Masters v Dobson Mitchell and Allport

[2014] TASSC 31

[2014] TASSC 31

COURT:  SUPREME COURT OF TASMANIA

CITATION:                Masters v Dobson Mitchell & Allport [2014] TASSC 31

PARTIES:  MASTERS, Alicia
  v
  DOBSON MITCHELL & ALLPORT
  BUGG, Timothy

FILE NO:  871/2009
DELIVERED ON:  3 June 2014
DELIVERED AT:  Hobart
HEARING DATE/S:  24 – 28, 31 March and 1 April 2014
JUDGMENT OF:  Pearce J

CATCHWORDS:

Professions and Trades – Lawyers – Duties and liabilities – Solicitor and client – Advising client.
Studer v Boettcher [2000] NSWCA 263, followed.

Aust Dig Professions and Trades [1171]

REPRESENTATION:

Counsel:
             Plaintiff:  In person
             Defendants:  D J Gunson SC and M D Duvnjak
Solicitors:
             Defendants:  Gunson Williams

Judgment Number:  [2014] TASSC 31
Number of paragraphs:  91

Serial No 31/2014

File No 871/209

ALICIA MASTERS v DOBSON MITCHELL & ALLPORT
and TIMOTHY BUGG

REASONS FOR JUDGMENT  PEARCE J

3 June 2014

1. Between 1986 and 2004 Timothy Bugg acted as solicitor for Alicia Masters in a claim against the Commonwealth Bank of Australia ("CBA").  A writ was issued against the CBA on 12 April 1989 by a legal firm in Burnie of which Mr Bugg was then a partner.  On 1 September 1993 he became a partner of another firm, Dobson Mitchell & Allport ("DMA") in Hobart.  On 27 February 2004, about 15 years after the action was commenced, Mr Bugg signed a consent memorandum for judgment for Mrs Masters against the CBA for $115,000.  That sum was inclusive of her legal costs of $15,000.  The consent memorandum was lodged with the Supreme Court and final judgment was entered on 4 March 2004.  A cheque for $100,000 was sent to Mrs Masters by DMA on 1 April 2004. 

2. Mrs Masters claims that Mr Bugg was negligent and in breach of his retainer in the settlement of the claim against the CBA.  She says that her claim should never have been settled in that amount and, as a result, she lost the opportunity of pursuing a greater claim against the CBA.  She claims that her instruction to Mr Bugg to settle the claim was not informed by any legal advice about the merits of her claim against the CBA, that Mr Bugg pressed her to settle the claim on those terms when it was not in her interest to do so, that her instruction to settle the claim was sought and given when she was not able to give informed consent to the settlement, and that the claim against the CBA should have proceeded to trial.

3. Mr Bugg contends that Mrs Masters' instruction to settle the CBA action was properly obtained and that his advice to her was appropriate.  He had sole carriage of Mrs Masters' action against the CBA.  The claim against DMA is brought only on the basis that the firm owed the same contractual and tortious duties to Mrs Masters as Mr Bugg, or on the joint and several liability of partners.  Thus, unless the claim against Mr Bugg succeeds, the claim against DMA cannot succeed.

4. Resolution of this action thus requires:

   (a)an inquiry into the strength of Mrs Masters' claim against the CBA;

   (b)a determination of whether Mr Bugg acted negligently or in breach of his retainer by advising settlement and consenting to judgment;

   (c)consideration of the circumstances of the settlement; and

   (d)a determination of whether, if negligence or breach is established, it caused Mrs Masters any and, if so, what loss.

Representation at the trial

1. Mrs Masters' writ against Mr Bugg and DMA was filed in person on 5 October 2009.  In the course of the interlocutory proceedings she, for a period, had legal representation.  The statement of claim on which this action came to trial was prepared by her legal representative.  However by the time the action came to trial Mrs Masters was again unrepresented.  She is originally from the Philippines.  She came to Tasmania in 1980.  Although she has lived in Tasmania for more than 30 years her spoken English language skills are not perfect.  I am satisfied that she had a sufficient understanding of the proceedings so the trial could be conducted fairly.  Her evidence and submissions during the trial disclosed that she is an intelligent person.  She professed to have a good understanding of written English and the ability to write well.  The documents I saw that she prepared tend to confirm that is so.  Nevertheless, in addition to all of the other issues that normally arise in the case of unrepresented litigants, it was necessary to allow some time and patience to enable her to communicate and convey her meaning effectively.  She conducted herself at all times with courtesy and respect.

2. The defendants were represented by David Gunson SC.  Mr Gunson's conduct of the trial was characterised by fairness and patience.

The circumstances that led to the action against the CBA?

1. In 1980 Mrs Masters married a Tasmanian man, Bill Masters.  They lived together on a rural property owned by his parents, Ernest and Alma Masters, at Lobster Creek Road near Ulverstone in north-west Tasmania.  Alicia Masters grew vegetables at the property and sold them locally.  Some time before 1983 her husband's son, Brett Masters, suggested that they should go into business growing and selling vegetables.  With the encouragement of her husband and his parents they found a suitable property, owned by a Mr and Mrs Linger, not far away, at Ironcliffe Road near Penguin.

2. The Ironcliffe Road property was purchased for $120,000 by Alicia Masters and Brett Masters as tenants-in-common in equal shares.  The transfer to them was registered on 11 November 1983.  The purchase was partly financed by a loan of $40,000 from the vendors, Mr and Mrs Linger.  That loan was secured by a mortgage.  The balance of the purchase money was lent by CBFC Limited, a company associated with the CBA, to Bill and Alicia Masters, Ernest and Alma Masters and Brett Masters, secured by a mortgage over the land to CBFC.  It was a bridging loan because Ernest and Alma Masters had agreed to sell their property at Lobster Creek Road and to use the proceeds to pay, at least in substantial part, the CBFC loan.  Ernest Masters also owned a property at South Rianna with Bill Masters.  It was agreed that the South Riana land was to be sold to pay the loan from Mr and Mrs Linger.  Alicia Masters' evidence is that it was the agreement of all parties to the transactions that Ernest and Alma Masters would be repaid their loans as and when income from the new farm business permitted, or on the sale of the farm if the venture did not succeed.

3. Alicia and Brett Masters formed a partnership.  They established other banking facilities.  The Commonwealth Trading Bank approved an overdraft initially limited to $10,000 secured by a mortgage over the land.  They opened a joint cheque account in the names B W and A Masters, account number 67 406 152145.  Cheques from the account are in evidence.  Some are headed Commonwealth Trading Bank.  Some are headed Commonwealth Bank of Australia.  Nothing turns on the distinction.  The cheques are all drawn on the same account.  It was a condition of the cheque account that no cheques would be paid or withdrawals permitted by the CBA against that account unless authorised by both parties.

4. At the relevant time Brett Masters also had another business, Coastal Pumping Equipment, which he conducted in partnership with a Lawrence Woodcock.  Coastal Pumping Equipment also established banking facilities with the CBA.

5. In March 1984 the Lobster Creek Road property owned by Ernest and Alma Masters was sold.  The net proceeds of sale of $72,795.84 were paid to CBFC in reduction of the $80,000 bridging loan.  The balance of the loan continued and the CBFC mortgage remained in place.  The loan from Mr and Mrs Linger was paid following the sale of a property at South Riana owned by Bill and Ernest Masters although a dispute arose about a small balance and the mortgage was not discharged. 

6. The vegetable growing business, which Mrs Masters referred to as the farm, commenced towards the end of 1983.  Mrs Masters said that she worked hard.  She was the person primarily responsible for the farm work.  The business had customers throughout the State.  She did not drive so she left it to Brett Masters to attend to most of the administration of the business.

7. By the end of 1984 the business had run into financial difficulty.  The same applied to Coastal Pumping Equipment.  The banking facilities fell into arrears.  Memoranda from the CBA to CBFC respectively dated 10 October 1984 and 15 October 1984 record that the "clients have arranged a temporary extension on their account for working capital to $24,000".  A Commonwealth Trading Bank document dated 15 November 1984 entitled "Letter of Request and Acknowledgement" was executed, the effect of which is a request by Alicia Masters and Brett Masters to the CBA to make advances to Coastal Pumping to be secured by the existing mortgage over the farm owned by Alicia and Brett Masters.

8. On 17 December 1984 the then manager of the Ulverstone branch of the CBA, Mr G R Basham, wrote a memorandum to CBFC recording that there had been a "complete re-arrangement of affairs and loans" of A and B W Masters.  The memorandum also recorded that the CBA had taken over the business of Coastal Pumping Equipment and that its indebtedness to the CBA was linked to the farm by the Letter of Request and Acknowledgment.

