Loumbos v Gray as a named partner of ClarkeKann (ABN 92 990 809 254)

[2021] NSWSC 1579

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Loumbos v Gray as a named partner of ClarkeKann (ABN 92 990 809 254) [2021] NSWSC 1579

Hearing dates:

1-2 December 2021

Decision date:

06 December 2021

Jurisdiction:

Common Law

Before:

Adamson J

Decision:

(1)   Judgment for the defendants.

(2)   Reserve costs.

(3)   List the matter for argument on costs at 9.00am on Tuesday 7 December 2021.

Catchwords:

NEGLIGENCE — plaintiff claims damages for alleged negligence and misleading and deceptive conduct — whether the defendants were the plaintiff’s solicitors and owed him duties of care and fiduciary duties — plaintiff was not the defendants’ client at the relevant time — consideration of limited circumstances in which solicitor holds a duty to a third party — interests of plaintiff were potentially in conflict with defendants’ client’s — defendants did not owe plaintiff a fiduciary duty — defendants may have owed a duty at common law or as fiduciary to their client to encourage the plaintiff to obtain independent legal advice — no breach of any duty established — the factual matrix of the misleading and deceptive conduct claim not made out

NEGLIGENCE — causation — scope of liability — consideration of what plaintiff would have done if defendants had advised him to obtain independent legal advice — not persuaded on the evidence that the plaintiff would have taken a different course or there would have been a different outcome if he did — plaintiff failed to discharge onus

EVIDENCE — credibility of witnesses — contest of fact between witnesses — plaintiff had poor recollection, inconsistencies between oral evidence and evidence in earlier proceedings, and contemporaneous documents favour the defendants’ case — determination that the evidence supports the defendants’ case

Legislation Cited:

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

Conveyancing Act 1919 (NSW), s 66W

Cases Cited:

Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18

Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649; [2009] NSWCA 258

Dare v Pulham (1982) 148 CLR 658; [1982] HCA 70

Hill v Van Erp (1997) 188 CLR 159; [1997] HCA 9

Loumbos v Ward [2016] NSWSC 885

Onassis v Vergottis [1968] 2 Lloyds Rep 403

Ward v Loumbos [2017] NSWCA 35

Watson v Foxman (1995) 49 NSWLR 315

Category:

Principal judgment

Parties:

John Valentine Loumbos (Plaintiff)
John James Montgomery Gray as a named partner of ClarkeKann (ABN 92 990 809 254) (First Defendant)
Miles Robert Anderson as a named partner of ClarkeKann (ABN 92 990 809 254) (Second Defendant)
Richard Michael Burr as a named partner of ClarkeKann (ABN 92 990 809 254) (Third Defendant)
Steven Mark Cardell as a named partner of ClarkeKann (ABN 92 990 809 254) (Fourth Defendant)
Dale Francis Cliff as a named partner of ClarkeKann (ABN 92 990 809 254) (Fifth Defendant)
Timothy John Crumpton as a named partner of ClarkeKann (ABN 92 990 809 254) (Sixth Defendant)
Timothy David Ferrier as a named partner of ClarkeKann (ABN 92 990 809 254) (Seventh Defendant)
John Richard Paul Hunt as a named partner of ClarkeKann (ABN 92 990 809 254) (Eighth Defendant)
Peter Lorrimer Karcher as a named partner of ClarkeKann (ABN 92 990 809 254) (Ninth Defendant)
Paul Michael O’Dea as a named partner of ClarkeKann (ABN 92 990 809 254) (Tenth Defendant)
Bernard Francis Tan as a named partner of ClarkeKann (ABN 92 990 809 254) (Eleventh Defendant)
John Dominic Toigo as a named partner of ClarkeKann (ABN 92 990 809 254) (Twelfth Defendant)
Belinda Eliza Hapgood (nee Weir) as a named partner of ClarkeKann (ABN 92 990 809 254) (Thirteenth Defendant)
Shane Russell Williamson as a named partner of ClarkeKann (ABN 92 990 809 254) (Fourteenth Defendant)

Representation:

Counsel:
In person (Plaintiff)
A Horvath SC (Defendants)

Solicitors:
Not applicable (Plaintiff)
Gilchrist Connell (Defendants)

File Number(s):

2017/208822

Judgment

Introduction

1. Valentine John Loumbos (the plaintiff) claims damages for alleged negligence and misleading and deceptive conduct against the partners of a firm of solicitors known as ClarkeKann (the defendants). His claim arises out of his providing funds to enable Deborah Ward, whom he intended to marry, to buy a property at Lilyfield (the Lilyfield property) which she was then renting.

2. The plaintiff alleges that the defendants were his solicitors, and, as such, owed him duties of care and fiduciary duties, which they breached in July 2011 by failing to advise him as to how he could protect his interests and that he ought obtain independent legal advice, as they were in a position of conflict. The plaintiff also alleges that the defendants were guilty of misleading and deceptive conduct.

3. The defendants maintain that, in July 2011, they were acting solely as the solicitors for Ms Ward, the donee of a gift from the plaintiff, and deny that they owed the plaintiff any duty. They contend that, even if they owed a duty to refer the plaintiff for independent advice (which they submit could only have been owed to Ms Ward), the result would not have been any different as the plaintiff’s long-standing solicitor, Greg Beattie of Wilshire Webb Staunton Beattie Lawyers, was acting on his behalf and gave him advice which he chose to ignore. Thus, they contend that the plaintiff would still have executed the documents on 12 July 2011 and therefore has suffered no relevant loss. They contend that the claim for misleading and deceptive conduct must fail for the same reasons.

The facts

The plaintiff’s background and his business

4. The plaintiff was born in 1945 in Bucharest, Romania. He migrated to Australia. He left school at the age of 13. In the 1960s he established a wastepaper and recycling business which he conducted through Loumbos Pty Ltd. The plaintiff married and had children. As at 2011, the plaintiff was the sole director of several companies, including Loumbos Pty Ltd, Couric Corporation Pty Ltd, Loumbos Wastepaper Sales and Services Pty Ltd, Active Waste Management Pty Ltd and Yeser Pty Ltd which I will refer to as the Loumbos Group. He was a widower, his wife having died some time earlier after 33 years of marriage.

5. The plaintiff was also a director of Sydney Nightclubs Pty Ltd, a company which he had established to purchase the Ruby Rabbit nightclub, which his daughter, Sue Loumbos, managed. He owned a restaurant in Balmain and was also trustee of his family trust.

6. Although the plaintiff can read, it is his practice to engage professionals and others whom he trusts to summarise documents and advise him about their contents. I accept the plaintiff’s submission that he is “a hands-on person” and “not a reading-type person”. Nonetheless, I am satisfied that the plaintiff has significant business acumen and understands concepts associated with obtaining finance, providing security, contracts for the purchase of real estate and the significance of someone being the registered proprietor of property.

7. From about late 2010, the plaintiff wanted to refinance loans advanced to the Loumbos Group by the National Australia Bank (NAB). He instructed Mr Beattie to act for him on the re-finance. He also obtained advice and assistance from his accountant, George Venardos, and a finance broker, Paul Smith, of Fixx Commercial Pty Ltd.

