is borne out by the consideration that notwithstanding Mr Gillis’s further efforts Westpac made no further offers in any case after the global offer. It did not respond in any way to the offers made on behalf of Ms Lavars and others on 21 December 2011. Rather it simply chose to ignore them, including Ms Lavars’s offer of $580K inclusive of costs, allowing them to expire in accordance with their own terms.

190. Having regard to this direct evidence, I am not satisfied on the balance of probabilities that the more likely inference is Westpac were or would have been prepared to offer Ms Lavars $565K inclusive of costs in full and final settlement of her Federal Court proceedings. The same course of events suggests that Westpac was not prepared to offer $550K inclusive of costs to Ms Lavars separately from the global offer. The more likely inference is as stated by Westpac’s solicitor at the mediation, Westpac’s offer to compromise of 2 December 2011 is the highest offer it was prepared to make to Ms Lavars individually, and that offer she was not prepared to accept.

Claim 3 – the 2012 costs advice

191. I am satisfied that the April 2012 costs advice was incorrect and, with respect, negligently so. The details are set out above ([104] – [108]). It will be recalled that the advice was volunteered by Mr Gillis after Westpac’s solicitors indicated on 21 March 2012 that Westpac consented to judgment being entered against it for the amount of the RIP in each matter when the matter was next before the court on 2 April 2012. It also agreed to interest at Federal Court rates from 13 November 2008 when the payment became due. I am prepared to infer that there may have been some discussion between Ms Lavars and Mr Gillis earlier in 2012 about the shadow the unaccepted offer to compromise cast over her case. I say this for he appears to have volunteered the advice (set out at [105] above) to the effect that consenting to judgment for part of the claim “invalidates the offers to compromise” because the offers to compromise were made on the basis that liability for the RIP was denied. Not satisfied, Ms Lavars queried the advice and Mr Gillis responded to the effect that denying liability for the RIP was unreasonable conduct of Westpac that had caused Ms Lavars to incur costs.

192. The matter was clearly of ongoing concern to Ms Lavars. In 2013 she said it was “worrying” her and on 4 June 2013, admittedly while judgment in the Federal Court was reserved, Mr Gillis advised Ms Lavars that there was a discretion to award indemnity costs, rather than a discretion to refuse them. He advised that indemnity costs are not “automatic” and “a significant factor” is whether the refusal of the offer was “reasonable”. He referred to the failure of Westpac to serve all of its evidence in a timely number and the denial of liability for the RIP.

193. It must be said that even a cursory reading of Rule 25.14 Federal Court Rules clearly demonstrates that where an offer is not accepted by the moving party in the proceedings and that party obtains a judgment that’s less favourable than the terms of the offer to compromise: (a) the moving party is not entitled to any costs after 11 a.m. on the second business day after service; and (b) the respondent is entitled to an order that the applicant pay the respondents costs after that time on an indemnity basis (my emphasis). The clear and express language of the rule makes it clear that the entitlement to indemnity costs is automatic where, as here, after the appeal to the Full Court of the Federal Court, Ms Lavars’s judgment was adjudged to be “less favourable than the terms of the offer”. Under Rule 1.35 the Federal Court has a discretion to make an order that is inconsistent with inter alia Rule 25.14. The type of factors identified by Mr Gillis of course may have some relevance to a decision whether to dispense with Rule 25.14. However, the policy considerations referred to in Maitland Hospital v Fisher [No 2] (see [14] and [21] above), including “the ordinary provision is expected to apply in the ordinary case”, also underpin the cognate Federal Court Rule. The distinction between a discretion to award indemnity costs on the one hand, and a discretion to deny them on the other, and the identity of the party carrying the onus of persuasion with respect to the exercise of the discretion, are all important practical considerations. However one looks at it, conceding a small part of a much larger claim does not “invalidate an offer of compromise” in a practical or legal sense.

194. Ms Lavars argues that had the correct advice been given when she sought it in April 2012, she would have appreciated the difference and instructed Mr Gillis to reignite the process of negotiation in an attempt to settle on favourable terms. I really think that this claim is fully informed by hindsight.

