McCrohon v Harith - [2010] NSWCA 67

No judgment structure available for this case.

New South Wales

Court of Appeal

CITATION: McCrohon v Harith [2010] NSWCA 67

HEARING DATE(S): 4 November 2009

JUDGMENT DATE:
8 April 2010

JUDGMENT OF: McColl JA at 1; Campbell JA at 142; Handley AJA at 143

DECISION: 1. Appeal allowed with costs. 2. Order that order 1 of the orders made on 23 March 2009 by Smart AJ in the Court below be varied so that the respondents have judgment in the sum of $152,691.97 together with interest thereon from 20 March 2009 in accordance with section 101 of the Civil Procedure Act 2005 (NSW). 3. Order that order 2 of the orders made on 23 March 2009 by Smart AJ in the Court below be varied so that the appellants pay the respondents’ costs in the Court below as agreed or assessed on the ordinary basis other than those costs incurred by the respondents in relation to the award of damages in the amount of $22,694 for the decrease in the respondents’ party-party costs. 4. Cross-appeal dismissed with costs.

CATCHWORDS: CONTRACT – breach – damages – time for assessment – relevance of post-breach events - TORT – breach of duty of care – damages – time for assessment – relevance of post-breach events - FIDUCIARY DUTY – breach – equitable compensation – time of determination of quantum - DAMAGES – contract – tort – breach of fiduciary duty – whether innocent party entitled to choose most advantageous remedy - CONTRACT – breach – damages – deprivation of opportunity – standard of proof applicable where innocent party seeks to establish future possibilities and past hypothetical situations - CONTRACT – breach – damages – where evidence called by innocent party fails to provide rational foundation for proper estimate of damages - EVIDENCE – admissibility of evidence from innocent party as to conduct if breach of contract had not occurred – s 5D Civil Liability Act 2002 (NSW) - PROCEDURE – notice of appeal – status of amended notice of appeal filed without leave after judgment reserved - PROCEDURE – submissions – where limited leave granted to submit further submissions on certain points after judgment reserved – where further submissions exceed scope of leave granted without further leave applied for or given

LEGISLATION CITED: Civil Liability Act 2002 (NSW)
Civil Procedure Act 2005 (NSW)
Fair Trading Act 1987 (NSW)
Trade Practices Act 1974 (Cth)
Uniform Civil Procedure Rules 2005 (NSW)
Uniform Civil Procedure Rules 1999 (Qld)

CATEGORY: Principal judgment

CASES CITED: Adelaide Petroleum NL v Poseidon Ltd (1990) 98 ALR 431
Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1
Baiyai Pty Ltd v Guy [2009] NSWCA 65
Biggin & Co Ltd v Permanite Ltd [1951] 1 KB 422
Booksan Pty Ltd v Wehbe [2006] NSWCA 3; (2006) Aust Torts Rep 81 – 830
Bouras v Grandelis [2005] NSWCA 463; (2005) 65 NSWLR 214
Bull v Lee (No 2) [2009] NSWCA 362
Bwllfa and Merthyr Dare Steam Collieries (1891) v Pontypridd Waterworks Co [1903] AC 426
Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534
Chaplin v Hicks [1911] 2 KB 786
Durban Roodepoort Deep Ltd v Newshore Nominees Pty Ltd [2005] WASCA 231
European Bank Limited v Robb Evans of Robb Evans & Associates [2010] HCA 6; (2010) 264 ALR 1
Gagner Pty Ltd trading as Indochine Cafe v Canturi Corporation Pty Ltd [2009] NSWCA 413; (2009) 262 ALR 691
Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1
Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] UKHL 12; [2007] 2 AC 353
Harith & Kanuth v Beale [2003] QSC 411
Harith & Kanuth v McCrohon [2009] NSWSC 111
Henderson v Merrett Syndicates Ltd [1994] UKHL 5; [1995] 2 AC 145
HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640
JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237
Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351
Kizbeau Pty Ltd v WG & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281
Kowalczuk v Accom Finance [2008] NSWCA 343
Malec v J C Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638
Miliangos v George Frank (Textiles) Ltd [1976] AC 443
Narni Pty Ltd v National Australia Bank Ltd [2001] VSCA 31
Nikolaou v Papasavas Phillips & Co [1989] HCA 11; (1989) 166 CLR 394
Nocton v Lord Ashburton [1914] AC 932
Notaras v Waverley Council [2007] NSWCA 333; (2007) 161 LGERA 230
O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262
Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 77 ALJR 768
Poseidon Ltd v Adelaide Petroleum NL [1991] FCA 663; (1991) 105 ALR 25
Poseiden Ltd & Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332
Ratcliffe v Evans [1892] 2 QB 524
Rosenberg v Percival [2001] HCA 18; 205 CLR 434
Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275
State of New South Wales v Moss [2000] NSWCA 133; (2000) 54 NSWLR 536
Suttor v Gundowda [1950] HCA 35; (1950) 81 CLR 418
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272
Target Holdings Limited v Redferns (a firm) [1996] 1 AC 421
The Commonwealth of Australia v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64
Todorovic v Waller [1981] HCA 72; (1981) 150 CLR 402
Troulis v Vamvoukakis [1998] NSWCA 237
United States Surgical Corp v Hospital Products International Pty Ltd [1982] 1 NSWLR 766
Wertheim v Chicoutimi Pulp Co [1911] AC 301
Willis v Commonwealth [1946] HCA 22; (1946) 73 CLR 105
Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484
Zorom Enterprises Pty Ltd v Zabow [2007] NSWCA 106; (2007) 71 NSWLR 354

TEXTS CITED: Equity Doctrines & Remedies, 4th ed (2002) Butterworth’s LexisNexis

PARTIES: Peter McCrohon - First Appellant
Karin Bergseng - Second Appellant
Christine Louise Perry - Third Appellant
Paul Antoni Harith - First Respondent
Elizabeth Gay Kanuth - Second Respondent

FILE NUMBER(S): CA 40123 of 2009

COUNSEL: S A Kerr SC with T J Breakspear for the Appellants
B R McClintock SC with PD Doyle Gray for the Respondents

SOLICITORS: Paul Bard Lawyers for the Appellants
Searle & Associates Lawyers for the Respondents

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S): SC 20238 of 2005

LOWER COURT JUDICIAL OFFICER: Smart AJ

LOWER COURT DATE OF DECISION: 5 March 2009

LOWER COURT MEDIUM NEUTRAL CITATION: [2009] NSWSC 111

CA 2009/00298263
SC 20238/05

McCOLL JA
CAMPBELL JA
HANDLEY AJA
Thursday 8 April 2010

McCrohon & Ors v Harith & Anor

Judgment

1 McCOLL JA:

The appellants, Peter McCrohon, Karin Bergseng and Christine Louise Perry, who are partners in a firm of solicitors practising in Sydney known as McCrohon Bergseng Partners, appeal from a judgment of Smart AJ in which his Honour found that they acted negligently, and in breach of their retainer and fiduciary duty, to the respondents, Paul Antoni Harith and Elizabeth Gay Kanuth, in their conduct of proceedings in the Supreme Court of Queensland (the “Queensland proceedings”).