8. In January 2011, the plaintiff exchanged contracts for the purchase of a property in Toora, Victoria, the funds for which was also to be provided as part of the re-finance.

The relationship between the plaintiff and Deborah Ward

9. In about February 2011, the plaintiff was having lunch with John Ward, a potential business contact. Mr Ward mentioned that he had a daughter, Deborah Ward, who was invited to join them. At that time, Ms Ward was renting the Lilyfield property where she lived with her disabled daughter. She had difficulty meeting the weekly rental payments of $1,200 per week. Although there was a self-contained unit on the property which could have been rented out, Jeff Fenech, the registered proprietor’s father, did not allow Ms Ward to sub-lease it to offset her rental liability.

10. Following the lunch, the plaintiff and Ms Ward began an intimate relationship. Ms Ward was considerably younger than the plaintiff. There was a temporary interruption to this relationship when the plaintiff resumed an earlier relationship with a previous partner. It was not long before this relationship deteriorated which led to the plaintiff and Ms Ward resuming their relationship.

11. After the separation between the plaintiff and his former partner, his former partner made allegations that the plaintiff had sexually assaulted her daughter. The plaintiff defended the charges laid as a result of these allegations. Ms Ward supported him emotionally throughout the criminal proceedings. As a result, they became closer and decided to marry although they did not become formally engaged until November 2011.

The purchase of the Lilyfield property

12. In about April 2011, the plaintiff, who was concerned about Ms Ward’s financial situation, discussed the purchase of the Lilyfield property with her. He spoke with Mr Fenech and negotiated a price of $1.3m.

The first proposal

13. The first proposal was that Ms Ward would be the purchaser and finance the purchase through a mortgage, which the plaintiff would guarantee. However, Ms Ward was reluctant to take on a loan of that magnitude, having regard to her difficulty in meeting the weekly rental payments.

The second proposal

14. The second proposal was that the plaintiff would purchase the property, rent it to Ms Ward and allow her to sub-lease the unit to defray the rent. On 6 May 2011, the solicitors for the vendor of the Lilyfield property sent an email to Mr Beattie (whom the plaintiff had nominated as the solicitor who would act for him on the purchase), confirming that they acted for the vendor and understood that he acted for the plaintiff as purchaser. The vendor’s solicitors enclosed a contract for sale and a certificate under s 66W of the Conveyancing Act 1919 (NSW). They also confirmed that there was “no legally binding agreement until contracts are exchanged.” On 7 May 2011, Mr Beattie forwarded this email to the plaintiff and Ms Ward.

The re-finance through CBA

15. In the meantime, the plaintiff was negotiating with the Commonwealth Bank of Australia (CBA) to refinance the NAB facilities. On 21 April 2011, the CBA offered to lend the plaintiff, and entities associated with him, the total sum of $8,993,000 in the form of four bill facilities. This sum included funds to enable him to purchase the Lilyfield property. The CBA’s offer was conditional on the plaintiff or members of the Loumbos group granting first registered mortgages over real property, including the Lilyfield property.

The change from the second proposal to the third proposal

16. Ms Ward was not happy with the second proposal because she was concerned that, if the Lilyfield property was purchased in the plaintiff’s name, she would be exposed to the risk that, if the plaintiff died, the plaintiff’s children (whom she understood did not like her and thought she was after their father’s money) would evict her and she would be homeless. The plaintiff, too, was concerned about this possibility. Ms Ward also worried about losing her home if the plaintiff became bankrupt. The plaintiff loved Ms Ward and had become attached to her daughter whom he described as a “lovely person” who, though 22 years old, had a mental age of two. At this time, the plaintiff wanted to do the right thing by both of them and was prepared to act in accordance with her preference.

17. Ultimately, on about 8 or 9 May 2011, the plaintiff and Ms Ward agreed on a third proposal: that the plaintiff would provide funds from the CBA facility to purchase the Lilyfield property and Ms Ward would be named on the contract as the purchaser and would become the registered proprietor of the Lilyfield property. I am satisfied that the plaintiff understood the differences between the three proposals and that he was content to proceed on the basis of the third proposal, which was Ms Ward’s preference.

18. On 9 May 2011, Ms Ward sent an email to Mr Beattie asking him to change the name of the purchaser of the Lilyfield property to her name rather than the plaintiff’s. At 5.19pm on 9 May 2011, the vendor’s solicitor forwarded to Mr Beattie a new front page on which Ms Ward was named as the purchaser. The subject line of the email was “Fenech Sale to Ward”. At 5.28pm on 9 May 2011, Mr Beattie forwarded this email to the plaintiff and Ms Ward, and copied it to Mr Venardos. The plaintiff saw the email at about that time and appreciated that Ms Ward’s name was on the contract of sale as purchaser and that if the purchase settled, she would become the registered proprietor of the Lilyfield property.

19. On 10 May 2011, Ms Ward sent an email to Mr Beattie, which was copied to the plaintiff, in which she inquired about the date for settlement of the Lilyfield property.

20. In about May 2011, in the course of a lunch at La Grande Bouffe at which the plaintiff, Ms Ward and Mr Smith were present, Mr Smith mentioned that he had a connection with the defendants and suggested that they act on her behalf with respect to the purchase of the Lilyfield property. Ms Ward, who did not at that time have a solicitor, accepted his suggestion.

21. On 3 June 2011, the CBA made a further offer of finance, which increased the facilities offered to a total of about $9,369,000. The conditions of the offer included that Ms Ward would execute a guarantee limited to $1,050,000 and that she would grant a first registered mortgage over the Lilyfield property as security for the loan. The mention of Ms Ward in the conditions of the offer from the CBA arose because of the third proposal that she be the registered proprietor of the Lilyfield property instead of the second proposal, which would have resulted in the plaintiff being the purchaser.

22. In June 2011, the plaintiff purchased a new BMW motor vehicle for Ms Ward for a price of $87,000. He also paid off the debt that was owing on the Mercedes Benz that she was driving at the time so that it could be sold. Mr Beattie continued to liaise with the vendor’s solicitor regarding the purchase of the Lilyfield property, including on 9 May 2011, 7 June 2011, 11 June 2011, 21 June 2011 and 22 June 2011.

Ms Ward’s retainer of the defendants

23. According to the defendants’ fee ledger for the purchase of the Lilyfield property, on 21 June 2011, Mr Smith told the defendants about the proposed transaction and asked them to contact Ms Ward with a view to acting on her behalf regarding the purchase of the Lilyfield property. I am satisfied that this was the first contact made to the defendants regarding this matter.

24. Kate Gardner, an associate in the defendants’ firm, sent an email to Ms Ward on Wednesday 22 June 2011, in which she said:

“Paul Smith of Fixx Commercial Pty Ltd has asked me to contact you as we understand that you wish us to act for you in relation to the purchase of 62 Justin Street, Lilyfield (‘Property’).

