Mal Owen Consulting Pty Ltd v Ashcroft

[2018] NSWCA 135

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:

Mal Owen Consulting Pty Ltd v Ashcroft [2018] NSWCA 135

Hearing dates:

23 April 2018

Decision date:

20 June 2018

Before:

Basten JA at [1];
Macfarlan JA at [47];
Barrett AJA at [90]

Decision:

(1)   Allow the appeal and set aside the orders made in the District Court on 29 June 2017.

 

(2)   Order that the respondent pay the appellant an amount of $100,000.

 (3)   Order that the respondent pay the appellant’s costs of the proceedings in the District Court and of the appeal.

Catchwords:

CONTRACT – breach - solicitor’s retainer – failure to pursue proceedings against third party – loss of commercial opportunity of recovery – proceedings later successful – no recovery due to third party’s bankruptcy – whether solicitor’s breach caused loss of valuable opportunity – whether plaintiff entitled to damages – assessing damages for loss of valuable opportunity

 

CONTRACTS – breach of contract – whether elements of cause of action for breach of contract modified by Civil Liability Act 2002 (NSW) s 5D, s 5E

WORDS AND PHRASES – “harm” – Civil Liability Act 2002 (NSW), s 5

Legislation Cited:

Bankruptcy Act 1966 (Cth), ss 81, 255
Civil Liability Act 2002 (NSW), ss 3A, 5, 5A, 5D, 5E; Pt 1A, Pt 2
Trade Practices Act 1974 (Cth), s 82

Cases Cited:

Allied Maples Group Ltd v Simmons & Simmons (a firm) [1995] 1 WLR 1602
Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1
Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18
Chaplin v Hicks [1911] 2 KB 786
Colonial Mutual Life Assurance Society Ltd v Donnelly (1998) 82 FCR 418; [1998] FCA 364
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54
Gett v Tabet [2009] NSWCA 76; 254 ALR 504
Johnson v Perez (1988) 166 CLR 351; [1988] HCA 64
Kitchen v Royal Air Force Association [1958] 1 WLR 563
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11
La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd (2011) 190 FCR 299; [2011] FCAFC 4
Malec v J C Hutton Pty Ltd (1990) 169 CLR 638; [1998] HCA 20
McRae v Commonwealth Disposals Commission (1951) 84 CLR 377; [1951] HCA 79
Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Ltd [2017] QCA 254
Secretary, Department of Family and Community Services v Smith [2017] NSWCA 206
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4
Tabet v Gett (2010) 240 CLR 537; [2010] HCA 12
Wallace v Kam (2013) 250 CLR 375; [2013] HCA 19

Texts Cited:

Review of the Law of Negligence – Final Report (September 2002)

  J Edelman, “Loss of a Chance” (2013) 21 Torts LJ 1

Category:

Principal judgment

Parties:

Mal Owen Consulting Pty Ltd (Appellant)
Peter Ashcroft (Respondent)

Representation:

Counsel:
J Sleight (Appellant)
I Griscti (Respondent)

  Solicitors:
Neville & Hourn Legal (Appellant)
Gilchrist Connell (Respondent)

File Number(s):

CA 2017/226085

 Decision under appeal 

Court or tribunal:

District Court

Jurisdiction:

Civil

Date of Decision:

29 June 2017

Before:

Taylor DCJ

File Number(s):

DC 2012/352794

headnote

[This headnote is not to be read as part of the judgment]

In July 2006, Mal Owen Consulting Pty Ltd (the appellant) retained Peter Ashcroft (the respondent) to recover moneys owed to it by Peter Bouzanis. Though the respondent commenced proceedings against Bouzanis in the District Court, he failed to pursue those proceedings over the following three years. The respondent accepted that this failure constituted a breach of the duties owed by him as the appellant’s solicitor.

In January 2010, the appellant instructed new solicitors; those solicitors commenced fresh proceedings against Bouzanis in June 2010. Judgment was obtained in the proceedings on 31 August 2012 in the sum of $200,808. An appeal by Bouzanis was dismissed on 20 April 2013. On 26 June 2013, Bouzanis was served with a bankruptcy notice; he entered bankruptcy on 18 December 2013. The appellant has not recovered a dividend from the bankruptcy.

The appellant commenced proceedings against the respondent, seeking damages for his failure to expeditiously pursue the proceedings commenced in 2006. The trial judge (Taylor DCJ) dismissed the claim.

The key issues on appeal were:

(i)   whether the appellant was entitled to recover for loss of a valuable commercial opportunity, even if it could not be established on the balance of probabilities that the opportunity would produce financial gain;

(ii)   whether the trial judge erred in holding that, on the balance of probabilities, the appellant had not established financial loss;

(iii)   the assessment of the value of the lost opportunity.

The Court (Basten JA and Barrett AJA, Macfarlan JA dissenting) allowed the appeal and held:

In relation to (i):

Per Basten JA:

1. A claim for breach of a contract promising a valuable commercial opportunity lies without proof of loss: [12]-[13], [19]. The opportunity to have the 2006 proceedings pursued expeditiously to an outcome by the respondent had real value to the appellant; accordingly, the respondent was entitled to recover damages for breach of contract: [36]-[39].

Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54; Tabet v Gett (2010) 240 CLR 537; [2010] HCA 12; Chaplin v Hicks [1911] 2 KB 786, applied; Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18, distinguished.

2.   The elements of a cause of action for breach of contract were not altered by the Civil Liability Act 2002 (NSW); the definition of “harm” in s 5 includes loss of an opportunity for economic benefit: [31]-[32].

Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420; [2009] HCA 48, applied.

Per Barrett AJA:

3.   The appellant proved, on the balance of probabilities, that it had lost an opportunity of real value; that is, of more than theoretical or negligible value. A final result in the earlier proceedings would probably have been forthcoming by early 2009. Given both the appellant’s success in the proceedings commenced in 2010, and Bouzanis’ incentive as a solicitor to avoid bankruptcy, the opportunity of finalising proceedings in early 2009 carried a real prospect of a beneficial outcome: [99]; [104]-[107].

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

In relation to (ii)

Per Macfarlan JA (dissenting):

4.   Sellars v Adelaide Petroleum NL and Badenach v Calvert are not easily reconciled; to the extent of any inconsistency, this Court must apply the later authority: [61]-[62], [65]. Following Badenach, the appellant could not recover damages unless it proved on the balance of probabilities that it would have been advantaged by an earlier judgment: [69].

5.   The appellant did not establish, on the balance of probabilities, that it had suffered actual financial loss as a result of the respondent’s negligence. The evidence did not establish, on the balance of probabilities, that Bouzanis’ financial position would, at least to some extent, have been better in 2010 than in 2013: [68]-[69], [77], [87] (per Macfarlan JA).

In relation to (iii):

Per Basten JA, Barrett AJA:

6. Calculation of loss was to be undertaken by an assessment of possibilities: [19]; [100]. An appropriate, albeit speculative, assessment would permit recovery of 50% of the debt without interest; that is, $100,000: [42]; [112]-[113].

Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4; Malec v J C Hutton Pty Ltd (1990) 169 CLR 638; [1998] HCA 20, applied.

Judgment

1. BASTEN JA: The appellant, Mal Owen Consulting Pty Ltd retained the respondent solicitor (Peter Ashcroft) to recover an amount owing to the appellant by a third party (Peter Bouzanis), being the balance of the purchase price of a business sold by the appellant to a company associated with Mr Bouzanis. The respondent negligently failed to pursue proceedings against Mr Bouzanis. The appellant brought proceedings against the respondent in the District Court seeking damages for the loss suffered as a result of the respondent’s negligent delay in prosecuting the proceedings.

2. The respondent admitted his breach of duty. However, the appellant was unsuccessful in recovering damages, the trial judge (Taylor SC DCJ) not being satisfied that the appellant had proved, on the balance of probabilities, that it had suffered a loss. [1] The appellant contends that the judge applied the wrong standard and should have assessed damages by reference to the loss of an opportunity to recover damages from Mr Bouzanis in proceedings brought in a timely fashion.

   1. Mal Owen Consulting Pty Limited v Ashcroft [2017] NSWDC 221.

3. In this Court, the appellant alleged error in two respects. First, it submitted that it was sufficient for it, as the plaintiff below, to have established the loss of a commercial opportunity having some value; it did not need to establish financial loss on the balance of probabilities. In the alternative, the appellant submitted that the judge was in error on the facts in failing to accept that the probability of financial loss had been established.

Factual and procedural background

4. The factual background, more fully explained by Macfarlan JA, may be briefly stated for present purposes. In February 2005 the appellant sold a debt collecting business to a company associated with Mr Bouzanis. The price was to be paid by instalments, but only a minor proportion of the purchase price was paid. In July 2006 the appellant instructed the respondent to act for him in relation to recovery of the debt. Initial steps were unsuccessful and, on the appellant’s instructions, the respondent issued proceedings in the District Court to recover the balance of the purchase price from Mr Bouzanis, who had guaranteed the obligations of the corporate purchaser. The respondent commenced proceedings in the District Court, but failed to pursue the proceedings during the next three years.