9. According to Mrs Masters she did not know that there were any problems with the farm finances until just after Christmas 1984 when she and her husband were served with a summons for an unpaid account.  She became concerned.  She said that she could not understand why there would be an unpaid account when she was working hard and it seemed to her that the sale of vegetables was going well.  On 5 February 1985 the Acting Manager of the CBA, Stephen Wass, sent a letter to Mr B W Masters and Mrs A Masters.  It records that cheques totalling $1,404.90 were paid by the bank on the proviso of a deposit of $3,000 that had not been received and expresses dissatisfaction at the conduct of the joint account.  Mr Wass visited the farm on 8 February 1985.  He made a note of that visit, the terms of which are relevant to the strength of Mrs Masters' case against the CBA and will be referred to later in these reasons.

10. On the same day he wrote an expansive typed file memorandum P23 extending to three pages.  It includes the following passages:

    "During these discussions we learnt that Mr Masters (Mrs Masters's husband and Brett's father) runs and owns the farm and has controlling say.  This was arranged this way following his divorce some years ago to his first wife and the following property settlement. 

    When visiting the farm today, Mr Masters Senior was very much alarmed to hear the extent of the debt.  All communications with customers has been changed to the farm in lieu of Brett at his business address.  Mr Masters will now become fully involved with the financial running of the farm and has promised that the account will be in order from sale of produce by the end of June 1985".

    The memorandum goes on to report about the prospects of the farm and expresses confidence about clearance of the debt by the end of June 1985.

11. The situation did not improve.  A CBA memorandum written by Mr Basham dated 3 April 1985 records that the farm overdraft had increased to $43,295.  The Coastal Pumping Equipment debt to the CBA was even greater.

12. In July 1985 a cheque dated 22 July 1985 from Edgell Birds Eye payable to A & B Masters for $6,237.43 was deposited by Brett Masters into a Commonwealth Trading Bank account in his sole name.

13. In mid-1985 the farm was sold.  Completion of the sale took place on 31 July 1985.  The balance sale proceeds of $113,014.80 were paid to the CBA in Ulverstone.  The manager, Mr Basham, wrote to Mr B W and Mrs A Masters on 1 August 1985 advising that the amount received by the CBA was distributed as follows:

    "Repay debt on account 15 2145  $46,658.90

    Repay personal loan No 16 0831  $5,558.75

    Repay CBFC Ltd Commercial Loan  $9,171.78

    Credited to loan account – Masters and Woodcock $51,625.37"

14. On 7 August 1985 Alicia Masters wrote to Australian Guarantee Corporation Limited ("AGC") requesting prepayment to her of a General Credits debenture stock in the sum of $3,600.  I would infer from the way that the letter is written that it was probably prepared by and sent at the instigation of the CBA. The letter expresses that the CBA had already advanced $2,500 to Mrs Masters against the debenture to pay accounts "overdue following sale of the farm property".  On 28 August 1985 the CBA received $3,596.90 from General Credits.  It paid $1,058.60 of that sum into an account in the sole name of B W Masters.  It paid the balance of $2,538.30 into an account in the name Alicia Masters FDL (Fully Drawn Loan).

15. By April 1986 a Mr I H Gresham was manager of the Ulverstone branch of the CBA.  On 2 April 1986 Mr Gresham wrote an internal memorandum after having been contacted by Mrs Masters.  She had requested copies of the statements and cheques for the joint account, and claimed that many of the cheques issued on the account were signed by Brett Masters only.

16. Mrs Masters first consulted Mr Bugg on 7 April 1986.  She was with her husband.  Mr Bugg already knew Mr Masters.  He had acted for him in matrimonial proceedings between Mr Masters and his former wife, Valma Masters.  Later Mr Bugg had also acted for Mr Masters in a commercial dispute, in the course of which Mr Bugg met Mrs Alicia Masters.  Mr Bugg made a handwritten note of his meeting with Mr and Mrs Masters on 7 April 1986.  In part, the note records that Mr Bugg was told that Brett Masters "seems to have taken all the money that was deposited in account in the name of Mrs Masters and B W Masters".  He was also told that Brett Masters may be bankrupt.  The file note then continues: "Wife guaranteed son's business debts at Commonwealth Bank with farm money.  Query whether he has written cheques without getting signature of wife".  Mr and Mrs Masters did not have copies of the cheques issued on the joint account nor any of the bank security and account documents.

17. Mr Bugg wrote to the CBA on 9 April 1986.  He asked for particulars of the accounts and copies of the cheques, statements and bank documents.  Mr Bugg's letter was directed to the CBA in Ulverstone.  Unknown to Mr and Mrs Masters and Mr Bugg, Mr Gresham, the manager, wrote an internal memorandum to the Hobart office of the bank enclosing all of the 168 cheques issued on the account and confirming that many of them, totalling $43,191.85, had only been signed by one party.  None of the documents were, at that stage, supplied to Mr Bugg or Mr and Mrs Masters.

18. Mr and Mrs Masters saw Mr Bugg again on 12 May 1986.  Mr Masters told Mr Bugg that he considered that his ex-wife was involved in taking money from the joint account.  Mr Masters also told Mr Bugg, I infer because of what the bank manager, Mr Gresham, may have said to him, that some cheques had been signed only by Brett Masters.  Mr and Mrs Masters also instructed Mr Bugg that they thought that a cheque payable to Alicia Masters and Brett Masters and drawn by Edgell Birds Eye in the sum of $6,237.43 had been paid by the CBA to Brett Masters only.

Action against the CBA

1. To understand the issues that were to be considered at the time the action brought by Mrs Masters against the CBA was settled, it is necessary to understand something of how the action proceeded.  The action was not commenced until 12 April 1989, about three years after Mr Bugg was first instructed.  Mr Bugg said that Mr and Mrs Masters had been considering suing the bank for some time but it was not until just before the writ was issued that he obtained instructions to proceed.  A statement of claim was delivered on 3 August 1989.  Mr Bugg still did not have, by then, copies of the cheques.  Mrs Masters claimed, in general terms, repayment of the amount debited from the joint account for cheques, plus the $6,237.43 paid on the Edgell Birds Eye cheque, the $1,058.60 from the proceeds of the debenture stock paid to Brett Masters and interest.

2. In March 1990 the copy cheques and account statements were provided to Mr Bugg by the CBA's solicitor.  Just before then the CBA's solicitor spoke to Mr Bugg.  He told him that the claim would be vigorously resisted and that the CBA would assert that, even though cheques were signed only by Brett Masters, they were nevertheless used for farm expenses of the partnership.  Having been provided with the copy cheques and statements, Mr Bugg spoke to Mr and Mrs Masters on 13 June 1990 and then prepared an amended statement of claim dated 20 June 1990.  That document lists 73 cheques dated between 2 October 1984 and 28 February 1985 for the total sum of $38,726.35 alleged to have been signed by Brett Masters only, but paid contrary to the terms of the authority on the joint account requiring signature by Mrs Masters also.  The amended pleading claims:

   (a)$19,363 being half of the value of the unauthorised cheques referred to in the statement of claim;

   (b)$33,177.95, being half the amount of further "unauthorised debits" against the account of $5,558.75, $9,171.78 and $51,625.37 totalling $66,355.90;

   (c)$7,289.19 being half the amount of three Edgell Birds Eye cheques for $4,840.96, $3,500 and $6,237.43 (one cheque referred to in the original statement of claim and two additional cheques) alleged to have been wrongly paid by the CBA to Brett Masters;

   (d)$2,500 Mrs Masters alleged that the CBA had wrongly paid to Brett Masters from the AGC debenture stock;

   (e)$1,058.60 Mrs Masters alleged the CBA had wrongly paid to Brett Masters from the AGC debenture stock; and

   (f)interest.

3. Mr Bugg overlooked delivering the June 1990 statement of claim to the solicitors for the CBA.  The CBA filed and delivered a defence dated 2 November 1990.  That defence responded to the 3 August 1989 statement of claim.  Apart from a couple of inconsequential admissions the defence disputes all of Mrs Masters' claims. 

4. Some time later, when the amended statement of claim was shown to the CBA's solicitors, they asserted that part of the new claim, for the value of the Edgell Birds Eye cheques for $4,840.96 and $3,500, was out of time.  Mr Bugg accepted that contention and conveyed his view to Mr and Mrs Masters, whom he said, accepted that was the case.

5. Thereafter the action proceeded at an even slower pace.  Mr Bugg saw Mr and Mrs Masters on 22 October 1993.  He spoke to them about the CBA's willingness to attempt to settle the claim.  On 5 December 1994 the CBA's solicitor wrote to DMA offering to settle the action for $4,200.00 inclusive of costs.  On 16 June 1995 Mr Bugg discussed the amount of the claim with Mr and Mrs Masters.  Mr Masters commented to Mr Bugg that they should be seeking $2,000,000.  Mr Bugg told him that such a figure could not be sustained.  On 30 June 1995 the CBA's solicitor indicated a willingness to seek instructions to offer around $10,000.  On 24 July 1995 the CBA gave notice of a payment into court of $8,347.79.  On 23 January 1998 a settlement conference was conducted by a mediator.  In the course of the conference the CBA offered $30,000 inclusive of costs.  On 21 April 1998 the CBA gave notice of another payment into court of $30,000.