2 The primary judge found that as a result of those breaches the respondents suffered loss in, and in relation to, the costs of the Queensland proceedings in three respects. First, $250,000 in respect of the costs they were ordered to pay to John Beale, the defendant in those proceedings as a result of an adjournment of the trial (the “adjournment costs”). Secondly, $22,694 in respect of a decrease in the party-party costs recoverable by the respondents from the defendant in the Queensland proceedings by reason of their bill of costs having to be converted from New South Wales assessable form into Queensland taxable form (the “party-party costs”). Thirdly, $9000 in relation to the costs the respondents incurred in objecting to the bill of costs in relation to the adjournment costs delivered by Mr Beale in the Queensland proceedings. His Honour entered judgment against the appellants for $395,845.46 (including interest) plus costs: Harith & Kanuth v McCrohon [2009] NSWSC 111 (the “primary judgment”).

3 The respondents also sought at trial to recover damages representing the difference between the amount they paid the appellants for solicitor-client costs and the amount of solicitor-client costs they alleged they would have paid if they had been advised to use, and had used, solicitors admitted in Queensland (the “solicitor-client costs”). The primary judge rejected that claim.

4 The appellants do not challenge the liability findings. The appeal relates only to the first two heads of damages. The respondents cross-appeal in relation to the primary judge’s refusal to award them damages in respect of their solicitor-client costs claim. To avoid confusion I will refer to the parties as the appellants and respondents even when dealing with the cross-appeal.

5 At the commencement of the appeal the Court ordered pursuant to Uniform Civil Procedure Rules 2005 (NSW), 7.10(2)(a) that the appeal continue in the absence of a representative of the estate of the first respondent, he having died recently.

The Queensland proceedings

6 In the Queensland proceedings the respondents sought a declaration that Mr Beale held land at Airlie Beach known as “Cool Palms” in trust for them. Airlie Beach is in the vicinity of the town of Mackay in North Queensland. The Queensland proceedings appear to have been commenced in the Mackay Registry of the Supreme Court of Queensland. The appellants, who were not admitted to practice in Queensland, acted for the respondents. The respondents were successful: see Harith & Kanuth v Beale [2003] QSC 411.

7 The background to the Queensland proceedings is set out in the primary judgment in this appeal as follows:

“8. Until late in 2002 the plaintiffs, who were then husband and wife and have since divorced were ordinarily resident in Florida, USA. In September 1999 they visited the Whitsunday area in North Queensland and stayed with Mr John Beale. Mr Beale and Ms Kanuth had been friends for about 27 years. The plaintiffs expressed a desire to acquire property and settle in or near Airlie Beach. One of the properties they looked at was ‘Cool Palms’. In about November 2000 Mr Beale telephoned Ms Kanuth and told her that Cool Palms was for sale. The subsequent history is set out in the judgment of Dutney J, delivered 5 December 2003. At the time of trial Mr Beale was the registered proprietor of Cool Palms. At the conclusion of the trial (15-18 September 2003) Dutney J made orders declaring the property to be held on trust for the plaintiffs but restraining the plaintiffs from dealing with the property other than by mortgaging it in favour of Howard Mortgage Finance Pty Ltd for an amount not exceeding $750,000. The remaining issue was the amount, if any, for which Mr Beale was entitled to be indemnified. On 5 December 2003 Dutney J entered judgment for Mr Beale against the plaintiffs for $31,929.03 together with interest of $2,926.83.”

8 In order to understand the claim for the adjournment costs it is necessary to explain what happened before the final trial of the Queensland proceedings.

9 The Queensland proceedings were set down for trial on 25 July 2003. On that day the respondents sought, and were granted, an adjournment. Costs of the adjournment were reserved.

10 The trial proceeded before his Honour Justice Peter Dutney in Mackay on 15 - 18 September 2003. Judgment was delivered in the respondents’ favour on 5 December 2003. Dutney J ordered Mr Beale to pay the respondents’ costs of the trial (the “trial costs”). In respect of the reserved adjournment costs, Dutney J found (at [57]) that the adjournment was “solely as a result of the plaintiffs' stated inability to fund their legal representation for the trial notwithstanding the attendance in Mackay on that day of counsel, a solicitor from Sydney and a solicitor from the Sunshine Coast as well as a town agent. Dutney J made orders in relation to the adjournment costs as follows (primary judgment at [9]):

8. Declare that such costs include all legal costs and outlays incurred by the defendant up to and including 12 September 2003, except costs and outlays necessarily incurred for the drafting and filing of pleadings, complying with the defendant's obligations in relation to disclosure, costs reserved on 24 June 2003, July 2003 and the interlocutory hearing in April 2003.”

The party-party costs

11 In due course the respondents delivered a bill of costs for $189,288.10 in respect of the trial costs to Mr Beale. The bill was prepared on a time based costing in accordance with the New South Wales rules for such bills. Upon objection by Mr Beale a Queensland registrar ruled the New South Wales bill should be withdrawn and prepared in accordance with the Queensland scale. The result of converting the New South Wales bill to one in which fees were charged on a task basis in accordance with the Uniform Civil Procedure Rules 1999 (Qld) was to reduce the party-party bill of costs to $166,593.35 and hence to reduce the amount the respondents could recover from Mr Beale by $22,694.75: see primary judgment (at [165] – [167], noting that within this section paragraphs numbered [163] – [166] appear for the second time in the judgment).

The adjournment/trial costs

12 At some stage not explained in the primary judgment but, according to counsel for the appellants, during the assessment process being undertaken in respect of one or both parties’ bills of costs, the respondents and Mr Beale agreed to quantify trial costs at $150,000 and the adjournment costs at $250,000. They then agreed to set off the trial and adjournment costs. Accordingly, the respondents paid Mr Beale $100,000 representing the agreed quantification of the two costs orders.

13 Despite the agreement as to Mr Beale’s trial costs, and the consequent set-off of that agreed amount against the adjournment costs, the respondents successfully claimed at trial $22,694, representing the amount by which their original bill of costs for the trial costs was reduced as described above. The appellants did not demur to this claim on the basis that that loss had been waived by and/or merged in the set-off costs agreement. It appears, accordingly, that that agreement was made without prejudice to the respondents’ right to claim the $22,694 referred to above.

The instant proceedings

14 The respondents put their case at trial in two ways.

15 First, insofar as the adjournment costs were concerned, they alleged the appellants breached their duty of care, their retainer and their fiduciary duty by taking action precipitating the withdrawal of counsel without reasonable notice (the “reasonable notice claim”). Such reasonable notice, it was asserted, would have allowed the respondents to engage fresh counsel or fresh solicitors, enabling the hearing to proceed: par 22, amended statement of claim.

16 The respondents claimed damages, both at common law and in equity, which they alleged flowed from the breaches of duty in respect of the adjournment costs. They asserted (at pars 23(a) - (e) of the amended statement of claim):

“(a) The Plaintiffs were ordered to pay Beale's costs thrown away due to the July 2003 adjournment on an indemnity basis (less some exceptions), i.e. from the start of the proceedings to 12 September 2003 and those costs were agreed at $250,000.00.

(b) Beale was ordered to pay the Plaintiff's costs (less a few exceptions) from the start of the proceedings to the trial date of 18 September 2003 on a party/party basis and those costs were agreed at $150,000.00.

(c) The Plaintiffs paid Beale $100,000.00 being the difference between the agreed costs.

(d) The Plaintiffs lost the opportunity of recovering their costs from Beale being agreed at $150,000.00.

[The primary judge refers (at [137] – [138]) to the respondents’ damages claims as being set out in paragraph 20 of the amended statement of claim. I assume this is a typographical error as the only copy of such a document in the Red Book sets out the claim in paragraph 23 and in like terms to those to which the primary judge refers.]