From my conversation with Paul, as we understand it:

1. you are currently renting the Property;

2. finance will be provided through a commercial facility which has been established for [the plaintiff] and his various entities (with whom you are in a relationship);

3. you will be required to provide a personal guarantee in respect of the commercial facility which is limited up to $1,050,000 and the [CBA] will take the first registered mortgage over the Property;

4. settlement is to occur within the next week.

5. Based on the above, we anticipate that in addition for acting for you in relation to the purchase of the Property that we will need to:

6. review the documentation from the Commonwealth Bank in relation to the guarantee and mortgage; and

7. draft an agreement between yourself and [the plaintiff] in relation to the provision of the funds for the Property to protect your interests.

8. We anticipate that our fees for the conveyance of the property and the reviewing and preparing documentation in respect of the finance documentation will be $3,500 - $5,000 plus GST and disbursements (which will include searches for the Property).

9. Please confirm if you are happy for us to proceed on this basis.

…”

[Emphasis in original.]

25. By email sent the following Monday (27 June 2011), Ms Ward instructed Ms Gardner to proceed. Ms Gardner, who was apparently unaware of Ms Ward’s communication with Mr Beattie on 9 May 2011, confirmed that she would contact the vendor’s solicitor to request that Ms Ward’s name be on the contract as the purchaser.

26. By email dated 30 June 2011, the defendants provided advice to Ms Ward which included the following:

“…

I note your advice that the purchase price of the property is to be a gift from [the plaintiff] to you. In the absence of any writing to confirm the gift, it is open to categorise the money as a loan. We recommend that something in writing be put in place to confirm this position e.g.

If it is a gift and you are compelled to pay the bank $1,050,000 under the guarantee then you are entitled to recover that amount from [the plaintiff] as the borrower;

If it is a loan and you are compelled to pay the bank $1,050,000 then you would set off this payment against any claim to repay the loan.

To provide some evidence of the gift we would suggest the following:

• That in consideration for your guarantee in relation to [the plaintiff’s] business loan from the CBA (limited to the amount of $1,050,000), he has gifted to you the amount of $1,300,000 (or plus the stamp duty amount [if] that is the agreement, please advise in this regard).

In effect, this means that at some stage in the future if the bank calls on you to sell your property in the event of the bank calling on your guarantee of the loan, the amount that the bank is limited to claiming from the sale price is $1,050,000. If we do not cover you in this regard, and we do not have the gift between you and [the plaintiff] of the purchase price evidenced In writing as a gift, it would be considered at law to be a loan, which opens you up to the possibility of having to repay the whole $1.3m.

We are happy to talk you through your options in this regard.

We need a copy of the guarantee and the mortgage documents that you will be required to sign as part of your guarantee of [the plaintiff’s] loan. Could you please send me copies of these?

…”

27. On 5 July 2011, Ms Ward executed a mortgage over the Lilyfield property in favour of the CBA. Her signature was witnessed by Mr Smith.

28. On 6 July 2011, Ms Kerry, an associate at the defendants’ firm, who was also working on the matter, sent an email to Ms Ward which included the following:

“… I advised [the vendor’s solicitor] of your plans to exchange and settle simultaneously, and they advised that they could see no problem with that, but obviously they’d need to seek instructions from their client.

…”

29. Ms Kerry sent a further email to Ms Ward on 11 July 2011 in which she notified her as follows:

“…The vendor's lawyers have agreed that we can exchange and settle the purchase simultaneously. This means that we will need to get you into our office to execute the contract for sale and the other documents including the deed of indemnity and declaration of the gift sometime this week (which will primarily have to be signed by [the plaintiff]). We’ll let you know when we have finalised drafts of these and send them to you for your prior review. We expect to receive the s 109 certificate this week, which, realistically means that settlement may happen sometime early next week. We will keep you updated as to timing when we have more information in this regard.

On settlement you will need to provide cheques for the purchase price of $1,300,000, the stamp duty of $57,040 (plus stamping fees of $45) and probably some small additional amounts for adjustments on the purchase price for e.g. council and water rates, owners corporation levies, LPI registration fees etc.

Can you please let us know what arrangements are in place for the payment of the price i.e. how much notice you need in order to arrange for funds to be available, and also, whether the bank will be attending settlement to take the title documents in line with the guarantee that you gave under the loan agreements for [the plaintiff] (or whether separate arrangements have been made for this).

…”

30. In response, Ms Ward informed Ms Kerry that she and the plaintiff could come to the defendants’ office the following afternoon to sign the documents. Ms Kerry subsequently sent an email, also on 11 July 2011, to Mr Smith about settlement and the CBA’s requirements. Ms Ward confirmed by email sent at 3.20pm on 11 July 2011 that she and the plaintiff would come in at 5pm on 12 July 2011.

The conference between the plaintiff, Ms Ward and Mr Gray on 12 July 2011

31. On 12 July 2011, prior to the conference with the plaintiff and Ms Ward, Ms Kerry drafted the Deed Poll Gift and the Deed of Indemnity. These draft documents were reviewed by Mr Gray and finalised before the plaintiff and Ms Ward arrived.

32. On 12 July 2011, the plaintiff and Ms Ward went to the defendants’ office to sign the documents for the purposes of settlement. The plaintiff appreciated that the defendants were not acting for him and that they were acting solely for Ms Ward. It was common ground (as alleged by the plaintiff in paragraph 5 of the second further amended statement of claim and accepted by the defendants) that, as at 12 July 2011, the defendants were aware of the facts set out below.

The matters of which the defendants were aware at the time of the conference on 12 July 2011

33. Ms Ward had retained the defendants to act for her on the purchase of the Lilyfield property. The defendants had not been retained by the plaintiff. Ms Ward had not yet entered into a contract for the purchase of the Lilyfield property although, in April 2011, the plaintiff had negotiated a purchase price of $1.3m. The plaintiff was significantly older than Ms Ward. The plaintiff and Ms Ward were in an intimate romantic relationship. Ms Ward did not intend to contribute any money to the purchase of the Lilyfield property. It was intended that contracts for the purchase of the Lilyfield property would be exchanged at the same time as settlement of the Lilyfield property, using funds to be provided by the plaintiff, being $1.3m for the purchase price, plus stamp duty and costs. The defendants considered that it would be in Ms Ward’s best interests to have the plaintiff fund her purchase of the Lilyfield property by way of gift of the purchase price and associated costs, rather than by way of loan.

34. As referred to above, prior to the conference on 12 July 2011, the defendants had received the contract for the sale of the Lilyfield property and had drafted documents entitled Deed Poll Gift and Deed of Indemnity. Neither draft had been provided to the plaintiff or Ms Ward in advance of the conference. The plaintiff had had no opportunity to obtain independent advice before the conference on 12 July 2011 and the defendants did not advise him prior to, during, or after the conference to obtain such independent advice. As set out above, Ms Ward had already been advised on 30 June 2011 that it would be in her interests that the transaction be structured in that way. The interests of the plaintiff and Ms Ward with respect to both the Deed Poll Gift and the Deed of Indemnity were those of opposite parties to the transaction.