6. None of the offers made by the CBA were accepted.  Mr Bugg sought, but did not receive, instructions to put some counter proposal.  Mr and Mrs Masters had much greater figures in mind.  On 31 July 2001 Mrs Masters wrote to Mr Bugg calculating her claim at $178,695.92 plus interest compounding at 16.5% amounting to $1,766,052.16, or, on the basis that she had lost the income from the farm for 16 years, figures ranging between $3,711,653.71 and $9,535,987.00.  Mrs Masters instructed Mr Bugg to proceed with the action.  On 24 September 2002 Mrs Masters sent a fresh calculation of her claim at $167,049.70 plus interest compounding at 18% amounting to $2,785,093.77. 

The 24 February 2004 mediation and judgment in the action

1. The mediation of Mrs Masters' action against the CBA was conducted at the Supreme Court in Launceston on 23 February 2004.  Mr Bugg was present with both Mr and Mrs Masters.  The CBA was represented by its solicitor, Mr Morris, and an officer of the CBA, the same officer who had attended the first court mediation in 1998.  More will be said about the mediation and the events that immediately followed it shortly because Mr Bugg's conduct in and after the mediation comprises an important part of Mrs Masters' claim.

2. In preparation for the mediation Mr Bugg prepared a new statement of claim.  Although the pleading had not been formally amended, the new document had been delivered to the CBA's solicitor and the mediation was conducted on the basis that it set out Mrs Masters' claim.  It claimed $119,343.78 and compound interest from 31 July 1985.  The amount of $119,343.78 was made up as:

   (a)$43,191.85, being the amount of the unauthorised cheques;

   (b)$66,355.90, being the total of three "unauthorised debits" for $5,558.75, $9,171.78 and $51,625.37 respectively;

   (c)$6,237.43, being the value of Edgell Birds Eye cheque;

   (d)$2,500, being part of the AGC debenture stock;

   (e)$1,058.60, being part of the AGC debenture stock.

3. A few things should be said about this statement of claim:

   ·     No defence to it was filed or delivered.  However the issues it raised had been the subject of earlier pleadings and discussions between Mr Bugg and the CBA's solicitors over many years, including at the earlier mediation.  The statement of claim formed the basis of the discussions at the 23 February 2004 mediation, but not all of the issues discussed at the mediation were pleaded in that document or other pleadings.  Again, more will be said of this later in these reasons.

   ·     The claim included the full value of the cheques and unauthorised debits, not just half, as in the March 1990 pleading.

   ·     The claim for two of the Edgell Birds Eye cheques was removed, based on Mr Bugg's acceptance that the claim for those two cheques was out of time.

   ·     Particulars of the interest claim were calculated on a separate document based on the Reserve Bank cash interest rate, bringing the claim for and principal and interest to $584,026.49.

4. In the course of the mediation the CBA offered Mrs Masters the sum of $100,000 inclusive of costs to settle her claim.  The offer was rejected.  Later in the mediation the CBA increased its offer to $110,000 inclusive of costs.  The offer was left open until Friday 27 February 2004.  On 27 February 2004 Mr Bugg telephoned Mrs Masters.  After speaking with her Mr Bugg phoned Mr Morris.  Mr Bugg offered to settle Mrs Masters' claim for $115,000 inclusive of costs.  After taking instructions Mr Morris phoned back and accepted the offer.  He initially requested that the settlement be effected by an agreement with a confidentiality clause but later agreed that there would, instead, be a consent judgment.  Mr Bugg prepared and signed a consent memorandum for judgment.  He sent it to Mr Morris.  I infer that Mr Morris signed and filed the memorandum because, on 4 March 2004, the Registrar of the Supreme Court signed a final judgment in terms that the plaintiff recover from the defendant the sum of $115,000 inclusive of costs.  A copy of the judgment was sent by letter to Mrs Masters on 10 March 2004 together with notes of Mr Bugg's costs and fees totalling $15,000.

5. On 30 March 2004 Mrs Masters telephoned Mr Bugg and told him that she did not agree to settle her claim and that she wished to proceed with it. On 1 April 2004 Mr Bugg wrote to Mrs Masters confirming that he had received the settlement funds and enclosing a cheque for $100,000.00.

The strength of the case against the CBA

1. Mrs Masters' claim pleaded against the CBA falls to be considered in its various parts.  First, I will deal with the cheques.  There was no issue in the CBA action, nor in this action, that cheques written on the account held jointly by Mrs Masters and Brett Masters required, according to the terms of the account, the signature or authority of both parties.  There is also no issue in this action that the CBA paid, from that account, cheques totalling $43,191.85 signed only by Brett Masters, contrary to the authority given by Mrs Masters.  Those facts do not, however, necessarily entitle Mrs Masters to recover the full amount of the cheques.  As a joint account holder Mrs Masters is entitled to recover: Ardern v Bank of New South Wales [1956] VLR 569; [1956] ALR 1210. However Ardern is also strong authority for the proposition that the measure of her damages was half of the sums for which the cheques were drawn: Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505.

2. The CBA also raised other issues relevant to Mrs Masters' entitlement to the value of those cheques.  First it pointed out that the cheques appeared to have been used to meet farm expenses. If that were true, Mrs Masters obtained the benefit of the account moneys, even though the cheques were paid without her authority.  Mrs Masters, in this trial, did not initially accept that was so, but later in her evidence agreed that some cheques were payable to farm creditors.  Mr Bugg gave evidence that on 13 June 1990 he had been given copies of most of the cheques and, during a meeting with Mr and Mrs Masters, went through each cheque with them.  He made a note of the meeting.  He recorded that they identified for him each of the cheques that were for farm expenses and he marked those cheques accordingly.

3. In defence of this part of the claim, the CBA also relied on the note written by its acting manager, Mr Wass, when he visited the farm on 8 February 1985.  The note is headed "BW and A Masters A/C No 152.145" and is in the following terms:

   "Prior to visiting the farm today I noted the cheques drawn on the above account and subsequently paid have in fact only one signature.  Reference to the authority indicates 'Both must sign'.

   Took this matter up with Mrs and Mr (Bill) Masters today.  They stated that they were aware of this and that this was in order as far as they were concerned.  Mrs Masters agreed to call at the Bank to countersign cheques and fresh A22 – either to operate is to be taken.

   Statements of account are now to be posted to farm (Mrs and Mr(Bill)) at PO Box 125 Penguin 7316."

4. According to Mr Bugg, the CBA intended to rely on the evidence of Mr Wass, as recorded in the note, as evidence of some form of estoppel to deny recovery by Mrs Masters of the value of the unauthorised cheques.  Mr Wass gave evidence.  He was called by Mrs Masters.  He adhered to the terms of his note.  Mrs Masters denied that she told Mr Wass in February 1985, or at any other time, that she was aware of the cheques signed only by Brett Masters before that meeting and that she agreed to ratify the cheques and sign an amended authority.  Whatever the truth, it does not seem to me that Mr Wass' evidence could have constituted a strong defence to that part of Mrs Masters' claim.  Even if Mrs Masters did say what Mr Wass recorded in his note, it was well after the cheques were written and paid.  Although Mr Bugg said an estoppel was asserted by the CBA, I see no evidence that the CBA relied on what Mrs Masters said or suffered any detriment as a result of it.  There is, perhaps, more merit in the CBA's claim that the unauthorised cheques were, in any event, to Mrs Masters' benefit because they paid farm expenses.  That was a matter which Mr Bugg was properly required to consider and take into account.

5. The next part of Mrs Masters' claim I deal with arises from the repayment of her AGC debenture in August 1985.  The CBA received $3,596.90 from General Credits.  On 29 August 1985 it paid $1,058.60 of that sum into an account in the sole name of B W Masters.  It had no authority to do so.  Mrs Masters had a strong claim against the CBA for that sum.  The claim for the balance is less certain.  After completion of the sale of the farm in July 1985 Mr and Mrs Masters purchased a caravan to live in.  They borrowed $2,500 to enable that purchase.  Part of the AGC debenture was to repay that small loan.  Mrs Masters contends that the caravan was repossessed because the CBA, instead, paid that balance of her debenture proceeds to Brett Masters.  The evidence does not support that contention.  A deposit slip in evidence shows that, on 29 August 1985, $2,538.30 was credited by the CBA to an account in the name Alicia Masters FDL (Fully Drawn Loan).  It seems likely that the funds were taken in discharge of the amount she owed to the CBA.  It also seems likely that the money that she thought had been paid to the vendor of the caravan had been taken by Brett Masters who, instead, wrote a personal cheque that was dishonoured.  That part of the claim against the CBA is weak.