5. In January 2010 the appellant instructed new solicitors who, after a number of unsuccessful attempts to obtain the file from the respondent, commenced fresh proceedings in June 2010, a little more than three years and six months after the initial proceedings were commenced by the respondent. Judgment was obtained in the fresh proceedings some two years later, on 31 August 2012. An appeal by Mr Bouzanis was dismissed on 20 April 2013. Mr Bouzanis was served with a bankruptcy notice on 26 June 2013 and entered bankruptcy on 18 December 2013. No dividend has been recovered from the bankruptcy.

6. The loss which the appellant seeks to recover is the loss resulting from the failure of the respondent to pursue the 2006 proceedings in a timely fashion. No one can know for sure how and when those proceedings would have been concluded, had they been diligently pursued. Nor can anyone know for sure whether any amount, and if so what amount, would have been recovered had the 2006 proceedings been diligently pursued. What is known is that the proceedings were ultimately successful in obtaining a judgment in favour of the appellant, but the judgment has proved unrecoverable. The appellant claimed it had (and lost, through the inaction of the respondent) an opportunity for a better outcome in the earlier proceedings.

Admission as to liability

7. Although negligence was admitted by the respondent in the District Court, the scope of the admission is important.

8. The case pleaded by the appellant in the District Court relied upon both breach of the contract of retainer of the respondent and a claim in negligence for breach of the respondent’s duty of care. [2] Unsurprisingly, damages were sought as a result of both the breach of the retainer and the duty of care. [3] Curiously, the respondent admitted breach of the retainer and denied the allegation of breach of duty, but, in relation to the claim for damages, admitted breach of duty but otherwise denied the allegation. [4]

   2.    Amended statement of claim filed 29 August 2014, pars 14 and 34.

   3.    Amended statement of claim, par 35.

   4.    Amended defence, pars 12(a), 35 and 36.

9. In this Court, the respondent admitted breach of the duty of care in his written submissions, but argued that the judge had correctly identified the requirement for the appellant to establish the loss of a valuable opportunity. The appellant’s submissions referred to the admitted breach of duty in the discharge of the retainer.

10. In these circumstances, the admission should be understood as applying to both breach of the contractual obligations under the retainer and tortious breach of the general law duty of care. The parties assumed, no doubt correctly, that the standard of conduct required of the respondent was identical on each basis.

Legal principles – identification of harm

11. The appellant’s claim is for damages for a lost commercial opportunity. The term “loss of opportunity” is commonly used in claims for damages where the nature or extent of the harm suffered is uncertain. However, to the extent the term suggests a unitary concept, it can be misleading; it covers a range of circumstances and does not provide a simple concept to resolve the various circumstances in which it is invoked.

(a)   general law principles

12. According to general law principles, there are two critical distinctions to be drawn in formulating the recoverable loss, namely (a) between that which is recoverable for breach of contract and that which is recoverable in tort, and (b) between injury to commercial interests and personal injury. Where there is the loss of an opportunity to obtain a commercial advantage, the harm suffered will be constituted by that loss of opportunity. Further, where the claim is in contract, the actual occurrence of the harm is not an essential element of the cause of action and, unlike a claim in tort, is not part of the damage which must be proved on the balance of probabilities in order to complete the cause of action.

13. These principles are well established in the general law. They are commonly sourced to Chaplin v Hicks. [5] The plaintiff, Ms Chaplin, was selected to take part in a competition for a theatrical engagement. The defendant, an impresario, in breach of his contract with Ms Chaplin failed to give her the opportunity to compete for one of 12 positions, valued at £780. She was allowed to recover the amount of £100 by way of damages for the loss of opportunity. The Hon James Edelman, writing extra-judicially, has said that Chaplin v Hicks “has been cited in hundreds of subsequent cases in both the law of torts and the law of contract.” [6] As explained by Dixon and Fullagar JJ in McRae v Commonwealth Disposals Commission,[7] “[t]he broken promise itself in Chaplin v Hicks was, in effect, ‘to give the plaintiff a chance’”. Similarly, a solicitor who agrees to undertake proceedings on behalf of a client does not promise to achieve an outcome, but merely to take steps to ensure that the client has the best opportunity or chance of obtaining a favourable outcome. Thus, in Commonwealth v Amann Aviation Pty Ltd [8] the plaintiff incurred expenditure on the basis of a repudiated contract where its prospects of making a substantial profit rested on its prospect of securing a renewal of the contract. [9] In discussing the assessment of such a loss of a chance, Deane J stated: [10]

“If, for example, what the plaintiff has lost by reason of the defendant's repudiation or breach of contract is a less than 50 per cent but nonetheless real and valuable chance of winning some contest or prize, of being the successful tenderer for some commercial undertaking or of deriving some other advantage, in circumstances where a court can decide that a proportionate figure precisely or approximately reflects the chance of success but can do no more than speculate about whether, but for the defendant's wrongful act, the plaintiff would have actually won the contest, prize or tender or derived the advantage, it would affront justice for the court to hold that the plaintiff was entitled to no compensation at all for the lost chance of competing or striving or for the wasted expenditure which was incurred in obtaining or performing the contract.”

5. [1911] 2 KB 786.

6.    Hon James Edelman, “Loss of a Chance” (2013) 21 Torts LJ 1 at 2.

7. (1951) 84 CLR 377 at 412; [1951] HCA 79.

8. (1991) 174 CLR 64; [1991] HCA 54.

9.    Amann Aviation at 74.

10.    Amann Aviation at 118.

14. The issue of damages for a lost opportunity was comprehensively reviewed by the High Court in Sellars v Adelaide Petroleum NL. [11] That case did not turn upon a breach of contract, but a claim for damages under s 82 of the Trade Practices Act 1974 (Cth), a cause of action which required the proof of loss or damage. [12] However, the joint reasons commenced with a statement relevant to a breach of contract claim: [13]

“In the realm of contract law, the loss of a chance to win a prize in a competition resulting from breach of a contract to provide the chance is compensable, notwithstanding that, on the balance of probabilities, it is more likely than not that the plaintiff would not win the competition. [14] As the contract contained a promise to provide the chance, the breach of the contract resulted in the loss of the chance and that loss was for relevant purposes an actual loss, in the sense in which Dixon and McTiernan JJ used that expression in Fink v Fink. [15] And, where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat an award of damages. The damages will then be ascertained by reference to the degree of probabilities, or possibilities, inherent in the plaintiff's succeeding had the plaintiff been given the chance which the contract promised.

This approach is not confined to contracts relating to games of chance, sporting contests or other competitions. … And there can be no doubt that a contract to provide a commercial advantage or opportunity, if breached, enables the innocent party to bring an action for damages for the loss of that advantage or opportunity. [16] ”

11. (1994) 179 CLR 332; [1994] HCA 4

12.    Sellars at 351.

13.    Sellars at 349 (Mason CJ, Dawson, Toohey and Gaudron JJ). (One footnote omitted.)

14.    Chaplin v Hicks; McRae at 411-412.

15. (1946) 74 CLR 127 at 143.

16.    Amann Aviation.

15. The joint reasons in Sellars, after referring to statements in Johnson v Perez,[17] Kitchen v Royal Air Force Association,[18] and of Deane J in Amann Aviation, stated: [19]

“Of course, Johnson, Kitchen and the example given by Deane J are cases of breach of contract.”

The statement by Deane J, approved in Sellars as an example of a claim in contract, was to the following effect:

“[A] plaintiff whose action against a third party has become statute-barred by reason of a defendant solicitor's breach of contract may recover damages by reference to the court's assessment of what the chance of success in the action against the third party would have been even though that assessment is 50 per cent or less.”

17. (1988) 166 CLR 351 at 372; [1988] HCA 64.

18. [1958] 1 WLR 563 at 576.

19.    Sellars at 354; Amann at 119.

16. To similar effect, Brennan J stated in Sellars: [20]

“The cases where a plaintiff seeks damages only for breach of a contractual promise to afford the plaintiff an opportunity to acquire a benefit are in a different category from cases under s.82(1) and cases in tort where damage is the gist of the cause of action. In a case like Chaplin v. Hicks, the relevant loss is identified by the contractual promise to afford the plaintiff an opportunity to acquire a benefit or to avoid a detriment. [21] A breach of the promise to afford that opportunity necessarily establishes that the loss flows from the breach. In contract cases, a plaintiff may be entitled to nominal damages for loss of the opportunity promised even though the plaintiff fails to prove what, if any, value performance of the unfulfilled promise would have had.”

