Marshall v Prescott (No 3)

[2013] NSWSC 1949

Supreme Court

New South Wales

Medium Neutral Citation:

Marshall v Prescott (No 3) [2013] NSWSC 1949

Hearing dates:

12 to 14, 16 and 19 August 2013; last written submissions 9 October 2013.

Decision date:

20 December 2013

Jurisdiction:

Common Law

Before:

Beech-Jones J

Decision:

The proceedings be dismissed.

Catchwords:

EQUITY - claim for damages for breach of fiduciary duty and obligation of confidence - solicitor and former client - fiduciary duty - scope and duration - before and after termination of retainer - obligation of confidence - whether there was a breach of confidence - whether solicitor misused confidential information of former client - circumstances in which information was imparted - limited retainer from former client - accepted that solicitor also retained by a different client with a potentially competing claim - information received to advance common objective of both clients to maximise recovery - information derived not exclusive to former client - whether allegations went outside the pleaded case.

ESTOPPEL - res judicata - judgments by consent - interlocutory orders - whether cause of action sued on in these proceedings merged into a judgment already entered - issue estoppel - whether orders necessarily decided the defendant breached his fiduciary duty or obligation of confidence.

TORT - duty of care - conspiracy by lawful and unlawful means.

COSTS - solicitor/client costs of previous proceedings - whether recoverable - whether estoppel arises - whether the issue of costs of previous proceedings was determined by costs orders made in those proceedings.

Legislation Cited:

- Civil Procedure Act 2005
- Evidence Act 1995
- Family Provision Act 1982

Cases Cited:

- Avenhouse v Hornsby Shire Council (1998) 44 NSWLR 1
- Anderson v Bowles (1951) 84 CLR 310
- Australian Broadcasting Corp v Lenah Game Meats Pty Ltd [2001] HCA 63; 208 CLR 199
- Baker v Campbell [1983] HCA 39; 153 CLR 52
- Beach Petroleum NL v Abbott Tout Russell Kennedy [1999] NSWCA 408; 48 NSWLR 1
- Berry v British Transport Commission [1962] 1 Q.B. 306
- Blair v Curran (1939) 62 CLR 464
- Bristol & West Building Society v Mothew [1998] Ch 1
- Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; 164 CLR 502
- Church v Price [2000] NSWSC 754
- Coco v AN Clark (Engineers) Ltd [1969] RPC 41
- Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39
- Commonwealth v Verwayen [1990] HCA 39; 170 CLR 394
- Cooper v Winter [2013] NSWCA 261
- Crofter Handwoven Harris Tweed Co Ltd v Veitch [1942] AC 435
- Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172
- Fleming v Marshall [2011] NSWCA 86; 279 ALR 737
- Glazier v Australian Men's Health (No 2) [2001] NSWSC 6
- Isaacs v Ocean Accident & Guarantee Corporation Ltd (1958) SR (NSW) 69
- Jack L. Israel Ltd v Ocean Dynamic Lines SA & Ocean Victory Ltd [1982] 2 Lloyd's Rep 88
- Jackson v Goldsmith (1950) 81 CLR 446
- Kallinicos v Hunt [2005] NSWSC 1181; 64 NSWLR 561
- Kelly v Cooper [1993] AC 205
- Kuligowski v Metrobus [2004] HCA 34; 220 CLR 363
- Marshall v Carruthers [2002] NSWCA 47
- Marshall v Prescott (No 2) [2013] NSWSC 1254
- Maurice Blackburn Cashman v Brown [2011] HCA 22; 242 CLR 647
- Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22; 54 NSWLR 146
- Mills v Day Dawn Block Gold Mining Co Ltd (1882) 1 QLJ 62
- Murray v Yorkshire Fund Managers Ltd [1998] 1 WLR 951
- National Mutual Holdings Pty Ltd v Sentry Corporation (1989) 22 FCR 209
- Nau v Kemp & Associates Pty Ltd [2010] NSWCA 164; 77 NSWLR 687
- O'Brien v Komesaroff [1982] HCA 33; 150 CLR 310
- Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589
- Prince Jefri Bolkiah v KPMG (a Firm) [1999] 2 WLR 215
- Provident Capital Ltd v Papa (No 2) [2013] NSWCA 156
- Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674
- Roads and Traffic Authority of NSW v Dederer [2007] HCA 42; 234 CLR 330
- Rogers v R [1994] HCA 42; 181 CLR 251
- Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health (1990) 22 FCR 73
- Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services & Health (1991) 28 FCR 291
- Spector v Ageda [1973] Ch 30
- Streetscape Projects (Australia) Pty Ltd & Anor v City of Sydney [2013] NSWCA 2; 295 ALR 760
- Worth Recycling Pty Ltd v Waste Recycling & Processing Pty Ltd [2009] NSWCA 354

Texts Cited:

- Gurry on Breach of Confidence, 2nd Ed (2012)
- McGregor on Damages, 17th Ed (2003)
K.R. Handley, Spencer Bower and Handley: - Res Judicata, 4th Ed (2009)

Category:

Principal judgment

Parties:

Margaret Lesley Marshall (First Plaintiff)
Kim Neil Marshall (Second Plaintiff)
Michael Prescott (Defendant)

Representation:

Counsel:
C.J. Bevan, E.W. Young (Plaintiffs)
J.C. Kelly SC, B. McManus (Defendant)
Solicitors:
Turner Freeman (Plaintiffs)
Colin Biggers & Paisley (Defendant)

File Number(s):

2009/297404

Judgment

1. On 31 May 2000 the late Neil Marshall was killed in an aircraft accident in the Spencer Gulf in South Australia. At the time of his death Mr Marshall was in a de facto relationship with Ms Linda Carruthers. However he was still legally married to the first plaintiff in these proceedings, Mrs Margaret Marshall. They had one son, being the second plaintiff, Kim Marshall. Mrs Marshall was the executrix of Mr Marshall's will. She and her son were the only beneficiaries.

1. Unfortunately Mr Marshall's death has led to a great deal of litigation none of which I suspect has been of much benefit to the plaintiffs (the "Marshalls"). In these proceedings they sue a solicitor based in South Australia, Mr Michael Prescott. As I will explain, some time shortly after the accident Mr Prescott commenced to act on behalf of the families of some of the persons who had died in the accident, including Ms Carruthers. In 2001 he contacted Mrs Marshall for the purpose of ascertaining whether she wished to join in litigation in the United States against entities associated with the manufacture and installation of the engine in the aircraft ("Lycoming"). Mrs Marshall referred Mr Prescott to her solicitor, Mr Goldberg from Turner Freeman. Thereafter Mr Prescott played a co-ordinating role on behalf of his own clients and the legal representatives of other families of victims of the crash in relation to, amongst other matters, the litigation in the United States.

1. Mr Prescott's efforts led to success. He made contact with a New York based firm, Kreindler & Kreindler ("Kreindlers"). With its assistance, litigation funding was arranged and proceedings were commenced in Pennsylvania (the "Pennsylvania proceedings"). As noted below there was considerable debate about who retained Kreindlers and for whose benefit the Pennsylvania proceedings were conducted. I do not consider it necessary to resolve that dispute. There is also a dispute as to whether any duty owed by Mr Prescott to Mrs Marshall was qualified by the fact known to all that he was retained by Ms Carruthers. I find that it was.

1. The Pennsylvania proceedings settled in principle in early 2003 and an agreed amount was allocated for distribution in respect of each deceased. Shortly afterwards Mr Goldberg wrote to Kreindlers demanding the unconditional release of those funds to Turner Freeman. Kreindlers resisted stating that it was concerned about a competing claim by Ms Carruthers. Eventually it provided the funds but only on condition that Mrs Marshall commence proceedings to vindicate her entitlement to the funds and they not be distributed without a court order. In the meantime Mr Prescott's retainer with Mrs Marshall was terminated.

1. After receiving the funds Mrs Marshall commenced proceedings against Ms Carruthers concerning their respective entitlements to the settlement proceeds (the "Marshall proceedings"). Mr Prescott acted for Ms Carruthers for a period. He ceased to act in June 2005 although he continued to assist her after that time. In November 2005 Mrs Marshall commenced proceedings against Mr Prescott (the "Prescott proceedings"). She obtained an interlocutory injunction against Mr Prescott preventing him from assisting Ms Carruthers. Eventually she obtained final relief by consent to that effect and an order for the payment of her costs on a party/party basis. She also obtained consent orders in the Marshall proceedings which represented almost complete success. The end result was that she obtained the entirety of the settlement funds and an order for the payment of an agreed amount for party/party costs.

1. Mrs Marshall sues Mr Prescott to recover the difference between the solicitor/client assessment of her costs of the Marshall proceedings and the Prescott proceedings and the amounts already recovered for costs pursuant to the orders just noted. She and Kim Marshall also seek exemplary and punitive damages. They allege that certain conduct by Mr Prescott and others which was alleged to be in breach of various legal duties he is said to have owed to them led to Kreindlers imposing the conditions that it did on the release of the settlement funds which in turn precipitated the Marshall proceedings and then the Prescott proceedings. They also allege that the conduct of Mr Prescott in acting for Ms Carruthers in the Marshall proceedings and then providing her informal assistance was in breach of various legal duties owed by him.

1. For the reasons that follow, the Marshalls' case must fail. This is principally so because, as framed, the case against Mr Prescott failed to have proper regard to the authorities binding on this Court at first instance which hold that any fiduciary duty owed by Mr Prescott to the Marshalls ceased on the termination of his retainer in May 2003. The case pleaded in the Further Amended Statement of Claim ("FASOC") only involved a very narrow set of allegations against Mr Prescott in respect of his conduct before the retainer was terminated. None of them was established as a matter of fact.

1. The balance of the case concerned Mr Prescott's conduct after the termination of his retainer. It is very unwise for a solicitor who is retained by multiple clients even on a limited basis to later act for one of those clients in a dispute between them. Such conduct will often lead to the solicitor being injuncted from acting, as Mr Prescott was in this case. Nevertheless the only relevant legal obligation owed by Mr Prescott to Mrs Marshall after the termination of his retainer that supported a claim for damages was his ongoing obligation of confidence. The Marshalls have failed to establish that the pleaded breaches of this obligation were made out.

1. The balance of this judgment is structured as follows:

[10] to [32]:		Mr Prescott's retainer
[33] to [43]:		The Pennsylvania Proceedings
[44] to [50]:		The settlement of the Pennsylvania proceedings
[51] to [70]:		The termination of Mr Prescott's retainer
[71] to [86]:		The release of the funds and the commencement of the Marshall proceedings
[87] to [93]:		The Prescott proceedings
[94] to [97]:		The resolution of the Prescott Proceedings and the Marshall proceedings
[98] to [100]:		The solicitor/client costs incurred by Mrs Marshall
[101] to [107]:		Kreindlers' retainer and the complaint
[108] to [133]:		The fiduciary duty owed by Mr Prescott to the plaintiffs
[134] to [141]:		Res judicata and issue estoppels relied on by the plaintiffs
[142] to [192]:		Breach of Confidence
[143] to [149]:		- Background
[150] to [156]:		- Principles
[157] to [162]:		- All the information obtained by Mr Prescott
[163] to [191 ] :		- Schedule A information
[192]:		- Conclusion
[193] to [197]:		The pleaded case
[198] to [217]:		The (so called) Prescott's First Marshall Misconduct
[218] to [228]:		The (so called) Prescott's Second Marshall Misconduct
[229] to [236]:		The (so called) Prescott's Third Marshall Misconduct
[237]:		The (so called) Prescott's Fourth Marshall Misconduct
[238] to [253]:		Mr Prescott's estoppel defences
[254]:		Proportionate liability
[255] to [256]:		Causation and quantum
[257]:		Orders

Mr Prescott's retainer

1. Mrs Marshall and the late Mr Marshall were married in 1967. Kim Marshall was born in 1980. In December 1992 he executed his last will naming Mrs Marshall as the executrix. At some point the marriage broke down. In 1995 Mr Marshall commenced a de facto relationship with Ms Carruthers. In 1996 Mr and Mrs Marshall effected a property settlement but they did not divorce.