17 Secondly, the respondents alleged in relation to the party-party and solicitor-client costs claims, that in breach of their fiduciary duty and retainer, the appellants failed fully to disclose the consequences of their not being admitted to practice in Queensland, in particular, the effect their not being entitled to conduct the Queensland proceedings might have on both the respondents’ ability to recover costs, and on the costs they would incur (the “non-disclosure claim”). Insofar as that allegation was concerned the respondents claimed, relevantly, the following losses (paras 24, 25, amended statement of claim):

“24 (a) the difference between the amount the Defendants charged the Plaintiffs for the litigation compared to the amount Queensland solicitors would have charged for the same work, the difference being the amount of $117,823.16 or such other amount as the Court finds.

(b) the Plaintiffs lost the amounts taxed off the New South Wales bills as a result of their being put into Queensland form by Order of Registrar Smith made 9 November 2004 such difference being $23,625.65 or such other amount as the Court finds.”

“25 (a) … the costs incurred in converting the format of the New South Wales bills of costs into the form pursuant to the Legal Profession Act 1982 New South Wales and then to the format prescribed by the Uniform Civil Procedure Rules Queensland when such conversions would not otherwise occurred”.

18 The respondents claimed “damages” and “equitable damages” in respect of the losses they alleged.

Primary judgment

19 The respondents knew the appellants were not admitted to practice in Queensland. As to their complaint that they were unaware of the ramifications of this, the primary judge found (at [125]):

“If the plaintiffs had been fully appraised of the costs consequences of MBP conducting litigation in Queensland and acted logically, in their financial circumstances, they would have retained Queensland solicitors, possibly based in Brisbane. While I have some reservations whether the plaintiffs would have acted logically especially in view of Ms Kanuth's confidence in Ms Perry, the probabilities are that after a full explanation and consideration of their own finances and reflecting on those they would have retained Queensland solicitors. They were in no position to incur costs which were not recoverable.”

20 His Honour held (at [126]) in relation to the non-disclosure claim, that the defendants had failed to explain fully to the plaintiffs the costs consequences of using Sydney, rather than Queensland, solicitors to conduct the Queensland proceedings and (at [134]) that this was a breach of their retainer.

21 Insofar as the adjournment costs were concerned the primary judge found (at [130]) that:

“If the plaintiffs had been alerted in early July 2003 that if the case did not go ahead on and from 24 July 2003 and they sought an adjournment there was the possibility that an adjournment would be refused and their case dismissed or that an adverse costs order would be made against them that could result in a substantial amount being payable, the plaintiffs would have been able to redouble their efforts to borrow the moneys the defendants required or apply for an adjournment at an earlier date.”

22 His Honour concluded (at [132]):

“In my opinion the defendants failed in their duty to the plaintiffs in altering the terms of counsel's terms engagement 2 days before the hearing in Mackay was due to commence and on the eve of counsel's departure from Brisbane to Mackay and in not bringing matters to a head by not later than 8 July 2003. If matters had been brought to a head by such earlier date and Mr McCrohon had decided to proceed and take security there would have been sufficient time for the plaintiffs to have obtained independent legal advice as to execution of the documents prepared by Mr McCrohon.”

23 The primary judge held (at [133]), in relation to the reasonable notice claim, that the failure of the appellants to give reasonable notice such as would have allowed the respondents to engage fresh counsel or fresh solicitors for the hearing to proceed constituted a “breach of an implied term of the retainer”. His Honour noted that if he was wrong in that view, the respondents were entitled to rely on a breach of the appellants’ duty of care. His Honour also found in respect of this claim, that the appellants breached the fiduciary duties they owed to the respondents as “[i]t is part of a solicitor's fiduciary duties to advance the interests of the clients and not prefer their own interests” and this “involves not changing the terms of counsel's engagement at the last minute so as to precipitate the withdrawal of counsel immediately before the hearing and thereby force an adjournment at great cost to the clients.”

24 The respondents do not challenge his Honour’s findings as to the nature of the appellants’ breaches, in particular the fact that he confined his finding as to the appellants’ breach of duty in respect of the non-disclosure claim to one of breach of retainer and did not find the breach of fiduciary duty pleaded in the amended statement of claim.

25 Turning to damages, the primary judge first dealt with the respondents’ claim that as a result of the appellants’ breaches in relation to the adjournment, they lost the opportunity to recover the trial costs of $150,000 from Mr Beale and that, taken with the amount they paid Mr Beale ($100,000), their loss was $250,000. The primary judge rejected this claim. The evidence before his Honour established that, by the time of the trial of the Queensland proceedings, Mr Beale was impecunious, having exhausted all his financial resources preparing for the adjourned July trial: primary judgment (at [139]). There was no evidence of Mr Beale’s financial position at the time of the trial before the primary judge. However his Honour concluded (at [142]) that it was improbable that the respondents would ever have been able to recover their costs of the Queensland proceedings (i.e. the trial costs) from Mr Beale, so that that lost opportunity had no real, and at best nominal, value. The respondents do not challenge this finding.

26 The respondents also submitted that there was another basis on which they should be able to recover the sum of $250,000 representing the liability they incurred in respect of the adjournment costs. The primary judge acceded to that application (at [143] – [144]) as follows:

144. I take the view that the defendants are liable for the amount the plaintiffs were bound to pay the defendants [Mr Beale], namely $250,000.”

27 The primary judge then dealt with the party-party costs claim made in respect of the decrease in the respondents' party-party costs in the Queensland proceedings by reason of those costs being converted from NSW assessable form into Queensland taxable form.

28 His Honour held (at [165] – [167], recalling that within this section paragraphs numbered [163] – [166] are repeated) that the reduction from the New South Wales amount to the Queensland amount flowed from the appellants not fully explaining to the respondents the costs consequences of using Sydney solicitors rather than local solicitors in Mackay (or possibly Rockhampton, where part of the proceedings were heard). Accordingly his Honour allowed (at [167]) that item of damage at $22,694.

29 Finally, the primary judge allowed the respondents $9000 being the costs they incurred in objecting to the bill of costs Mr Beale delivered in the Queensland proceedings in respect of the adjournment cost (at [173(b)], [179] – [180]). The appellants do not challenge this award.

The cross-appeal: solicitor-client costs

30 The respondents also claimed $117,823 at trial in respect of the solicitor-client costs claim. They sought to establish the quantum of that claim by tendering a notional solicitor-client bill of costs (exhibit “MAG2”), prepared by Mr Garrett, a Queensland solicitor who practised as a legal costs consultant. Mr Garrett had acted for the respondents in relation to the costs assessments which flowed from Dutney J’s costs orders. Accordingly he was not an independent expert witness properly so-called, but one who gave evidence about certain factual matters not presently relevant, as well as preparing MAG2. He was, however, apparently treated as an expert witness insofar as he carried out that task, and signed the Code of Conduct Expert Witness. There is no suggestion he did not discharge the obligations of such a witness.

31 MAG2 purported to set out what a firm of solicitors based in Mackay would have charged the respondents for acting in relation to the Queensland proceedings ($189,220) compared to what the appellants had charged ($307,043): see primary judgment (at [149]). MAG2 proceeded on at least two premises which the appellants challenged: first, that, if properly advised, the respondents would have engaged solicitors who practised in Mackay; and, secondly, that those solicitors would have charged the respondents on a task basis, on which, according to Mr Garrett, items are charged close to the Queensland Supreme Court Scale, rather than on a time-cost basis.