20.    Sellars at 359 (some footnotes omitted).

21.    McRae at 412.

17. That reasoning was affirmed in Tabet v Gett,[22] a case approving the refusal of this Court to allow damages for the loss of a chance of a better outcome in relation to a claim for personal injury resulting from medical negligence. In addressing the issue of principle, Gummow ACJ stated:

“[47]   It should be said immediately that the principles dealing with recovery of damages for breach of contract offer no appropriate analogy. The action for breach of contract lies upon the occurrence of breach, but that in negligence lies only if and when damage is sustained. This has significance for the application of limitation statutes. But it has the further and relevant importance identified by Brennan J in Sellars …. This is that in a negligence action, unlike an action in contract, the existence and causation of compensable loss cannot be established by reference to breach of an antecedent promise to afford an opportunity.”

Kiefel J (with whom Hayne and Bell JJ and Crennan J agreed) adopted a similar view:

“[123]   It was recognised in Sellars v Adelaide Petroleum NL that a loss of the opportunity to obtain a commercial advantage or benefit is loss or damage for the purposes of s 82(1) of the Trade Practices Act 1974 (Cth), where the cause of action arose under s 52(1) of that Act. Previous decisions allowing for recovery had been based in contract, where the breach of the promise to provide the chance itself gave rise to the loss of that chance. [23] But as Brennan J said, in cases under s 82(1), ‘as in cases of tort where damage is the gist of the action, a lost opportunity may or may not constitute compensable loss or damage’ and it must be proved in some other way. [24]

[124]   What cases in contract, such as The Commonwealth v Amann Aviation Pty Ltd and Sellars v Adelaide Petroleum NL, have in common is that the commercial interest lost may readily be seen to be of value itself. [25] The same cannot be said of a chance of a better medical outcome or a person's interest in it. Lord Hoffmann observed in Gregg v Scott that most cases where there has been recovery for loss of a chance have involved financial loss, where the chance itself can be regarded as an item of property. [26] And in Sellars v Adelaide Petroleum NL Brennan J observed that, ‘[a]s a matter of common experience, opportunities to acquire commercial benefits are frequently valuable in themselves’. So long as an opportunity provides a substantial and not merely a speculative prospect of acquiring a benefit, it can be regarded as of value and therefore loss or damage. [27] ” (One footnote added; one footnote omitted.)

22. (2010) 240 CLR 537; [2010] HCA 12.

23.    Chaplin v Hicks; Fink v Fink.

24.    Sellars at 359.

25. The reference to Sellars as a case in contract may be understood as a reference to the passage set out at [15] above. Alternatively, the comma should come after the reference to Amann and not after Sellars.

26. [2005] 2 AC 176 at 197 [83].

27.    Sellars at 364.

18. There is nothing in Badenach v Calvert,[28] on which the trial judge placed significance, inconsistent with this line of authority. Badenach involved a claim in negligence brought by the beneficiary under a will whose expectation had been significantly reduced by a family provision claim by the daughter of the testator by an earlier marriage, for whom no allowance had been made in the will. The beneficiary sued the testator’s solicitor. The claim was in negligence, not contract. Accordingly, as in Tabet, loss was an essential element of the cause of action. There was no reference in Badenach to claims for breach of a contract to provide a commercial opportunity.

    28. (2016) 257 CLR 440; [2016] HCA 18.

19. Once it is accepted that a claim lies for breach of a contract promising a commercial opportunity, the calculation of loss must be undertaken by an assessment of possibilities, in the manner recognised in Malec v J C Hutton Pty Ltd. [29] That step was not taken in the present case.

    29. (1990) 169 CLR 638; [1990] HCA 20.

20. That being the position under the general law, it is necessary to consider whether that position has been modified by statute, and, in particular, by the Civil Liability Act 2002 (NSW).

(b)   Civil Liability Act, s 5D

21. Part 1A of the Civil Liability Act is expressed to apply “to any claim for damages for harm resulting from negligence, regardless of whether the claim is brought in tort, in contract, under statute or otherwise.”[30] The term “negligence” is defined to mean “failure to exercise reasonable care and skill.”[31]

    30. Civil Liability Act, s 5A(1).

    31. Definition for the purposes of Pt 1A, s 5, "negligence".

22. Section 5D(1)(a) identifies as an element of a determination that negligence “caused particular harm” a finding that the negligence “was a necessary condition of the occurrence of the harm”. Section 5D(2) allows that “[i]n determining in an exceptional case, in accordance with established principles, whether negligence that cannot be established as a necessary condition of the occurrence of harm should be accepted as establishing factual causation, the Court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.”

23. Section 5E provides:

5E   Onus of proof

In proceedings relating to liability for negligence, the plaintiff always bears the onus of proving, on the balance of probabilities, any fact relevant to the issue of causation.

24. There is a question, not addressed by the parties, as to whether ss 5D and 5E were intended to vary the general law principles set out above.

25. There is no doubt that the Civil Liability Act was intended to vary general law principles; the question is whether by its application to claims in contract as well as in tort, it was intended to change underlying principles of contract law.

26. In order to address that issue, it is necessary to note a further definition in Pt 1A of the Civil Liability Act:

5   Definitions

In this Part:

harm means harm of any kind, including the following:

(a)   personal injury or death,

(b)   damage to property,

(c)   economic loss.

27. The Civil Liability Act owed its genesis to a report to the Commonwealth Government by a committee established to review the law of negligence in Australia. [32] The critical recommendation in the report (recommendation 2) stated that the proposed Act should be expressed to apply “to any claim for damages for personal injury or death resulting from negligence regardless of whether the claim is brought in tort, contract, under a statute or any other cause of action.” It is apparent that this was the basis for s 5A(1). However, the drafter abandoned the term “damages for personal injury or death”, replacing it with the phrase “damages for harm” and including a broad definition of harm. The recommendation reflected the limitation in the panel’s terms of reference which referred to the award of “damages for personal injury” and required the panel to examine “a method for the reform of the common law with the objective of limiting liability and quantum of damages arising from personal injury and death”. [33] The report expressly noted that, in conformity with its terms of reference its focus was on “liability for negligently-caused personal injury and death”. [34] The same passage continued:

“We have not considered the law governing liability for negligently-caused property damage and economic loss (although some of our broader proposals and recommendations have implications beyond personal injury law).”

32.    Law of Negligence Review Panel, Review of the Law of Negligence: Final Report (September 2002), Canberra. The Panel was chaired by the Hon David Andrew Ipp.

33.    Report, par 1.3.

34.    Report, par 1.14.

28. In Gettv Tabet,[35] this Court considered whether the definition of “harm” in the Civil Liability Act could properly encompass a “loss of an opportunity of a better outcome”. That was in the context of medical negligence, with respect to which the underlying assumption was that such an approach would expand the general law concept of harm. [36] That was, in one sense, the reverse of the present issue, which is whether the combined effect of ss 5, 5D and 5E limit the operation of the general law with respect to claims in contract for damages involving economic loss.

    35. [2009] NSWCA 76; 254 ALR 504.

    36.    Gett at [380]-[381].

29. In answering this question, reference should be made to s 3A of the Civil Liability Act, which provides:

3A   Provisions relating to operation of Act

(1)   A provision of this Act that gives protection from civil liability does not limit the protection from liability given by another provision of this Act or by another Act or law.

(2)   This Act (except Part 2) does not prevent the parties to a contract from making express provision for their rights, obligations and liabilities under the contract with respect to any matter to which this Act applies and does not limit or otherwise affect the operation of any such express provision.

(3)   Subsection (2) extends to any provision of this Act even if the provision applies to liability in contract.

30. As the present issue is not concerned with Pt 2 of the Act (which deals with personal injury damages) the parties to a contract would be entitled to make express provision “for their rights, obligations and liabilities under the contract”, inconsistently with the effect of Pt 1A. However, it was not suggested that they had done so in the present case; the question was rather whether the general law principles governing liability for breach of contract applied despite the terms of the provisions noted above.

31. There are three reasons for rejecting the view that the Civil Liability Act has overruled the general law principle in relation to loss claimable for breach of contract. First, as explained in Adeels Palace Pty Ltd v Moubarak,[37] the Civil Liability Act does not affect the law with respect to breach of duty in tort; nor does it affect the elements of a cause of action in contract. Accordingly, the provisions dealing with causation must be read as applying to the general law elements of the cause of action, not as imposing new elements.

    37. (2009) 239 CLR 420; [2009] HCA 48 at [13]; see also the exercise undertaken at [23]-[26].

32. Secondly, the definition of “harm” as meaning “harm of any kind” is expansive; the three paragraphs which follow are illustrative rather than exhaustive. Thirdly, while it may be awkward to read the definition of harm, incorporating a loss of opportunity, into the substantive provisions, the insertion of the definition into the substantive provisions is semantically awkward however one defines “harm”. [38] Inserting the definition of harm into s 5B(1), so that it refers to “a risk of loss of an opportunity for an economic benefit”, rather than “a risk of economic loss”, is not sufficiently awkward to demonstrate inconsistency with the statutory scheme.

    38. The exercise was approved, somewhat dogmatically, by McHugh J in Kelly v The Queen (2004) 218 CLR 216; [2004] HCA 12 at [103].