1. As noted, on 31 May 2000 Mr Marshall was killed in an aircraft accident in the Spencer Gulf. Seven other persons on the plane were killed.

1. On 9 November 2000 probate of Mr Marshall's will was granted to Mrs Marshall.

1. In December 2000 Ms Carruthers commenced proceedings under the Family Provision Act 1982 (the "FPA proceedings").

1. At some point in this period Ms Carruthers retained Mr Prescott to act on her behalf in any claim for compensation arising out of the accident. Mr Prescott also received instructions to act on behalf of the families of some of the other persons killed in the accident and was in contact with the legal representatives of the remainder.

1. In May 2001 Mr Prescott telephoned Mrs Marshall. According to Mrs Marshall he stated:

"I am acting for Linda Carruthers and families of victims of the crash, looking at bringing an action today or tomorrow in the United States in respect of all the victims of the crash. Is Kim interested in participating?"

Mrs Marshall replied: "I am Neil's wife and Kim's mother. Kim is not here."

Mr Prescott then stated: "I don't know anything about you."

Mrs Marshall then referred Mr Prescott to her solicitors, Turner Freeman. If it was not otherwise obvious, Mrs Marshall accepted in her oral evidence that she knew that Mr Prescott acted for Ms Carruthers.

1. This conversation appears to have led to a conversation between Mr Goldberg and Mr Prescott on the morning of 29 May 2001. Mr Prescott did not give evidence in these proceedings. Mr Goldberg did but he did not address this conversation. In any event, later that day Mr Goldberg wrote to Mr Prescott referring to their conversation, confirming that Turner Freeman acted for Kim Marshall and Margaret Marshall, providing certain details such as their address and occupation, and stating "they instruct you to arrange for Roger Clark, lawyer in the USA to issue a complaint/court process in California (or Florida or anywhere he sees fit) to preserve their rights arising out of the crash in which Neil Marshall died". Mr Clark was an aviation law specialist based in California.

1. On 31 May 2001 Mr Prescott wrote to Turner Freeman outlining the result of his work to that point in identifying potential causes of action that could be pursued in the USA against the manufacturer of the aircraft's engine, the forum in which to sue and the potential sources of litigation funding. It is clear that the letter was a standard one sent to all the legal representatives of the family members of the victims. At the conclusion of the letter Mr Prescott listed the names of each deceased, their dependants and legal representatives "[i]n order that everyone is aware as to the potential parties and their representation". In respect of Mr Marshall he stated:

"Deceased: Neil Marshall

Kim Neil Marshall (son)

Linda Hope Carruthers (de facto)

Represented by: Michael Prescott at Prescotts

Margaret Lesley Marshall

Represented by: Turner Freeman, Sydney."

1. On 14 June 2001 Mr Goldberg wrote to Mr Prescott, acknowledging receipt of his letter but asking him to note that Turner Freeman acted for Kim Marshall as well as Mrs Marshall. He noted that "[w]e obviously have no difficulty with you acting as overall representative in terms of liaising with Roger Clark on behalf of our clients".

1. On 26 July 2001 a judge of the (then) Compensation Court of New South Wales awarded Ms Carruthers $200,000.00 based on her being a dependant on Mr Marshall. Nothing was awarded to Mrs Marshall or Kim Marshall. (Mr Marshall's death arose out of his travelling in the course of his work as a trade union organiser.)

1. On 3 August 2001 Macready AsJ made orders in the FPA proceedings. His Honour awarded Ms Carruthers a half interest in Mr Marshall's property at Newtown on certain conditions, as well as certain items of personalty with Kim Marshall to receive a legacy out of the estate.

1. Mr Prescott pursued litigation funding from Insolvency Litigation Fund Pty Ltd ("ILF") for him and counsel retained by him, Mr Greenwell, to travel to the USA and investigate the claim. ILF appears to be an entity associated with the Insolvency Management Fund ("IMF"), an Australian based litigation funder. On 21 November 2001 Mrs Marshall signed the funding agreement with ILF on her own behalf and on behalf of Kim Marshall. Paragraph D of the recitals to this funding agreement records that the "Appointor", namely Mrs Marshall, claims to be entitled to be paid money from certain entities arising from the aeroplane crash.

1. Clause 5.3 provided that the "Lawyers", being Mr Prescott and Mr Greenwell, were retained by the Appointor but would be paid directly by ILF. Otherwise the agreement made provision for the Appointor to nominate ILF as debt collector to recover loss arising out of the accident and conferred on ILF rights to receive reports and information from the "Lawyers" and Kreindlers. (It thus appears that contact had been made with Kreindlers by this time.) Clause 9.1 granted ILF first right to recover the investigation costs, the costs of funding any litigation and 20% of any settlement received on or before 30 June 2002, and 30% of any settlement received after. As explained below, these fee arrangements were subsequently amended.

1. On 7 February 2002 Mr Prescott sent a detailed letter to all of the representatives, including Mr Goldberg, updating them on the outcome of their research into liability, the appropriate forum and the obtaining of litigation funding. He referred to discussions he had with Kreindlers who was said to be "very keen to run this action in the United States". Kreindlers was said to regard the case as having great merit but be concerned about whether the United States was the appropriate forum. His letter advised that he had been "looking at an agreement with the Americans [ie Kreindlers] at 30% of the damages recovered" as well as an agreement with the "Australian funder", IMF, under which a further 30% would be taken. Despite this he outlined how both had agreed to each take a 20% share of any verdict. Mr Prescott also advised that the proceedings "will be run not as a class action but rather on an individual basis" with a "separation of claims on behalf of the passengers as opposed to both the airline and the pilot's family". He concluded by emphasising the importance of finalising the various agreements.

1. On 22 February 2002 Mrs Marshall's appeal against Macready AsJ's judgment was upheld (Marshall v Carruthers; Marshall v Marshall [2002] NSWCA 47). Hodgson JA (with whom Young CJ in Eq and Palmer J agreed) found that Ms Carruthers had failed to establish that the "provision for her was inadequate for her proper maintenance" (at [67]). In the judgment, his Honour referred to Ms Carruthers as Mr Marshall's "de facto wife".

1. On 20 March 2002 Mr Prescott circulated an email to the various representatives stating that he and Mr Green had been "able to arrange funding for the US claim through ILF in Sydney". The proposed contingency fee was reduced to one third of the total verdict excluding out of pocket expenses so that "[n]et recovery is the gross settlement less out of pocket expenses". The contingency fee was proposed to be split between ILF and Kreindlers, with one third to be paid to the former and two thirds to the latter. He stressed the urgency for the signing of the retainer agreements for both ILF and Kreindlers and added:

"Firstly, the US agreement is to be signed by one person on behalf of all plaintiffs claiming under a deceased. I am advised that this person must be the executor or administrator of the estate. In the [United States] they are known as 'estate representatives'. These people sign on behalf of all plaintiffs even if they did not have any entitlement under the will or the Act.

The ILF require that each potential adult plaintiff sign and if they have plaintiff dependants, then on their behalf also." (emphasis added)

1. On 21 March 2002 Mr Prescott and Mr Goldberg exchanged emails in relation to the execution of Kreindlers' retainer agreement. On that day Mrs Marshall signed its retainer. Underneath her signature appeared the words "In respect of the death of Neil Marshall" and against the phrase "Full Name of signatory" she was described as "(Executor/Personal Representative)".

1. On the same day each of Mrs Marshall and Kim Marshall separately signed a revised funding agreement with ILF. This agreement was similar to the previous one although it contemplated that proceedings would be commenced. Paragraph H of the recitals to the agreement records that the "Appointor" had appointed Kreindlers to conduct proceedings in the USA on the basis that Kreindlers fund all costs and disbursements other than those expressly agreed to be paid by ILF.

1. Clause 5.3 again provided that the "Lawyers" (ie Mr Prescott and Mr Greenwell) would be retained by the "Appointor" and be paid directly by ILF. Clause 10 dealt with the procedure to be adopted if a settlement was proposed. ILF's fees were revised so that after repayment of investigation and funding costs, it was to receive 11.111% of any settlement or judgment achieved in proceedings in the United States, and 35% of any settlement or judgment achieved from any proceedings that might be conducted in Australia.

1. The next day Mr Goldberg wrote to Mr Prescott enclosing the signed agreements. In relation to Kreindlers' retainer agreement, Mr Goldberg stated:

"[We enclose the] Kreindler and Kreindler retainer agreement signed by Margaret Marshall. As we understand it, this agreement is signed on behalf of Kim Marshall and Linda Carruthers, correct us if we are wrong." (emphasis added)

1. In her affidavit Mrs Marshall stated that she executed, inter alia, this agreement "on my own behalf and on behalf of Kim". In cross examination Mr Goldberg stated that before Mrs Marshall signed Kreindlers' retainer agreement he told her that she would be signing on behalf of Kim Marshall and Ms Carruthers. Mrs Marshall stated that she could not remember being told that but when shown Mr Goldberg's letter was prepared to accept that "he did tell me". I am satisfied that she was told.

1. At this point it is only necessary to note that, irrespective of whether this letter had the effect of making Ms Carruthers a party to the retainer agreement with Kreindlers, at the very least it reflects a common position between Mr Prescott and Mr Goldberg (and Mrs Marshall, Kim Marshall and Ms Carruthers) that Kreindlers was engaged to work to further the interests of all the claimants and potential claimants claiming through the late Mr Marshall, namely Mrs Marshall, Kim Marshall and Ms Carruthers.

1. On or about 8 April 2002 Ms Carruthers also signed the revised funding agreement with ILF. It was in the same terms as the agreement signed by Mrs Marshall, but this time defined Ms Carruthers as the "Appointor". Thus the recitals recorded that she "claim[ed] to be entitled" to be paid money by certain entities as a result of the crash, and that she had appointed Kreindlers to conduct proceedings in the United States. It also includes clause 5.3 pursuant to which she appointed Mr Prescott and Mr Greenwell.

The Pennsylvania Proceedings

1. On 29 May 2002 the Pennsylvania proceedings were commenced in the United States District Court Middle District of Pennsylvania. Lycoming was the defendant. The plaintiffs are described in the complaint as "Margaret Lesley Marshall and Kim Neil Marshall, individually and as Executors and Personal Representatives of the Estate of Neil Marshall, Deceased". The complaint included the following paragraphs:

"2. Plaintiffs MARGARET LESLEY MARSHALL and KIM NEIL MARSHALL have been or will be appointed Executors and Personal Representatives of the Estate of Neil Marshall (the 'Estate') and they bring this lawsuit in said capacity on behalf of the Estate and surviving family members of Neil Marshall.

...