32 The primary judge set out (at [144]) the approach taken by Mr Garrett, whose “experience, knowledge of costing matters and skill” he considered to be “impressive”:

“(a) he attempted to calculate the plaintiffs' solicitor and client costs on the basis that they retained solicitors admitted in Queensland who were practising in Mackay instead of the defendants; and

(b) he started with exhibits [MAG1] (the plaintiffs' Standard Costs Bill against Beale) and DJS-5 (Summary of the NSW Solicitors Fees Incurred Based on the Queensland Supreme Court scale); and

(c) he deleted items that appeared in both MAG1 and DJS-5 that were duplicated services (i.e. done by both agent and principal) because had the plaintiffs retained solicitors admitted in Queensland who were practising in Mackay instead of the defendants, there would have been only principal solicitors, no agents and hence no duplicated services; and

(d) he deleted items that appeared in either MAG1 and DJS-5, that were services provided by Sunshine Coast solicitors, because had the plaintiffs retained solicitors admitted in Queensland who were practising in Mackay instead of the defendants, the Mackay solicitors would not have had to retain Sunshine Coast solicitors. From Mr Garrett's examination of the files, the work done by the Sunshine Coast solicitors was limited to receiving instructions from the defendants and then in turn giving instructions to agents in Mackay; and

(e) he calculated the costs for the remaining items using the rates specified in his affidavit of 12 January 2007, being the rates charged by a medium sized firm in Mackay which conducts litigation routinely in the Supreme Court in North Queensland; and

33 As I have said, the appellants challenged the utility of MAG2 in the light, in particular, of the following submissions. They submitted that even if the respondents had retained a Queensland solicitor, there was no evidence that they would have retained solicitors based in Mackay. They also submitted that Mr Garrett's opinion lacked a proper factual foundation. This was because, they contended, solicitors in Queensland are free to enter into costs agreements with their clients which can specify that all work is to be charged on a time, rather than task, basis and there was nothing to prevent Mr Garrett from costing the respondents’ likely fees, even if Mackay solicitors were engaged, on a time-cost basis: see primary judgment (at [152]).

34 Mr Garrett accepted he could have prepared MAG2 on a time-costed basis, but said he did not do so because of the difficulty of unravelling the overlapping of work, for example as between work in fact done by Queensland solicitors retained as the appellants’ agents and the appellants: primary judgment (at [148]). Mr Garrett also accepted that if the plaintiffs had retained Brisbane solicitors some charges would have been required for a town agent closer to Mackay and the deductions he made concerning the agency fees of Mackay solicitors retained by Sunshine Coast solicitors could not be recovered: primary judgment (at [151]).

35 MAG2 also included costs for tasks which Mr Garrett described as:

“[N]ot necessarily required for the litigation but which related to the Plaintiffs’ claim against the property known as Cool Palms for example FIRB [Foreign Investment Review Board] applications, re-financing applications and the like.”

36 As to these amounts, the primary judge observed:

“155. I raised with Senior Counsel for the plaintiffs whether they were entitled to claim for items not connected with the litigation, such as the FIRB application. Senior Counsel accepted that he could not claim for work done in relation to the FIRB application. He said (at T183, lines 35-36) ‘…we do not claim anything that is not connected with the litigation in Queensland, nor could we do so.’ Senior Counsel had the understanding that Mr Garrett excluded any items for non litigious work. When MAG2 is examined this does not appear to be the position. See, for example, Items 29, 32, 73, 75, 77.

….

37 The primary judge rejected the claim for solicitor-client costs, concluding the evidence did not enable him to quantify the amount payable in relation to this head of damage. His Honour said:

Mr Garrett's exercise, although helpful, gives rise to some problems. While I have found that, if the costs consequences had been fully explained the plaintiffs should have instructed Queensland solicitors, those instructed could well have been located in Brisbane and this would have involved a Brisbane firm using a Mackay agent.

It is probable that the plaintiffs would have been asked to execute a Costs Agreement permitting costs and fees to be charged on a time basis as the arrangements between Beale and the plaintiffs were messy and a little involved. There were also the FIRB and migration issues. The issues raised could also have led to the Mackay solicitors seeking a Costs Agreement permitting time based charging even though task based charging was usual in Mackay.

161. A considerable amount of time was spent by MBP in endeavouring to secure payment of monies for their costs and to put them in funds to meet counsel's fees, Queensland agents' fee and disbursements.

162. While there may well be solicitor/client costs paid by the plaintiffs to MBP which would be recoverable the evidence does not enable me to quantify the amount which is payable. I have given consideration to making a broad estimate but that would not be fair given that time based charging would probably have to be considered along with the retention of Brisbane based solicitors and isolating the work that was fairly referrable to the Court action.

163. A difficult issue would arise as to any claim for solicitor/client costs as to aspects of the Deed of Security*** in the light of the events of 22-23 July 2003 and separating these from the Deed of Security which was later executed.

164. On the evidence as it stands I am not persuaded that I should make any allowance for this item as I am not able to quantify the amount that should be allowed with any degree of reliability.” (emphasis added)

** It will be recalled that the primary judge had earlier found (at [125]) that if the respondents had been fully informed of the costs consequences of retaining New South Wales solicitors to conduct the litigation in Queensland, they would have retained Queensland solicitors “possibly based in Brisbane”.

38 The respondents did not challenge any of paragraphs [155] and [160] – [162] in the notice of cross-appeal as originally filed. As shall become apparent, they sought to do so after the appeal was heard. I will return to this.

Issues on appeal and cross-appeal

39 The appellants appeal from the primary judge’s findings as to the adjournment and the party-party costs, complaining that (a) the primary judge erred in finding that they were liable to pay to the respondents the sum of $250,000 having regard to his Honour’s findings that Mr Beale was impecunious and that the opportunity the respondents lost to recover their costs of the Queensland proceedings had no real value (Ground 1); and (b) the primary judge erred in finding that, even if the appellants did not fully explain to the respondents the cost consequences of using Sydney solicitors rather than Mackay or possibly Rockhampton solicitors, the respondents’ conduct should be regarded as a material cause of the loss (Ground 2).

40 The respondents cross-appeal against the primary judge’s refusal to award them damages in respect of their solicitor-client costs claim. The appellants have in turn filed a notice of contention submitting his Honour’s refusal to award damages in this respect was justified on five other grounds – only two of which (grounds 3 and 4) were addressed in written submissions.

Submissions: appeal

41 The substance of the appellants’ submission in relation to both grounds of appeal ultimately was that the primary judge erred in failing to take into account in the assessment of damages the circumstances at the time of trial, including Mr Beale’s impecuniosity.

42 Mr S A Kerr of Senior Counsel, who appeared with Mr T J Breakspear for the appellants on appeal and at trial, contended in relation to the adjournment costs claim that the respondents did not suffer a loss of $250,000 because they never paid that amount to Mr Beale. As to the $150,000 representing the agreed value of the trial costs order of which the respondents were the beneficiary, Mr Kerr argued that the respondents would never have been able to recover this amount from Mr Beale given the primary judge’s findings concerning his impecuniosity. Accordingly, he submitted, the only damages which flowed from the primary judge’s findings that the appellants breached their duty in relation to the adjournment costs issue was the $100,000 the respondents paid Mr Beale in agreed set-off of the adjournment costs and the trial costs orders. The award of $250,000, he contended, was a windfall.