195. I accept that the contemporaneous documents persuasively establish that as at 2012 and 2013 and thereafter Ms Lavars was worried about the cost ramifications of her rejection of the offer to compromise. I infer that she appreciated, as Westpac’s counsel had made clear at the mediation, that Westpac’s costs well exceeded her own even at that stage and she would have fully appreciated how much the costs for each side would have grown during the intensive phase of preparation of hearing. She may even have come to regret allowing the offer to compromise to lapse, notwithstanding Mr Gillis’s reassurances.

196. However, I am well satisfied that Ms Lavars was properly advised by Mr Goot SC, Mr O’Dowd and Mr Gillis about the legal effect including the costs ramifications of an offer to compromise at the mediation and that she then understood the advice she had been given. I am of the view that it is her understanding of the advice she had been given which caused her to query Mr Gillis’s different advice in 2012 and 2013.

197. Another difficulty I have with Claim 3 is that there is no evidence that there was any realistic, by that I mean non-speculative, prospect of achieving any settlement that Westpac would be prepared to offer and Ms Lavars prepared to accept after the expiration of the offer to compromise on 16 December 2011, or at least after 23 December 2011 at the latest. Moreover, Ms Lavars was suspicious of the accuracy of Mr Gillis’s advice and has not been shown to have in any way relied or acted upon it in such a manner as to cause economic loss after it was given in April 2012.

198. Accepting that Mr Bechelli had been able to settle his case in 2012 in circumstances and on terms which are not established in the evidence, I am of the view that so far as Ms Lavars and the other six remaining clients were concerned, the die was cast by Christmas 2011. Thereafter as I have said the decks were cleared for action and the concession in relation to the RIP claim was an aspect of that.

Conclusions on liability

199. It follows that I am not satisfied that Ms Lavars has made good any of her claims and that judgment must be entered for the legal practice.

200. The legal practice raised a defence of contributory negligence which does not now arise. Three grounds were advanced: failing to follow up with Mr Gillis on her question about costs on 13 December 2011; failing to instruct Mr Gillis to accept the offer to compromise or other offers made by Westpac; and failing to instruct Mr Gillis to pursue settlement after 21 December 2011. I am not persuaded that any of these grounds have been made good. There is no evidence that other than, perhaps, acceptance of the offer to compromise, any of the matters would have made any possible difference to the outcome by averting any part of the loss suffered by Ms Lavars. It must be borne in mind that Mr Gillis did not affirmatively recommend to Ms Lavars acceptance of any of the offers made to her, other than by pointing out the uncertainties of litigation when he spoke to her after 4.00 pm on 16 December 2011 in relation to the imminent expiration of the offer to compromise. Mr Gillis was not obliged to make any recommendation, but in circumstances where he did not it is hardly unreasonable for the lay client to have failed to exercise better foresight of the risk of harm materialising if the offer was rejected than the experienced solicitor retained to advise her. I would have rejected the defence of contributory negligence.

201. It only remains to make contingent findings in relation to quantum lest I am wrong on the liability questions.

Contingent findings on quantum

202. The parties agreed that they should have the opportunity to bring in short minutes and address further argument on the quantum issues after publication of my reasons. But given my liability decision those steps will be unnecessary. Lest I am wrong about this I will allow liberty to apply.

203. Ms Lavars recovered $289,288.45 plus interest after the contested hearing in the Federal Court. On Westpac’s application for costs orders reflecting Rule  25.14 (Murphy (No 2)), Griffiths J, applying the Federal Court jurisprudence, held that it was only appropriate to depart from the presumptive position under Rule 25.14 “for proper reasons which, ‘in general, only arise in an exceptional case’” (at [20]). His Honour was not satisfied that any of the seven cases, including Ms Lavars’s, were exceptional. However, in Ms Lavars’s case his Honour decided that the judgment was not less favourable than the offer to compromise because, applying the judgment of North J in Merost Pty Ltd v CPT Custodian Pty Ltd (No 2) [2014] FCA 594 (“Merost v CTP Custodian”), Ms Lavars was entitled to have pre-judgment interest for the whole of the period up to the date of the judgment taken into account. On this basis she recovered more than the offer to compromise and his Honour ordered Westpac to pay the whole of Ms Lavars’s party and party costs of and incidental to the proceedings, refusing Westpac’s application for costs in accordance with the default position provided for by Rule 25.14.