6. The next aspect of Mrs Masters' claim arises from the manner in which the CBA dealt with the balance proceeds after the sale of the farm was settled on 30 July 1985.  The bank paid $46,658.90 in discharge of Mrs Masters and Brett Masters partnership overdraft.  No claim is made about that payment in the statement of claim against the CBA, even though Mrs Masters said, in her evidence in this action, she was not aware that the overdraft had blown out to that extent.  However Mrs Masters claimed from the CBA the sum of $66,355.90, being the total of three "unauthorised debits" of $5,558.75, $9,171.78 and $51,625.37 respectively.  Those sums are taken directly from the CBA's letter to Mr and Mrs Masters dated 1 August 1985 accounting for the proceeds of sale.

7. As to the sum of $9,171.78, Mrs Masters had no proper claim against the CBA.  The evidence establishes that sum was the balance owing to CBFC by Alicia Masters and Brett Masters on the loan used to purchase the farm, and secured by the mortgage discharged on sale.  The CBA was entitled to take that amount in return for the discharge of mortgage.

8. The evidence establishes that $5,558.75 was used to pay a personal loan in the name of Brett Masters.  The balance of $51,625.37 was paid in reduction of the debt to the CBA of Coastal Pumping Equipment, the partnership between Brett Masters and Lawrence Woodcock.  Mrs Masters received no benefit from those payments.  If the deduction of those sums by the CBA from the proceeds of sale was unauthorised, then Mrs Masters had a good claim for recovery. Again, the preponderance of authority is that Mrs Masters' claim was restricted to half of the amount paid away: Ardern v Bank of New South Wales (above) and Vella v Permanent Mortgages Pty Ltd (above).  See also Fidock v Legal Profession Complaints Committee [2013] WASCA 108 at [63].

9. The strength of Mrs Masters' claim against the CBA for those payments depended on the validity of the cross security documents relied on by the CBA.  To justify appropriation of those sums the CBA relied on the Commonwealth Trading Bank "Letter of Request and Acknowledgement" dated 15 November 1984.  In the course of the CBA action Mr Bugg also became aware of another document upon which the CBA relied.  It is in the form of a letter addressed to the Manager, Commonwealth Bank of Australia, Ulverstone.  The copy in evidence is not dated.  It bears what may be a Commonwealth Bank stamp, but any date on it is indecipherable.  It is apparently signed by L H Woodcock, J L Woodcock, B W Masters and A Masters.  It reads:

   "I/We hereby consent to the Bank from time to time granting to Coastal Pumping Equipment (hereinafter called the Debtor) advances and accommodation and other wise permitting the Debtor to incur liabilities to the Bank not exceeding the amount of one hundred and thirty seven thousand dollars ($137,000) against the security of my/our mortgages to the Bank dated (no date inserted) in favour of the Debtor.  I/We clearly understand that this amount does not include interest, Bank charges or any other monies with which the Bank shall be at liberty to charge and debit the account of the Debtor.

   I/We expressly acknowledge that the above Mortgage shall continue in full force and effect and in particular but without limiting the meaning of the acknowledgement, that my/our liability for the whole amount payable by me/us under the Mortgage is not in any way varied by this consent."

10. The CBA relied on those two documents to claim that it was entitled on or just before 1 August 1985, to retain and pay from the balance proceeds of the sale of the farm, Brett Masters' personal loan of $5,558.75, and the Coastal Pumping Equipment debt of $51,625.37.  According to Mr Bugg's evidence he was told by the CBA's solicitor that the Coastal Pumping Equipment debt to the CBA was for a greater sum.  An internal CBA memorandum dated 18 March 1985 lists the Coastal Pumping Equipment debt as in excess of $121,000.

11. Notwithstanding the 15 years or so between the delivery of the original statement of claim in Mrs Masters' CBA action and the mediation in 2004, the CBA had not pleaded its right to take those sums in its defence to Mrs Masters' claim.  Its reliance on those documents however was well known by Mr Bugg.  It was also well known to Mrs Masters, because, throughout the conduct of the CBA action, Mrs Masters maintained that, on the two documents on which the CBA relied, as well as on other bank documents, her signature was forged.  The allegation that her signature had been forged was well known to Mr Bugg and it was well known to the CBA.  The question of the alleged forgery occupied a considerable amount of Mrs Masters' attention.  In October 1995 she and her husband instructed Mr Bugg that documents had been forged.  In about 1996 Mr and Mrs Masters engaged a handwriting expert, a former police officer, to examine the documents.  He gave an opinion that he could not be certain because he had only been given copy documents to examine. A police investigation was commenced.  No charges were brought.  Consideration of the handwriting issue continued until at least 2001, although it was, according to Mr Bugg, something that was pursued by Mr and Mrs Masters independently of him, apart from Mr Bugg receiving a few telephone calls from police officers engaged in the investigation.  At one point the investigation was referred to the Director of Public Prosecutions.  On 13 March 2000 the CBA's solicitor told Mr Bugg that the CBA was aware of the police investigation and had been asked to produce original documents, but no evidence of forgery had been produced.

12. There are a number of things to be said about the forgery allegations:

    ·     the allegations of forgery had not been pleaded against the CBA, but the occasion to deliver such a pleading had not arisen because the CBA had not pleaded the contentious security documents in its defence;

    ·     by the 2004 mediation there was no forensic evidence of the forgery of Mrs Masters' signature on the CBA's security documents;

    ·     the allegation of forgery first made by Mr and Mrs Masters in 1996 and following is not consistent with the note made by Mr Bugg during his first meeting with Mr and Mrs Masters on 7 April 1986 that, "Wife guaranteed son's business debts at Commonwealth Bank with farm money";

    ·     in Mrs Masters' action against Mr Bugg and DMA there is no express allegation in the statement of claim that Mr Bugg was negligent or in breach of his retainer by failing to pursue allegations of forged bank documents in response to the CBA's reliance on those documents.

13. Although there was no convincing evidence of forgery, that is not to say that the CBA's case, based on those two security documents, meant that that part of Mrs Masters' claim against the CBA would inevitably have failed.  The Letter of Request and Acknowledgment which the CBA claimed entitled it to the benefit of the farm property as security for the Coastal Pumping Equipment overdraft debt is dated 15 November 1984.  The CBA took over the business of Coastal Pumping Equipment only a month or so later.  It is open to infer that the financial position of Coastal Pumping Equipment was already precarious at the time the CBA sought the security of that letter.  There is no evidence about the circumstances of the execution of that document, and the issue of whether those circumstances may have affected the validity of the security against the farm property was not explored.  The same can be said of the other letter purporting to link the debt of Coastal Pumping Equipment to the farm mortgage. 

14. Although some of Mrs Masters' letters of instruction to Mr Bugg indicated her view that she had lost, as a result of the CBA's actions, ongoing profits from the farm, there is no evidence that Mrs Masters had a claim for consequential loss that had any realistic prospect of success.  Leaving aside the interest claim that I will deal with separately, no claim for consequential loss was pleaded or particularised in the action against the CBA.  The "unauthorised debits" were made only after the farm was sold, although it was clear that the debt of Coastal Pumping Equipment played a part in the decision to sell.  Although Mrs Masters obviously had a different view, the evidence overwhelmingly suggests that, to the extent that the financial position of the farm business contributed to the decision to sell, it was not because the CBA wrongly paid the unauthorised cheques (most of which at least appear to be for farm expenses as the CBA later suggested), but because the business was not sufficiently profitable.  It was the performance of the farming business and the business of Coastal Pumping Equipment, rather than the wrongful payment of the cheques, that led to the sale of the farm.

15. I would conclude from all of the foregoing:

    ·     Mrs Masters' claim for $43,191.85 as the value of the unauthorised cheques had an arguable prospect of success limited to half the value of the cheques, attended by the further risk that the claim would fail because the cheques paid for farm expenses in any event;

    ·     the claim for $9,171.78 as part of the "unauthorised debits" of $66,355.90 had no prospect of success;

    ·     the claim for $5,558.75 and $51,625.37 as part of the "unauthorised debits" of $66,355.90 was likely restricted to half and, even as to that half, was attended by real risk of failure if the CBA successfully relied on the cross-security documents;

    ·     there was a viable claim for half of the $6,237.43, being the value of the Edgell Birds Eye cheque wrongly paid by the CBA to Brett Masters;

    ·     the claim for $2,500, being part of the AGC debenture stock had little prospect of success;

    ·     there was a strong claim for recovery of $1,058, being part of the AGC debenture stock.

16. It follows that, in my assessment, excluding interest, there was no realistic prospect of a successful claim for a sum greater than about $55,000.  A proportion of that claim sum was attended by considerable further risk.