20. As a result of the foregoing, the plaintiffs MARGARET LESLEY MARSHALL and KIM NEIL MARSHALL, the decedent's survivors and the Estate of Neil Marshall are entitled to recover the full wrongful death and survival compensatory damages, including damages for loss of the decedent's earnings, loss of support, loss of services, loss of prospective inheritance and future accumulations, loss of protection, care, counsel, society and companionship, loss of parental training, education, care and guidance, loss of consortium, the decedent's mental and physical pain and suffering and fear of impending death, burial and funeral expenses, punitive damages and other damages for economic and intangible losses as may be permitted by Pennsylvania law." (emphasis added)

The complaint concluded with the following recitation:

"Wherefore, plaintiffs MARGARET LESLEY MARSHALL and KIM NEIL MARSHALL, as Executors and Personal Representatives of the Estate of Neil Marshall, deceased, and on behalf of all heirs and next of kin of Neil Marshall, deceased, demands judgment against defendants ..." (emphasis added)

1. On their face the emphasised portions of these parts of the pleading are capable of referring to Ms Carruthers. In December 2006 Mr Goldberg obtained an opinion from a law firm in Pennsylvania which in part addressed this. I discuss this below (at [93] and [107]).

1. On 21 June 2002 Mr Prescott sent a copy of the pleadings filed in Pennsylvania to Mr Goldberg.

1. On 25 July 2002 Mr Goldberg sent an email to Mr Green at Kreindlers which was copied to Mr Prescott. He stated, inter alia:

"I now understand that you would like us to provide you with more information as to the assessment of damages. I can only do that in respect of Kim and Margaret, but not Linda. Michael Prescott and I have an agreement that I will send material to you directly. By way of background, I advise that my clients and Linda have been involved as opposing parties in various actions in Court here over the estate of Neil Marshall, and their relationship is not good." (emphasis added)

1. Mr Goldberg also queried paragraph 20 of the complaint and the manner in which damages were calculated and recovered. He stated, inter alia:

"There is no guidance on this provided in the statement of claim/ complaint other than paragraph 20. I would point out that my two clients and Linda Carruthers are adults and in New South Wales where I practice law, damages are not awarded to adults in respect of many of the losses that are set out in paragraph 20 of the complaint. How will the US Court calculate damages for 'loss of services' and 'loss of parental support'?" (emphasis added)

1. Mr Goldberg sent a further email on 29 July 2002 which was apparently in response to an email from Mr Green at Kreindlers that was not tendered. The opening part of the e-mail is of particular significance. Mr Goldberg stated:

"As I have previously advised you, all matters relating to damages in respect of Kim Marshall and Margaret Marshall ... have to be dealt with directly with me, and not Prescotts. We do not and cannot act for Linda Carruthers. I have discussed these issues with Michael Prescott and as I understand it, he and his client agree with this approach." (emphasis added)

1. Mr Goldberg then posed a number of detailed questions for Mr Green about the manner of assessment of damages in respect of the proceedings commenced in Pennsylvania. The closing part of the e-mail stated:

"I look forward to your detailed and complete response. Please note that the response should be forwarded to me only at first instance and not forwarded to Prescotts. These inquiries are made in my capacity as solicitor for the Marshalls and for the Estate in whose interests we understand you act. I am anxious to avoid conflicts of interest." (emphasis added)

1. On 30 July 2002 Mr Green responded. He expressed concern about the delays in obtaining information. He provided a short summary response to Mr Goldberg's questions addressing the position if the matter was covered by US law as follows:

"The action[s] in the US have been, and had to be, brought by the personal representative of the decedent's estate, but are brought on behalf of the estate and the decedent's survivors. If the court applies US law, each dependant survivor will obtain an award for loss of support and an award will be made to the estate for the decedent's pre-death pain and suffering. If there are no dependent survivors, an estate accumulations award will be made to the estate and will go to the estate beneficiaries. The award for pain and suffering would not be a 'personal' recovery as I understand your question."

1. Mr Goldberg responded on 31 July 2002 raising the existence of a possible conflict of interest on the part of Kreindlers for the first time stating, inter alia: "[i]n my opinion there are potential problems in you acting for Carruthers and for my clients. Their respective interests are not the same and part of the problem in supplying the information you want is caused by their conflicts".

1. On 1 August 2002 Mr Green responded by rejecting the existence of any conflict. He stated that "I have been retained by each decedent's estate and my only role is to maximise the recovery for each decedent's estate". He stated that his role was that he would "not be involved with any intra or inter-family disputes and the distribution of the monies is a separate issue".

1. The debate continued in an exchange of emails on 5 August 2012. Mr Goldberg advised that his client had "an objection to you communicating with Carruthers in any way or even acting in her interests". He reminded them that the Court of Appeal found that Ms Carruthers had no interest in the estate. Mr Green responded that his firm only acted for the estate and that to the extent there was a dispute between those who claimed to have an interest in the estate then Kreindlers "cannot become involved" and added "[i]f Linda Carruthers was not dependent on the decedent and doesn't have an interest in the estate, then there won't be any dispute". He reminded Mr Goldberg that this was a debate for a later time as they had to overcome a motion to dismiss the proceedings on a forum non conveniens basis and, if so, then prove liability.

The settlement of the Pennsylvania proceedings

1. On 11 February 2003 Mr Bowman, the IMF representative, circulated an email advising the various representatives that a meeting on that day had been arranged between [him] and Mr Green and representatives of Lycoming. He advised that it was anticipated that the discussions would cover the potential for settlement and noted that:

"Before any offer of settlement can be properly assessed, each Plaintiff will need to know what their share of the settlement amount will be. The plaintiffs have agreed to be bound by an advice from Justin as to how much each plaintiff is likely to receive in the US should the cases be successful. Each Plaintiff will then receive its proportionate share of the settlement sum."

1. This prompted a further request from Mr Goldberg to Mr Green about the manner in which damages would be calculated. On 13 February 2003 Mr Green responded. His email set out three caveats. First, there was likely to be a significant contest as to whether the damages were governed by US law or Australian law. Second, the quantum of damages would ultimately be determined by a jury and thus there was no "formula" to be applied. Third, any estimate of damages had to reflect the risk of losing the forum non conveniens argument or failing to establish liability. Mr Green's email then addressed the method of calculating damages if "US law" was applicable. He did not state whether there were differences between the various states or if any particular considerations applied to cases litigated in Pennsylvania. His advice confirmed that the calculation of the amount payable in respect of each deceased was determined principally, and perhaps solely, by reference to the deceased's earning capacity and imputed pain and suffering as opposed to, by way of example, determining an amount of loss per dependant.

1. Mr Green sent a further email to Mr Goldberg on 15 February 2003 stating as follows:

"I can only say what the law is here in the United States. Wrongful death damages are not estate assets - they are paid to the survivors and do not pass through the estate. The persons entitled to the damages are identified in the intestate law - spouse, children and maybe parents typically (parents are generally cut out if there are children). Wrongful death damages are awarded based upon the survivors' loss.

Damages awarded to compensate for the pain and suffering of the decedent are estate assets and go through the estate. If there is a settlement, we generally ask the Court to award very little for pain and suffering - in the U.S. wrongful death damages are not taxed, but estate assets are subject to estate tax.

If we obtain a settlement, the proceeds will likely be distributed in accordance with Australian law since the estates are all in Australia.

Hope that this answers your questions."

1. On 19 February 2003 Mr Greenwell sent an email to the various representatives attaching a document which provided a breakdown of the percentage of any total settlement that was payable to "each Plaintiff".

1. Sometime around 21 February 2003 and at the time the motion to dismiss was due to be heard an in-principle settlement of the Pennsylvanian proceedings was reached. Lycoming agreed to pay US $5.5 million in total.

1. On 26 February 2003 Mr Goldberg sent a detailed letter posing a series of questions to Mr Green concerning the quantification of damage, the apportionment of amounts for economic loss and pain and suffering, and the taxation treatment of the amounts paid. He advised Mr Green that it was "important that we obtain answers to [the questions] given that there have been substantial disputes in the past in respect of distributions of money flowing to the estate of [the] late Neil Marshall which has resulted in two sets of Court proceedings in New South Wales so far".

1. On 14 March 2003 a meeting was held at Mr Greenwell's chambers in Adelaide. A number of the legal representatives of the families attended including Mr Brett Allen from Turner Freeman. Mr Allen made a file note of the meeting which he sent to Mr Goldberg on 17 March 2006. Mr Allen's note records a discussion concerning the cost and logistics of effecting the settlement. The note also included the following:

"Michael Prescott raises the potential issue of Marshall and Carruthers' competing claims. Michael Prescott says that 100% of the amount recovered on behalf of Marshall should go to the estate and be held in trust pending agreement between Mrs Marshall and Ms Carruthers.

Michael Prescott told BMA that Michael would not be instructed to act for Carruthers in any dispute with Mrs Marshall."

The termination of Mr Prescott's retainer

1. On 8 April 2003 Mr Greenwell sent a letter to Mr Goldberg attaching a copy of the final agreed percentage allocations in respect of each deceased. The nominated percentage in respect of Mr Marshall was 8.75%.

1. On the same day Mr Goldberg wrote an emphatic letter to Kreindlers. It constituted a demand that Kreindlers forward the entire net amount of the settlement proceeds that concerned Mr Marshall to Turner Freeman. To support this demand it set out three assertions under the headings "Proposition 1", "Proposition 2" and "Proposition 3". Proposition 1 was that Kreindlers and Turner Freeman acted for the same clients, namely Kim Marshall and Mrs Marshall individually and Mrs Marshall in Mrs Marshall's capacity as executor of Mr Marshall's estate. Later in the letter it was asserted that the "only retainer" Kreindlers had was with Mrs Marshall (ie it did not extend to Ms Carruthers). The letter enclosed Kreindlers' retainer agreement but did not enclose a copy of Mr Goldberg's letter of 22 March 2002. The second proposition was that the only persons who either had a "legal interest" or were entitled beneficially to a share in the proceeds were Mrs Marshall and Kim Marshall. This was said to follow from the terms of the court process filed in the Pennsylvanian proceedings that are extracted above.

1. The third proposition in Mr Goldberg's letter was said to be as follows:

"Any failure on the part of Kreindler & Kreindler or Turner Freeman to ensure that the settlement amount is distributed in accordance with the explicit instructions of the Marshalls will involve a breach of the professional obligations of those attorneys to their mutual clients."

1. Mr Green responded by letter dated the same day and apparently received by facsimile by Turner Freeman on 9 April 2003. In view of how Mrs Marshall's case was put it is necessary to set out the text of the response:

"This responds to your facsimile of April 8, 2003. We represent the Marshall estate[s] in this matter and cannot become involved in a dispute between individual estates or wrongful death distributees. The representatives of the Marshall estate[s] owe a fiduciary duty to ensure that the settlement is distributed equitably to all persons entitled to receive the proceeds under Australian law. If a potential claimant is cut off, that claimant may sue the estate representative and the estate[s] lawyers for breach of their fiduciary duty. Distributing the settlement proceeds without dealing with these issues is contrary to your clients' interests.

Your letter is not clear. You need to clearly inform me of the dispute between potential settlement distributees. What is the problem?

Unless an agreement can be reached, we will have to hold the settlement until a court of competent jurisdiction, most likely in Australia, rules on the proper settlement distributees." (emphasis added)

1. On 9 April 2003 Mr Goldberg wrote to Mr Greenwell terminating his retainer on behalf of Mrs Marshall and Kim Marshall. The next day he wrote to Mr Green reiterating his request for Kreindlers to account to them for the total amount of the net settlement referable to Mr Marshall. He pointed out that the relevant "Australian law" as referred to by Mr Green was the law of New South Wales and the only persons with any rights to claim against the estate of the deceased person under that law were Mrs Marshall and Kim Marshall.