43 Insofar as the party-party costs claim was concerned, the appellants’ written submissions complained that the primary judge erred in concluding that the respondents suffered loss flowing from the lack of an explanation as to the consequences of using Sydney rather than Queensland legal practitioners. In short they contended that the primary judge’s conclusion was based on the fallacy that, had the respondents retained Queensland legal practitioners, those legal practitioners would have charged on a task-costed basis, rather than, as the appellants had done, on a time-costed basis. The written submissions also contended that while the evidence established that some Mackay solicitors charged costs based on tasks undertaken, the weight of the evidence was that Queensland solicitors charged on a time-costed basis. Accordingly the appellants contended, as the primary judge found (at [125]), that if properly advised the respondents would have retained a Brisbane-based legal practitioner, and (at [160]) a practitioner who would have asked them to execute a costs agreement permitting costs and fees to be charged on a time-costed basis. Any bill of costs such a practitioner prepared in relation to the party-party costs would have been prepared on the same basis as the appellants’. In such circumstances a reduction in the Queensland practitioner’s bill of costs would have occurred in any event because Queensland costs assessors appraise bills of costs on a task-costed basis.

44 In oral argument Mr Kerr accepted that this ground of appeal could also be dealt with on the same basis as the adjournment costs, that is to say, that as Mr Beale was impecunious so that no party-party costs could, in any event, have been recovered from him, the primary judge erred in awarding damages under this head.

45 Mr B R McClintock of Senior Counsel, who appeared for the respondents with Mr Doyle Gray on appeal and at trial, submitted that the consequence of the adjournment costs order was that the respondents immediately incurred a liability to Mr Beale in that amount ultimately quantified at $250,000 – a liability they would not have incurred if the appellants had not breached their duty. He contended that Mr Beale’s impecuniosity, and the way in which the respondents subsequently discharged the liability, by set-off against the favourable costs order against Mr Beale, was irrelevant to the determination of the “loss” that the respondents suffered when the adjournment costs order was made. He contended that Mr Beale’s impecuniosity was only relevant to the respondents’ claim that as a result of the appellants’ breaches, they had lost the chance to recover their trial costs from Mr Beale.

46 Further, Mr McClintock sought to argue on appeal that there was no basis upon which the sum of $250,000 could be set off against the favourable costs order against Mr Beale. He pointed to the fact that Dutney J, in a telephone hearing on 3 November 2004, confirmed that there would be two parallel costs orders: one whereby the respondents recover their costs on the standard basis and one where Mr Beale recovers the same costs on the indemnity basis, as his Honour was of the view that Mr Beale was entitled to all costs he incurred back from the plaintiffs on the indemnity basis: see primary judgment (at [11]). Mr McClintock contended that the effect of the parallel costs orders was that the two orders stood by themselves and could not be set off against each other.

47 Insofar as the party-party costs were concerned, Mr McClintock’s written submissions contended the appellants did not adduce any evidence that a bill of costs prepared by Queensland legal practitioners who might have represented the respondents would have been reduced in the manner the appellants’ bill had been. He argued, even though the evidence was that Queensland legal practitioners charged on a time basis, Queensland bills of costs such as that submitted for taxation on Mr Beale’s behalf were prepared “in the usual format in Queensland where the items are not bulked together”: see primary judgment (at [150]). Accordingly he argued it was open to the primary judge to infer that any bill of costs prepared by Queensland legal practitioners who might have represented the respondents would have been prepared in a manner which accorded with Queensland practice and would not have been subject to the adverse taxation the appellants’ bill suffered.

48 Mr McClintock accepted in oral argument that if the appellants were successful as to their argument in relation to the adjournment costs that damages had to be assessed at the time of trial, they would also succeed on that point in relation to the party-party costs issue.

Consideration: the appeal

49 As I have said, the primary judge found (at [132] – [133]) that the appellants breached their retainer, alternatively their duty of care, and their fiduciary duty in the circumstances which led to the respondents incurring the adjournment costs order. Neither party suggested that the respondents’ damages might differ depending on the cause of action – rather they assumed they were the same - an assumption which may not always be sound: HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640 (at [14]) (Full Court).

50 Damages awarded for breach of contract may, for example, differ from those in tort because of rules of remoteness or the terms of the contract: Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1 (at [60]) per Gleeson CJ, McHugh, Gummow and Hayne JJ. Damages awarded in tort may differ from those awarded for breach of contract because of the availability of apportionment in cases of tort, but not contract, or because of the operation of contributory negligence legislation: see generally Astley v Austrust Ltd; cf Civil Liability Act 2002 (NSW), s 5A.

51 If the remedies did differ depending on the cause of action the respondents should be able to take advantage of the most advantageous remedy: Henderson v Merrett Syndicates Ltd [1994] UKHL 5; [1995] 2 AC 145 (at 194) per Lord Goff of Chieveley, referred to with apparent approval in Astley v Austrust Ltd (at [84]) per Gleeson CJ, McHugh, Gummow and Hayne JJ; see also HTW Valuers (at [14]). From the reasons that follow it will be apparent that in this case nothing relevantly turned on the different causes of action.

52 The object of an award of damages, in the case of a tort, is to put the injured plaintiff in the position in which he or she would have been if the tort had not occurred (Todorovic v Waller [1981] HCA 72; (1981) 150 CLR 402 (at 412) per Gibbs CJ and Wilson J; Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351 (at 355) per Mason CJ); and in the case of breach of contract, in the position in which he or she would have been had the contract been performed: Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1 (at 11- 12) per Mason, Wilson and Dawson JJ; (as to contract see also Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272 (at [13]) (Full Court); European Bank Limited v Robb Evans of Robb Evans & Associates [2010] HCA 6; (2010) 264 ALR 1 (at [11]) (Full Court)).

53 An injured plaintiff is not entitled to make a profit in an action in tort or contract; in other words, to be awarded damages for a loss never suffered (Wertheim v Chicoutimi Pulp Co [1911] AC 301 (at 307 – 308) per Lord Atkinson) or, in the case of contract, to be placed in a superior position to that which he or she would have been in had the contract been performed: The Commonwealth of Australia v AmannAviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 (at 82) per Mason CJ and Dawson J.

54 The general rule is that "damages for tort or for breach of contract are assessed as at the date of the breach" – the date of breach rule: Johnson v Perez (at 367) quoting Miliangos v George Frank (Textiles) Ltd [1976] AC 443 (at 468) per Lord Wilberforce. However, the general rule is not rigid and “will yield if, in the particular circumstances, some other date is necessary to provide adequate compensation”: Johnson v Perez (at 367) per Wilson, Toohey and Gaudron JJ; (at 370 – 371) per Brennan J; (at 386 - 387) per Dawson J; see also Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] UKHL 12; [2007] 2 AC 353. As Campbell JA (with whom Macfarlan JA and Sackville AJA agreed) said recently, referring to Johnson v Perez, the “certainty of [the] principle concerning the time as at which damages are assessed has now been eroded”: Gagner Pty Ltd trading as Indochine Cafe v Canturi Corporation Pty Ltd [2009] NSWCA 413; (2009) 262 ALR 691 (at [51]).