204. On appeal, Merost v CTP Custodian was overruled (Westpac Banking Corporation v Wittenberg at [322], [334] and [341]). The costs order in Ms Lavars’s favour was set aside and instead the Full Court ordered Westpac to pay Ms Lavars’s costs of the proceedings on a party and party basis up to and including 11 a.m. 6 December 2011 and Ms Lavars to pay Westpac’s costs of the proceedings on an indemnity basis for the period after 11 a.m. on 6 December 2011. The basis of the Full Court’s order was that for the purpose of determining whether a judgment is less favourable than an offer to compromise it is necessary to “compare like with like”. The comparison required by Rule 25.14 “is between the substantive amount of an offer and the substantive amount of a verdict, with interest only being taken into account to the same date in each case” (Westpac Banking Corporation v Wittenberg at [324] – [325]).

205. Although the total amount recovered by Ms Lavars under the principal judgment of Griffiths J (including the retention payment and interest) was $402,650.81 (at [319]), as at 2 December 2011 the total amount with interest to that date would have been $339,718.63. This was less favourable than the offer to compromise of $375,000 which she did not accept. These figures are also set out in the affidavit of Mr Collinge sworn on 18 May 2018 at [16] ff.

206. In their detailed written submissions, Mr Faulkner and Mr Roucek set out calculations supporting the assessment of damages on three different bases. The first basis relates to Claim 1 as a calculation of the loss flowing from non-acceptance of the offer to compromise of 2 December 2011. These figures are contained in Schedule 5 and the total claimed is $711,588.82. Schedule 7 relates to Claim 2 and deals with two scenarios. The first is but for Mr Gillis’s negligent advice about the global offer, Ms Lavars would have reached a settlement with Westpac in the sum of $565K producing a loss of $730,588.82. If one assumes settlement at $550K, the loss is $715,588.82. These three alternatives are advanced on the basis that the losses have been proved on the balance of probabilities or, alternatively, are sufficiently certain to be payable without discount.

207. So far as Claim 3 is concerned, Ms Lavars’s case is put as a loss of a valuable opportunity to negotiate a settlement in the early part of 2012 in accordance with the principles discussed in Sellars.

208. Although there are differences between Schedule 5 and Schedule 7, the various components interacting to produce the total amount claimed include the offer foregone, costs allegedly overpaid, amounts actually recovered under Federal Court judgments in Ms Lavars’s favour ($290,496), the amount of costs paid by Ms Lavars to the legal practice after 2 December 2011 ($242,582.64), an amount that Ms Lavars agreed to pay to Westpac to compromise her liability for its costs ($200,000) and the amount of additional costs and disbursements payable to the legal practice as assessed ($176,073.94). The same approach is adopted in Schedule 7 and each scenario with which it deals. As these are contingent findings, it is probably sufficient to concentrate on Schedule 5.

209. However, before doing so, it is relevant to refer again to Mr Collinge’s affidavit at [48] (CB 2; tab 48; p. 528). For reasons not fully explained except that there may have been a stay (Murphy (No 2), [61]), Westpac did not pay the full amount to which Ms Lavars was entitled under the judgment of Griffiths J. It appears that of the $402,650.81 to which she was entitled, the amount of $290,496 only was paid. Mr Collinge’s figure is somewhat different. The additional bonus and interest, her party and party costs and the costs of a successful interlocutory application remained outstanding. According to Mr Collinge, these amounts total $273,147.40. Ms Lavars liability to Westpac for indemnity costs of the trial from 6 December 2011 in the sum of $375,670 and Westpac’s costs of her cross-appeal on a party and party basis in the sum of $35,931.06 total $411,601.06.

202. Schedule 4 to Ms Lavars’s submissions takes a different view of these outstanding obligations on either side of the Federal Court record. In any event, Ms Lavars settled these respective outstanding claims with Westpac by agreeing to pay $200,000, being the excess over her entitlements from Westpac. On her figures she made a saving of between about $15,000 and $50,000 by entering this agreement. The legal practice contends she paid too much. I accept that it was reasonable for Ms Lavars to settle with Westpac as she did. She was represented throughout and it was reasonable as between her and the legal practice for her to accept the advice she was given.

203. It must also be borne in mind that the $200K was a set-off and I am not satisfied in any event that inclusion of that amount as a component of damages is the proper method of calculating Ms Lavars’s economic loss.