1. It seems that one letter to Mr Green on 10 April 2003 was not enough. Mr Goldberg wrote again to him on that day. He complained about the adequacy of Mr Green's response and asserted that Ms Carruthers was a mere spectator to the Pennsylvania proceedings.

1. Mr Green emailed his response to Mr Goldberg almost immediately at 5.50am on 11 April 2003. Not surprisingly he described Mr Goldberg's recent communications as "unfair". His response included the following:

"Third, you are wrong about the law, at least here in the United States. Because Mrs. Marshall has brought the action on behalf of the Marshall estate, she has a fiduciary duty to distribute the settlement proceeds to those persons who are entitled to receive the money. Only the estate personal representative has standing to bring the lawsuit here in the U.S., so even if a third party is entitled to settlement proceeds they have no standing to sue. For example, if a widow is appointed and sues on behalf of her late husband's estate, she brings the action on her own behalf and on the behalf of everyone who is entitled to receive wrongful death damages.

We have to come up with a plan that will not put the Marshalls at risk. Usually, the best course is to have the third party agree to the distribution, even if they do not receive anything. Is that possible? If not, a court of competent jurisdiction would have to rule on the distribution. That Court would have to be in Australia. If you are correct that Australian law would provide the full recovery to the Marshalls, it should be no problem getting a Court to order that distribution.

I suggest that we get an agreement that the entire net settlement be paid to Mrs. Marshall as estate representative and that settlement will be held in an interest bearing account until you get court approval to distribute it only to the Marshalls.

Pass this e-mail on to Mrs. Marshall and Kim Marshall. Please contact my office so that we can set up a telephone conference with the Marshalls at their first convenience so that we can deal with this problem." (emphasis added)

1. Mr Goldberg sent a letter to Mr Green on the same day. He referred to the "frustration and anger" that he and his clients apparently felt. He rejected Mr Green's proposals in strident language and rejected any suggestion that Mrs Marshall and Kim Marshall were at risk. He told Mr Green to carry out his clients' instructions and that if they did not receive an "unequivocal acknowledgement" of them the Marshalls would terminate Kreindlers' retainer.

1. On 13 April 2003 Mr Greenwell sent an email to Mr Green. He attached a copy of the letter from Mr Goldberg dated 22 March 2002. This email is a critical part of one of the central allegations against Mr Prescott and it is necessary to set it out in full:

"Further to our telephone conversation on Friday night (local time) I indicated to you that Prescott had today sent me a letter from Turner Freeman dated 22nd March 2002, which I pass on to you for your attention. It's clear from that letter that Goldberg returned the signed Kreindler and Kreindler retainer agreement, executed by Margaret Marshall, on behalf of Kim Marshall and Linda Carruthers. At least at that stage, it would appear, that both Mr Goldberg and his client were aware that Margaret Marshall was the nominee for the estate of Mr Marshall and that apart from any interest that she may or may not have they recognise that there are at least 2 other persons, Kim Marshall and Linda Carruthers, who also have an interest. She is a fiduciary with respect to those interests."

1. On 15 April 2003 a four page letter was sent by Kreindlers to Mr Goldberg. It was signed by Mr Francis G. Fleming. Mr Fleming advised that he was "the oldest and most experienced lawyer" at the firm who had worked on the case. Mr Fleming passed over what he described as the "offensive remarks" in Mr Goldberg's letter and simply noted that the "tone and character" of Mr Goldberg's letter were not helpful. He then addressed the respective positions of Mr Goldberg's clients and Ms Carruthers in respect of the proceeds of the settlement. His conclusion was that "[u]nder Pennsylvanian law, since Ms Carruthers has been recognized by an Australian Court as the de facto spouse, she would have a claim to the wrongful death recovery [component of the claim] assuming that Australian law treats de facto spouses as de jure spouses in these types of actions". He suggested that the best means of resolving the matter was by agreement or suggested that a third party custodian might be utilised. He also offered to obtain a further opinion from Mr Cliff Rieders who was the local counsel engaged in Pennsylvania. Consistent with the position taken by Mr Green the previous year, Mr Fleming described Kreindlers' role in the following terms:

"Our professional responsibilities are to maximize the recovery from Lycoming, but once that is done we can take no part in a dispute on allocation."

1. Mr Green followed up this letter with an email. In his email he denied having any communications with "counsel for Ms Carruthers", which was presumably a reference to Mr Prescott, "regarding the settlement". It was contended that this statement was false given the e-mail of 13 April 2003 (see [59]). It is not necessary for me to determine that question. Mr Green said that he had "only stated that all those legally entitled to the settlement proceeds must agree to the distribution".

1. Mr Goldberg wrote to Mr Fleming on 24 April 2003 rejecting his advice but indicating that he would take up the matter with Mr Rieders. On the same day he sent a five page letter posing 24 questions for Mr Rieders.

1. On 25 April 2003 Mr Green sent Mr Greenwell an email which was copied to Mr Bowman. There is no evidence that it was sent to Mr Prescott although it was submitted that Mr Greenwell was Mr Prescott's "agent" for that purpose. As the email was alleged to have conspiratorial overtones it is appropriate to set it out in full:

"Please keep this confidential: I have been contacted by a lawyer here in the U.S. that was contacted by the solicitor for Carruthers. Luckily he works for a firm that knows our reputation and gave me the courtesy of calling before doing anything else. Apparently Carruthers wanted to know what could be done in the U.S. to prevent all of the Marshall settlement being paid to Mrs. Marshall and Kim. I told him that I wasn't able to speak with him in substance, but that filing anything would be untimely since Marshall has not signed the release yet.

By separate e-mail I am going to send you the draft releases. I will be working on finalizing the releases and sending them down to you to have executed. It is very important that Marshall executes the release."

1. On the same day Mr Green sent Mr Goldberg a draft release for execution in relation to the settlement.

1. On 28 April 2003 Mr Bowman prepared a letter for sending to Mr Goldberg which he ultimately did not send. Like Kreindlers, Mr Bowman was proposing to point out that he, and inferentially IMF, had no interest in who was entitled to so much of the proceeds of the settlement as concerned Mr Marshall. His letter was annotated with the following:

"Not sent. Justin Green is to address Turner Freeman's concerns. Justin says - under Pennsylvanian law - dependent (ie Kim) would get pain and suffering award [and] wife would get balance - Mrs Marshall would get it ([because Mr Marshall] is still married to her) but Justin says [Australian] law as to who is the wife would apply - would be that Ms Carruthers [because] she is the defacto would be treated as the wife."

1. The plaintiffs' written submissions in reply dated 19 August 2013 (at [5]) assert that this file note is evidence "that Mr Green never believed, on the available evidence, that Carruthers had any entitlement whatsoever under Pennsylvania law", and that he "well knew her to be persona non grata under Pennsylvania law". I do not agree. Instead it recorded Mr Green's opinion that the interaction of so much of Australian law that might recognise as Mr Marshall's de facto spouse with Pennsylvanian law might lead to Ms Carruthers having an entitlement in respect of the settlement funds.

1. On 16 May 2003 Mr Rieders wrote to Mr Goldberg in response to the letter of 24 May 2013 which Mr Rieders had received on 30 April 2013. Amongst other matters he explained that in Pennsylvania the right to sue for the benefit of the estate is held by the personal representative of the estate "for the benefit of the spouse, children or parties" and that the "[p]roceeds are distributed according to the rules of intestacy, regardless of the existence of a will". However it was clear that Mr Rieders regarded the rights to the proceeds as being governed by Australian law which he stated he would not comment upon. He also pointed out that the fact that Ms Carruthers was not named as a party to the proceedings "in her own name [was] not determinative" in that a "potential beneficiary of wrongful death proceeds does not need to be a party in her own name in order to have the right to participate in the recovery".

1. Also on 16 May 2003 a solicitor acting on behalf of Ms Carruthers from Teece, Hodgson & Ward, Mr Neal, emailed Mr Green. He attached the letter of 22 March 2002 and stated that "reflect[ed] the representative nature of [Kreindlers'] retainer". He asked Mr Green to hold the proceeds in escrow. Mr Green immediately sent Mr Neal's e-mail to Mr Goldberg under cover of an e-mail stating:

"I just received the following email. Please provide your input on how I should respond to the email and explain your letter which Mr Neal attached to the email."

1. On the morning of 22 May 2003 Sydney time, Mr Goldberg had a telephone conference with Messrs Green and Fleming at the chambers of Mr C.J. Bevan of Counsel. Messrs Green and Fleming told him that the funds would not be released unless Mr Goldberg gave an undertaking on behalf of the Marshalls to seek a ruling from the "Australian Court supervising the Estate" as to the entitlements of Mrs Marshall and Ms Carruthers.

1. On 23 May 2003 Mr Goldberg wrote to Mr Prescott complaining that he had improperly provided Mr Neal with the letter of 22 March 2002. He asserted that his conduct involved a "breach of client/legal professional privilege". He was asked to advise within seven days why Mrs Marshall should not be entitled to various forms of relief against him. Although the letter did not expressly say so, it was common ground between the parties that this letter terminated Mr Prescott's retainer.

The release of the funds and the commencement of the Marshall proceedings

1. Thereafter Mr Goldberg and Mr Green corresponded in relation to the release sought by Lycoming as a condition of the settlement. One issue that arose concerned a clause of the release pursuant to which Mr Goldberg agreed to indemnify Lycoming in respect of claims made by third parties, including workers' compensation insurers. In Mr Marshall's case there was a potential for such a claim in that, as noted, the GIO had paid out $200,000.00 to Ms Carruthers (see [19] above).

1. Eventually on 13 June 2003 Mrs Marshall signed a Deed of Release. On 25 June 2003 Mr Goldberg wrote to Kreindlers providing three undertakings required by Kreindlers before the proceeds of the settlement were released, namely undertakings not to release the funds without an order of this Court (other than to pay IMF's fees), to receive the funds on behalf of the estate of the late Mr Marshall and to serve all Court processes on Ms Carruthers by way of personal service.

1. Over the next few weeks the funds were received by Turner Freeman with various fees paid to IMF. In the end result an amount of AUD$420,115.57 was retained.

1. On 17 July 2003 Mr Prescott wrote to Mr Goldberg requesting, inter alia, that he retain the funds pending determination or agreement as to the respective entitlements and confirmation that Mr Goldberg's clients would make application to this Court. Mr Goldberg responded the next day disputing various matters, but confirming those two.

1. By October 2003 proceedings had not been commenced. On 24 October 2003 Mr Prescott wrote to Mr Goldberg querying, inter alia, whether litigation had been or would be commenced and sought to have the settlement proceeds placed in an interest bearing joint account rather than a non-interest bearing account.

1. Mr Goldberg responded on 4 November 2003. One matter he raised was the inappropriateness of Mr Prescott continuing to act when his firm had previously acted as "the former estate solicitors in the US proceedings".

1. By this time the GIO had learned of the possibility of recovery. It wrote letters to each of Mr Prescott and Mr Goldberg asserting its right to be repaid out of the proceedings of the settlement of the Pennsylvania proceedings. Mr Goldberg emphatically rejected the suggestion. However in a letter dated 25 November 2003 Mr Prescott stated that there was a comity of interest between his client and the GIO. He suggested that the GIO fund and indemnify his client.

1. On 30 April 2004 Mrs Marshall commenced the Marshall proceedings by filing a statement of claim in the Equity Division of this Court. Ms Carruthers was named as a defendant. Mrs Marshall sought declaratory relief to the effect that she was entitled to the entire net proceeds of settlement of the Pennsylvania proceedings retained by Turner Freeman.