55 The general rule is flexible because the object of the award (and assessment) of damages is to give an injured plaintiff that amount in damages which will most fairly compensate for the wrong suffered: Johnson v Perez (at 355 – 356) per Mason CJ; (at 367) per Wilson, Toohey and Gaudron JJ; (at 371) per Brennan J; (at 380) per Deane J; (at 386) per Dawson J. What will amount to “fair” compensation has to take into account what is fair to the defendant as well as the plaintiff: Narni Pty Ltd v National Australia Bank Ltd [2001] VSCA 31 (at [29]) per Tadgell JA, Buchanan and Chernov JJA agreeing.

56 Accordingly, the general rule will yield if, at the time damages are assessed, the court is aware of new and material facts relevant to the assessment because courts prefers actual facts to speculation, prophecies, conjecture and guessing: Willis v Commonwealth [1946] HCA 22; (1946) 73 CLR 105 (at 109) per Latham CJ; Bwllfa and Merthyr Dare Steam Collieries (1891) v Pontypridd Waterworks Co [1903] AC 426 (at 431) per Lord MacNaghten, cited with approval by Wilson, Dawson, Toohey and Gaudron JJ in Nikolaou v Papasavas Phillips & Co [1989] HCA 11; (1989) 166 CLR 394 (at 404); Kizbeau Pty Ltd v WG & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281 (at 293 - 295) (Full Court); HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (at [38] – [40]) (Full Court).

57 In Golden Strait, in December 2001 charterers repudiated a charterparty of a ship due to run until mid-2005. The owners accepted the repudiation and sought to recover damages. On 20 March 2003 the Iraq war broke out. It was agreed between the parties that this was an event which would have entitled the parties to cancel the charter under the war provision (cl 33) of the charterparty. The owners argued that because the charterers' repudiation and their acceptance of it preceded the March 2003 event, the rule requiring damages for breach of contract to be assessed at the date of breach required that event to be ignored. The House of Lords rejected that argument by majority (Lord Bingham of Cornhill and Lord Walker of Gestingthorpe dissenting).

58 Lord Scott of Foscote (with whom Lord Carswell and Lord Brown of Eaton-under-Heywood agreed and with whom, in turn, Lord Scott also agreed), said (at [30]):

The Mihalis Angelos

‘… if it can be shown that those events were, at the date of acceptance of the repudiation, predestined to happen, then … the damages which [the claimant] can recover are not more than the true value, if any, of the rights which he has lost, having regard to those predestined events.’

59 Accordingly, Lord Scott rejected (at [32]) the owners’ contention, describing it as attributing “to the assessment of damages at the date of breach rule an inflexibility which is inconsistent both with principle and with the authorities.” While his Lordship accepted the date of breach rule usually put the victim of a breach of contract in the same position, so far as money could do it, as if the contract had been performed (the “compensatory principle”), his Lordship did not accept that that was universally so. In his view (at [38]) the owners’ argument offended the compensatory principle, because they were seeking compensation exceeding the value of the contractual benefits of which they were deprived. This was because their case required “the assessor to speculate about what might happen over the period 17 December 2001 to 6 December 2005 regarding the occurrence of a clause 33 event and to shut his eyes to the actual happening of a clause 33 event in March 2003.”

60 In equity, too, a defendant is only liable for the consequences of the legal wrong he or she has done to the plaintiff and to make good the damage caused by such wrong. Damages was not an equitable remedy for breach of purely equitable obligations, such as breach of fiduciary duty: Meagher, Gummow and Lehane, Equity Doctrines & Remedies, 4^th ed (2002) Butterworth’s LexisNexis (at [23-005]). In the case of a beach of fiduciary duty, the court has an inherent power to grant relief by way of monetary compensation: United States Surgical Corp v Hospital Products International Pty Ltd [1982] 1 NSWLR 766 (at 816) per McLelland J. The object of equitable compensation is to restore persons who have suffered loss to the position in which they would have been if there had been no breach of the equitable obligation: O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 (at 272) per Spigelman CJ, referring to Nocton v Lord Ashburton [1914] AC 932 (at 952) per Viscount Haldane LC. While the plaintiff is to be put in the same position as he or she would have been in if the wrong for which equitable compensation is awarded had not been sustained, the defendant is not liable to pay compensation which exceeds the loss suffered from such wrong: Target Holdings Limited v Redferns (a firm) [1996] 1 AC 421 (at 432) per Lord Browne-Wilkinson, cited with approval in O'Halloran (at 272).

61 However unlike the general rule in contract and tort, the rule in equity is that the determination of the quantum of any pecuniary remedy for breach of equitable duty falls for determination “at the time of trial, using the full benefit of hindsight”: Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 (at 555) per McLachlin J, cited with approval by the Full Court in Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 (at [35]; see also at [50]); see also Target Holdings (at 439) as to the use of hindsight and common sense in determining causation in assessing equitable compensation, approved in O'Halloran (at 273).

62 Thus in Target Holdings, the plaintiff was held not to be entitled to recover damages from its solicitors who were found to have acted in breach of trust in paying out trust moneys prematurely, contrary to the plaintiff’s instructions to transfer those moneys only when a commercial property had been conveyed to a mortgagor and the mortgagor had executed charges in favour of the plaintiff. Subsequently, the property was conveyed to the mortgagor and the charges executed. However, on the plaintiff’s exercise of its power of sale, the mortgaged property turned out to be worth far less than the amount prematurely disbursed by the solicitors. The House of Lords rejected the plaintiff’s argument that events subsequent to the solicitors’ breach of trust were to be disregarded and that the defendants had to restore the entirety of the monies transferred prematurely. Lord Browne-Wilkinson observed (at 436):

To impose such an obligation in order to enable the beneficiary solely entitled (i.e. the client) to recover from the solicitor more than the client has in fact lost flies in the face of common sense and is in direct conflict with the basic principles of equitable compensation

63 As noted by the Full Court in Youyang v Minter Ellison (at [47]), in approving Lord Browne-Wilkinson’s reasoning, it was significant that the solicitors’ breach of trust left the plaintiff in exactly the same position as if there had been no breach. If the instructions had been obeyed, the transaction would still have gone ahead and the plaintiff would have suffered a loss represented by the difference between the amount advanced on security and the amount realised from the security. That loss would have been caused by the fraud of third parties.

64 If the date of breach rule was applied to determine the loss the respondents suffered as a result of the adjournment costs order then it might be accepted that they suffered a loss of $250,000.

65 However, with respect to the primary judge, to award that sum without having regard to the fact the respondents only paid $100,000 to discharge their liability in respect of that costs order was to proceed without regard to the proper application of the compensatory principle – as applied in respect of each of the respondents’ causes of action. It was not to the point that in consequence of the adjournment costs order the respondents immediately incurred a liability to Mr Beale ultimately quantified at $250,000. Applying the proposition that “fair” compensation takes into account what is fair to the defendant, as well as the plaintiff (see Narni at [29], above at [54]), and that a defendant is not liable to pay compensation which exceeds the loss suffered, the primary judge ought to have taken into consideration that the only amount the respondents actually paid to discharge the adjournment costs order was the sum of $100,000.

66 It is equally not to point if, as Mr McClintock submitted, the two costs orders could not be set off as a matter of law, when that, in fact, is what happened. As is apparent from the foregoing discussion, the Court must take material facts into account when assessing damages. The fact the respondents paid only $100,000 to discharge their liability under the adjournment costs order was a material fact the primary judge ought to have taken into account.

67 Accordingly, in my view, the primary judge erred in awarding the respondents $250,000 in respect of the adjournment costs claim.