What occurred during the conference on 12 July 2011

35. I accept Mr Gray’s evidence that, at the commencement of the conference, he followed his usual practice and told the plaintiff that he acted only on behalf of Ms Ward. He explained the effect of the Deed Poll Gift and the Deed of Indemnity to Ms Ward in the plaintiff’s presence. I accept the plaintiff’s evidence that he did not pay particular attention to what Mr Gray said to Ms Ward about the effect of the documents. I infer that his lack of interest arose from his preparedness to structure the purchase in the manner set out in the documents. I do not accept the plaintiff’s evidence that he told Mr Gray that the documents were “not to see the light of day” until after he and Ms Ward were married or that the plaintiff told Mr Gray of any qualification to the documents which he executed on that day.

36. After he had explained the documents to Ms Ward in the plaintiff’s presence, Mr Gray presented the draft Deed Poll Gift and the Deed of Indemnity to the plaintiff for execution. The plaintiff executed the documents. Ms Ward also signed an acknowledgment of the gift on the second page of the Deed Poll Gift. The plaintiff executed the Deed of Indemnity for himself and for each of the companies in the Loumbos Group who were parties to the deed. Although these documents were executed on 12 July 2011, they were not dated until 14 July 2011, and each bear the date of 14 July 2011.

37. The Deed Poll Gift was a two-page document. Most of the second page was reserved for the execution by the plaintiff and the acknowledgment by Ms Ward. The first page set out the parties: the plaintiff was described as the “Donor” and Ms Ward as the “Donee”. Under the heading, “BACKGROUND”, it said:

“The Donor intends to make an immediate gift of the purchase price of $1,300,000, the stamp duty and any other fees and costs (“the Gift”) associated with the purchase by the Donee of [the Lilyfield property] to the Donee on the terms set out in this Deed Poll.”

[Emphasis in original.]

38. Clause 1 provides:

“Gift

The Donor hereby gifts to the Donee all monies comprised in the Gift.”

39. The parties to the Deed of Indemnity were Ms Ward, four companies within the Loumbos Group and the plaintiff. The Deed of Indemnity provided that Ms Ward had agreed under the Transaction Documents (being the NAB facilities) to guarantee the obligations of the “Borrowers” to a maximum amount of $1,050,000 and that the other parties had agreed to indemnify her against any loss incurred under the Transaction Documents.

40. The plaintiff said that he did not read these documents. I accept the truth of the following exchange in his cross-examination on 20 February 2018 (in other proceedings referred to below):

“Q. Why do you say you didn't read the deed of gift, Mr Loumbos?

A. Because I had no reason to doubt the integrity and honesty of Deborah. She got lawyers to prepare the deed, I signed it in good faith ...”

41. According to Mr Gray’s time records for 12 July 2011, the conference took about 24 minutes.

The aftermath of the conference on 12 July 2011

42. The CBA contacted Mr Beattie in the morning of 13 July 2011 to tell him that the purchase of the Lilyfield property was to be settled on 14 July 2011. Mr Beattie had not previously been aware of this timing. I infer from the email sent by Mr Beattie to Ms Ward at 2.43pm on 13 July 2011 that, at some time before then, the plaintiff had telephoned Mr Beattie and told him that he had signed various documents on 12 July 2011 at the office of Ms Ward’s solicitors and that he did not have copies of the documents. Mr Beattie advised him that he needed to see the documents so that he could review them to ensure that the plaintiff’s interests were properly protected. I infer that Mr Beattie also told the plaintiff that settlement of the Lilyfield property ought be deferred until both Mr Beattie and Mr Venardos had reviewed the documents which the plaintiff had signed and confirmed that his interests were protected, including relating to his taxation position. The plaintiff chose not to do anything in response to Mr Beattie’s advice because he was happy to purchase the Lilyfield property for Ms Ward with monies he and the Loumbos Group were to borrow from the CBA as he loved and trusted her and expected that they would be married.

43. Mr Beattie contacted Ms Ward at some time before 13 July 2011 to ask her about the settlement of the Lilyfield property. She responded by email at 2.27pm on 13 July 2011, informing him that she had her own solicitor to handle the purchase.

44. At 2.43pm on 13 July 2011, Mr Beattie sent an email to Ms Ward, which was copied to the plaintiff and Mr Venardos, in which he asked her to request that her solicitor send copies of the documents signed by the plaintiff by email to him. At 5.25pm on 13 July 2011, Ms Kerry notified Ms Ward and Mr Gray that settlement had been booked for 2.30pm on 14 July 2011. At 5.31pm on 13 July 2011, Ms Ward sent an email to Ms Kerry to ask for “a copy of the documents that we signed yesterday.” At 5.45pm on 13 July 2011, Ms Ward sent an email to Mr Beattie to say that she would forward copies of the documents to him when she received them.

Exchange and settlement of the purchase of the Lilyfield property on 14 July 2011

45. The evidence does not reveal at what time on 14 July 2011 exchange and settlement occurred. I infer from the booking time referred to above that exchange and settlement (which were to be simultaneous) took place at or shortly after 2.30pm on 14 July 2011. At settlement, a total of $1,300,054.86 was paid by the CBA at the direction of the purchaser. Cheques were drawn in favour of the purchaser, the purchaser’s solicitors, the Council, Sydney Water and Sydney Law Stationers. The CBA also advanced $56,990 for stamp duty.

46. At 4.29pm on 14 July 2011, Mr Beattie sent an email to the plaintiff and Mr Venardos as follows:

“Please see further email from [Ms Ward] (5.45pm) [the email of 13 July 2011 referred to above]

I Confirm my previous advice to you that the purchase of 62 Justin Street SHOULD NOT SETTLE until:-

i) both Mr Venardos and I have seen the documents that you have signed with [Ms Ward’s] solicitor;

(ii) both Mr Venardos and I have confirmed that your interests are protected;

(iii) Mr Venardos has provided his tax advice to you in relation to the purchase.”

[Emphasis in original.]

47. Notwithstanding the terms of the email, the plaintiff took no steps to obtain the deeds which he had signed and deliver them to Mr Beattie to seek advice about them. I am satisfied, for the reasons given above, that he was content with the transaction as he loved and trusted Ms Ward and valued the support she was providing to him with respect to the criminal proceedings.

48. On 15 July 2011, the defendants wrote to Ms Ward, reporting on the settlement which had occurred on the previous day. They also enclosed a copy of the front page of the contract, their memorandum of fees, a copy of the executed Deed Poll Gift and the Deed of Indemnity.

49. On 15 September 2011, Mr Beattie rendered a tax invoice and account dated 31 August 2011 to the plaintiff for acting on his behalf regarding the purchase of the Lilyfield property.

50. By November 2011, the plaintiff had been acquitted of the criminal charges. As mentioned above, he formally proposed marriage to Ms Ward and she accepted. On 19 December 2011, he purchased an engagement ring for her for approximately $58,000 and also bought two white gold wedding bands.