17. That brings me to the question of interest. Given the lapse of time between the facts in 1984 and 1985 that were the basis of the cause of action, and the settlement of the action in 2004, a claim for interest, if established, obviously formed a significant part of Mrs Masters' claim. No entitlement to interest arose under s34 of the Supreme Court Civil Procedure Act 1932. Even if that section applied to this claim, no notice of a claim under that provision was given prior to the commencement of the action. No claim is made against the defendants for the failure to give such notice. In Tasmania, unlike other States, there is no authority or power to award interest on damages. Thus, the prospect of a successful claim for an award in the nature of interest against the CBA depended on proof of damages representing compensation for a wrongfully caused loss of use of money. Such loss may be assessed by reference to interest or income that would have been earned by investment of money withheld or paid away, or interest which was in fact paid on borrowings which otherwise would have been unnecessary or retired: Hungerfords v Walker (1989) 171 CLR 125; Doolan v Renkon Pty Ltd [2011] TASFC 4 at [96] – [97].

1. Doing the best I can on the evidence I have, I consider Mrs Masters' claim for damages in the nature of interest was very weak.  There was no evidence that she put any of her own money into the purchase of the farm.  She gave evidence that it was the mutual intention of her, her husband and Brett Masters, that on the sale of the farm the money advanced by Ernest and Alma Masters would be repaid to them.  Ernest and Alma Masters advanced $72,795.84 from the sale of their property.  A further sum of about $40,000 was advanced from the sale of the property jointly owned by Ernest and Bill Masters.  Both Ernest and Alma Masters are now deceased.  There is no evidence of when Alma died.  There is no clear evidence of when Ernest died, although Mrs Masters said that it was 14 – 16 years ago and thus he would have been alive when the farm was sold.  If I am wrong about that there is likely to have been an equivalent obligation to repay the respective estates.  Moreover, there is no evidence of what Mrs Masters' intention may otherwise have been concerning the use of money wrongly paid or retained by the CBA.  As to the unauthorised cheques, the only inference reasonably open is, if that money had not been paid from the account, it would have been used in the farming business.  I have no evidence that the farm was trading profitably.  The evidence strongly suggests the contrary.  As to other money retained by the CBA, apart from the general assertion that Mrs Masters and her husband intended, if possible, to buy another farm at some stage, there is no evidence that proves loss of earnings or interest unnecessarily incurred.

2. I am well aware that a court will do the best it can to assess damages of this kind on sparse material.  Nevertheless, the onus was on Mrs Masters to prove the suffering of a loss of the Hungerfords kind and the extent of any such loss.  Sufficient evidence was required to sustain such findings on the balance of probabilities: Doolan v Renkon Pty Ltd (above) at [101]. In this trial Mrs Masters led little evidence to establish she could have proved such a claim. It is possible that, at a trial of her action against the CBA, more evidence could have been called. However, any proper assessment of the strength of Mrs Masters' claim against the CBA for damages in the nature of interest must have taken into account the difficulties of proof I have referred to. In my assessment there was a high chance that such a claim could not have been proved.

The credibility and reliability of the evidence of Mrs Masters and Mr Bugg

1. Before I consider the case against Mr Bugg in more detail I should say something about my assessment of the evidence of Mrs Masters, on the one hand, and Mr Bugg on the other.  I am left in little doubt that Mrs Masters is an honest witness.  I did not perceive any attempt on her part to deliberately misrepresent the truth.  However I have considerable reservations about the reliability of her evidence in many key respects.  By the time this action came to trial she had been pursuing her grievances against and concerning the CBA for more than 19 years.  It is my strong impression that for much of that time the grievances have dominated her life.  She has developed and maintained a strong sense that she has been done an injustice that has not been vindicated.  She has pursued the action against Mr Bugg with great persistence, despite the disadvantage of being unrepresented, her unfamiliarity with the legal processes she has had to negotiate and in the face of considerable opposition.  She is to be admired for that.  Regrettably however, her evidence is now to be treated with caution, not just because of the passage of time, but because her perception of events is so coloured by the opinions and beliefs she so strongly holds.  This is not deliberate.  The reasons have their origins in events and issues that were not properly understood by her in the first place.  She perceives facts which are capable of explanation in a suspicious and distrustful way.  Many of the complaints she had about the CBA and the conduct of her business partner, Brett Masters, are justified.  But she, over time, and fuelled by the sense of injustice I have referred to, developed quite unrealistic expectations of what was capable of being achieved through the legal action she brought against the CBA.  That, in turn, affected her perception of Mr Bugg's actions and has affected her action against him and the evidence she gave.

2. Mr Bugg is not immune from criticism.  I will refer to some aspects of this later in these reasons.  However, unless I make an express finding to the contrary, wherever there is any relevant conflict between his evidence and that of Mrs Masters, I accept the evidence of Mr Bugg.  His evidence was given in a careful and considered fashion.  He made concessions where appropriate.  He did not attempt to reconstruct evidence.  I am well aware that he has the advantage of familiarity with the court room and with the notion of giving evidence.  Mrs Masters was not a skilled cross-examiner.  However his evidence was tested appropriately, including to some extent by me, and his answers were rational and consistent.  In many respects his evidence was corroborated or assisted by file notes made at the time, or by other records and documents.

Was Mr Bugg's advice about settlement negligent or in breach of his retainer?

1. Mr Bugg is sued in contract and in tort.  It was an implied term of his contract for professional services to exercise reasonable care and skill in the performance of his retainer: Astley v Austrust Ltd (1999) 197 CLR 1 at 20. In tort, the standard of care he was to observe by a person with some special skill or competence is that of the ordinary skilled person exercising and professing to have that special skill: Rogers v Whitaker (1992) 175 CLR 479 at 487.

2. The allegations against Mr Bugg fall into two broad categories.  First, that he should not have recommended settlement at all.  Second, that he failed to properly advise Mrs Masters and pressured her into a settlement.

Should the settlement recommendation have been made at all?

1. There is no dispute that Mr Bugg recommended the settlement of Mrs Masters' action against the CBA for $115,000 inclusive of costs of $15,000 and I so find.  He recommended against proceeding to trial.  In substance, Mrs Masters claims that Mr Bugg was negligent and in breach of retainer by making that recommendation because she had a greater claim and it was in her interests to proceed with the action.  Her pleading alleges that Mr Bugg was negligent and in breach of contract by:

   (a)advising Mrs Masters to settle when it was not in her interests to do so;

   (b)failing to advise Mrs Masters that her chances of obtaining a better settlement or result would be best served by proceeding to trial;

   (c)failing to negotiate a settlement for $115,000 plus costs;

   (d)failing to pay proper regard to and/or critically analyse the claim and advance it with a claim for interest;

   (e)failing to take into account and advise that on the basis of simple interest at 5% her action, if successful, was for in excess of $250,000.

2. I am not satisfied that any of those allegations are established.

3. The failure of a legal practitioner to give competent advice as to the strength of a client's case can give rise to liability in negligence: Seamez (Australia) Pty Ltd v McLaughlin [1999] NSWSC 9 at [236]; Kolavo v Pitsikas [2003] NSWCA 59. However, courts are reluctant to find negligence if the settlement advice could reasonably and properly have been given. Put another way, liability will not attach to settlement advice unless the advice was such that, in the circumstances, no reasonable solicitor or barrister could have given it. It is not enough that a court subsequently considers that a more favourable outcome would or might have been obtained later: Studer v Boettcher [2000] NSWCA 263 at [62]. In Tasmania, as in most jurisdictions around Australia and in many other parts of the world, settlement of civil disputes is encouraged. There is a long established rule of public policy that settlement of litigation is to be encouraged in the public interest: Tresize v National Australia Bank (1994) 122 ALR 185 at 199. Especially for private individuals, the financial and emotional burden of litigation can be a heavy one. Businesses and corporations recognise the commercial benefit of settlements. The cost and risk of trial is to be avoided if possible. Litigation involves uncertainty. The risk of an adverse result in litigation is well known to competent lawyers but is sometimes not fully appreciated by parties unfamiliar with court proceedings and preoccupied by the correctness of their own position. As was pointed out in Kelley v Corston [1998] QB 686:

   "Settlements of litigation are to be encouraged, and as early as possible.  One specific feature relating to all settlements needs attention.  Every lawyer in practice and every judge knows that there is no such thing as the case which is bound to succeed.  Experience shows that cases with the brightest prospects of success somehow fail and it is difficult to underestimate the value of the certainty provided by a settlement as opposed to the continuing risks of litigation through to judgment.  This factor alone should militate against successful proceedings based on criticism of advice leading to a settlement."