(c)   assessment of loss

33. Once a cause of action for breach of contract has been established on the balance of probabilities, the assessment of the loss suffered by the plaintiff is to be undertaken in accordance with the principles explained in Malec v J C Hutton Pty Ltd. [39] Thus the plurality stated in Sellars: [40]

“[W]e consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s. 52(1), should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognized in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind.”

39. (1990) 169 CLR 638; [1990] HCA 20.

40.    Sellars at 355.

Application of principles

34. The trial judge referred to the respondent’s admission of breach of duty but accepted that the appellant could only succeed if it showed that it had lost a “valuable opportunity” by reason of the delay occasioned by the respondent’s conduct, relying on a passage in Badenach v Calvert which referred to Sellars v Adelaide Petroleum. [41] Dealing with the concept of causation of loss in tort,[42] the joint reasons in Badenach required that the claimant prove on the balance of probabilities that there was “a substantial prospect of a beneficial outcome”. [43] In the second paragraph relied upon by the trial judge, the joint reasons in Badenach stated:

“[41]   The onus of proving causation of loss is not discharged by a finding that there was more than a negligible chance that the outcome would be favourable, or even by a finding that there was a substantial chance of such an outcome. The onus is only discharged where a plaintiff can prove that it was more probable than not that they would have received a valuable opportunity. To the extent that the majority in Allied Maples Group Ltd v Simmons & Simmons (a Firm) [44] holds that proof of a substantial chance of a beneficial outcome is sufficient on the issue of causation of loss, as distinct from the assessment of damages, it is not consistent with authority in Australia and is contrary to the requirements of s 13(1)(a) of the Civil Liability Act."[45]

41.    Badenach at [40]-[41]; Sellars at 355, 367-368.

42. Badenach at [39].

43. Badenach at [40].

44. [1995] 1 WLR 1602; [1995] 4 All ER 907.

45. The equivalent provision in the NSW Act being s 5D.

35. For the reasons noted above, a different approach to causation arises in a claim for breach of contract. Further, it is apparent that the trial judge adopted the balance of probabilities test in determining hypothetical considerations, stating:

“[33]   Accordingly, in my view, the proper inference is that the proceedings would have continued in the same manner as they ultimately did (although three and a half years earlier) if Mr Ashcroft had not breached his duty. For these reasons, I conclude, on the balance of probabilities, that had Mr Ashcroft not been negligent, the judgment would have been obtained in early 2009, that the appeal by Mr Bouzanis would have been determined in late 2009, and that Mr Bouzanis would have been made bankrupt in about June 2010.”

36. The respondent’s breach of duty only arose after litigation had been advised, the advice accepted as the appropriate course by the appellant and proceedings commenced. Further, and by way of contrast with the cases where claims have become statute-barred as a result of the solicitor’s negligence, proceedings were later taken and were successful. The various elements required to establish a breach of the retainer, causing the loss of an opportunity to recover damages, were therefore satisfied.

37. On the basis that the appellant was entitled to make a claim based upon the loss of a valuable opportunity, the critical question is whether the lost opportunity had a real value to it, in the Chaplin v Hicks sense, as applied in claims against solicitors based on breach of contract. It is important to identify with precision the lost opportunity. It was not merely the opportunity to bring proceedings against Mr Bouzanis, but to have the proceedings in fact commenced in November 2006 pursued expeditiously to an outcome.

38. In circumstances where the 2010 proceedings were ultimately determined in favour of the appellant, there is no doubt that the proceedings themselves were potentially valuable to the appellant. The question is whether they would have been more valuable in 2006 when in fact they were litigated some three years later. It is now known that in financial terms the proceedings were worthless in 2013; however, it does not follow that they were worthless in 2006. Nor is the question answered by comparing the financial circumstances (at best only partly revealed) of Mr Bouzanis at the date of his bankruptcy and at the date at which the proceedings, expeditiously pursued, might have been resolved.

39. At no stage was success in the proceedings guaranteed, nor was recovery necessarily doomed. If, as appeared to be the case in 2006, Mr Bouzanis was intent on continuing to work as a solicitor, it would have been reasonable to expect that he would have taken some steps to avoid bankruptcy, with the result that the appellant would have had a reasonable expectation of some, if not complete, recovery. It is significant that the respondent did not advise the appellant that proceedings should not be pursued because there was no realistic expectation of recovery. Indeed, the fact that the appellant continued to pursue its claim against Mr Bouzanis some three years after first commencing proceedings is an indication that it thought the claim had value.

40. A finding that recovery was more probable than not in the event that the first claim had been successfully prosecuted to judgment is not required in order to conclude that expeditious pursuit of the claim had value to the appellant. Rather, an assessment is to be made of the possibility of recovery of some damages. That is the distinction drawn in the passage set out above from Sellars, which is engaged in the present circumstances.

Assessment of damages

41. On the basis that the appellant was entitled to claim for the lost opportunity of the expeditious resolution of his claim, it becomes necessary to undertake an assessment based on the hypothesis that the claim would have been resolved favourably to the appellant, either by settlement or judgment, within a reasonable period from the date on which proceedings were commenced. For that purpose the time taken to prosecute and the result achieved in the later proceedings may give guidance, but is not the sole indicator of the likely outcome. There was always a possibility that the ultimately successful claim would fail; there was also the possibility, on the other side of the balance, that the proceedings, if pursued with reasonable expedition, might have been settled or might have reached an earlier conclusion.

42. There has been no suggestion that the appellant was acting irrationally in pursuing the claim; nor was Mr Bouzanis acting irrationally in resisting it on the basis, as he saw it, that the contract had been induced by misrepresentations as to the value of the business being purchased. There was always a possibility that conflicting positions might have resulted in a compromise. Further, if in fact Mr Bouzanis had been on the verge of insolvency at any time between 2006 and 2009, he might have made that known to the appellant, as a basis for compromising its claim, before extensive legal costs were incurred. While it was possible that Mr Bouzanis was at that stage on the verge of insolvency, he was able to continue in business until after judgment was obtained against him, defending the proceedings with legal representation, until 2013.

43. On the other hand, there are strong reasons for thinking that the appellant would not, even had the proceedings been pursued expeditiously, have recovered the full amount of its debt. Given these conflicting considerations, in my view an appropriate, albeit speculative, assessment would permit recovery of 50% of the debt, without costs, on the basis that such an outcome might have been achieved by about 1 January 2008.

Conclusions

44. It follows that the appeal should be allowed. There should be judgment in favour of the appellant, which may be reduced to a fixed sum.

45. In the finalised District Court proceedings against Mr Bouzanis and the purchaser of the business, NCS Corporate Services Pty Ltd, the appellant obtained a judgment on 31 August 2012 in an amount of $200,808. Given the uncertain nature of the assessment of recovery at an earlier point in time, interest should be disregarded and judgment given, to date from today, in an amount of $100,000.

44. Accordingly the appropriate orders are:

1. Allow the appeal and set aside the orders made in the District Court on 29 June 2017.

2. Order that the respondent pay the appellant an amount of $100,000.

3. Order that the respondent pay the appellant’s costs of the proceedings in the District Court and of the appeal.

47. MACFARLAN JA: On 14 February 2005 the appellant, Mal Owen Consulting Pty Ltd, entered into a contract to sell a business known as National Commercial Services for the price of $185,000, payable by instalments. The purchaser’s obligations were guaranteed by Mr Peter Bouzanis. The purchaser defaulted after paying only $50,000 of the purchase price, leaving $135,000 which the appellant claimed from Mr Bouzanis. Due to the admitted negligence of the appellant’s solicitor, Mr Peter Ashcroft (who is the respondent in this Court) the commencement of proceedings by the appellant against Mr Bouzanis was delayed for 3½ years. Although the appellant eventually obtained judgment against Mr Bouzanis, the judgment was not, to any extent, able to be satisfied, due to Mr Bouzanis’ bankruptcy.

48. In the action out of which the present appeal arises, the appellant sued Mr Ashcroft in the District Court for damages for professional negligence. As Mr Ashcroft admitted that he was negligent, the hearing before Taylor DCJ proceeded on issues of causation of loss and assessment of damages only. By judgment of 29 June 2017 his Honour held that the appellant had not established that it would have been able to enforce a judgment against Mr Bouzanis if Mr Ashcroft had acted in a timely fashion and the judgment had therefore been obtained 3½ years earlier than it was. His Honour thus held that the appellant had not established that any loss flowed from Mr Ashcroft’s negligence and entered judgment in his favour.

49. For the reasons given below, I do not consider that the appellant established that his Honour’s decision was erroneous. The appeal should therefore be dismissed with costs.

THE JUDGMENT AT FIRST INSTANCE

The sequence of events

50. The primary judge made the following presently relevant factual findings.

51. Following two unanswered letters to the purchaser concerning outstanding instalments of the purchase price, on 30 October 2006 Mr Ashcroft served a statutory demand on the purchaser and sent a copy of it and a draft Statement of Claim to Mr Bouzanis. On 1 November 2006 Mr Bouzanis responded by alleging that the purchaser had a defence to the claim, and also a substantial cross-claim available to it for damages for breach of contract and misleading and deceptive conduct.