1. Mr Prescott continued to press the GIO for funding. On 30 July 2004 he advised the GIO's solicitors that, having regard to her previous experience, his client would not under any "circumstances run any action to challenge [Mrs Marshall's] summons on her own account". On 4 August 2004 the GIO solicitors advised Mr Prescott that they would agree to fund his appearance at the first return date of the proceedings. There was a great deal of correspondence between Mr Prescott and the GIO's solicitors from this point through to 2005. It suffices to state that from late 2004 to June 2005 the GIO funded Mr Prescott to act for Ms Carruthers on an interim basis (defined in the FASOC as the "GIO interim litigation funding agreement").

1. On 15 October 2004 a defence and a cross claim were filed on behalf of Ms Carruthers. Prescotts were the solicitors on the record. Teece Hodgson & Ward were retained as their agents. The cross claim sought a declaration to the effect that Ms Carruthers was entitled to the entirety of the amount retained by Turner Freeman.

1. From this point into 2005 Mr Prescott continued to correspond with the GIO's solicitors in an effort to finalise a funding agreement. On or around 9 June 2005 Ms Carruthers and the GIO entered into an agreement pursuant to which the latter agreed to fund the former's costs and disbursements in relation to the Marshall proceedings, and indemnify her against any adverse costs order or agreement to pay Mrs Marshall's costs (the "GIO Final Litigation Funding Agreement"). Paragraph F of the recitals to the agreement records that Ms Carruthers did not wish to defend the proceedings or pursue her cross claim without funding from the GIO.

1. In the meantime, on 8 June 2005 Mr Prescott wrote to Mr Rieders seeking his opinion on various questions of law said to be relevant to Ms Carruthers' defence of the Marshall proceedings. On 13 June 2005 Mr Rieders provided a short response. He suggested that they hire an expert in Pennsylvania law and noted that he could not give any legal advice in "connection with the Whyalla Airlines Crash".

1. On 10 June 2005 Teece Hodgson & Ward wrote to Mr Prescott on behalf of Ms Carruthers terminating his retainer. The letter suggested that this had occurred because he was perceived to be "a material witness". Mr Prescott was asked to provide the materials in his possession including the contact details for Mr Rieders.

1. Mr Prescott responded on 21 June 2005. In his letter he stated that, based on his discussions with the GIO's solicitors, "a continued role [was] intended" for him notwithstanding the termination of his retainer. To that end he continued to correspond with Mr Rieders in an endeavour to obtain a suitable expert in Pennsylvanian law. He discussed the provision of answers to particulars from solicitors from Teece Hodgson & Ward and corresponded with the GIO's solicitors in relation to the progress of the proceedings.

1. On 21 October 2005 an attorney practising in Williamsport, Pennsylvania, Cynthia Person, provided an opinion to the effect that the finding in the FPA proceedings that Ms Carruthers was the de facto spouse of Mr Marshall meant that, under the law of Pennsylvania, Ms Carruthers was entitled to half of the net proceeds of the settlement.

1. There was other correspondence in the period after 8 June 2005 which was said by Mrs Marshall and Kim Marshall to constitute a breach of confidence by Mr Prescott. I address this below.

The Prescott Proceedings

1. On 31 October 2005 a notice of motion was filed on behalf of Ms Carruthers in the Marshall proceedings which sought an extension of time to comply with earlier orders of the Court. In support of the motion a solicitor from Teece Hodgson & Ward filed an affidavit. It seems that the affidavit revealed the ongoing assistance being provided to Ms Carruthers by Mr Greenwell and Mr Prescott. On 4 November 2005 Turner Freeman wrote to each of them referring to the previous retainer from Mrs Marshall and demanding they each provide a detailed undertaking to the Court to, inter alia, not act against her interest or assist others to do so. They threatened to take proceedings if their demand was not complied with.

1. Mr Prescott responded in a letter dated 8 November 2005. He denied that he ever acted for Mrs Marshall and stated that his "role was no more than that of the co-ordinator of the various plaintiff solicitors acting for the various families in the crash". He addressed other matters raised by Mr Goldberg and refused to provide any undertaking.

1. On 9 November 2005 Mrs Marshall commenced the Prescott proceedings by filing a summons in the Equity Division of this Court. She named each of Mr Prescott and Mr Greenwell as defendants. The summons sought final and interlocutory injunctions restraining them from, inter alia, acting against the interests of Mrs Marshall, including by way of providing assistance to Ms Carruthers or her solicitors in the Marshall proceedings.

1. The application for interlocutory orders was returnable on 16 November 2005. On that day Mr Greenwell proffered various undertakings to the Court. The proceedings against him were dismissed by consent. In the case of Mr Prescott, Barrett J made interlocutory orders by consent to the effect of that sought in the summons (the "Interlocutory Orders"). Mrs Marshall proffered the usual undertaking as to damages.

1. As by then it had become apparent that, at its highest, Ms Carruthers could only claim half of the net proceeds of the settlement, Turner Freeman gave notice that it proposed to distribute half of the amount that it was holding. On 8 March 2006 Windeyer J dismissed an application by Ms Carruthers to restrain that from occurring. Mrs Marshall's evidence was that the monies were released and applied for the payment of legal costs.

1. Mrs Marshall then moved to strike out Ms Carruthers' defence and cross claim. On 8 August 2006 Macready AsJ struck out certain parts of those pleadings and gave her liberty to replead. However his Honour did not enter judgment against her, finding that there was a "real controversy which should go to trial".

1. In December 2006 Tuner Freeman obtained a rival opinion from an attorney in Pennsylvania, Lynn Evans. Ms Evans addressed a number of questions including who was entitled to share in the proceeds of the settlement monies. Ms Evans concluded that Ms Carruthers was not so entitled. Ms Evans was also asked whether "Linda Hope Carruthers [was] named or referred to, directly or indirectly in the [complaint] as a party to or a beneficiary of the Pennsylvania proceedings?" Ms Evans noted those parts of the complaint that I have extracted above which refer to "surviving family members" and "next of kin" and continued:

"In Pennsylvania, there is no statutory definition of 'family members'. However, the Probate, Estates and Fiduciaries Code does provide a rule of interpretation for wills which construes such terms as 'family', 'heirs' and 'next of kin.' 20 Pa.C.S.A. 2514(4)

2514. Rules of Interpretation

In the absence of a contrary intent appearing therein, wills shall be construed as to real and personal estate in accordance with the following rules:

(4) Meaning of 'heirs' and 'next of kin', etc.; time of ascertaining class, - A devise or bequest of real or personal estate whether directly or in trust, to the testator's or another designated person's 'heirs' or 'next of kin' or 'relatives' or 'family' or to 'the persons thereunto entitled under the intestate laws' or to persons described by words of similar import, shall mean those persons, including the spouse, who would take under the intestate laws if the testator or other designated person were to die intestate at the time when such class is to be ascertained ...

Under the foregoing rule of interpretation, the 'family members,' 'heirs' and 'next of kin' of Neil Marshall are his surviving spouse and his child. As discussed hereinabove at Paragraph 111(A)(1), under Pennsylvania law, Mr. Marshall's spouse was Margaret Lesley Marshall, and his sole child was Kim Neil Marshall. There is no provision for any person equivalent to a de facto spouse in this rule of interpretation. Therefore, Ms. Carruthers is not named or referred to as a party to or beneficiary of the Pennsylvania proceedings."

The resolution of the Prescott Proceedings and the Marshall Proceedings

1. On 28 February 2007 final orders were made by Macready AsJ by consent in the Prescott proceedings (the "Consent Orders"). The first order made was a declaration (the "Consent Declaration") which provided:

"1. The first defendant was retained to act as a solicitor for the plaintiff, Kim Neil Marshall and the estate of the late Neil Marshall, on or about 29 May 2001 until about May 2003 in the following matters or proceedings, and to act for them in the various capacities referred to below (hereafter which are referred to collectively as 'the first defendant's retainer'), and in the case of sub-paragraph (e) below, he was retained to so act in addition to the firms of Turner Freeman, Lawyers, of Sydney, Kreindler & Kreindler, Attorneys, of New York and Rieders Travis Humphrey Harris Waters & Waffenschmidt, Attorneys, of Williamsport, Pennsylvania, namely:

(a) for the plaintiff in her own right or as executrix of the estate of the late Neil Marshall or in respect of her son, Kim Neil Marshall;

(b) for the plaintiff on behalf of her son, Kim Neil Marshall, in respect of which she acted as his agent to retain and instruct the first defendant;

(c) for Kim Neil Marshall thereafter on his own behalf;

(d) in the investigation of the plaintiff's legal rights in Australia and the United States of America (whether) arising out of the Whyalla Airline Plane crash on 31 May 2000 ('the Whyalla Airlines plane crash investigation');

(e) in relation to the conduct of proceedings Complaint no. 4: CV02-918 filed on 29 May 2002 at Williamsport (Docket of Judge Muir) in the US District Court for the Middle District of Pennsylvania ('the Pennsylvania Proceedings');

(f) in relation to the conduct of an inquest into the death of the late Neil Marshall in the Coroner's Court of Adelaide ('the Coroner's Court proceedings');

(g) in relation to the conduct of proceedings in the District Court of South Australia pursuant to the Civil Aviation (Carriers Liability) Act, 1959 (Cth) and the Civil Aviation (Carriers Liability) Act, 1962 (SA) ('the South Australian proceedings'),

(all of which are hereafter collectively referred to as 'the former proceedings')." (emphasis in original)

1. Orders 2(a), (b) and (c) of the Consent Orders permanently restrained Mr Prescott from accepting a retainer to act against Mrs Marshall, accepting a retainer to assist or otherwise assisting Ms Carruthers and "waiving or otherwise communicating ... the terms of any confidential communication which he has had with [Mrs Marshall]" in respect of his retainer respectively. Order 2(d) restrained him permanently from "otherwise breaching any obligation of confidence which he owes to [Mrs Marshall] in respect of [his] retainer, the [Pennsylvania proceedings] or the [Prescott proceedings]". Order 3 restrained him from communicating with various entities such as Teece Hodgson & Ward or Kreindlers about his retainer, the Pennsylvania proceedings or the Prescott proceedings. Order 4 required him to deliver up various documents.

1. Order 8 of the Consent Orders required Mr Prescott to pay Mrs Marshall's costs "of and incidental to this proceeding, insofar as they related to claims for relief made against [Mr Prescott] (whether wholly or partly), up to and including the date of [the] orders, as agreed or assessed". An annotation to the orders recorded an agreement between the parties that Mrs Marshall would not make any application for any further order as to costs of the proceedings against Mr Prescott, adding that such further costs were "incurred of an incidental to the determination of the issues remaining for determination as between the plaintiff and the intervenor which are referred to in order 7 above". This appears to relate to the costs being incurred in a privilege dispute between Mrs Marshall and Ms Carruthers which had spilled over into the Prescott proceedings. This annotation recorded an agreement by Mrs Marshall to not seek any further costs from Mr Prescott incurred after the orders in relation to her ongoing dispute with Ms Carruthers. It is not necessary to consider this further. Although it was contended on behalf of Mr Prescott that Order 8 precluded recovery of part of the damages sought by Mrs Marshall, it was not contended that the annotation to that order had that effect. The amount of party/party costs that Mr Prescott was ordered to pay in the Prescott proceedings was $114,156.15.