4. In Studer v Boettcher (above) the Court of Appeal, New South Wales said at [63]:

   "A lawyer's advice to a client to make or reject an available compromise is commonly not concerned only with the client's rights, obligations and hopes.  Usually, other matters must also be considered.  For example, it is often impossible to predict the outcome of litigation with a high degree of confidence.  Disagreements on the law occur even in the High Court.  An apparently strong case can be lost if evidence is not accepted, and it is often difficult to forecast how a witness will act in the witness-box.  Many steps in the curial process involve value judgments, discretionary decisions and other subjective determinations which are inherently unpredictable.  Even well-organized, efficient courts cannot routinely produce quick decisions, and appeals further delay finality.  Factors personal to a client and any inequality between the client and other parties to the dispute are also potentially material.  Litigation is highly stressful for most people and notoriously expensive.  An obligation on a litigant to pay the costs of another party in addition to his or her own costs can be financially ruinous.  Further, time spent by parties and witnesses in connection with litigation cannot be devoted to other, productive activities.  Consideration of a range of competing factors such as these can reasonably lead rational people to different conclusions concerning the best course to follow.  Advice to compromise based on a variety of considerations is not negligent if a person exercising and professing to have a legal practitioner's special skills could reasonably have given that advice."

5. The Court in Studer also cited, with approval, the following passage from the judgment of Anderson J in the Ontario High Court in Karpenko v Parvian, Courey, Cohen and Houston (1981) 117 DLR (3d) 383 at 397:

   "...  an industrious and competent practitioner should not be unduly inhibited in making a decision to settle a case by the apprehension that some Judge, viewing the matter subsequently, with all the acuity of vision given by hindsight, and from the calm security of the Bench, may tell him he should have done otherwise."

6. Earlier in these reasons I assessed the factors that impacted on the strength of Mrs Masters' case against the CBA.  Other factors personal to Mrs Masters were relevant to whether the case should proceed to trial.  Her evidence in this trial was unassisted by counsel.  However, expressing it as respectfully as I can, there would have been a real risk that she would not have presented well as a witness, even allowing for the benefit of counsel.  Much of her case depended on documents and questions of law, but important aspects of it had to be proved.  Her claim for interest was one example.  It depended on the evidence of her and others about what use would have been made of the money paid away by the CBA.  She had completely unrealistic expectations about the amount of her claim overall.  I cannot find with any confidence that she would have achieved an outcome more favourable than the amount of the settlement.  The risk that she would not do so was significant, and the consequences to her in that event could have been disastrous, especially if a successful claim did not exceed an offer of compromise made by the CBA.  In light of those matters and the quantum and risk of her claim, I am wholly unpersuaded that Mr Bugg's recommendation to settle, per se, was negligent or in breach of his retainer.  It was advice that was reasonably and properly given.

Was the instruction to settle given?

1. It is not pleaded in the statement of claim in this action that Mr Bugg settled the action with the CBA without instructions or authority to do so.  There is a particular of negligence that Mr Bugg "failed to act on her instructions to proceed to trial in the action".  That pleading is inconsistent with other parts of the pleading.  Indeed, the pleading otherwise alleges that settlement was authorised.  Ordinarily I could put that issue aside for that reason.  However I will deal with it because Mrs Masters is unrepresented, she raised it at the trial, and because it is closely related to other issues that were pleaded and raised at the trial.

2. The immediate circumstances that led to the instruction start with the mediation conducted in the Supreme Court in Launceston on 23 February 2004. Before referring to this mediation, I will say something about mediations generally. In the Supreme Court of Tasmania, as in most courts around Australia, mediation of civil disputes and actions is common. In 2004 they were sometimes referred to as "Registrar's conferences". Before an action is set down for trial the solicitors for the parties are required by the Supreme Court Rules to sign a Certificate of Readiness in the prescribed form: Supreme Court Rules 2000, r544(2)(b). The prescribed form requires the parties to certify that they have seriously explored the possibility of settlement of the action. A common way of achieving that result is to participate in a mediation conducted by a court appointed mediator. The form and procedure for such mediations is up to the parties and the mediator but, in general, they take a fairly common course. After preliminary words from the mediator the legal representative of the plaintiff is invited to outline the plaintiff's case. The legal representative of the other party or parties is invited to respond. The main issues are identified and the position of the respective parties concerning those issues is explained. Sometimes the parties lay their cards on the table. Sometimes cards are played close to the chest. To encourage further discussion and disclosure mediators often invite the parties to participate in separate sessions. For that purpose one or both parties and their representatives may adjourn to a different room. During such sessions parties are more able to disclose the strengths and weaknesses of their case to the mediator on a confidential basis. With the approval of a party the mediator may move between the two groups, to give information he or she is authorised to disclose, or to convey offers and counter-offers. Sometimes the legal representatives speak to each other to make points, or convey information or offers in the absence of their clients. Sometimes settlements are achieved. Sometimes they are not. Where settlements are not achieved, the mediation may provide some momentum from which a later settlement is reached.

3. The following facts are not in dispute.  On the morning of the mediation Mr and Mrs Masters met Mr Bugg at the office of his firm in Launceston for about 50 minutes or so.  The mediation was conducted at the Supreme Court in Launceston by an experienced court appointed mediator, Mr Pickard, formerly a very experienced legal practitioner.  The mediation continued for about three hours.  In the course of the mediation the CBA, through its legal representative, Mr Morris, offered to settle Mrs Masters' action for $100,000.  That offer was rejected.  The CBA increased its offer to $110,000 inclusive of costs.  That offer was rejected.  Mr Bugg strongly recommended to Mrs Masters and her husband that they "seriously consider" the offer.  They did not accept his advice.  The mediation concluded without settlement having been achieved.  On Friday, 27 February 2004, Mr Bugg and Mrs Masters spoke on the telephone.  Mr Bugg then put an offer to the solicitor for the CBA to settle for $115,000 inclusive of costs.  The offer was accepted.  A consent memorandum for judgment was signed and judgment entered on 4 March 2004.

4. In other respects however Mrs Masters and Mr Bugg have differing accounts of what happened at and following the mediation.

5. Mrs Masters said she agreed to participate in the mediation only because Mr Bugg told her that, without doing so, her action could not be set down for trial.  She wanted a trial of her action and so attended the mediation to get it out of the way.  At the pre-mediation meeting with Mr Bugg they talked about making an offer but she had, she said, made clear what her settlement position was.  I infer she was referring to her earlier letters detailing what she said her claim was.  She said that when the mediation started Mr Bugg, when outlining her case, whispered in a way that could not be heard.  After responding, the CBA's solicitor, Mr Morris, offered to settle for $100,000 inclusive of her costs.  She then claimed to have been taken to a different room where she and her husband were shut in and left alone.  Mr Pickard came to speak to her.  She told him she did not want to settle and wanted to proceed to trial "so everything could be addressed".  Mr Bugg started "pressuring her to take the $100,000", but she refused, insisting she wanted "justice".  Mr Bugg then left the room before returning and saying that the CBA had increased its offer to $110,000.  He told them to "take the offer".  Again she refused, saying she wanted "justice".  She said Mr Bugg took them to yet another room and told her he had spoken to her father-in-law, Ernest Masters (who, I interpose, had been dead for many years), and later that he was now "representing the Bank".  She said Mr Bugg told her that he wanted $50,000 up front for court expenses.  She offered their properties as security but he "would not hear it".  She told him she "wanted their farm back" because it was now worth $1,000,000.  She thought Mr Pickard and Mr Bugg were prejudiced against her at the mediation.  When the action did not settle she thought the mediation was to resume on 27 February.

6. After the mediation Mr and Mrs Masters drove home.  On the way, her husband became ill.  After they arrived home he was sent to hospital for a brain scan.  She said that on 24 February she asked another lawyer to take over her case but was sent back to Mr Bugg.  Her husband came home from hospital but he was on medication and still not very well.  He had lost his balance and could not walk properly, so was in bed.  She said she did not speak to Mr Bugg on 24 February 2004 but she rang Mr Bugg's firm and spoke to his secretary, Paula Reid, on that day to inform her that her husband was ill.  Mr Bugg phoned her, she said, on both 25 and 26 February to check on her husband's health.  On Friday, 27 February, she was at home, working.  She went into her husband's room and found he had fallen from the bed onto the floor and was very white and barely conscious.  She was attempting to assist him back into bed when the phone rang.  There was a phone by the bed which she answered.  It was Mr Bugg.  Mrs Masters spoke to him while she was still holding her husband.  She said it was a short conversation.  She did not tell Mr Bugg about her husband.  She felt under pressure still from what had happened at the mediation.  Mr Bugg again pressured her to take the CBA's offer.  Because she was feeling under pressure she did not "hear it properly", but said "yes" to Mr Bugg because her husband was ill and to make Mr Bugg "go away".  She heard nothing more until she received the letter from Mr Bugg dated 10 March 2004 enclosing a copy of the judgment.  She rang DMA on 30 March 2004 and spoke to Mr Bugg's secretary, Paula.  She asked Paula "why my claim was entered into final judgment when I want to go to trial".  When Mr Bugg rang her that day she asked the same question.

