Lindsay-Owen v HWL Ebsworth Lawyers

[2025] NSWSC 829

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Lindsay-Owen v HWL Ebsworth Lawyers [2025] NSWSC 829

Hearing dates:

22 July 2025

Date of orders:

28 July 2025

Decision date:

28 July 2025

Jurisdiction:

Common Law

Before:

Harrison CJ at CL

Decision:

See paragraph [13].

Catchwords:

CIVIL PROCEDURE – professional negligence by solicitors – where breach of duty and breach of retainer admitted – UCPR 20.14 – calculation of damages – where plaintiffs seek reference to experts for inquiry and report on four remaining taxation accounting questions – whether reference out preferable to contested hearing on the issues before the trial judge

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW), r 20.14

Cases Cited:

Lindsay-Owen v HWL Ebsworth Lawyers (No 2) [2024] NSWSC 541

Lindsay-Owen v HWL Ebsworth Lawyers [2023] NSWSC 68

Category:

Procedural rulings

Parties:

Gregory Hamilton Willoughby Lindsay-Owen (First Plaintiff)
Dairycorp Pty Limited (Second Plaintiff)
Martin Downing & Ors Trading as HWL Ebsworth Lawyers (First to One Hundred and Sixth Defendants)

Representation:

Counsel:
T Alexis SC with P Afshar (Plaintiffs)
D Lloyd SC with C Bannan (Defendants)

Solicitors:
Gadens (Plaintiffs)
Gilchrist Connell (Defendants)

File Number(s):

2016/85879

Publication restriction:

Nil

Judgment

1. HIS HONOUR: The events that give rise to this litigation began in 2005 when Mr Lindsay-Owen retained the defendants to act for him, although the relevant history of the Schofields land goes back many years before then. The amended statement of claim was filed on 8 July 2016. Malcolm Turnbull had just days earlier been returned as Prime Minister of Australia in the first double dissolution election since 1987. Barack Obama was at that time in the final months of his second presidential term. Much has changed in Australia and the United States in the nine years since then. Much less has changed in these proceedings.

2. The substantive hearing of the matter commenced before me on 7 March 2022. It proceeded until 1 April 2022 when I reserved my decision. My first judgment was published on 17 February 2023: Lindsay-Owen v HWL Ebsworth Lawyers [2023] NSWSC 68. My second judgment was published fifteen months later on 10 May 2024: Lindsay-Owen v HWL Ebsworth Lawyers (No 2) [2024] NSWSC 541. Now, fourteen months after that, in a case in which breach of duty by the defendants and breach of their retainer was admitted on 12 March 2022, the end is still not in sight.

3. The final paragraph of my first judgment was as follows:

“Conclusions

359 It will be apparent that I have not yet calculated the final sum representing the plaintiffs’ damages. Having regard to the manner in which the quantum claim has been approached, I consider that, as the parties have anticipated, they should have an opportunity to consider my reasons so far and provide me with their respective contentions about how best to proceed from here. The burden of my findings on lost development profits is that Mr Dempsey’s calculations on the basis of Mr Dyson’s scenario 1 most closely represent the loss suffered by the plaintiffs under that head. I accept that some further clarification of that conclusion may be required. It may also be worthwhile giving some consideration to whether or not any outstanding issues upon which the parties cannot agree should be referred to an appropriate referee for determination.” [Emphasis added]

4. In what was clearly a triumph of hope over experience, I concluded my reasons for my second judgment on 10 May 2024 with the following words:

“Conclusion

205 I direct the parties to approach my Associate when convenient with a view to relisting this matter when they have had an opportunity to consider my findings. It is to be hoped that the final calculation of the plaintiffs’ loss, with the benefit of my latest conclusions, will then be possible.” [Emphasis added]

5. Progress is a relative concept. The stage has now been reached in which the parties have somewhat remarkably agreed that their remaining disagreements about the matters that require final determination can be reduced to the following five issues:

“List of Issues

The parties agree that there are five remaining issues to be determined by the Court (although there is a dispute as to the extent to which those issues are properly open), but the parties propose to articulate those five issues differently, as set out below.

Issue one: Taxation of the pre-tax cashflows and the proper approach to the calculation of loss

Plaintiffs’ version

1. Should tax be calculated at the date of loss, or at some other time?

Defendants’ version

1. Is it appropriate to calculate loss:

(a) (plaintiffs) using hypothetical pre-tax cashflows and deducting the actual pre-tax cashflows, discounting the difference to 29 March 2010, and determining the tax payable on that notional amount and then making an allowance for carry forward tax losses used by Dairycorp; or

(b) (defendants) using hypothetical post-tax cashflows (assuming tax was paid on 15 May in the years following the financial years in which the cashflow occurred), and deducting actual post-tax cashflows, and discounting the difference to 29 March 2010?