The re-finance of the CBA facility

51. By mid-2012, the plaintiff, who had become dissatisfied with the terms of the CBA facility, instructed his finance broker to attempt to refinance it. By September 2012, the Loumbos Group had defaulted on the CBA facility. By January 2013, the debt outstanding on the CBA facility was greater than $10m. CBA threatened to appoint receivers. On 29 January 2013, the plaintiff learned that CBA would defer recovery action until 13 February 2013 by which time it expected all group facilities to be repaid in full.

52. The re-finance of the CBA facility was effected when short-term finance was obtained from JWH Nominees Pty Ltd as trustee for the Hunt Investment Trust (JWH). The defendants acted for the plaintiff and Ms Ward on the re-finance. Prior to the plaintiff’s execution of documents on 8 February 2013 and the making of the advance to CBA, the plaintiff spoke to Ms Ward about security over the Lilyfield property. She said that she was not willing to be liable for the whole debt to JWH and wanted her liability to be capped to $960,000 and for JWH to be able to resort only to the Lilyfield property in satisfaction of that liability.

The JWH facility

53. On 8 February 2013, JWH advanced loan funds of $11,075,000 pursuant to four deeds of loan. The term of the loans was three months from the first drawdown. Interest was charged at 24% per annum for the term of the loan and was pre-paid at the time of drawdown. The default interest rate was 36% per annum. JWH became the first registered mortgagee over properties owned by the plaintiff and the Loumbos Group at Kingsgrove and Hunters Hill and also the Lilyfield property which was owned by Ms Ward. JWH also obtained a charge over the assets and business of the Loumbos Group. The plaintiff and the Loumbos Group were to guarantee the loans and provide indemnities to JWH. Ms Ward was to provide an indemnity and guarantee limited to $960,000.

54. The CBA facility (of $10,472,253.60) was paid out on 8 February 2013. At the time of the JWH refinance, the plaintiff and Ms Ward executed a document entitled Second Deed of Indemnity which entitled Ms Ward to place caveats on the properties owned by the plaintiff or the Loumbos Group at Hunters Hill, Kingsgrove and Toora. According to the plaintiff, he did not appreciate that this was the effect of the Second Deed of Indemnity. Ms Ward lodged caveats over each of these properties in February 2013. I note that there is no allegation in the pleading that the defendants breached duties which they owed to the plaintiff in 2013. The pleading is confined to alleged breaches in 2011.

The breakdown in the relationship between the plaintiff and Ms Ward and his request for the Lilyfield property to be returned

55. In about March 2013, the relationship between the plaintiff and Ms Ward ended as a result of his suspicion that she had been unfaithful to him. The plaintiff asked her to return the Lilyfield property to him. She refused to do so. She also refused to remove the caveats which she had lodged over the Hunters Hill, Kingsgrove and Toora properties and withheld her consent to the Lilyfield property being used as security in the refinance of the JWH facility, which was due to expire on 8 May 2013.

56. In about April 2013, the plaintiff raised with the defendants the effect of the Deed Poll Gift he had signed in 2011.

57. On 17 April 2013, the plaintiff received an indicative finance proposal (which fell short of a formal offer of finance) from St George Bank (St George) whereby St George would advance $8.807m for a term of three years. The proposal was subject to various conditions which included a first registered mortgage over the Hunters Hill property and the Kingsgrove property. On 24 April 2013, Allstate Home Loans gave conditional approval (not amounting to an offer) for an interest-only loan of $1m with the Lilyfield property as security. There is no evidence of any formal offer of refinance which, if accepted, would have enabled the JWH facility to be discharged. The combined limit of the indicative offers from St George and Allstate Home Loans was insufficient to pay out the JWH facility.

The change of solicitors

58. By 10 May 2013, the plaintiff had instructed new solicitors, Rockwell Olivier, to act for him in trying to regain the Lilyfield property, although he continued to retain Mr Beattie for other non-litigious matters. He instructed Rockwell Olivier to obtain his client files from the defendants and also to write to Ms Ward and demand that she transfer the Lilyfield property to him.

59. Rockwell Olivier set out their instructions as to the background to the Deed Poll Gift. Their letter dated 10 May 2013 said in part:

“… At about this time [mid-2011], [the plaintiff] suggested that he could purchase the Property using funds to be made available from the re-finance with CBA, in contemplation of your marriage to him.

We are instructed that you did not get along well with [the plaintiff’s] four children. You therefore expressed concern to [the plaintiff] that after you married, if [the plaintiff] predeceased you, then his children may challenge you for the Property and take it away from you and your daughter. You therefore requested [the plaintiff] to purchase the Property in your name, which he agreed to do so on the basis that you were to be married.

You took [the plaintiff] to see your solicitors, ClarkeKann Lawyers, who prepared a two-page document titled ‘Deed Poll – Gift’. That document purports to gift to you the purchase price of $1,300,000 and all other fees and costs associated with the purchase by you of the Property. However, the facts establish that you would hold the Property on trust for [the plaintiff].

[The plaintiff] was prepared to purchase the Property in your name on the clear understanding and agreement that you would only receive a beneficial interest in the Property (a) after you and [the plaintiff] married and (b) if he pre-deceased you. The Deed was then later signed on 14 July 2011.

In August 2011, the settlement of the purchase of the Property to you was completed. The Property was purchased by funds procured by [the plaintiff] and was encumbered by a mortgage to the CBA in your name, although the borrower was [the plaintiff] (or one of the Entities). You made no payment or contribution to the purchase price of the Property.

[The plaintiff] has made all mortgage payments. [The plaintiff] has also provided you with additional, significant financial assistance including:

-   Paying the debt on the Mercedes vehicle which you owned at the time that you met [the plaintiff] (about $30,000 to $40,000);

-   Paying about $85,000 to purchase a new BMW vehicle for you;

-   Providing you with about $75,000 for maintenance and repair work to the granny flat on the Property so you could rent it out;

-   Referring various leases on trucks to your business, Multilease;

-   Paying you $2,500 per week to run the business which trades as Loumbos Ward Recycling.

-   …”

60. It is significant that, notwithstanding the detail in this letter, there was no mention of any meeting between the plaintiff and the defendants in May 2011 and no suggestion that they acted on his behalf prior to 2013.

The appointment of receivers by JWH

61. On 26 September 2013, JWH appointed receivers and managers to the businesses conducted by the Loumbos Group. On 17 October 2013, the plaintiff caused a caveat to be lodged on the Lilyfield property.

Proceedings relating to the plaintiff, the Loumbos Group and the Lilyfield property

62. The various proceedings which arose concerning the plaintiff, Ms Ward and the Lilyfield property are summarised below. Their relevance is relatively limited: first, Ms Horvath SC, who appeared on behalf of the defendants, cross-examined the plaintiff about evidence he gave in these proceedings which was inconsistent with evidence he had given in the present proceedings; second, they explain, in part, the passage of time between the events the subject of these proceedings (mid-2011) and the commencement of these proceedings on 10 July 2017; and, third, the plaintiff’s schedule of loss includes a claim for legal costs incurred in the various proceedings which is said to amount to a total of $1,815,568 (which comprises $1,584,625.30 in fees and pre-judgment interest of $230,942.59).