1. Mr Bugg has a substantially different version.  He described the mediation as having proceeded in substantially the standard way with opening remarks and then exchanges between the parties and their respective solicitors from separate rooms.  He recommended to Mrs Masters at the mediation that she "strongly consider" the CBA's offer of $100,000, and then $110,000, inclusive of costs.  He said Mr Pickard expressed the same view.  Mr Bugg said that in his opinion there was no prospect of recovering anything like the figures Mrs Masters said she wanted to achieve, and he discussed the risk of costs if the action proceeded to trial.  According to Mr Bugg he certainly did not say that he had spoken to (the deceased) Ernest Masters or that he now represented the CBA.  At the conclusion of the mediation he asked whether the CBA would leave its offer open.  Mr Pickard requested that he be advised on or before Friday, 27 February 2004, whether the matter had settled or not.  There was never any suggestion, he said, that the mediation would resume on 27 February.  Although Mrs Masters referred many times to going to trial he told her that the CBA's offer had been left on the table and he would talk to her about it later in the week.  Paula Reid, Mr Bugg's secretary, had no recollection or note of a phone call from Mrs Masters on 24 February 2004, but Mr Bugg said he made a very short phone call to Mrs Masters from his home at about 7pm on that day.  He went to Melbourne on 25 and 26 February and next contacted Mrs Masters at 9.23am on Friday, 27 February 2004, when he rang her home number from his office and spoke to her.  His telephone records indicate that the call went for almost 11 minutes.  He made a note of the phone call in the following terms:

   "T/a Mrs Masters.  Mr Masters still not well.  Has been told he should avoid stress.  Unless he avoids stress it could be very serious for him.  I note the action will be mentioned again this afternoon by Mr Pickard.  She asked what I think about the proposed settlement.  I note the advice I have her on Monday and also Geoff Pickard's views.  I say I understand her views, but I consider that there is considerable risk in proceeding further.  I cannot guarantee that she can get any more than that.  She says that the file note by Mr Wass is wrong.  She did not say that about the cheques.  I note the offer of $110,000 includes costs.  I suggest trying to get slightly more and I would reduce our costs.  I suggest asking for $115,000.  She content with that."

2. Mr Bugg said his recollection of that conversation is substantially in accordance with his note.  He said that when he spoke to her on 27 February he "detected nothing other than a desire on her part at that time to try to resolve the matter" and that she referred (even though the file note does not record this) to the benefit to her husband's health if he did not have the pressure of the action to deal with.  Mr Bugg's evidence is that, during that conversation, Mrs Masters gave him clear instructions to proceed with his suggestion to put an offer to the CBA to settle the action for $115,000 inclusive of costs.  He rang Mr Morris and put the offer.  Mr Morris rang him back and accepted.  There was a discussion about whether the CBA would require a deed of release with a confidentiality clause, but after a further phone call it was agreed that the action would be finalised by judgment.  Mr Bugg then made another phone call to Mrs Masters.  His dictated note of that conversation, which his records indicate lasted for two minutes, is:

   "T/a Mrs Masters.  I tell her of settlement.  I note reduction in costs.  She thanks me for that.  I to prepare judgment.  I say we should have the money within a week."

3. Mr Bugg informed Mr Pickard of the settlement and prepared a consent memorandum for judgment which he later signed.  He next heard from Mrs Masters' when he returned her call on 30 March 2004.

4. For a number of reasons I accept, at least for the most part, Mr Bugg's evidence about what happened at and following the mediation wherever it conflicts with the evidence of Mrs Masters.  His evidence was rational and consistent and in all material respects confirmed by other evidence.  Mrs Masters' description of the mediation is inherently unlikely.  For example, I reject her evidence that at the mediation she was "shut in" a room, that Mr Bugg told her he had spoken to her (deceased) father-in-law, and that he was "now representing the Bank".  It may be that her belief about those matters arises from misunderstanding, but I find them to be untrue.  Mr Bugg's evidence about the mediation is the subject of a note he made on the day and is in accordance with how a mediation of that nature would ordinarily proceed.

5. As to the events following the mediation, Mr Bugg's evidence of the dates of telephone conversations after the mediation is confirmed by his contemporaneous file notes and the phone records.  Mrs Masters' evidence of the time, dates and duration of phone calls is inconsistent with the records.  Despite Mrs Masters' insistence that there was only one phone call from Mr Bugg on 27 February 2004, I am left in no doubt that there were two phone conversations between Mrs Masters and Mr Bugg that day.  That fact alone strongly corroborates Mr Bugg's version of what was said and done.  I find that in the first conversation Mrs Masters said words to Mr Bugg which he took as an instruction to put a counter-offer to the CBA and, in the second conversation he conveyed to Mrs Masters that the counter-offer had been accepted.  I am satisfied that Mrs Masters did in fact instruct Mr Bugg to make the counter-offer.  When giving evidence she was reluctant to concede that was so.  She agreed that she and Mr Bugg were discussing the CBA's offer, although she would not state clearly which offer that was.  She agreed that she said "Yes", but only to get Mr Bugg off the phone.  I reject her evidence that she said that word without referring to the recommendation to make the counter-offer or intending its meaning.  She was cross examined at length about that aspect of her evidence and her answers were inconsistent and, at times, evasive.  Contrary to her evidence, the conversation in which she gave the instruction was not a short or cursory one.  Mr Bugg's note of the conversation reveals discussion of detail, including her non-acceptance of some of the facts and arguments advanced by the CBA.  I do not accept Mrs Masters' suggestion that there was no common understanding about what her instruction was.  Her understanding was informed by what had taken place at the mediation and the advice that had been given to her there.  The second call, which I find occurred when and in the terms that Mr Bugg explained, supports the contention that Mrs Masters gave the instruction to make a counter-offer and was informed of the result.  Had she not instructed the counter-offer, she would have protested to Mr Bugg when he rang her back on that day, some hours later and when she had had time to reflect.  She did not make known any disagreement with the settlement or assert that it was reached without her authority until she phoned Mr Bugg's office more than a month later on 30 March 2004, about three weeks after she had been sent a copy of the judgment on 10 March 2004.

6. This aspect of the dispute would largely have been avoided if Mr Bugg had adopted the prudent course of obtaining from Mrs Masters a written authority to settle.  However I have little doubt, and I so find, that Mrs Masters authorised the counter-offer that led to the settlement.  At the critical time it was not her instruction to proceed to trial.  Then Mrs Masters changed her mind about the bargain.  It may well be that she has convinced herself that she never authorised it, but I find she did.

Was the instruction to settle sought negligently?

1. Was there something, then, about the way in which the instruction to settle was sought and given, that was negligent or in breach of contract? The statement of claim alleges that Mr Bugg was negligent and in breach of his retainer in the manner he sought instructions from Mrs Masters on 27 February 2004 because:

   ·     he knew her husband was very sick;

   ·     no written advice had been given about the merits of settlement;

   ·     he gave no explanation of the "implications" of Mrs Masters authorising settlement;

   ·     he caused or permitted Mrs Masters to authorise settlement in a single phone call when she was under pressure;

   ·     all the circumstances meant Mrs Masters was not able to make a "balanced and sensible decision" about settlement.

2. This aspect of the claim raises many of the same issues that arose in determining whether the instruction was given at all.  Mrs Masters was cross-examined about what pressure Mr Bugg put on her during the phone call on the morning of 27 February.  She did not give a clear answer.  She said that the pressure arose from the circumstances of her husband's health and his collapse just before the phone call (of which Mr Bugg was not informed) and the pressure she still felt from the mediation.  There is no doubt that Mr Bugg strongly recommended settlement.

3. It is legitimate for a lawyer to apply considerable pressure on a client to settle a proceeding when it is in the client's best interests to do so, although the final choice must be that of the client.  In Harvey vPhillips (1956) 95 CLR 235, the High Court said at 242:

   "It is hardly necessary to say that, be [a] compromise wise or unwise in [the client's] interest, it [is] a matter for [the client] to decide in the exercise of a judgment formed upon an appreciation of the advice of [their] counsel and solicitor but under no sense of coercion."

4. In Studer v Boettcher (above) the appellant unsuccessfully sued his former solicitor for professional negligence. He argued that he had been unduly pressured into accepting a settlement. In dismissing the appeal the Supreme Court of New South Wales Court of Appeal expressed the duty of a legal practitioner in such circumstances, at [74] – [76], in these terms:

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

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

   People repent at bargains for many reasons.  In the present matter, the appellant's wife, who was not present at the mediation, was dissatisfied with the compromise which he had reluctantly made.  Whatever the reason for a subsequent change of mind, a client who was reluctant to make a compromise and was persuaded to do so by his or her lawyer can easily become convinced that the now unwanted bargain was coerced.  Since there is no clear boundary between permissible persuasion and impermissible coercion, the distinction can be difficult to apply to the circumstances of a particular case."