1. On 23 July 2008 the Marshall proceedings were resolved by the entry of final orders also by consent. As noted, half of the amount retained by Turner Freeman had previously been distributed. These orders included a declaration to the effect that Mrs Marshall was entitled to the remainder and Ms Carruthers was not. They also included orders requiring Ms Carruthers to pay Mrs Marshall's costs of the proceedings on a party/party basis. The enforcement of that order was expressed to be discharged if the amount of $150,000.00 was paid on behalf of Ms Carruthers.

The solicitor/client costs incurred by Mrs Marshall

1. Mrs Marshall retained a very experienced solicitor and costs assessor, Gordon Salier, to report on the "amount of costs recoverable on a solicitor/ client basis in respect of the work done" for each of the Prescott proceedings and the Marshall proceedings. Mr Salier worked from a comprehensive bill prepared in each matter by a costs consultant, Chris Davitt. In the Prescott proceedings Mr Salier assessed them at $239,775.72. As noted they were assessed on a party/party basis as $114,156.14 and that amount was paid on behalf of Mr Prescott. The difference is $125,619.58.

1. In the Marshall proceedings Mr Salier assessed the costs payable on a solicitor/client basis in the amount of $334,565.88. As noted an amount of $150,000.00 was paid on account of her costs on behalf of Ms Carruthers. The difference is $184,565.88.

1. In his report Mr Salier identified a difficulty in assessing the costs in that he did not have any objections from Mr Prescott, although he stated he had regard to the objections lodged on behalf of Mr Prescott during the assessment of the costs on a party/party basis. He did not have any such objections with the Marshall proceedings. In cross examination Mr Salier accepted that this was an "inherently awkward task" but he nevertheless attempted to adopt a "devil's advocate" role. Even allowing for this limitation I accept Mr Salier's assessments as representing a fair and reasonable assessment of the costs incurred by Mrs Marsall in both sets of proceedings.

Kreindlers retainer and the complaint

1. At this point it is appropriate to note two matters that were the subject of various submissions which I do not consider are necessary to resolve.

1. First, the parties devoted a considerable amount of energy to establishing whether or not Ms Carruthers had a retainer with Kreindlers. As best as I can ascertain the perceived significance of that circumstance was that it was thought to be relevant to the analysis of whether or not Kreindlers' insistence upon Mr Goldberg providing undertakings as a condition of his receiving the proceeds of the net settlement was a consequence of any conduct on the part of Mr Prescott. Some of the submissions appeared to treat this issue as having significance to the scope of Mr Prescott's retainer and any fiduciary duty he owed to Mrs Marshall (and Kim Marshall), as well as relevant to the respective entitlements to the confidential information in the possession of Mr Prescott.

1. I will address these latter issues but I do not accept that it is necessary for me to determine whether Ms Carruthers had a retainer with Kreindlers. Kreindlers' retainer was governed by the law of New York (Fleming v Marshall [2011] NSWCA 86; 279 ALR 737 at [81] per Macfarlan JA, Spigelman CJ and Sackville AJA agreeing). Both the ILF funding agreement executed by Ms Carruthers and Mr Goldberg's letter of 22 March 2002 appear to provide some support for the contention that Ms Carruthers retained Kreindlers, although it is not clear whether and, if so, when those documents were provided to Kreindlers. Even if Ms Carruthers did not directly retain Kreindlers, then it may be that under the laws and customs regulating its conduct Kreindlers either owed her some form of duty or perhaps only a duty to Mrs Marshall not to allow her to be placed at risk of breaching any fiduciary duty she might owe to someone such as Ms Carruthers, notwithstanding Mr Goldberg's offensive letters demanding that it forward the money unconditionally.

1. For present purposes it is only necessary for the Court to address what Kreindlers appears to have regarded as its obligations which I do below at [209]ff. Otherwise I have already addressed at [31] the significance of the letter of 22 March 2002 which passed between Mr Goldberg and Mr Prescott. It is further considered below (at [118]). What is critical to determining this case is what were the arrangements between Mrs Marshall and Mr Goldberg on the one hand and Mr Prescott and Ms Carruthers on the other. Ultimately it was Mr Prescott's retainer and duty that were at issue in this proceedings, not Kreindlers'.

1. A second and related issue was whether the complaint filed in the Pennsylvania proceedings meant that the proceedings were filed on behalf of Ms Carruthers. In cross examination Mr Goldberg was asked and answered as follows:

"Q. You understood that the effect of the words in your letter of 22 March 2002 where you said, 'This agreement is signed on behalf of Kim Marshall and Linda Carruthers', was that a retainer ... being effected with Kreindler and Kreindler by Margaret Marshall on behalf of Linda Carruthers, correct?

A. Yes, I think so."

1. However Mr Goldberg said that he came to the belief that this view was wrong because "[i]t became apparent after the complaint was filed that I may well have been wrong and I spent quite a bit of time after that sorting that out". This appears to be a reference to the terms of complaint subsequently filed in Pennsylvania. As best as I can ascertain Mr Goldberg asserted that he construed the complaint as not embracing Ms Carruthers as a potential claimant. It was suggested to Mr Goldberg in cross examination that this was a contrivance that he made up a number of years later. I do not consider it necessary to determine whether he did genuinely form this opinion during the period 2002 to 2003, although I note that at no point prior to his letter of 8 April 2003 did he take up this particular aspect of his concerns about the complaint with Mr Green or explain to anyone that he provided his letter of 22 March 2002 because he had in some way been misled.

1. As the emphasised portions from the court process filed in the Pennsylvanian proceedings make clear (see [33]), on its face the pleaded claim was certainly capable of including Ms Carruthers. Prima facie she falls with the descriptions "surviving family member", "the decedent's survivors" and "next of kin". The subsequent advice obtained from Ms Evans rejects this. I find that opinion unconvincing as it uses the interpretation rules appropriate for wills whereas the complaint is a pleading. In any event this is all irrelevant. The advices that Mr Green provided to Mr Goldberg during 2002 and 2003 make it clear that he considered it at least arguable that Ms Carruthers may have had some entitlement. The terms of the complaint did not appear and would not have appeared to him (or Mr Prescott) to be inconsistent with Ms Carruthers ultimately recovering. Mr Green, however, made it clear that he would not enter the fray on that issue, but instead only saw his firm's role as being to maximise the amount recovered.

The fiduciary duty owed by Mr Prescott to the plaintiffs

1. Before addressing the pleaded case, it is necessary to address three related topics, namely: (i) the duration and scope of any fiduciary duty owed by Mr Prescott to Mrs Marshall and Kim Marshall; (ii) the effect of any estoppels created by the Consent Orders; and (iii) the allegation that Mr Prescott breached an obligation of confidence after the termination of his retainer.

1. What was the duration of any fiduciary duty owed by Mr Prescott to Mrs Marshall and Kim Marshall? The Consent Declaration records that the period of Mr Prescott's retainer to act on behalf of Mrs Marshall was from "on or about 29 May 2001 until about 23 May 2003". As noted it was common ground that it was terminated by Mr Goldberg's letter to Mr Prescott of 23 May 2003. The authorities binding on this Court at first instance are clear in holding that the "fiduciary relationship which subsists between solicitor and client comes to an end with the termination of the retainer" (Prince Jefri Bolkiah v KPMG (a Firm) [1999] 2 WLR 215 at 225 per Lord Millet; Beach Petroleum NL v Abbott Tout Russell Kennedy [1999] NSWCA 408; 48 NSWLR 1 at [205]). Further, any contractual duty of loyalty also comes to an end at that point (Kallinicos v Hunt [2005] NSWSC 1181; 64 NSWLR 561 at [76]). Ultimately in the plaintiffs' final written submissions in reply dated 9 October 2013 (at [47]) Counsel for the Marshalls, Mr Bevan, conceded that this was the effect of the authorities, although he sought to preserve his clients' position by formally submitting that they were wrongly decided in this respect.

1. This conclusion has a significant impact on Mrs Marshall's case. I address the specific allegations made in the FASOC against Mr Prescott below. As will become clear, a significant number of them are predicated on the existence of an ongoing duty of loyalty by Mr Prescott in the period after the termination of his retainer. As a consequence they must be rejected.

1. However the authorities also recognise that "after termination or conclusion of a retainer, [a solicitor] has an ongoing duty to preserve the confidentiality of confidential information disclosed by a former client" (Cooper v Winter [2013] NSWCA 261 at [97]; Kallinicos at [76]). Ultimately Mr Bevan's submissions concerning Mr Prescott's conduct after 23 May 2003 were principally directed to establishing that he breached this obligation. I address the suggested misuse of confidential information by Mr Prescott below.

1. What was the scope of the fiduciary duty owed by Mr Prescott to Mrs Marshall and Kim Marshall during the period of his retainer? In the defendant's submissions dated 15 August 2013, counsel for Mr Prescott, Mr J.C. Kelly SC, identified the following passage from Beach Petroleum as having particular significance:

"[188] Even in the case of a solicitor client relationship, long accepted as a status based fiduciary relationship, the duty is not derived from the status. As in all such cases, the duty is derived from what the solicitor undertakes, or is deemed to have undertaken, to do in the particular circumstances. Not every aspect of a solicitor client relationship is fiduciary. Conduct which may fall within the fiduciary component of the relationship of solicitor and client in one case, may not fall within the fiduciary component in another.

[189] The relationship of solicitor and client has at its core an element of confidence and influence which equity will preserve and protect. Nevertheless, the confidence and influence are not always so pervasive as to require equitable intervention in every facet of the relationship.

[190] The primary thrust of Beach's submissions was to challenge the conclusions of Rolfe J that there was no relevant retainer and hence no conflict between the duty ATRK owed to Beach and the duty they owed to other companies in the group which retained them in all or any of the relevant transactions. In so far as this Court accepts that any retainer was broader than that found by his Honour, it will be necessary for this Court to identify the scope of the retainer in order to determine the scope of the fiduciary duty.

...

[194] The existence and scope of the duty may derive from a course of dealing. In a passage frequently cited with approval from Birtchnell v The Equity Trustees, Executors and Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384, a partnership dispute, Dixon J, as his Honour then was, said at 408:

'The subject matter over which the fiduciary obligations extend is determined by the character of the venture or undertaking for which partnership exists; and this is to be ascertained, not merely from the express agreement of the parties, whether embodied in written instruments or not, but also from the course of dealing actually pursued by the firm.'"

(emphasis added)

1. The above passages from Beach Petroleum warrant a consideration of the "course of dealing" in the period around the time of his retention between Mr Prescott and Mrs Marshall and Mr Goldberg in acting on her behalf and on behalf of Kim Marshall to determine the scope of the fiduciary duty. Mr Bevan pointed to the terms of the Consent Declaration as exhaustively defining the scope of Mr Prescott's retainer and any fiduciary duty he owed. While I accept that it is necessary to consider the Consent Declaration closely and not proceed inconsistently with it, as I will explain, it does not purport to exhaustively describe Mr Prescott's retainer, and it is not determinative of the scope and content of any fiduciary duty he owed.

1. The first three sub-paragraphs of the Consent Declaration record "for" whom Mr Prescott acted, namely Mrs Marshall in her own right, or as executrix of the estate, Mrs Marshall on behalf of her son and Kim Marshall. Subparagraphs (d) to (g) then specify the matters in respect of which Mr Prescott was retained, namely "in the investigation of" Mrs Marshall's and Kim Marshall's legal rights arising out of the "Whyalla Airlines plane crash investigation", and "in relation to the conduct" of "the Pennsylvania proceedings", the "Coroner's Court proceedings" and the "South Australian proceedings".