204. The legal practice was content to adopt a similar approach to the calculations, disputing the correctness of the figures, arguing Sellars was applicable to Claims 1 and 2, and denying that the amount of Ms Lavars’s assessed costs was properly included in the assessment because liability in respect of it had not crystallised in the filing of the certificate of assessment as a judgment. Omitting that last item, it argued the loss for Claim 1 was $466,614.90 reduced by 50% by application of Sellars. For Claim 2 the loss was $471,514.90 reduced by 75% because of the greater degree of uncertainty of outcome on that scenario.

205. It seems to me that the methodology adopted in the plaintiff’s schedules with respect is not the preferred approach to assessing the plaintiff’s loss. As these are contingent findings only, I consider it unnecessary to set out all of the detail contained in the schedule. I should say in relation to Claim 1 that as the offer to compromise had been made and was capable of acceptance up until 16 December 2011, it is appropriate to treat that sum as a starting point undiscounted by any considerations arising out of Sellars. That is, it was a sum certain that she would have obtained but for the negligence of the legal practice on her case, which I have rejected.

206. In relation to Claim 2, because the offers upon which the calculations are proffered were in fact never made by Westpac, at least in a form capable of acceptance by Ms Lavars unilaterally, it would probably have been appropriate to make some discount by application of the Sellars principle on the basis of the loss of opportunity to achieve those outcomes which were more favourable than the offer to compromise. Although I am doubtful about the matter for the reasons rehearsed, I would assess the appropriate discount as 40%. I would regard the “losses” underpinning Claim 3 as too speculative on the Sellars principle to justify any recovery at all. That is to say, I am not satisfied that Ms Lavars proved that she suffered some loss as a result of the negligence she succeeded in establishing in respect of Claim 3.

207. I will illustrate what I regard as the preferred approach to assessing economic loss in respect of either Claim 1 or Claim 2 by reference to Claim 1 only. That will suffice to demonstrate the approach which in my opinion should be taken, bearing in mind that in respect of Claim 2 a discount would have been called for had Ms Lavars been otherwise successful.

208. In my view the starting point is the comparison which the Full Court made for the purpose of the application of Rule 25.14. This is the difference between $375,000 and $339,718.63. This, after all, is the initial loss which generated the adverse costs consequences. It is sufficient to call this $35,000. To this it is necessary to add Westpac’s costs of the trial on an indemnity basis after 6 December 2011 in the sum of $375,670. I am not of the view that it is appropriate to allow the costs of Ms Lavars’s cross-appeal that she was ordered to pay to Westpac. This was not a loss in my opinion caused by the rejection of the offer to compromise and I do not regard it as the reasonable cost of mitigation of losses caused by the putative negligent settlement advice of the legal practice. That expenditure was incurred because Ms Lavars brought the cross-appeal after she was unsuccessful on some issues at trial. Finally, the amount of the costs and disbursements due to the legal practice after 6 December 2011 has been assessed in the sum of $176,073.94. Notwithstanding this assessment apparently Ms Lavars, according to her affidavit, had paid the sum of $242,582.64 on account of costs and disbursements after 2 December 2011 which suggests an overpayment by her of $66,508.70. So far as her own wasted costs are concerned the measure of her loss is the amount payable as solicitor and client costs notwithstanding that had her judgment not been less favourable than the offer to compromise she would have recovered party and party costs only. She is entitled to recover costs reasonably expended: Berry v British Transport Commission [1962] 1 QB 306 by Devlin LJ at 321; Talacko v Talacko [2021] HCA 15 at [60] by the Court. The amount of any overpayment, while not strictly a loss within the scope of the legal practice’s liability, could have been conveniently recovered in these proceedings. I accept that Ms Lavars’s liability to the legal practice for her costs arises out of the retainer and the assessment of them is sufficient evidence of the amount due.

209. My total on this somewhat different methodology is in the sum of $618,037.85. I repeat, had Ms Lavars been successful on her Claim 1, I would have allowed this sum without a Sellars discount. Ms Lavars would also have been entitled to pre-judgment interest from the date of the Full Court’s decision, 14 March 2016 which was when her cause of action arose.

210. Given the limited utility of this aspect of my judgment, I do not propose to make any further findings in relation to Claim 2 over and above the observations I have already made. No question of quantification arises in respect of Claim 3.

Orders

219. For these reasons my orders are:

1. Judgment for each of the first, second and third defendants against the plaintiff;

2. The plaintiff to pay the defendants’ costs;

3. Liberty to apply on short notice.

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Decision last updated: 25 March 2022