52. On 6 November 2006 Mr Ashcroft filed in the District Court a Statement of Claim commencing an action by the appellant against the purchaser and Mr Bouzanis. On 14 November 2006 the parties to that action unsuccessfully attempted to settle it. In the settlement discussions, Mr Bouzanis repeated his allegation that the appellant had engaged in misleading and deceptive conduct. Mr Owen, on behalf of the appellant, subsequently gave Mr Ashcroft instructions to proceed with the action. After an exchange of correspondence in the period to 4 December 2006, several years passed without Mr Ashcroft taking any steps to progress the action. (The action was presumably dismissed for want of prosecution.)

53. In January 2010 the appellant instructed a new solicitor, resulting in a fresh action being commenced and judgment being obtained against Mr Bouzanis on 31 August 2012. By his judgment of that date Bozic DCJ rejected Mr Bouzanis’ defence and cross-claim in which he alleged, inter alia, that the present appellant had engaged in misleading and deceptive conduct in relation to the business sale. An appeal by Mr Bouzanis was dismissed on 20 April 2013 and Mr Bouzanis was bankrupted on 18 December 2013.

54. After consideration of arguments to the contrary, the primary judge found that “the proceedings would have continued in the same manner as they ultimately did (although three and a half years earlier) if Mr Ashcroft had not breached his duty” (Judgment [33]). As a result his Honour concluded that “on the balance of probabilities, … had Mr Ashcroft not been negligent, the judgment [against Mr Bouzanis] would have been obtained in early 2009, … the appeal by Mr Bouzanis would have been determined in late 2009, and … Mr Bouzanis would have been made a bankrupt in about June 2010” (ibid). The proceedings at first instance included a complaint that the claim against the purchaser was not pursued in a timely fashion but that is not in issue on appeal.

Whether an earlier judgment could have been enforced

55. The primary judge addressed three bases upon which the appellant contended that it would have been able to obtain at least some significant recovery if timely judgments had been obtained against NCS and Mr Bouzanis. His Honour rejected the appellant’s contention in relation to each of them. On appeal, the appellant only challenges his Honour’s decision in relation to the third basis, namely, that Mr Bouzanis’ financial position was significantly better at the time that enforcement of an earlier judgment would have been attempted (in 2010) than it was in 2013.

56. His Honour’s findings in respect of this topic were as follows:

“56   The third opportunity that was allegedly lost concerned the prospect of recovery against Mr Bouzanis personally. Mr Bouzanis’ earnings were, in the years up to about 2010/11, less than $100,000 a year. At least a year before he became bankrupt, he ceased operating his business, took employment as an employed solicitor and his earnings in the 12 months before he was bankrupt were approximately $160,000, with a similar expectation for the following year. Those improved earnings did not operate to preclude his bankruptcy. In these circumstances, it is impossible to conclude that on his lower earnings in 2010, Mr Bouzanis’ financial position was any better.

57   MO Consulting relied on lists of Mr Bouzanis’ creditors in the Statement of Affairs. The greater proportion of the debts there listed appear to be relatively recent. That does not establish that he had no earlier debts. In particular, a question must arise as to whether any of the debts in 2013 or thereabouts arose because of the discharging of an earlier debt.

58   Mr Bouzanis’ debt to MO Consulting is dated 2013 in the Statement of Affairs, but of course it really dated from about 2004 or 2005: 2013 represented the year when his final appeal was dismissed. Another listed debt was to Mr Geroulis and was dated 2006, although that was the refinancing of an earlier debt Mr Bouzanis owed to his mother. There are other substantial debts listed in respect of the years 2009, 2010 and 2011, and the listed credit card debts might be inferred to have arisen over time. I do not regard the Statement of Affairs in 2013 as evidence that Mr Bouzanis was in a better position in 2010 than in 2013.

59   MO Consulting also referred to other evidence of Mr Bouzanis in the examination hearing transcript. Mr Bouzanis said that he did not pay the debt because he did not believe anything was owed, but that if he believed otherwise, he could have paid the debt. Yet his debts, indicated by the settlement sheet for the Shiprock Rd property, at least raise a doubt about Mr Bouzanis’ ability to pay the debt in 2006 were he so inclined. In any case, whatever was Mr Bouzanis’ ability to pay the debt in 2006, it gives no real guide to his ability to pay the debt in 2010.”

57. His Honour concluded that in these circumstances Mr Ashcroft’s negligence did not cause loss to the appellant.

THE GROUNDS OF APPEAL

58. By its first ground of appeal, the appellant contended that there was a real possibility that Mr Bouzanis’ financial position was better in 2010 than it was in 2013, giving rise to a significant chance that some satisfaction of an earlier judgment could have been obtained. It referred first to his earnings position and secondly to his assets and liabilities.

59. By its second ground of appeal, the appellant contended that for four additional reasons there was a significant prospect that the appellant would have been advantaged by having an earlier judgment. These were, first, that Mr Bouzanis would have been more likely to voluntarily satisfy an earlier judgment, secondly, that a settlement of the proceedings would have been more likely, thirdly, that Mr Bouzanis would have been less likely to prosecute an appeal and obtain a stay and, fourthly, that if Mr Bouzanis had obtained a stay, it would likely have been conditional, for example upon payment of the judgment amount.

DETERMINATION OF THE APPEAL

Relevant legal principles and their application

60. According to the High Court’s decision in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355; [1994] HCA 4, in a claim for damages for deprivation of a commercial opportunity, the plaintiff must first prove, on the balance of probabilities, that the defendant’s breach of duty has caused it some loss. The plaintiff can show that “some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value) …” (ibid). The value of the lost opportunity is then determined “by reference to the degree of probabilities or possibilities (ibid)”. Applying these principles, the High Court found that, but for the contravening conduct in that case, the plaintiff would have entered into a potentially valuable agreement with a third party and that “[a]lthough on the probabilities, [the agreement] would not have been completed, there was a significant chance” that that would have occurred (at 356). The award made in the court below of 40% of the value of the agreement to the plaintiff if it had been completed was therefore in those circumstances upheld.

61. In Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18 a beneficiary named in a will sued the solicitor who prepared the will for damages for negligence, alleging that the solicitor owed a duty to the intended beneficiary to give his testator client advice which would have been of benefit to the beneficiary. The High Court found that such a duty was not owed. In addition, it concluded that the beneficiary would not in any event have been entitled to damages because the Court was unable to conclude, on the balance of probabilities, what course of action the client would have taken if given the postulated advice.

62. Their Honours (other than Gageler J, who did not consider this issue) stated that they followed Sellars v Adelaide Petroleum but their decision on this point is difficult to reconcile with that case. It would seem to have been sufficient in accordance with Sellars for the plaintiff to have established on the balance of probabilities that there was a substantial prospect that the solicitor’s client would have acted on the advice the solicitor allegedly should have given. Although the plurality suggested, in the first and third sentences of paragraph [40] of the judgment, that it would have been sufficient for the plaintiff to prove that there was “a substantial prospect that the client would have chosen” to act on the putative advice, their Honours’ conclusion was that the plaintiff’s case failed because it could not be concluded “on the balance of probabilities, what course of action the client would … have taken” (at [34]).

63. Consistent with this approach was the plurality’s rejection (in [41]) of the decision of the majority in Allied Maples Group Ltd v Simmons & Simmons (a firm) [1995] 1 WLR 1602 to the extent that it held “that proof of a substantial chance of a beneficial outcome is sufficient on the issue of causation of loss, as distinct from the assessment of damages”.

64. In Allied Maples Group, Stuart-Smith LJ (who with Hobhouse LJ comprised the majority) said at 1611:

“In many cases the plaintiff’s loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff, as in this case, or independently of it. In such a case, does the plaintiff have to prove on balance of probability, as Mr Jackson submits, that the third party would have acted so as to confer the benefit or avoid the risk to the plaintiff, or can the plaintiff succeed provided he shows that he had a substantial chance rather than a speculative one, the evaluation of the substantial chance being a question of quantification of damages?

Although there is not a great deal of authority, and none in the Court of Appeal, relating to solicitors failing to give advice which is directly in point, I have no doubt that Mr Jackson’s submission is wrong and the second alternative is correct.”

65. In Badenach, Gordon J adopted the same approach as the plurality. Her Honour concluded at [98] that the plaintiff “could not prove, on the balance of probabilities, what the testator would have done had there been a breach of duty (assuming such a duty existed). In particular [the plaintiff] could not prove, on the balance of probabilities, that the testator would have taken steps necessary for him to have acquired a better outcome than in fact happened …” (emphasis added). As with the plurality, her Honour rejected the views expressed by the majority in Allied Maples (at [99]). In her Honour’s view, it was not therefore sufficient to prove that there was a substantial chance, rather than a probability, that the testator would have acted on his solicitor’s advice.