1. Nowhere in the Consent Declaration is it stated that Mrs Marshall and Kim Marshall were the only persons who retained Mr Prescott in relation to the subject matters listed in subparagraphs (d) to (g). Thus a consideration of the circumstance known to all that Mr Prescott was also retained by Ms Carruthers in relation to at least the subject matter listed in subparagraph (e) is not precluded by the terms of the Consent Declaration.

1. In the plaintiffs' written submissions dated 15 August 2013 Mr Bevan contended that the Consent Declaration records that Mr Prescott was retained to, inter alia, "conduct" the Pennsylvania proceedings (at [65]). This misstates the declaration. As noted it only refers to him being retained "in relation to the conduct" of the Pennsylvania proceedings. In fact the declaration does not purport to specify precisely what Mr Prescott "under[took] or is deemed to have undertaken" (Beach Petroleum at [188]) when retained "in relation to the conduct of" the proceedings nominated in subparagraphs (e) to (g). Nor does it purport to state exhaustively what the "course of dealing" between Mr Prescott and his "clients" was in relation to those matters (Beach Petroleum at [194]).

1. The defendant's written submissions dated 15 August 2013 pointed to a number of circumstances as bearing upon what Mr Prescott undertook and the relevant "course of dealings" (Beach Petroleum at [194]). These were said to be significant to any assessment of the scope of the fiduciary duty owed by Mr Prescott.

1. The first has already been noted, namely that it was known by all that Mr Prescott was retained by Ms Carruthers. Mr Prescott announced that he acted for Ms Carruthers at the outset in his first telephone call with Mrs Marshall (see [15]). It was restated in his letter of 31 May 2001 (see [17]) and Mr Goldberg was clearly aware of that at the time he wrote his letter of 22 March 2002 to Mr Prescott (see [29]). Ms Carruthers was the "client" of Mr Prescott that Mr Goldberg was referring to in his email of 29 July 2002 (see [38]). Neither Mr Goldberg nor Mrs Marshall were ever advised that Mr Prescott had ceased to act for Ms Carruthers. Further, in stating that he was acting for Ms Carruthers, Mr Prescott clearly identified her as a person who wished to assert a claim or at least a potential claim for compensation in respect of Mr Marshall's death. Any doubt about this was dispelled by his letter of 31 May 2001.

1. None of these allegations has any substance. In relation to (iii), for the reasons already noted and as was eventually conceded on behalf of the Marshalls, Mr Prescott's fiduciary duty to them did not survive the termination of the retainer. In relation to (i), there was no attempt made to substantiate the existence of any express or implied term to the effect contended for that somehow survived the termination of Mr Prescott's retainer. As noted, in Kallinicos Brereton J found that the contractual duty of loyalty did not survive the termination of the retainer.

1. Similarly, in relation to (ii) Mr Bevan's initial submissions of 15 August 2013 (at [123] to [125]) simply asserted the existence of a duty of care and did not attempt to differentiate between the period during and after the termination of the retainer. It articulated the duty in terms that reflect a fiduciary duty, namely to "promote and protect only the interests of the [Marshalls] in connection with the Pennsylvania proceedings". A duty of care expressed in those terms can never arise (Roads and Traffic Authority of NSW v Dederer [2007] HCA 42; 234 CLR 330 at [49] per Gummow J). Hence the original misconception about the effect of the decision in Beach Petroleum NL v Abbott Tout Russell Kennedy [1999] NSWCA 408; 48 NSWLR 1 informs this aspect of the Marshalls' claim. In any event, in respect of the period after the breach of the retainer and, in the absence of any properly developed argument, I do not accept that Mr Prescott owed Mrs Marshall a duty of care given that he was at that time retained to act on behalf of Ms Carruthers. To impose a duty of care on Mr Prescott in those circumstances would be inconsistent with his duty to Ms Carruthers. (It may be that Mr Prescott was in breach of the duty of care he owed Ms Carruthers if he was impeded in acting on her behalf for any reason of any obligation of confidence he owed Mrs Marshall: see Spector v Ageda [1973] Ch 30. However that is irrelevant for present purposes.)

1. In relation to the claimed breach of an obligation of confidence, I have already addressed in detail the alleged confidential information that Mr Prescott is said to have misused in the period after the termination of his retainer. It has not been established that Mr Prescott misused any confidential information exclusive to the Marshalls in the period up to his ceasing to act on behalf of Ms Carruthers in the Marshall proceedings.

1. The conspiracy allegation also fails. It follows from the above that the acts of Mr Prescott in procuring funding were not "unlawful". Most significantly there is not a scintilla of evidence that either the GIO or Ms Carruthers agreed with Mr Prescott or anyone else to commit any "unlawful acts".

1. In relation to the allegation of a conspiracy by lawful means, as noted, it is necessary to establish a predominant purpose to harm the Marshalls' interests (Crofter). In the plaintiffs' written submissions in reply dated 19 August 2013 at [15], Mr Bevan sought to address this as follows:

"In reply to [the defendant's written submissions dated 15 August 2013 at [47]], the evidence of the intention to harm the interests of the Marshalls is the conduct taken to secure an entitlement to the fund for Carruthers without any real insight whatsoever into the Pennsylvania law which was later relied on to support it. A reckless disregard for the rights of one client to disadvantage another client is evidence of intention to harm the second client because there is no bona fide belief held as to the prosecution of any legitimate rights of the first client which are said to compete with the latter client's rights."

1. This submission was directed to a period after the termination of Mr Prescott's retainer with Mrs Marshall so that the suggestion he had two clients is ill founded. Otherwise I do not accept that Mr Prescott had anything other than a bona fide belief that Ms Carruthers had an arguable claim. Mr Prescott, Ms Carruthers and the GIO acted to further her and the GIO's legitimate interests which suffices to defeat the allegation of a conspiracy by lawful means (Crofter supra). Generally, the proposition that a solicitor who procures funding for their client thereby enters into a tortious conspiracy with their client and their funder to harm the other party to litigation is simply bizarre.

1. I reject so much of Mrs Marshall's case that alleges that Mr Prescott is liable to her because he engaged in the Prescott's first, second, third and fourth GIO misconduct.

The (so called) Prescott's Third Marshall Misconduct

1. This alleged misconduct was defined in [79] of the FASOC as follows:

"Although he ceased to act for Carruthers in the Carruthers proceeding in the formal sense, Prescott continued to act for her informally by seeking information on Pennsylvania law to support her defence and cross-claim in the Carruthers proceeding and did so in breach of his obligation of confidence to the [Marshalls], in breach of his fiduciary duty to the [Marshalls], in breach of his contractual duties to the [Marshalls] and in breach of his tortious duties to the [Marshalls] under the terms of the Prescott retainer (Prescott's third Marshall misconduct)." (emboldened emphasis in original; italicised emphasis added)

1. There is no doubt that from the period of the cessation of his retainer by Ms Carruthers in June 2005 until he was injuncted in November 2005 Mr Prescott continued to assist Ms Carruthers in her defence of Mrs Marshall's proceedings. However this allegation is more narrowly focused and only concerns his conduct in "informally ... seeking information on Pennsylvania law".

1. Paragraphs 80 and 103 to 107 make the same allegations in respect of this so called misconduct as I have noted in [221] above in relation to the Prescotts second Marshall misconduct.

1. The findings I have made in relation to the allegations of breach of fiduciary duty, negligence and breach of the retainer at [222] to [223] apply with equal force to Prescott's third Marshall misconduct.

1. Sub-paragraph 80(d) of the FASOC alleges that the Prescott's third Marshall misconduct "constituted ... a breach of the fiduciary duty he owed to the plaintiffs and the obligation to keep confidential the information he had obtained during his retainer from them". Paragraph 106(a) is in similar terms. In the discussion at [163] to [192] I rejected the suggestion that Mr Prescott misused any information exclusively confidential to the Marshalls, save that I observed that prima facie he appears to have misused the information that was passed on to him by Mr Greenwell, as referred to in Mr Prescott's letter of 11 August 2005 ([179]).

1. However, I decline to make any finding to that effect because no such allegation is raised by the pleaded case. The pleaded case in this respect is confined to an abuse of information acquired during the course of Mr Prescott's retainer with the Marshalls of which this is not. It also only alleges a breach of the obligation of confidence by Mr Prescott in "seeking information on Pennsylvania law". There is nothing to suggest that Mr Prescott used any of the information he obtained from Mr Greenwell for that purpose.

1. This may appear to involve an overly strict approach to the pleaded case. However it is necessitated by the observations at [193] to [194] and the course of the submissions on this topic which I traced at [143] to [149]. The Marshalls only identified the confidential material with precision in their final written submissions in reply dated 9 October 2013 and in doing so implicitly suggested that its deployment involved a misuse. This course precluded Mr Prescott from having a proper opportunity to consider whether what was finally alleged against him was consistent with the FASOC. In those circumstances no departure from the pleaded case should be permitted.

1. The conspiracy allegations in respect of Prescott's third Marshall misconduct fail for the same reasons they did in relation to Prescott's first, second, third and fourth GIO misconduct.

The (so called) Prescott's Fourth Marshall misconduct

1. I have already addressed this at [197] above.

Mr Prescott's estoppel defences

1. Only Mrs Marshall was a party to the Prescott proceedings and the Marshall proceedings. Thus, to the extent that recovery was sought in these proceedings of the solicitor/client component cost of those proceedings, then only Mrs Marshall can recover them. Kim Marshall's rights of recovery are limited to the claim for exemplary and punitive damages.

1. Mr Kelly SC contended that, even if Mrs Marshall established a cause of action against Mr Prescott, she was not able to recover the solicitor/client component of her costs in the Prescott proceedings and the Marshall proceedings. He contended that the issue of the costs of those proceedings has already been determined by the costs orders that were made in each of those proceedings. For the reasons that follow I accept Mr Kelly SC's contention so far as it concerns the solicitor/client component of the Prescott proceedings, but reject it so far as it concerns the solicitor/client component of the Marshall proceedings.

1. At the outset Mr Bevan contended that Mr Prescott "waived" his right to rely on these defences because it was said they had been withdrawn in January 2011 and only reinstated this year following an application by Mr Prescott to amend his defence (Marshall v Prescott (No 4) [2013] NSWSC 455) (plaintiffs' written submissions dated 15 August 2013 at [143]). He pointed to the cost and disbursements incurred in the meantime as well the "stress" of the litigation occasioned in the interim when there was no risk of these defences being upheld. Although the submission referred to the defences being "waived", the footnote to the submission referred to numerous passages from Commonwealth v Verwayen [1990] HCA 39; 170 CLR 394 which discuss both estoppel and waiver. Other than the incurring of costs which can be addressed if necessary, the balance of the claimed detrimental reliance was not the subject of any evidence so that no question of any estoppel sufficient to preclude these defences being relied on even arises. As for waiver, only Toohey and Gaudron JJ in Verwayen found that there was some form of "waiver" that precluded the Commonwealth's reliance on the limitation defence. Further, Gaudron J did so in the context of "deliberate action or inaction which has resulted in a changed relationship to which the parties will be held whether or not detriment is actually established" (Verwayen at 485). This has no relevance to this case and thus the particular form of waiver found in Verwayen by their Honours has no application here.