Proceedings 2013/341579 – the Receiver Proceedings

63. On 12 November 2013, the plaintiff commenced proceedings 2013/341579 in the Equity Division of this Court for injunctive relief against the receivers appointed by JWH to restrain them from dealing with the assets of the Loumbos Group (the Receiver Proceedings). The Receiver Proceedings were resolved by consent when the plaintiff purchased the assets from the receivers.

Proceedings 2013/363949 – the Ward Proceedings

64. On 3 December 2013, the plaintiff commenced proceedings 2013/363949 in the Equity Division of this Court against Ms Ward (the Ward Proceedings). In the Ward Proceedings, the plaintiff sought an extension of the caveat he had lodged on the title of the Lilyfield property; a declaration that Ms Ward held the Lilyfield property on trust for him; and orders that she transfer the Lilyfield property to him. Mr Gray swore an affidavit on 8 October 2015 which was filed and read in those proceedings on behalf of Ms Ward. Mr Gray’s affidavit in the present proceedings, affirmed on 6 May 2020, which was read on behalf of the defendants, adopted the earlier affidavit of 8 October 2015, which was annexed to it.

64. Lindsay J decided the Ward Proceedings in the plaintiff’s favour: Loumbos v Ward [2016] NSWSC 885. Ms Ward’s appeal was upheld by the Court of Appeal and a re-trial ordered: Ward v Loumbos [2017] NSWCA 35. The re-trial was heard by Rein J in February 2018. The proceedings were ultimately resolved (after the plaintiff had been cross-examined). Orders were made by consent that the summons be dismissed and that the plaintiff pay $400,000 towards Ms Ward’s costs and release her from any claim with respect to the Lilyfield property. It was common ground that the settlement of the Ward Proceedings on this basis was reasonable.

Proceedings 2014/20554 - the Bendigo Refinance Proceedings

66. On 22 January 2014, the plaintiff and companies in the Loumbos Group commenced proceedings in the Equity Division of this Court seeking orders that Ms Ward consent to the registration of a first-registered mortgage over the Hunters Hill property and the Kingsgrove property, on the titles of which she had lodged caveats (the Bendigo Refinance Proceedings). The plaintiff discontinued the Bendigo Refinance Proceedings in May 2014.

Proceedings 2014/31129 – the JWH Proceedings

67. On 31 January 2014, JWH commenced proceedings against Ms Ward for orders for possession of the Lilyfield property on the basis of its first registered mortgage (the JWH Proceedings). Ms Ward defended the claim on the basis that the mortgage was not enforceable and filed a cross-claim on 31 October 2014 to that effect. She also cross-claimed against various parties, including the defendants (alleging that they had breached the duties which they owed to her); the plaintiff; JWH; and another lender. The JWH Proceedings were settled by Deed of Settlement and Release executed on about 22 July 2016. Ms Ward’s claim against the defendants was resolved as part of this settlement.

68. The plaintiff also commenced proceedings in 2016 seeking removal of caveats lodged over the Hunters Hill property and the Kingsgrove property. These proceedings were discontinued when the parties reached a settlement in 2016.

69. As referred to above, the present proceedings were commenced on 10 July 2017.

The credibility of witnesses

The plaintiff’s credibility

70. The plaintiff gave detailed affidavit evidence and was cross-examined. I formed the impression that, with a couple of minor exceptions, he genuinely believed in the truth of the evidence he was giving. Although he was, in the main, an honest witness, he was not an entirely reliable one. Ms Horvath cross-examined him by reference to contemporaneous documents and prior inconsistent statements he had made in affidavits and on transcript, including in proceedings to which he was a party. The plaintiff accepted that the passage of time and his increasing age (65 at the time of the relevant events and 76 at the time of the hearing of the present proceedings) had adversely affected his memory.

71. Further, he had instructed solicitors and given evidence throughout the period of more than 10 years since executing the Deed Poll Gift and the hearing of the present proceedings. It is little wonder that, at times, he became confused and conflated events and times.

72. The principal factual dispute between the parties revolved around the plaintiff’s contact with the defendants. The plaintiff was adamant in his evidence in these proceedings that he had been to the defendants’ office on two occasions: the first in May 2011; and the second in July 2011. He said that on the first occasion, he had made it clear to Mr Gray that the defendants were acting for both Ms Ward and him, and that he had instructed Mr Gray as follows:

“I would like to put in place something that will give her [Ms Ward] the [Lilyfield property] if we get married or if something goes wrong before we get married, such as me passing away or going broke. The document is not to take effect until we are married though. Is this possible to do?”

73. The plaintiff said that on the second occasion, 12 July 2011, he attended solely to execute the documents which he understood the defendants to have prepared in accordance with the instructions he had given at the first conference. He said that he did not bother to read them, having elicited from Mr Gray an assurance that his interests were protected.

74. The defendants’ case, based on Mr Gray’s evidence and the surrounding circumstances and documents, was that in 2011, they only ever acted for Ms Ward and understood that Mr Beattie acted for the plaintiff. They considered themselves bound to protect Ms Ward’s interests and act in accordance with her instructions. According to Mr Gray, the only time the plaintiff came to the defendant’s office in 2011 was when he accompanied Ms Ward there on 12 July 2011 to execute the documents.

75. The following passages summarise the process of fact-finding where there is a contest of fact between witnesses. In Watson v Foxman (1995) 49 NSWLR 315, McLelland CJ in Eq said, at 319:

“... human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.”

76. Lord Pearce in Onassis v Vergottis [1968] 2 Lloyds Rep 403 at 431 said (Lord Wilberforce agreeing):

“‘Credibility’ involves wider problems than mere ‘demeanour’ which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be ... Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.”

77. As is evident from the findings I have made above, I accept the version of events for which Ms Horvath contended. There are several features of the evidence which support the defendants’ case in this respect.

78. First, the plaintiff was not privy to the communications which passed between Ms Ward and the defendants up to and including 12 July 2011. The plaintiff was not copied into the emails between them. Further, Ms Ward had been contacted directly by the defendants following an approach from Mr Smith.

79. Secondly, the plaintiff had a poor recollection of the sequence of events. In his oral evidence in cross-examination, he became confused between what occurred in 2011 (when the defendants acted solely for Ms Ward) and what occurred in 2013 (when the defendants acted for both the plaintiff and Ms Ward in relation to further refinancing). Thus, it would appear that he was mistaken in his belief that he met with Mr Gray earlier than 12 July 2011.