66. As Badenach constitutes the High Court’s most recent identification of the proper approach to the question arising in the present case, this Court needs to apply it. The implications for the present case are in my view as follows.

67. The question of how the appellant would have acted in the hypothetical circumstance that Mr Ashcroft had not been negligent is to be determined on the balance of probabilities. In accordance with the primary judge’s findings, the appellant would have pursued the earlier action against Mr Bouzanis and sought to obtain a judgment as soon as it could. These findings are not challenged on appeal.

68. The next question is what would have occurred in relation to the third party, Mr Bouzanis. Whether the earlier proceedings would have been resolved quicker than the later proceedings were (because perhaps Mr Bouzanis may have been less intransigent) is to be determined on the balance of probabilities (see Ground 2 addressed below), as is whether the earlier judgment, unlike the later, could have been enforced to any extent (see Ground 1 addressed below). It would not have been sufficient for the appellant to prove, for example, that, although it could not be concluded on the balance of probabilities that Mr Bouzanis’ financial position would have been better at the earlier point of time (and that the judgment could therefore be enforced), there was a significant chance, say a 25% prospect, that that would have been so.

69. The primary judge’s ultimate findings were that it was “impossible to conclude that on his lower earnings in 2010, Mr Bouzanis’ financial position was any better [than when judgment was later obtained]” and that evidence concerning Mr Bouzanis’ debts did not indicate that he was “in a better position in 2010 than in 2013” ([56] and [58]). Likewise his Honour found that, on the balance of probabilities and in the absence of Mr Ashcroft’s negligence, the earlier proceedings would have proceeded in the same fashion as the later ones did (Judgment [33]).

70. The approach evident in these findings is in my view consistent with Badenach. His Honour appears to have asked, correctly, whether the appellant would (on the balance of probabilities) have been advantaged by an earlier judgment. He did not ask whether the appellant had shown that there was a substantial, and not a merely speculative, prospect that the appellant would have been better off with an earlier judgment.

71. I add that in oral argument the appellant contended that a judgment is an intrinsically valuable thing and that therefore the appellant necessarily suffered relevant loss by being deprived of the postulated earlier judgment, irrespective of whether it was more or less likely that it would have been able to be enforced.

72. This contention should however be rejected as it fails to acknowledge that the identification of a loss suffered by a plaintiff as a result of negligence involves a comparison between the plaintiff’s actual position and what it would have been if there had been no negligence. Thus, in the present appeal, the value of an earlier hypothetical judgment needs to be compared with the value of the judgment the appellant in fact obtained.

Ground 2: whether there is a substantial prospect that the proceedings would have progressed differently

73. It is convenient to address the second ground of appeal before the first.

74. In its written submissions, the appellant submitted that, in the absence of Mr Ashcroft’s negligence, the same events would not necessarily have occurred in the same manner in which they did later ([14]). This submission misstates the relevant test, which is whether the appellant proved on the balance of probabilities that, in the absence of negligence, the relevant events would not have occurred earlier in the same way that they did later and that the appellant would have been advantaged by that.

75. The appellant also submitted that if the earlier proceedings had been pursued in a timely fashion Mr Bouzanis “may” not have attempted to delay them, by lodging an appeal and seeking a stay, as he allegedly did later ([15]). As the use of the word “may” appears to recognise, this is merely speculation.

76. A third example in the appellant’s written submissions of its erroneous identification of the question to be answered on the issue of causation of loss is its submission that an “assessment ought to have been made as to the possibility … that the hypothetical early judgment would not have been appealed and such first instance judgment would have been enforced” ([18], emphasis added). Instead, the issue to be addressed is whether the appellant proved, on the balance of probabilities, that the appellant’s position would have been better at the earlier point in time.

77. The appellant was not able to point to any material that threw doubt upon the primary judge’s finding that the earlier proceeding would have proceeded in the same manner as the later proceeding did. Support for his Honour’s finding is to be found in the fact that Mr Bouzanis was adamant from the beginning that the purchaser, and therefore he as guarantor, should not have to pay the appellant. Referring to the settlement meeting in November 2006, he made it clear in his bankruptcy examination that at that time (as later) he had no intention of paying the appellant:

“Q.   So [you didn’t pay the appellant] not because you couldn’t pay him but you didn’t want to pay him?

A.   Well, in my opinion I had a valid cross claim?–Right. So why would I pay him?

78. This disposes of the first three arguments referred to in Ground 2 of the appeal (see [59] above). As to the fourth, there was simply no evidence, or indeed argument going beyond mere assertion, that the terms of a stay of an earlier judgment would, or even may, have been different to what they in fact were in respect of the later judgment.

Ground 1: whether Mr Bouzanis’ financial position would have been better in 2010

Mr Bouzanis’ earnings

79. As to Mr Bouzanis’ earnings, the appellant referred to the fact that Mr Bouzanis practised as a solicitor throughout the relevant period, but the appellant did not suggest that the net profits from this practice increased over the period 2000 to 2012 when Mr Bouzanis practised on his own account and accepted that when he became an employed solicitor in 2013 his earnings increased significantly.

80. In its written submissions, the appellant suggested that Mr Bouzanis had another source of income (from a family trust) that the primary judge did not take into account but accepted during oral argument that the business carried on by that trust was in fact the solicitor’s business of which the primary judge had already taken account. The appellant then fell back on a submission that some of the expenses shown in the trust’s accounts were “expenses that you derive a benefit from, but are frequently set out as deductions”. The appellant did not however establish that these “expenses” comprised payments to Mr Bouzanis that were available to him to use in satisfaction of the judgment debt or, in particular, that account of them established that there was a substantial prospect that his financial position was materially better in 2010 than it was 2013.

Mr Bouzanis’ debts

81. The appellant further submitted that the evidence demonstrated that Mr Bouzanis had substantially fewer debts in 2010 than in 2013, and was therefore more likely to have been able to pay at least some of the judgment debt if the judgment had been obtained in 2010. It relied in this respect on a Statement of Affairs provided by Mr Bouzanis in or after 2013 for the purposes of his bankruptcy. The Statement of Affairs recorded that most of his then outstanding debts were incurred in 2012 or 2013. The primary judge concluded however, and in my view for good reason, that the Statement of Affairs could not be treated as an accurate representation of when the debts arose (Judgment [57]-[58] quoted in [56] above).

82. The following matters support that conclusion:

1. Importantly, the debt to the appellant is shown as having been incurred in 2013 but in reality it was incurred in 2005;

2. A debt to Mr Geroulis is shown as having been incurred in 2006 but it was a refinancing in that year of an earlier debt;

3. Debts to BMW Financial Services are shown as having been incurred in 2012 and 2013 but, as they were for asset finance, the probability is that they were incurred over a period of time;

4. Four separate credit card debts are shown as having been incurred in 2013 but the probability is that they were incurred over a period of time;

5. Debts to the Australian Taxation Office are shown as having been incurred in 2013 but, as Mr Bouzanis was an employed solicitor in that year and presumably had tax deducted from his salary, the probability is that they were incurred over a period of time; and,

6. The evidence revealed that, over time, Mr Bouzanis had refinanced a number of debts. As the primary judge indicated, this raised doubts as to whether some of the remaining debts said to have been incurred in 2013 simply replaced earlier debts (Judgment [57]).

83. In addition, debts due to a number of different barristers are shown as having been incurred in 2012 or 2013 but they related to the appellant’s proceedings against Mr Bouzanis and would likely have been incurred earlier if the proceedings had progressed earlier. Their inclusion in the Statement of Affairs does not therefore support a conclusion that Mr Bouzanis’ debt position may have been better in 2010 than in 2013.

84. Furthermore, there was no reliable evidence as to Mr Bouzanis’ debt position in 2010. The appellant relied on the transcript of the examination of Mr Bouzanis for the purposes of his 2013 bankruptcy. In that, Mr Bouzanis said that, apart from $40,000 that he owed his mother and “day-to-day accounts from the office”, he had no debts in 2006 and could have paid the appellant its debt if he had wanted to.

85. The transcript was tendered before the primary judge without objection from Mr Ashcroft, apparently on the assumption that s 255(2) of the Bankruptcy Act 1966 (Cth) rendered the transcript admissible in proceedings such as those before his Honour. The decision of the Full Federal Court in Colonial Mutual Life Assurance Society Ltd v Donnelly (1998) 82 FCR 418; [1998] FCA 364 however demonstrates that that assumption was erroneous. When read together with s 81(17) of the Bankruptcy Act, as it should be, “s 255(2) must be qualified so as to make a s 81 transcript admissible (subject to the power of the court to make an order to the contrary) only in proceedings under the Bankruptcy Act to which the examinee is a party” (at 434).