5. Those comments are particularly apt in this case.  Mrs Masters had unrealistically high expectations about what could be achieved if her case against the CBA went to trial.  She had demonstrated, over a period of many years, a particular reluctance to settle for anything less than the inflated figures she told Mr Bugg she wanted.  It was not only the financial aspect of the case that motivated her but her belief that she had been badly treated by the CBA and her desire for "justice".  Her reluctance to settle was despite Mr Bugg's strong recommendations to her to do so.  The offer the CBA had made was a fraction of what she wanted, and although it represented a generous assessment of her prospects of success, it was no doubt disappointing for her.  In those circumstances, it was not improper for Mr Bugg to advise her in strong terms and impose considerable pressure on her to settle, provided she was not overborne.  To the contrary, it is not sufficient for a legal practitioner, armed with the knowledge and experience of the law and litigation he or she possesses, to blindly follow instructions from clients without attempting to warn them of risks and pitfalls, correct wrong notions or unrealistic expectations and encourage the client in the direction the lawyer believes to be in the client's best interest.  Mrs Masters settled reluctantly and changed her mind not long afterwards.  She has become convinced that she was coerced by Mr Bugg.  However I am not persuaded that Mr Bugg subjected Mrs Masters to anything approaching the type of pressure that would have crossed the line from permissible persuasion to impermissible coercion.

6. Even so, there are other aspects of how the settlement came about that have caused me earnest consideration.

7. I find it surprising, to say the least, that despite the many years during which Mr Bugg acted for Mrs Masters, there is no evidence of any written advice to her about the strengths and weaknesses of her claim.  That includes the period immediately before the mediation and in the period between the mediation and the settlement.  Speedy written communication was possible because Mrs Masters had a fax machine that Mr Bugg had used before.  Mrs Masters would not have been happy to receive Mr Bugg's written advice setting out his pessimistic view of her prospects.  Her views to the contrary were strongly held and entrenched.  In one sense her strongly held views, and because the recommendation was so far below her expectations, made written advice more desirable, especially given her spoken language limitations and when instructions were taken over the phone.

8. There is no absolute duty to give or confirm advice in writing: Fortune v Bevan [2001] QCA 378. It is unnecessary in this case to consider whether a solicitor's duty of care in tort can ever extend further than his or her contractual duty of care: see Doolan v Renkon Pty Ltd (above) at [30] – [33]. Subject to limitations imposed by the terms of the retainer, however, the failure of a legal practitioner to give written advice may be negligent. No principle of universal application can be stated, but in some cases there may be a particular need to make clear the requirement to take action within a certain time, to ensure that a client is aware of the risks of or obligations arising from a certain course, or to draw the attention of a client to an unusual aspect of a contract or transaction. In general, the giving or confirmation of advice in writing is prudent to avoid disputes about what advice was given. I have concluded in this case, however, that Mr Bugg was not in breach of his duty, at or prior to obtaining the instruction to settle, by not giving written advice to Mrs Masters about the merits of her claim and the settlement. There is little dispute that he gave advice. I am satisfied Mrs Masters understood his advice. She well understood that Mr Bugg was advising her to settle her claim at the conference for $110,000. It was part of her claim that he was "pressuring" her to settle on that basis. I find that she also understood Mr Bugg's recommendation on 27 February 2004 to make the counter-offer of $115,000 that the CBA then accepted. In this regard, her real complaint is that she did not agree with the advice, not that it was not given or she did not understand it. An examination of the correspondence she sent Mr Bugg over the years discloses that she was well aware of the issues that affected her claim. For example, letters she wrote in 2000 and 2002 disclose an awareness of her entitlement to only half of the unauthorised cheques and include detailed calculations of the components of her claim and interest. She had been sent copies of proposed amended pleadings and read and given instructions about them. There had been numerous conferences between Mr Bugg and Mr and Mrs Masters at which the claim had been discussed. There were two settlement conferences at which the issues in the action were discussed in detail and she heard, first hand, the position of the CBA. I reject any assertion that she did not understand the effect of a settlement; that is, that it would put an end to her action. The evidence overwhelmingly is that she understood the choice between settling the action and continuing to trial.

9. Mrs Masters' decision to settle was something of an about face.  It followed years of a refusal to settle or even make a reasonable counter-offer.  She had long expressed very strong views about the justice of her case and the correctness of her own position.  I have reflected on whether more ought to have been done to allow her the opportunity to properly consider Mr Bugg's recommendation to make a counter-offer, especially when the instruction was sought over the phone.  In some circumstances such conduct may well amount to a breach of the duty a legal practitioner owes to a client to take properly informed instructions.  In this case I am not satisfied of such a breach.  As I have already indicated, Mrs Masters had been advised about her claim, albeit not in writing.  She well understood the issues.  Even allowing for her husband's ill health, it had been some days since the mediation, thus allowing her the opportunity to think about her case, consider her position and make a sufficiently informed decision.  Mr Bugg had a justifiable view that the settlement was in his client's best interests.

10. There is only one other particular of negligence remaining to be dealt with.  It is pleaded that Mr Bugg was negligent in causing or permitting the action to take 20 years before it was listed for mediation.  It is true that the case took an extraordinary amount of time to progress.  There were long periods of delay.  Many years passed while investigations of forgery were undertaken by Mr and Mrs Masters, but there were many unexplained periods of delay.  It was no doubt a difficult case, not because the issues were especially complicated, but because of the absence of evidence to support Mrs Masters' high expectations.  Although he did not give evidence to this effect, I infer that Mr Bugg may have been reluctant to progress the matter to trial because it was not in Mrs Masters' interests to do so.  There was very good reason to exhaust every effort to resolve the case by agreement.  Legal practitioners have a duty to progress every case, however difficult, with reasonable expedition.  That principle is reflected in the legal profession Rules of Practice 1994, r10(b), which provides that a practitioner must do his or her best to complete a client's business within a reasonable time. Such delay as occurred in this case is indicative of a breach of that duty. However, I have concluded that, for the reasons I have referred to, there is not sufficient evidence for me to find that delay was caused by Mr Bugg's negligence or that the delay resulted in any loss. Delay is not the substance of the problems Mrs Masters complains of. It did not deprive Mrs Masters of a remedy she would otherwise have been entitled to. To the contrary, I strongly suspect the delay led to a settlement on more favourable terms to her because of the CBA's desire to finalise the matter for commercial reasons.

1. I have concluded that Mrs Masters has not established that Mr Bugg was negligent or in breach of his contract.  None of the particulars of negligence are made out.

Damages

1. I would make some brief comments about the issue of damages.  Mrs Masters has not proved that any loss was caused by any breach she alleges.  Damages for negligence and breach of contract may be awarded for the loss of a chance or opportunity of more than speculative or negligible value.  The existence of that chance must be proved on the balance of probabilities: Doolan v Renkon Pty Ltd (above) at [58]; Origin Energy LPG Ltd (formerly Boral Gas (NSW) Pty Ltd) v BestCare Foods Ltd [2013] NSWCA 90 at [84]. Once the loss of a chance or opportunity has been so proved, then it is for the court to value the possibility or prospect of that chance or opportunity. The loss of a valuable opportunity and the assessment of its amount require separate consideration, although the same body of evidence will bear upon both questions. The assessment of the value of a lost opportunity is not an exercise to be carried out on the balance of probabilities: Sellarsv Adelaide Petroleum NL (1994) 179 CLR 332. The court may adjust its award to reflect the degree of probability or possibility of a loss eventuating. In Tabet v Gett (2010) 240 CLR 537, Kiefel J said at [137]:

   "Thus in the case of the loss of a commercial opportunity, the plaintiff must first establish the fact of the loss, for example by reference to the fact that it had a commercial interest of value which is no longer available to be pursued because of the defendant's negligence.  The damages assessed of that loss, the estimation of its value, reflect the chance, often expressed in a percentage, that the opportunity would have been pursued to a successful outcome.  The award is proportionate in that sense."

2. Even though the assessment may involve some speculation, guesswork or estimation the onus remains on the plaintiff to prove a loss of some value: Sellars v Adelaide Petroleum NL (above).  That is so even though it is not necessary that I assess Mrs Masters' chance at being greater than 50%.

3. In this case Mrs Masters claims the loss of the chance or opportunity to obtain a greater benefit had her action not settled on the terms it did, and proceeded to trial.  The question is whether she lost an opportunity of some value.  I am not satisfied she did.  I am satisfied that some aspects of her claim had good prospects of success.  However what this Court is to evaluate is the chance that Mrs Masters would recover more than $100,000 clear of her costs had she proceeded to trial.  It is in a good position to make that evaluation.  For the reasons explained earlier in these reasons she has not established that there was any substantial prospect of obtaining such a benefit.  She has not established a chance of anything other than speculative or negligible value.  Her best result, excluding interest, was very likely to fall substantially short of the amount she in fact recovered, and she has not proved any realistic prospect of a successful claim for interest.

Conclusion and orders

1. The plaintiff has not made out her claim.  None of the particulars of negligence pleaded in the action are proved.  There will be judgment for the defendants.