Issue two: Timing of the hypothetical cashflows

Plaintiffs’ version

2. From what date or dates should the 5% discount for non-diversifiable risk be applied back to the date of loss?

Defendants’ version

2. In the hypothetical counterfactual, when would the joint venture have distributed the proceeds of the joint venture to the joint venture participants:

(a) (plaintiffs) on various dates from 28 February 2015 to 31 July 2016; or

(b) (defendants) at the completion of the project on 31 July 2016.

If the answer is (a) above, when would distributions have been made and what would be the amount of each such distribution?

Issue three: Tax actually payable on the sale of the land

Plaintiffs’ version

3. Is the tax actually paid by the plaintiffs relevant to the calculation of the post-tax losses? If so, how?

Defendants’ version

3. If the defendants’ position on Issue 1 is accepted, are any adjustments required to the tax actually payable on the sale of the land to derive the actual post-tax cashflows? If so, what adjustments are necessary?

Issue four: Allocation of cost base

Plaintiffs’ version

4. Is the allocation of the cost base for the purpose of calculating capital gains tax relevant to the calculation of the post-tax losses? If so, how?

Defendants’ version

4. If the defendants’ position on Issue 1 is accepted, how should the $23m cost base that is available to GLO be apportioned?

Issue five: tax treatment of award of damages

Plaintiffs’ version

5. Is the plaintiffs’ award of damages to be treated as income or as revenue on the capital account?

Defendants’ version

5. If the plaintiffs’ position in relation to Issue 1 is accepted, is the plaintiffs’ award of damages to be treated as income or revenue on the capital account for the purpose of calculating the gross up for the tax payable on the damages?”

6. So, by notice of motion filed on 11 July 2025, the plaintiffs moved the Court for the following relief:

“1 An order pursuant to UCPR 20.14 that issues one (1), three (3), four (4) and five (5) of the List of Issues annexed to this Notice of Motion and marked "A" be referred to a panel of two (2) referees for inquiry and report.

2 An order that the panel of referees be identified as follows or in any other way the Court sees fit:

a. the parties are to agree on the panel of referees within a period of time as the Court sees fit;

b. failing agreement, the parties are to request the President for the time being of the Institute of Chartered Accountants to choose the panel of referees; and

c. the parties are to provide to the Court the names of the panel of referees chosen in accordance with (a) and (b) above.

3 An order pursuant to UCPR 20.15 appointing the persons chosen in accordance with prayer 2 above as referees for the purposes of the reference as set out in prayer 1 above.

4 Any further or other order as the Court deems necessary, including orders for the conduct of the reference as set out in prayer 1 above.”

7. These orders are opposed by the defendants.

8. UCPR 20.14 is relevantly as follows:

20.14 Orders of referral

(1) At any stage of the proceedings, the court may make orders for reference to a referee appointed by the court for inquiry and report by the referee on the whole of the proceedings or on any question arising in the proceedings.

(2) …

Consideration

9. Each of my judgments proceeded upon the basis of an express acceptance by the parties that I should provide what in effect were the legal and factual integers with the benefit of which the parties and their experts would then proceed to crunch the numbers. That, obviously, has not occurred. Instead, I have been presented with competing versions of the issues that remain outstanding and which must be resolved before the final amount of the plaintiffs’ damages can be calculated.

10. The four issues which are the subject of the plaintiffs’ motion are quintessentially tax accounting issues. They involve potentially difficult questions that invite consideration by people with tax accounting expertise. I do not qualify as such a person.

11. The defendants’ proposal is that on 5 and 6 August 2025, when the matter is next before me, I hear expert opinion evidence and competing submissions on all five as yet unresolved issues in dispute and decide these issues with reasons for my judgment. The plaintiffs’ proposal, in contrast, is that the issues be referred to experts who can assess the competing views with the benefit of their own expertise and experience without the need for a two day hearing or the requirement for me to decide which view is correct. The plaintiffs’ proposal proceeds upon the basis that the answer does not lie in a judicial determination of which view is to be preferred but in the provision of the answer arrived at by two suitably qualified experts with no situational or historical connection or allegiance to either party. That is the approach I prefer.

12. The plaintiff’s position has the added advantage of eliminating the need for a full-blown hearing on the four issues in question, with a significant prospect that the correct answers will be arrived at in a technical fashion without the overlaid excesses of an adversarial contest and potentially more quickly as well. The fact that dissatisfaction with the outcome might result in a contested adoption hearing, as the defendants have somewhat pessimistically been quick to emphasise, if not predict, should not in my view be permitted to divert attention from the advantages of a reference out in accordance with UCPR 20.14.

13. Although the parties were going to attempt to agree on the identity of the proposed referees, including their particular field or fields of expertise, that has so far not occurred. I somehow doubt that it will. However, the parties should where possible be the authors of their own destiny. To that end I will direct them to provide me with the usual form of order for reference, naming either the proposed referees or the mechanism by which they should be appointed, by no later than 10am on 5 August 2025.

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Amendments

30 July 2025 - [5] Typographical error corrected

Decision last updated: 30 July 2025