86. The transcript was tendered, and seemingly accepted by the primary judge, as effectively constituting the evidence-in-chief of Mr Bouzanis, with the appellant offering to make Mr Bouzanis available for cross-examination if Mr Ashcroft required him to attend. Mr Ashcroft did not avail himself of this opportunity. As a result, what Mr Bouzanis said in the transcript was evidence in the proceedings and was not challenged by way of cross-examination. This did not however have the significance that it might otherwise have had if there had been a finding of dishonesty on the part of Mr Bouzanis (see Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [71]) or if it had not been clear on the pleadings and written submissions that Mr Bouzanis’ debt position at the earlier and later times was in issue (Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1 at 16 and 27). In the circumstances of this case, it was in my view open to the primary judge to give little weight to Mr Bouzanis’ evidence (Colonial Mutual Life v Donnelly at 436; Secretary, Department of Family and Community Services v Smith [2017] NSWCA 206 at [53]) because it simply comprised general assertions, not supported by detailed documentary or other evidence, as to his debt position prior to 2013.

87. His Honour did not however need to approach Mr Bouzanis’ evidence in this way because Mr Bouzanis’ evidence referred to above in [84] was only directed to his financial position in 2006. There was no reason why the primary judge should not, as he did, have treated that evidence as providing no significant assistance in determining whether Mr Bouzanis was able to pay the appellant’s debt in 2010 (Judgment [59]).

88. In its written submissions, the appellant challenges the primary judge’s approach on the basis that there was “no evidence of any debts being incurred between the date of settlement [of the sale of a property in 2006] and the hypothetical date of enforcement [in 2010]”. The onus was however on the appellant to establish on the balance of probabilities that Mr Bouzanis’ position would, at least to some extent, have been better in 2010 than in 2013. His evidence relating to 2006 was insufficient to do this, particularly when the evidence before the primary judge relating to 2013 suggested that substantial debts were likely to have existed prior to that year.

ORDERS

89. For the reasons set out above, the appellant’s challenges to the primary judge’s findings fail. The appellant did not establish on the balance of probabilities that it would have been able to obtain at least some recovery under the earlier judgment that, but for Mr Ashcroft’s negligence, it would have obtained. As a result, its appeal should be dismissed with costs.

90. BARRETT AJA: The circumstances giving rise to this appeal are described in the reasons of the other members of the Court, as are the facts by reference to which the appeal is to be decided.

91. In the proceedings determined by the primary judge, the defendant (now respondent), Mr Ashcroft, admitted breach of a duty owed by him as a solicitor to the appellant (his client). Mr Ashcroft accepted that his duty had required him to prosecute to finality certain proceedings he had commenced on the appellant’s instructions against Mr Bouzanis on 6 November 2006 [46] . It will be convenient to refer to these as “the original proceedings”. Instead of being prosecuted to finality, the original proceedings were left to lapse into abeyance. The issue in dispute before the primary judge was, in his Honour’s words, “what, if any, damages were caused by Mr Ashcroft’s negligence”.

    46.    Although there were two defendants in those proceedings, it is sufficient, for present purposes, to regard them as proceedings against Mr Bouzanis alone.

92. That question arose in circumstances where other solicitors instructed by the appellant had later prosecuted to judgment the causes of action on which the original proceedings were based. Those later proceedings (“the subsequent proceedings”) were commenced on 4 June 2010. [47] Judgment against Mr Bouzanis in the sum of $200,808 was ordered on 31 August 2012, an appeal was dismissed in April 2013 and Mr Bouzanis became bankrupt on 18 December 2013 after the filing of a creditors petition by the appellant on 17 September 2013. [48]

    47.    Again, Mr Bouzanis was one of two defendants and the other defendant may be ignored.

    48.    There was no evidence of any dividend for creditors who proved in the bankruptcy. The trustee in bankruptcy gave evidence by affidavit dated 22 March 2017 that, if no recoveries were made in respect of claims against Mr Bouzanis’ mother and former wife, no dividend would be paid.

93. The primary judge proceeded on the footing that, if the original proceedings had been prosecuted diligently, they would have yielded a result equivalent to that achieved in the subsequent proceedings and according to a like timeframe involving judgment in favour of the appellant in early 2009, dismissal of an appeal in late 2009, bankruptcy of Mr Bouzanis in about June 2010 and failure to recover under the judgment. His Honour’s decision was that, if Mr Ashcroft had not been negligent, had prosecuted the original proceedings with reasonable despatch and had obtained some three and a half years earlier the judgment that was in fact obtained in the subsequent proceedings in August 2013, attempts to enforce the judgment obtained in the earlier proceedings would have yielded results no better than the singular lack of financial return actually achieved through the judgment obtained in the subsequent proceedings.

94. The primary judge dealt with the matter as an action for damages for the tort of negligence. Although a case in contract was pleaded (in addition to a case in negligence), that aspect was not separately considered. No ground of appeal challenges that approach.

95. The appellant’s case at trial concentrated on Mr Ashcroft’s failure to act in a timely way in relation to the original proceedings. Specific shortcomings in that respect were particularised (including failure to advise as to the availability of default judgment). The substance of the pleaded case was that, if Mr Ashcroft had executed instructions given to him in June 2006 with reasonable competence and diligence, he should have achieved judgment for the appellant at a time when either Mr Bouzanis had assets sufficient to satisfy the judgment or there were reasonable prospects of taking steps to reverse transactions entered into by him to defeat creditors. It was in this context that Mr Ashcroft admitted breach of duty.

96. The grounds of appeal challenge two particular findings of the primary judge: first, that the appellant did not lose any valuable opportunity by reason of Mr Ashcroft’s failure to prosecute the original proceedings with reasonable despatch; and, secondly, that it was impossible to conclude that Mr Bouzanis’ financial position was any better in 2010 than in 2013. The correct findings, it is said, are that, if the original proceedings had been prosecuted with due despatch, there would have been a possibility or likelihood of an outcome more favourable than the essential lack of success achieved in the subsequent proceedings.

97. The opportunity of which the appellant was deprived by Mr Ashcroft’s admitted negligence was the opportunity to obtain and enjoy the fruits of due and timely prosecution of the original proceedings. This was not a case in which the lost opportunity might have taken any of several forms. It was a case of a particular and specific opportunity that, in light of the fact that the appellant prosecuted the subsequent proceedings to judgment (and beyond), may be accepted as one that the appellant would have pursued had it been made available. The outcome beneficial to the appellant that might have emerged was a judgment or an agreed payment by way of compromise before judgment.

98. In Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4, Mason CJ, Dawson, Toohey and Gaudron JJ said (at CLR 355):

“[W]e consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s. 52(1), should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognized in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind.

On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable.”

99. The court’s task, in relation to the issue of causation, is thus to assess the prospects of success of the opportunity had it been pursued. Such an assessment depends on proof by a plaintiff according to the balance of probabilities that he or she has sustained some loss or damage because deprived of an opportunity having value beyond merely theoretical or negligible value. As French CJ, Kiefel and Keane JJ pointed out in Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18 at [40], there must be a determination, according to the balance of probabilities, whether there was a substantial prospect of a beneficial outcome; and the plaintiff’s onus in that respect is discharged only by proof that it was more probable than not that an opportunity of value would have been received but for the defendant’s negligence.

100. The process just described goes to the issue of causation. It represents the first of what the joint judgment in Sellars v Adelaide Petroleum NL identifies as two distinct stages relevant to the resolution of a case such as the present. [49] At that first stage, causation must be proved on the balance of probabilities: the question of causation is, after all, “entirely factual, turning on proof of relevant facts and on the balance of probabilities in accordance with s 5E” of the Civil Liability Act 2002 (NSW) [50] . The second stage becomes relevant only if causation is established at the first. The issue at the second stage is the assessment of damages; and the focus then is upon the actual value of the lost opportunity which, to that point, has been appraised only as not merely theoretical or negligible. Value must be ascertained at the second stage by reference to “the degree of probabilities, or possibilities, inherent in the plaintiff’s succeeding had the plaintiff been given the chance” of which the plaintiff has been deprived. These are again words used in the joint judgment in Sellars v Adelaide Petroleum NL.

     49. A recent description of the two stage process of analysis may be found in the judgment of McMurdo JA in Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Ltd [2017] QCA 254 at [13].

     50. Wallace v Kam (2013) 250 CLR 375; [2013] HCA 19 at [14].

101. At each of the two stages, therefore, attention must be given to a question relevant to the value of the lost opportunity. At the first stage concerned with causation, the task is no more than to confirm that the value is not in the realms of the merely theoretical or negligible - in other words, to establish, according to the balance of probabilities, that there is some colour of value to the lost opportunity. It is only if the second stage is reached (after causation is established at the first) that anything approaching particular quantification is required.  An assessment made at the second stage by reference to the degree of probabilities and possibilities of factual hypotheses may require a process of estimation extending even to a degree of guesswork [51] and may lie at any point within a broad range.

     51. See La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd (2011) 190 FCR 299; [2011] FCAFC 4 at [89]-[90], [112]-[113].