1. In relation to the solicitor/client costs of the Prescott proceedings, Mr Kelly SC pointed to a stream of judicial statements that precludes one party from recovering further costs from another in a separate action where there was a judicial pronouncement of the parties' respective costs entitlements in a previous proceedings (defendant's written submissions dated 15 August 2013 at [144] to [150]). Thus in Anderson v Bowles [1951] HCA 61; 84 CLR 310, Dixon, Williams, Fullagar and Kitto JJ stated at 323:

"It is a general rule that where it is sought to include costs incurred in other proceedings in the damages arising upon a cause of action, costs shall not be included, if as a matter of judicial determination or by a positive rule of law they are treated as costs which should be borne by the party suing. Accordingly it is not possible to recover as part of such damages the difference between party and party costs awarded to the plaintiff in the original litigation and the costs as between solicitor and client which he has incurred: Barnett v. Eccles Corporation (1900) 2 QB 423, at p 428. Further, if costs are expressly withheld by the court in the original proceeding none can be recovered in the action for damages brought by the plaintiff from whom they were so withheld."

1. This passage does not specify the precise basis for this "general rule". At least in cases involving a previous "judicial determination" it seems that it is a form of res judicata in that the entitlements of the parties in respect of costs merge in the order that is made. In cases where the "rule of law" precluding recovery is a statute then presumably the general rule derives from an ascertainment of a statutory intention that the legislation deals exhaustively with the topic of costs, although it is not necessary to consider this further.

1. Mr Kelly SC also referred to Avenhouse v Hornsby Shire Council (1998) 44 NSWLR 1. In Avenhouse one issue that arose on appeal was whether in proceedings in this Court against the Council for negligence the appellants could recover their costs of litigating against the Council in the Land and Environment Court at the conclusion of which there had been "no order as to costs". The Court of Appeal upheld the trial judge's refusal to allow recovery of those costs. Sheller JA, with whom Mason P and Priestley JA agreed, found (at 37) that:

"[The appellants] having agreed that there should be no order for costs, they cannot, in my opinion, now seek to go behind that agreement by claiming the costs as damages in the present proceedings."

Of precise relevance to this case, Sheller JA noted (at 36) that:

"Had [the appellants] obtained an order for costs in the Land and Environment Court, principle would suggest that they could not recover in the present proceedings the difference between the costs assessed and the actual costs or expenses they incurred."

1. Sheller JA did not refer to Anderson in his judgment. Presumably this is so because his Honour treated "no order as to costs" as only an agreement between the parties that precluded later recovery and not as a "judicial determination or ... positive rule of law" as referred to in Anderson.

1. Mr Bevan contended that there is an exception to the "general rule" stated in Anderson as expressed in the following passages from McGregor on Damages, 17th Ed (2003) at 632:

"More difficult are the cases where the now claimant claims that a separate tort was involved in instigating, assisting or causing the previous proceedings and sues for damages for that tort. Such torts could be malicious prosecution, false imprisonment or conspiracy. If the now claimant is thus capable of establishing a separate cause of action, it may be that he has found a sufficient peg upon which to claim as damages costs incurred by him in the earlier proceeding. Devlin L.J. in Berry v British Transport Commission [footnote: [1962] 1 Q.B. 306] certainly thought this should be so. He said:

'I find it difficult to see why the law should not now recognise one standard of costs as between litigants and another when those costs form a legitimate item of damage in a separate cause of action flowing from an additional wrong.' (emphasis added)

...

(c) Conspiracy. Conspiracy is another tort which might be held to arise from instigating, assisting or causing the previous proceedings. This would be analogous to malicious prosecution but would also require an agreement between two parties to bring or defend the previous proceedings: it might however be wider in that, for instance, it could, unlike malicious prosecution under the present law, apply to all civil actions. On principle there is no reason why the now claimant should not recover as damages costs incurred by him in the previous proceedings. In Hathaway v Barrow [footnote: (1807) 1 Camp. 151] the now defendants had unsuccessfully brought a petition against the now claimant and costs had been awarded against them. The now claimant claimed to recover as damages the costs he had incurred above those awarded, but the court refused their recovery, Sir James Mansfield saying that those already awarded 'must be considered as satisfaction'. This, however, is the only case and it is a decision of 1807, which was long before the general principles were worked out by the courts; moreover, it is at odds with the general view of Devlin L.J. already referred to. [footnote: In Berry v British Transport Commission [1962] 1 Q.B. 306, CA at 322. See para. 17-005, above]"

1. Mr Bevan contended that Mrs Marshall falls within this exception as she sues in conspiracy (plaintiffs' written submissions dated 15 August 2013 at [165]). I reject this contention for two separate reasons.

1. First, at this point I am dealing with Mrs Marshall's claim for the solicitor/ client costs of the Prescott proceedings. Mrs Marshall does not allege that any "separate tort" on the part of Mr Prescott was "involved in the instigat[ion], assisting or causing" of those proceedings, as opposed to Ms Carruthers' defence of the Marshall proceedings. Thus, even if the first passage from McGregor on Damages was to be read as a definitive statement of an exception to the general rule stated in Anderson and the words "will be" were substituted for "may", it does not assist Mrs Marshall's claim to recover the solicitor/client costs component of the Prescott proceedings.

1. Second, I do not accept that the exception alluded to in the passage from McGregor on Damages operates in circumstances where there has been a previous order addressing costs by a Court with full power to award them. In Avenhouse at 35 Sheller JA noted this possible exception as stated in earlier edition of McGregor on Damages, and then discussed various cases that bore upon the existence of the exception (namely Berry; Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674 and Jack L. Israel Ltd v Ocean Dynamic Lines SA & Ocean Victory Ltd [1982] 2 Lloyd's Rep 88). His Honour then referred to Hanrahan v Ainsworth (1985) 1 NSWLR 370 in which a plaintiff claimed damages for the defendant's alleged abuse of legal process by instituting defamation proceedings and sought to recover costs incurred as a result of those defamation proceedings.

1. In Hanrahan at 375 Hunt J stated:

"The first defendant objects that the actual temporal loss upon which the plaintiff relies in the present case (the expenses which he incurred in travelling to see his legal advisers) cannot be recovered in these proceedings. Those expenses, he says, are costs properly recoverable in the earlier defamation action, and only in that action. The expenses necessarily incurred in defending criminal proceedings are recoverable in a subsequent action for damages for malicious prosecution: Savile v Roberts (1698) 1 Ld Raym 374 at 378; 91 ER 1147 at 1150. But, where the action for malicious prosecution is based upon a civil action and not upon criminal proceedings, those costs are recoverable in the earlier action, and not in the action for malicious prosecution: Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674 at 690. This is because the successful party in civil proceedings (but not in criminal proceedings) is - so the theory goes - compensated in those proceedings by an order for costs, and the law does not permit that successful party's entitlement to costs in the earlier civil proceedings to be litigated a second time in the claim for damages for malicious prosecution: Berry v British Transport Commission [1962] 1 QB 306 at 320; Coleman v Buckingham's Ltd [1963] SR (NSW) 171 at 176, 177-178; 80 WN 593 at 596-597, 598.

The first defendant's argument does not, however, take into account the fundamental differences between an action for damages for abuse of process and an action for damages for malicious prosecution. (Those differences are also recognized in Coleman v Buckingham's Ltd (at 179; 599).) The difference principally relevant here is the need in the action for malicious prosecution, but not in the action for abuse of process, for the plaintiff to plead and to prove that the earlier proceedings have terminated in his favour. Thus there is not in the action for abuse of process (as there is in the action for malicious prosecution) necessarily an adjudication in the earlier proceedings in relation to the present plaintiff's entitlement to costs. If the earlier proceedings had terminated in favour of the present plaintiff, then his expenses would have been recoverable in those proceedings and they would not support his subsequent action for abuse of process. But, where those earlier proceedings have not so terminated in favour of the present plaintiff, I see no reason why his expenses in relation to those proceedings should not validly support his present claim." (emphasis added)

1. In Avenhouse at 36 Sheller JA specifically cited the latter part of this passage but I take his Honour as having endorsed the entirety of Hunt J's analysis. Hunt J's analysis was such that it precluded recovery in the latter proceedings of solicitor/client costs in earlier (civil) proceedings where there was an "adjudication in the earlier proceedings" as to costs. There was no such adjudication in Hanrahan but there was in this case. I take Sheller JA (with whom Mason P and Priestley JA agreed) in Avenhouse as having endorsed Hunt J's analysis in Hanrahan which confines the operation of any exception of the kind identified in McGregor on Damages in the manner I have stated at [248].

1. Otherwise it should be noted that this analysis is only apposite to the circumstance where the earlier proceedings were conducted in a court exercising a civil jurisdiction with full powers to award costs on a variety of bases and in respect of a range of circumstances. Since Hanrahan and even Avenhouse the powers of this Court hearing civil proceedings to award costs have only expanded so that the rationale for these decisions is even more appropriate now than it ever was. However the power to award costs in, say, criminal proceedings is more limited. Thus a different approach has been adopted where the earlier proceedings involve a criminal prosecution (see Berry at 317, 323 to 332 and 336 to 339).

1. Mr Kelly SC sought to apply the same analysis to Mrs Marshall's claim to recover the solicitor/client costs component of the Marshall proceedings. Mr Bevan contended that the authorities relied upon by Mr Kelly SC and noted above have no application where the earlier proceedings were not between the same parties. He contended that, as a matter of principle, there was no difficulty with a party recovering from, say, their solicitor all the costs they incurred in other proceedings against a different party, provided that the usual preconditions for recovery such as causation and remoteness, etc, are satisfied. I agree (see Provident Capital Ltd v Papa (No 2) [2013] NSWCA 156 at [13] to [17], and cases cited at [14], per Macfarlan JA with whom Sackville AJA agreed).

1. Mr Kelly SC sought to rely on an Anshun estoppel as precluding recovery by Mrs Marshall of the solicitor/client costs in the Marshall proceedings. As I understand this contention it concerns Mrs Marshall's alleged failure to either seek a solicitor/client costs order against Ms Carruthers in the Marshall proceedings or to make such an application against Mr Prescott in the Marshall proceedings, presumably under ss 98 and 99 of the Civil Procedure Act 2005. It is not necessary to address all the potential difficulties with this contention because it suffices to state that I am not satisfied that it was "unreasonable" for Mrs Marshall not to have made any such application (Anshun at 602 per Gibbs CJ, Mason and Aickin JJ). To have done so would have put at risk the favourable settlement she had negotiated with Ms Carruthers. Moreover I consider that a litigant in her position was entitled to take stock and consider the financial effect of all the costs orders and costs she had incurred before deciding to embark upon further litigation.

Proportionate liability

1. Mr Prescott's defence pleaded that Mrs Marshall's and Kim Marshall's claim was an apportionable claim and that there were concurrent wrongdoers, namely Mr Greenwell and Kreindlers. No submissions were advanced in support of the defence. In view of my findings, it is neither necessary nor possible to address it.

Causation and quantum

1. Various submissions were made by Mr Kelly SC concerning whether any conduct of Mr Prescott was causative of the solicitor/client costs claimed by Mrs Marshall. I have already addressed one matter relevant to causation in respect of the period prior to the termination of Mr Prescott's retainer to act on behalf of Mrs Marshall and Kim Marshall (at [210]). In view of my rejection of the entirety of the pleaded allegations against Mr Prescott it is not possible to address the balance of the points raised.

1. In relation to quantum, I have already addressed Mr Kelly SC's submission concerning Mr Salier's assessment. Obviously, the claim for exemplary or punitive damages fails.

Orders

1. I will order that the proceedings be dismissed and hear the parties as to costs.

1. Accordingly the Court orders that:

(1)   The proceedings be dismissed.

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