80. Thirdly, there were several inconsistencies between the plaintiff’s evidence in the present proceedings and the evidence he had given in earlier proceedings. For example, he had no recollection when cross-examined in the present proceedings that it was Mr Smith who had had the connection with the defendants’ firm but agreed that this was the case when the transcript of his cross-examination on 6 October 2015 was put to him and he was reminded that he had said as much on that date. Further, he had said on 6 October 2015 that there had been no need for the defendants to explain any of the documents to him on 12 July 2011 because “they were not [his] lawyers.” Also in the course of cross-examination on 6 October 2015, he accepted that he had not met Mr Gray until 12 July 2011 although his evidence in the present proceedings was that he had met him in May 2011 when he first instructed him. In an affidavit sworn on 8 December 2015, the plaintiff swore that, on 12 July 2011, Ms Ward had told him that they needed to go to her solicitors to attend to the paperwork for the purchase of the Lilyfield property; that he did not recall whether she mentioned the firm name, ClarkeKann; that he was not familiar with the firm as he had “never used them for any legal work”; and that they had gone to the defendants’ office on that day where she had introduced him to Mr Gray.

81. Fourthly, the objective probabilities and contemporaneous documents favour the defendants’ case on the question of meetings between Mr Gray and the plaintiff. On 12 July 2011, settlement of the Lilyfield property was imminent. Earlier that day (according to their fees ledger) the defendants had prepared the Deed Poll Gift for execution by the plaintiff and Ms Ward. The plaintiff was at that time in love with Ms Ward and trusted her. He had spent a considerable amount of money on buying her a new motor vehicle and paying out her debts, explaining that he did not want his wife to go into the marriage in debt. At that time, he had no reason to doubt that the relationship would be a long and happy one. The only clouds hanging over the couple in July 2011 were the criminal charges which had not yet been determined and the plaintiff’s children’s aversion to Ms Ward. The former was resolved by his acquittal prior to the proposal in November 2011; the latter did not, as far as the plaintiff was concerned, constitute an impediment to their marriage.

Mr Gray’s credibility

82. Mr Gray gave affidavit evidence (to which was annexed his affidavit of 8 October 2015) and was cross-examined. In his affidavit he did not refer to or annex a file note of the conference with the plaintiff and Ms Ward. His evidence was informed, in part, by business records kept by the defendants, such as time sheets, and by his usual practice (including to inform those present of the person for whom he acted). I accept his evidence as to there only being one meeting at which the plaintiff was present: namely, the occasion on 12 July 2011 when the documents were executed by the plaintiff and Ms Ward. I also accept his denial that the plaintiff said anything to him about the deeds not being operative unless he married Ms Ward. The matters referred to above, including the sequence of events as established by contemporaneous documents and undisputed or incontrovertible facts, are consistent with Mr Gray’s evidence and inconsistent with the plaintiff’s evidence.

Consideration

The claim in negligence and for breach of fiduciary duty

83. For the reasons given above, I am satisfied that the plaintiff was not, at the relevant time, 2011, the defendants’ client. His interests were opposed to those of Ms Ward, for whom the defendants, to his knowledge, acted. Thus, the question is whether the defendants owed a duty to the plaintiff although he was not their client.

84. A solicitor owes a duty “to exercise professional knowledge and skill in the lawful protection and advancement of the client’s interests”: Hill v Van Erp (1997) 188 CLR 159 at 167 (Brennan CJ); [1997] HCA 9. Subject to limited exceptions, this duty is owed solely to the solicitor’s client. The rationale for the limitation is fundamental. The duty a solicitor owes to his or her client cannot be compromised by a countervailing duty to a person whose interests do not coincide with those of the solicitor’s client. An exception to the general principle arises where the client’s interests and a third party’s interests coincide, such as where the client instructs a solicitor to prepare a will to benefit a particular beneficiary, a duty to take reasonable care for the beneficiary’s interests may arise and the solicitor can be held liable to the beneficiary in tort, as in Hill v Van Erp, although the beneficiary was not the solicitor’s client.

85. Otherwise, the circumstances in which a solicitor has been held to owe a duty to a third party (that is, a non-client) are limited. In the present case, the interests of the third party (the plaintiff) were, in July 2011, potentially in conflict with those of Ms Ward, the defendants’ client. Further, the plaintiff, who was represented by Mr Beattie, could not be described as vulnerable: cf. Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649; [2009] NSWCA 258 at [103] (Allsop P, Simpson J agreeing). In these circumstances, the defendants did not owe a duty to the plaintiff.

86. It also follows that the defendants did not owe a fiduciary duty to the plaintiff as the only relevant category of relationship that was contended would give rise to such a duty in the present circumstances is that of solicitor and client.

87. This is not to say that the defendants did not owe a duty (whether at common law or as a fiduciary) to Ms Ward to encourage the plaintiff to obtain independent legal advice. Indeed, the exercise of reasonable care and skill may well have required the defendants to insist on proof that either the plaintiff had been advised by Mr Beattie or some other solicitor as to the Deed Poll Gift and the Deed of Indemnity or that he had refused to obtain independent legal advice. However, any such duty was owed to Ms Ward and not to the plaintiff in order to protect her interest in the validity and enforceability of the Deed Poll Gift by minimising, if not eradicating, the risk of its being set aside at the suit of the plaintiff if there was an allegation of undue influence, unconscionability or improvidence (of which there is no evidence in the present case). The plaintiff would have no standing to sue for any breach of the duty which the defendants owed to Ms Ward. I note that any such claim by Ms Ward against the defendants has been resolved by the Ward Proceedings and therefore can no longer be brought.

88. In these circumstances, and on the basis of my findings of fact set out above, I am not satisfied that the plaintiff has established that the defendants were in breach of any duty, whether fiduciary or the common law duty of care, owed to the plaintiff. Accordingly, his claims on these bases must fail.

Allegation of misleading and deceptive conduct

89. The plaintiff also alleged that the defendants were guilty of misleading conduct by failing to advise him that the gift of the purchase price of the Lilyfield property was not conditional; that they acted only for Ms Ward; and that he should obtain independent legal advice. This claim must fail for the same reasons given above as it is based on a factual matrix which has not been made out. Mr Gray told the plaintiff and Ms Ward that he only acted for Ms Ward. He explained to Ms Ward in the plaintiff’s presence the effect of the Deed Poll Gift, including that it was an unconditional gift. The document itself was short and simply expressed. The present is not a situation where it was misleading or deceptive for the defendants not to tell the plaintiff that he should obtain independent legal advice.

Further fact-finding

90. As a trial judge, I am obliged to make findings of fact and assess damages to guard against the possibility of a different view being taken as to liability. The present case presents difficulties with complying with that obligation since the foundation of the plaintiff’s case has not, for the reasons given above, been made out on the evidence.

91. There are also difficulties in identifying a relevant counterfactual to determine what the plaintiff would have done if the defendants had complied with their duties (which I have found were not breached).

92. I accept Ms Horvath’s submission that the only relevant basis on which such an exercise could usefully be undertaken would be to posit the question: what would the plaintiff have done if the defendants had advised him to obtain independent legal advice?