68 The same reasoning applies to the claim for party-party costs. That was really an aspect of the respondents’ pursuit of the trial costs order they secured against Mr Beale. If, as the evidence revealed, at the time of the trial in this Court, it was apparent the respondents could not recover the benefit of that order from the impecunious Mr Beale (which was the logic of his Honour’s rejection (at [142]) of the respondents’ claim to recover damages for their lost opportunity to recover the trial costs), then they have suffered no loss in the reduction in the amount sought in converting the bill proposed to give effect to that order into Queensland format. Or, to put it another way, the loss they suffered in this respect was not caused by the appellants’ breaches of duty, but by Mr Beale’s impecuniosity. Accordingly, in my view, the primary judge erred in awarding the respondents $22,694 in respect of the party-party costs claim.

69 On that basis the appellants should succeed on both grounds of appeal. It is not necessary to deal with the appellants’ alternative submission in relation to ground 2 regarding whether Brisbane based solicitors would have charged on a time cost basis.

Cross-appeal – submissions

70 At the core of Mr McClintock’s submissions on the cross-appeal as originally framed, was his reliance on the primary judge’s finding (at [162]) that “there may well be solicitor/client costs paid by the plaintiffs to MBP which would be recoverable”, and his criticism of his Honour’s conclusion that, nevertheless, “the evidence does not enable me to quantify the amount which is payable.” He contended that, as the first statement amounted to a finding that the respondents had suffered loss as a result of the non-disclosure, the primary judge erred in making the latter finding and, in any event, in not assessing damages “as best as he could”.

71 Mr McClintock first submitted that the evidence supported the proposition that the appellants’ failure to give full disclosure of the costs consequences of using Sydney solicitors “caused the [respondents’] loss”. He pointed to Mr Garrett’s evidence that translating the respondents’ New South Wales formatted party-party costs bill into Queensland format led to a reduction in the claimable amount of $22,694. He contended that MAG2 was evidence to which the primary judge could refer in quantifying the respondents’ loss. He argued that the differences between the assumptions on which MAG2 was based and the facts as found by the primary judge, were not sufficient to justify his Honour’s complete failure to award any damages.

72 Secondly, Mr McClintock contended that the primary judge’s statements to the effect that the respondents may “possibly” (at [125]) or “could well have” (at [160]) engaged Brisbane solicitors fell short of a definite finding that the respondents failed to establish one of the factual premises of MAG2.

73 Thirdly, Mr McClintock argued that as the only criticism the primary judge made of the preparation of MAG2 was that Mr Garrett erroneously included items unrelated to the litigation such as the FIRB and migration issues, damages could have been quantified by “the simple task” of extracting from Mr Garrett’s assessment the items that could not be claimed. While Mr McClintock accepted that it would have been difficult for the primary judge to have excluded items from MAG2 which did not relate to the Queensland proceedings, he argued that it was incumbent upon his Honour to undertake that exercise.

74 Finally, Mr McClintock submitted that as the primary judge did not find his clients were “not worse off” by reason of the appellants’ breach of retainer, his Honour ought to have taken a “broad rule of thumb approach” to the assessment of damages. On that basis he contended his Honour should either have awarded $117,823.16 (the bottom line of MAG2) or a significant proportion of that sum, “say $100,000”.

75 Mr Kerr contended that the primary judge found that the respondents had not established the factual foundation for MAG2 and, accordingly, there was no evidence which could enable him to quantify the loss, if any, the respondents had suffered. He submitted that the primary judge’s statements (at [125], [160]) were supported by the evidence and meant one of the factual assumptions for MAG2 had been rejected.

76 Secondly, Mr Kerr argued that the primary judge also properly rejected MAG2 because it was based on the unproven assumption that any Queensland solicitor the respondents might have engaged would charge on a task costed basis. He pointed to evidence he contended supported the primary judge’s finding that it was more probable that Queensland solicitors would have charged on a time costed basis.

77 Finally, Mr Kerr submitted that there was no basis on which the Court could award the respondents either the amount set out in MAG2 or their alternative figure of $100,000. He contended the latter figure had been “merely plucked from thin air” and that “[a]ny other figure would be drawn from the same space.”

78 Mr Kerr also relied on the appellants’ notice of contention in the following two respects. First, he submitted that the primary judge’s conclusion that the respondents had failed to establish any quantifiable loss flowing from the non-disclosure was also open on the basis the respondents failed to adduce evidence that, properly advised, they would have used Queensland rather than New South Wales solicitors. Secondly, he contended the primary judge ought to have found Mr Garrett could have prepared MAG2 on the basis of what Mackay solicitors would have charged on a time costed basis.

Cross-appeal: supplementary submissions

79 In the course of oral argument the Court expressed concern about the respondents’ submission that the primary judge could, and should, have excised from MAG2 the items for non-litigious work: cf primary judgment [155]. While Mr McClintock submitted the amounts were “trivial”, he acknowledged that MAG2 – which was not then in the appeal papers – was a substantial document. He informed the Court that the respondents did not challenge his Honour’s conclusion that those amounts were irrecoverable – accepting that he had informed the primary judge that the respondents “could not get anything that was not connected with the litigation”. He did not challenge Mr Kerr’s indication that the respondents had not given his Honour any assistance as to how to disentangle such amounts from MAG2. Nevertheless, as I have said, he submitted that his Honour could have quantified the loss “by the simple task of extracting out of the amounts the small amounts for FIRB”.

80 The Court gave the respondents leave to file and serve submissions explaining the approach they contended the primary judge ought to have taken to extract the “non-litigious work” items from MAG2; quantifying the amounts his Honour ought on that approach to have subtracted from the bottom line figure in MAG2 and the sum for the solicitor–client costs claim his Honour ought to have derived as a result of that exercise; and showing where, if at all, a submission had been made at trial as to how his Honour ought carry out such an exercise.

81 Mr Kerr objected to the respondents being given that leave, arguing they should not be able to conduct the appeal on a different basis to the approach taken at trial. He was invited to address both this question and issues of costs in respect of the matters on which the respondents had been given leave in his written submissions in response.

82 The respondents filed supplementary submissions. Contrary to the express acceptance during the oral argument that MAG2 included “non-litigious” items, the supplementary submissions argued that MAG2 did not include any impermissible items. Rather, the supplementary submissions contended that in preparing MAG2, Mr Garrett excluded items that were not recoverable as costs of the Queensland proceedings. To the extent the primary judge found otherwise, the respondents sought leave to file an amended notice of cross-appeal (a document which had already been filed in the Registry on 17 November 2009), which added a ground 1(h) complaining that the primary judge:

“…erred at [155] and [162] in finding that work done in relation to the FIRB application was not connected with the litigation in Queensland, and consequently in finding that MAG2 included items that were not connected with the litigation in Queensland and were not recoverable by the Cross-Appellants.”

83 The supplementary submissions then sought to embark upon a detailed consideration of exhibits DJS2, DJS4, DJS5 and MAG1 (on which MAG2 was apparently based), to seek to demonstrate why Mr Garrett had already excluded non-recoverable items from MAG2. Copies of DJS2, DJS4, DJS5, MAG1 and MAG2 accompanied the supplementary submissions.

84 The supplementary submissions conceded that, on their face, DJS2, DJS5 and MAG1 each included items which might be thought not to have been connected with the Queensland proceedings and hence not recoverable “on a party-party basis as costs of the proceedings”. They then contended that, in fact, such items, which included costs in relation to FIRB approval and efforts by the respondents to refinance against the security of Cool Palms, were connected with the litigation and recoverable by the respondents and also (although the relevance of this was not apparent) by Mr Beale as the result of Dutney J’s orders. They referred, non-exhaustively, to numerous such items in DJS2, DJS4 and DJS5.