102. It is convenient to address at this point the question of the timeframe within which the original proceedings would, on the balance of probabilities, have produced an outcome favourable to the appellant. That the outcome would have been favourable to the appellant is indicated by the substantial money judgment that the appellant obtained (and retained) in the subsequent proceedings based on the same causes of action. The primary judge worked on the basis that the original proceedings commenced in November 2006 would, like the subsequent proceedings, have taken about three and a half years to reach a conclusion, and that the conclusion would have emerged in mid-2010, with judgment as such having been obtained in early 2009. The period thus selected is indicated by the fact that the subsequent proceedings were commenced in June 2010 and that Mr Bouzanis became bankrupt in December 2013 (the first instance judgment was delivered in August 2012).

103. The appellant does not challenge the finding that judgment in the earlier proceedings would have been obtained in early 2009. It says, however, that there are no secure grounds for concluding that other elements of the subsequent proceedings would have been replicated in the original proceedings. That submission should be accepted. In saying this, I am particularly influenced by the evidence about the appeal by Mr Bouzanis that followed the adverse judgment of 31 August 2012 in the subsequent proceedings. The notice of appeal filed on 30 November 2012 alleged error by the trial judge in seven respects. The appeal was dismissed in April 2013 without a hearing on the merits and Mr Bouzanis (the appellant) was ordered to pay the respondents’ costs on an indemnity basis. From this it should be inferred, according to the balance of probabilities, that Mr Bouzanis was eventually unwilling to pursue in any serious fashion the argument that the trial judge had fallen into error in any of the seven ways alleged. That casts doubt on the objective genuineness of the appeal. And, of course, it cannot be assumed that the hypothetical judge trying the hypothetical earlier proceedings would have made the same (or, indeed, any) errors so as to provide even faintly arguable grounds of appeal.

104. The fact that grounds of appeal were seen by Mr Bouzanis as existing in relation to the first instance decision in the subsequent proceedings provides no basis for a finding that grounds of appeal would have been available had the original proceedings been pursued to judgment. The subsequent proceedings established the validity and viability of the causes of action that would have been pursued in the original proceedings. I am therefore of the opinion that the timeframe ascribed to the original proceedings should be that indicated by the period from commencement to judgment in the subsequent proceedings (4 June 2010 to 31 August 2012), that is, a period of a little more than two years. Whether the now established viability of the causes of action would have made compromise before judgment likely is problematic, given Mr Bouzanis’s adamant conviction (referred to at [77] of Macfarlan JA’s reasons and eventually shown to have been misplaced) that he should not have to pay. But the possibility of such compromise must be seen as having always existed in a theoretical sense. For these reasons, I have concluded that early 2009 should be regarded as the time by which a final result of the earlier proceedings would probably have been forthcoming, most likely by judgment but possibly by settlement.

105. Returning to the question of causation and the first stage of the process of assessment indicated by the joint judgment in Sellars v Adelaide Petroleum NL, I am satisfied that the appellant did prove, on the balance of probabilities, that there was a real prospect of a beneficial outcome from the opportunity to pursue the original proceedings; and that, but for Mr Ashcroft’s negligence, the plaintiff would have had an opportunity of more than theoretical or negligible value to obtain resolution of its claim against Mr Bouzanis at an earlier time than in fact occurred by means of the subsequent proceedings. The opportunity the appellant was denied was the opportunity to bring the original proceedings to a favourable conclusion according to the timeframe I have mentioned.

99. Two particular circumstances point to a conclusion that that opportunity should have been viewed as having value beyond the merely theoretical or negligible. The first has already been mentioned: the outcome of the subsequent proceedings established the validity and viability of the causes of action that would have been pursued in the original proceedings. The second circumstance is that Mr Bouzanis was a practising solicitor in and after November 2006. For that reason, he had a great incentive to avoid the bankruptcy to which he eventually succumbed in December 2013 as a result of the subsequent proceedings. Under the Legal Profession Uniform Law (NSW), as well as under predecessor legislation in force at the relevant time, a solicitor must immediately notify the Law Society of any “bankruptcy-related event” affecting the solicitor; and the Law Society must then determine whether the person concerned is a fit and proper person to continue to hold a practising certificate. Any solicitor in active practice who depends on that practice for his or her livelihood could reasonably be expected to make strenuous efforts to avoid such a situation.

100. These two matters should, to my mind, have caused the primary judge to find, according to the balance of probabilities, that the ability to pursue the original proceedings in a timely fashion after they were commenced in November 2006 was, of its nature, an opportunity of some real value, which value was, in general terms, commensurate with an appreciable prospect of, at the least, some realistic settlement offer by Mr Bouzanis. It follows that causation was established and that the loss of a chance case presented by the appellant should have succeeded on the issue of liability.

101. I turn now to the question of damages for deprivation of the opportunity. At this point, the inquiry shifts from an appraisal of the substance of the opportunity in general terms to a quantitative appraisal of the prospects of success that the opportunity would have presented had it been available to be pursued. The focus is no longer on whether the opportunity had value beyond the merely theoretical or negligible. It is upon quantification, in money terms, of the value inherent in the ability to pursue the opportunity (or the prospects of success that the opportunity embodies) in the factual context in which it was available to be pursued.

102. The question of this value should, in my opinion, be addressed on the basis that any financial return to the appellant from the earlier proceedings would, as a matter of virtual certainty, have been realised not later than 2010 and would, according to the balance of probabilities (and as outlined above), have been realised as early as the start of 2009. This brings to the fore a particular matter relevant to (but by no means determinative of) the valuation of the lost opportunity for the purpose of assessing damages, namely, Mr Bouzanis’ financial position and the question whether it should be regarded as having been in, say, January 2009, so appreciably better than it in fact was in late 2013 (when the judgment obtained in the subsequent proceedings proved worthless) that a recognisable value can be ascribed to the opportunity to prosecute the original proceedings.

103. The evidence on that issue (as at 2010, rather than early 2009) is reviewed comprehensively in the judgment of Macfarlan JA. Mr Bouzanis was in financial difficulties in 2010 and it may be that, as the primary judge found, he had no greater prospects then of meeting a liability of the order of $200,000 (ignoring costs) than he was shown to have had in late 2013. But the evidence paints a picture of progressive financial decline coupled with ongoing actions and strategies to ensure financial survival, including substantial borrowing from Mr Bouzanis’ mother and successful refinancing of various commitments. It is significant that Mr Bouzanis himself said in his bankruptcy examination that he had no debts in 2006 and could have paid the appellant then if he had wanted to. This matter is referred to at [84] of Macfarlan JA’s reasons but, as his Honour notes, the probative value of the statement is limited. Nonetheless in the circumstances of progressive decline, successful refinancings and other successful survival strategies to which I have referred, any ability to pay the full amount in 2006 would point to a greater likelihood that Mr Bouzanis could have paid some appreciable part (if not the whole) of the total amount in early 2009.

104. There is, in my view, a distinctly recognisable possibility that Mr Bouzanis was better off financially in early 2009 than he was in 2010 or in late 2013. There is also the point, noted in relation to the issue of causation, that he was, in early 2009 and at all other material times, a solicitor with a very clear personal interest in staving off bankruptcy unless there were no real alternative. It is also relevant to note that he was able to find money, throughout the period June 2010 to April 2013, to fund ongoing litigation of apparently sizeable proportions. [52]

     52.    The material before this Court does not appear to disclose the number of hearing days involved in the subsequent proceedings but the fact that the District Court judgment (part only of which is included in that material) runs to 31 pages (152 paragraphs) indicates that a substantial hearing and the preliminaries to it were funded by Mr Bouzanis.

105. In the whole of the circumstances, I am persuaded that, while exigencies of the kind that attend all litigation and the growing financial stress affecting Mr Bouzanis mean that diligent pursuit of the earlier proceedings would probably not have yielded to the appellant the full amount for which judgment was given in the subsequent proceedings, some significant measure of recovery should be regarded as having been achievable according to the principles relevant to the second stage of the two stage inquiry to be undertaken in accordance with Sellars v Adelaide Petroleum NL. Basten JA, at [43] of his reasons, considers a factor of 50 per cent (applied to the debt, without interest or costs) to be appropriate. Applying a process of estimation extending even to a degree of guesswork, my own assessment is the same.

106. For these reasons, the appeal should be allowed and there should be judgment for the appellant against Mr Ashcroft in the sum of $100,000. In addition, Mr Ashcroft should be ordered to pay the appellant’s costs both here and in the court below.

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Endnotes

Amendments

22 June 2018 - Cross-references in [78], [81] and [87] updated.

27 March 2019 - [34] Amending citation in quote.

[62] Adding "Adelaide" in citation

[64] Amending "change" to "chance" in quote.

[87] Amending cross-reference

[99] Correcting spelling of "Keane J".

Amending footnotes/endnotes - 13, 19, 20, 29, 31, 32, 39.

Decision last updated: 27 March 2019