93. In determining this question, it is instructive to note what the plaintiff did, and chose not to do, in the period from 12 July 2011 (the date on which he executed the documents) to 14 July 2011 (the date on which exchange and settlement of the Lilyfield property took place). As set out above, Mr Beattie contacted the plaintiff on 13 July 2011 after he had executed the documents but before exchange and settlement to tell him not to allow settlement to occur before obtaining advice from Mr Beattie and Mr Venardos.

94. The plaintiff plainly held Mr Beattie in very high regard. He trusted Mr Beattie, who had been his solicitor for over 30 years. Notwithstanding Mr Beattie’s advice to him on 13 July 2011, the plaintiff chose not to communicate with him or do anything to defer the settlement pending further advice from him. I infer that the plaintiff did not communicate with Mr Beattie because he had already decided what he wanted to do: buy the Lilyfield property for Ms Ward and have the property registered in her name so that she would be protected from his children or from any mishap in his own financial affairs, such as bankruptcy (although this protection was limited as the Lilyfield property was encumbered by a first registered mortgage to the CBA).

95. The plaintiff submitted that, if he had obtained independent legal advice, he would have been advised to lend to Ms Ward the full amount of the purchase price of the Lilyfield property plus stamp duty and costs on terms that it would be repayable on demand; secured by a mortgage in his favour; and that the debt would be forgiven if the plaintiff and Ms Ward married before July 2012 or if the plaintiff died before July 2012.

96. Even if the plaintiff had communicated with Mr Beattie and Mr Beattie had given him independent advice, I am not persuaded that the plaintiff would have taken a different course than the one he in fact took. He had already gone through the various options with Ms Ward: that she would borrow the money for the purchase herself and that he would guarantee it (the first proposal), which she rejected because of her own financial position; or that he would buy the property and she would rent it from him (the second proposal), which did not commend itself to her because she would be at risk of dispossession if the plaintiff died or became bankrupt. Furthermore, the plaintiff loved and trusted Ms Ward and the transaction made sense from his point of view. Although he was providing Ms Ward with the security of a property in her name, it was subject to a first registered mortgage to the CBA to secure the debts owed to the Loumbos Group. Her liability was limited to $1,050,000. Thus, his gift to her amounted to the difference between this figure and the purchase price of $1.3m, plus stamp duty and associated costs, together with any capital gain which may be made on the Lilyfield property while she owned it.

97. However, even if I were satisfied that the plaintiff would have proposed the course for which he contended in the proceedings (a loan from him to Ms Ward on the terms set out above), I am not satisfied that Ms Ward would have agreed or that the plaintiff and Ms Ward would not have married by July 2012 in that event. On the plaintiff’s scenario, she would have had a significant financial incentive to marry him by July 2012; they were already engaged and committed to each other; and the only way she could have secured her financial future would have been to marry him before July 2012. Further, the funds for the purchase of the Lilyfield property were provided by the CBA. There is no reason to suppose that the CBA would not have insisted on a first registered mortgage over the Lilyfield property to secure the funds advanced.

90. In the alternative, the plaintiff submitted that he could have purchased the property in his own name, on conditions which included that he would transfer it to Ms Ward if they married by July 2012 and that he would make a will leaving her the Lilyfield property if he died in the meantime. This alternative is substantially similar to the second proposal referred to above, which was rejected by Ms Ward as not providing her with sufficient security of residence. There is no reason to suppose that the plaintiff did not want to comply with her wishes.

91. The plaintiff bears the onus of establishing on the balance of probabilities factual causation: s 5E of the Civil Liability Act 2002 (NSW). In the present case, he must prove what he would have done if he obtained independent legal advice: Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18 at [34] (French CJ, Kiefel and Keane JJ). The plaintiff has not proved that, even if the defendants were in breach of duties which they owed to him, he would have been in any different position.

Further matters

100. It emerged in the course of the hearing that the plaintiff, who appeared for himself, considered his current financial situation to be the result of Ms Ward lodging caveats on the properties at Kingsgrove and Hunters Hill. He argued that her caveats had prevented him from refinancing the JWH facility which had led to him and the companies within the Loumbos Group to incur substantial losses by reason of the high interest rate charged by JWH (36% on default). As noted above, the pleaded case was confined to allegations of breach in 2011. The present is not a case such as was referred to in Dare v Pulham (1982) 148 CLR 658 at 664 (Murphy, Wilson, Brennan, Deane and Dawson JJ); [1982] HCA 70 “where the parties choose to disregard the pleadings and to fight the case on issues chosen at trial”. After the plaintiff referred in opening to his grievance regarding Ms Ward’s lodgement of caveats against his properties in 2013, Ms Horvath made it clear, at the conclusion of the plaintiff’s opening, that the defendants had relied on the pleadings and prepared their case accordingly. She confirmed that the defendants had come to meet a case based on their alleged conduct in 2011. She accepted that if matters that occurred in 2013 were relevant to causation or damages, she could not object to evidence limited to those issues.

101. Ms Ward’s entitlement to lodge caveats arose from the Second Deed of Indemnity which was executed on 8 February 2013 (a copy of which is not in evidence). Although the defendants were acting for both the plaintiff and Ms Ward in 2013 (in comparison to 2011, when they acted solely for Ms Ward), their conduct in 2013 was not the subject of any allegation of breach in the pleading in these proceedings and therefore does not arise for determination.

102. The plaintiff further argued that, if Ms Ward had not been the registered proprietor of the Lilyfield property, she would have had no arguable right to lodge caveats over the properties at Kingsgrove or Hunters Hill. Even if the plaintiff could establish that Ms Ward’s ownership of the Lilyfield property was a necessary condition of the occurrence of the harm, within the meaning of s 5D(1)(a) of the Civil Liability Act (a proposition which I consider to be doubtful), I would not be satisfied that it is appropriate that the scope of the defendants’ liability for what occurred in July 2011 extend to harm caused as a result of an entitlement conferred by the Second Deed of Indemnity executed on 8 February 2013.

103. Further, even if there were a causal connection between a breach by the defendants in July 2011 and Ms Ward’s lodgement of caveats over the Kingsgrove and Hunters Hill properties, the plaintiff has failed to establish that he could have refinanced the JWH facility with either St George or Allstate Home Loans, or indeed any other lender and, if so, on what terms. Nor has the plaintiff been able to establish a sufficient causal connection (for the purposes of s 5D of the Civil Liability Act) between what the defendants did in July 2011 and his expenditure on legal costs in the proceedings set out above. It is, accordingly, unnecessary to address the plaintiff’s submission that had he been able to refinance the JWH facility, he would have retained the Hunters Hill and Kingsgrove properties and would have benefited from the capital gain in their respective values.

Costs

104. Ms Horvath asked that I reserve the question of costs and list the matter for argument at the same time or shortly after delivery of judgment. Accordingly, my Associate will contact the parties to list the matter shortly after publication of these reasons.

Orders

105. For the reasons given above, I make the following orders:

1. Judgment for the defendants.

2. Reserve costs.

3. List the matter for argument on costs at 9.00am on Tuesday 7 December 2021.

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Amendments

09 December 2021 - "Hovarth" replaced by "Horvath" - coversheet

Decision last updated: 09 December 2021