85 The supplementary submissions contended that the statement in Mr Garrett’s affidavit of 12 January 2007 (at [29]) that he had “included attendances which were not necessarily required for the litigation but which were related to the Plaintiffs’ claim against the property”, implied that costs associated with “FIRB applications, refinancing applications and the like” were connected with the Queensland proceedings. That implication was said to be reinforced by the statement in Mr Garrett’s affidavit of 26 September 2008 that MAG1 and DJS5, both of which included items relating to FIRB, refinancing and the like, were the starting point for the creation of MAG2. The supplementary submissions contended that such items properly formed part of taxable party-party costs both for Mr Beale and the respondents. It might conveniently be noted at this point that Mr Garrett’s affidavit does not include any express statement to the latter effect, but, rather, described DJS4 (for which MAG1 was the “corresponding Costs Statement”) and DJS5, in substance, as party-party bills of costs in form capable of assessment either in New South Wales or Queensland.

86 Finally, the supplementary submissions drew attention to the following exchanges between his Honour and Mr Garrett, and his Honour and Mr McClintock in the course of address, which, it was contended, demonstrated that the primary judge led himself into error:

Q. In paragraph 29 you make a reference there to FIRB applications, Foreign Investment Review Board work, that’s fairly specialised work, isn’t it?

[Garrett] A. I wouldn’t have thought it was specialised work. It might be. I’m not too sure. I suppose it is. I’m not sure. I can’t actually remember what work they actually did.

A. I can’t actually recall, your Honour, what was involved in the application, filling in a form or making submissions on, but I can’t recall. Unless I see the file I don’t know.

……

HIS HONOUR:

Q. I had some real difficulty with the claim that you made in respect of the items such as the FIRB application. That didn’t seem to me to be at all connected with this litigation.

I accept I could not get work for FIRB.

If it is necessary, I will ask my learned junior to do a short note explaining what I have just said to your Honour and showing why we do not claim those matters and showing how Mr Garrett came to the figures in question. I think it is fairly clear, in fact, from Mr Garrett’s affidavit as to what he did.

As I said, we do not claim anything that is not connected with the litigation in Queensland, nor could we do so.

[BLACK 188]

87 The supplementary submissions then contended that the primary judge may not have “erred as he did” if it had been put to Mr Garrett in cross-examination that he had erroneously included non-litigious items in MAG2, or if the primary judge had directly put such questions, if it had been apparent to Counsel for both parties that this issue should be followed up, or if his Honour had accepted the respondents’ offer of a written note.

88 The appellants submitted that the respondents should not be given leave to rely on their proposed amended cross-appeal nor on their supplementary submissions. They pointed out that the supplementary submissions did not address the questions upon which the Court invited assistance but, rather, advanced a new position contrary to that advanced before the primary judge and that put in oral argument during the hearing of the appeal. They complained that their consent had not been sought to the filing of the amended notice of cross-appeal and that such a document should not have been filed in the Registry without the Court’s leave. They submitted that to allow the respondents to amend their notice of cross-appeal following oral argument and to advance submissions beyond the scope of the leave granted was inconsistent with s 56 and s 57 of the Civil Procedure Act 2005 (NSW) and the practice in this Court, referring to Bull v Lee (No 2) [2009] NSWCA 362.

89 Next, the appellants complained that the respondents’ submission that work done in relation to the FIRB application should be considered to be connected with the Queensland proceedings was contrary to the position they took at trial. They drew attention to the primary judge’s reliance on Mr McClintock’s concession that the respondents could not get work for FIRB at trial. They pointed out that the respondents had not assisted the primary judge in the exercise of how he might extract non-litigious amounts from MAG2.

90 Next, the appellants made a number of submissions about the respondents’ reliance on DJS2, DJS4 and DJS6. In particular, they pointed out that DJS2, DJS4 and DJS5 were bills of costs in taxable/assessable form and there was no evidence that any of the FIRB related items were allowed following taxation – although it is unclear whether or not anything was taxed (see [12]) above, nothing turns on this. They submitted that the respondents’ submission that it could be “implied” that FIRB work was recoverable in the litigation had no foundation in fact and, further, was contrary to Mr Garrett’s evidence.

91 The supplementary submissions also identified in MAG1 agency fees said to amount to $1686.70, which it was said the respondents would have incurred had they retained solicitors based in Brisbane instead of Mackay, which they accepted should have been excluded from the claim for damages.

92 The appellants pointed out that MAG1 was a bill Mr Garrett prepared in Queensland taxable form containing all the work done by the Queensland agents. They complained that no submission was made at trial that the primary judge should have reviewed MAG1 and extracted particular agency related costs, let alone any submission as to the basis on which his Honour could have undertaken such an exercise. They complained that the respondents’ supplementary submissions were silent as to the methodology they applied to extract the sum of $1686.70.

93 The appellants submitted that there were many items of work in MAG1 which would have been the same on the hypothetical scenario that, properly advised, the respondents would have engaged Brisbane solicitors. They drew attention to two examples it is unnecessary to repeat and contended, again, that the respondents had failed to show what items in MAG1 actually represented a loss to them.

Cross-appeal: damages

94 The respondents bore the onus of proving on the balance of probabilities that they had suffered loss as a result of the appellants’ breach of retainer, as well as the quantum of the loss they had suffered: Commonwealth v Amann (at 80) per Mason CJ and Dawson J; (at 99) per Brennan J; (at 118) per Deane J; (at 137 – 138) per Toohey J. If they demonstrated that, properly advised, they would not have retained the appellants, but would have retained Queensland solicitors, they were entitled to “such damages as may reasonably be supposed to have been in the contemplation of both parties concerned at the time they made the contract as the probable result of the breach” (European Bank Ltd v Robb Evans (at [13])) – that question being determined by the terms of the retainer in the light of the matrix of circumstances in which it was made: Commonwealth v Amann (at 92) per Mason CJ and Dawson J; (at 99) per Brennan J. The respondents were entitled, accordingly, to recover as damages expenditure they wasted on account of the appellants’ breach of retainer: Commonwealth v Amann (at 81 - 82) per Mason CJ and Dawson J. However, as I have said (at [52]) they were not entitled to damages for a loss never suffered – or to put it in terms relevant to the argument in this case, for a loss or expense not incurred as a result of the breach of retainer.

95 To recover more than a nominal amount for breach of retainer the respondents had to “affirmatively establish assessable damage, that is to say, loss or injury which is capable of being measured in monetary terms”: Commonwealth v Amann (at 118) per Deane J.

96 A plaintiff who seeks to establish historical facts must attain the civil standard of proof – the balance of probabilities. However that standard of proof does not apply to a plaintiff who seeks to establish future possibilities and past hypothetical situations (such as what might have happened had the plaintiff not lost a chance) for the purpose of assessing damages: Malec v J C Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638 (at 639 – 640) per Brennan and Dawson JJ; (at 642 – 643) per Deane, Gaudron and McHugh JJ; Poseidon Ltd & Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 (at 349 – 350).

97 Thus, where a breach of contract deprives a party to the contract of a chance, the loss of that chance is compensable, notwithstanding that, on the balance of probabilities, it is more likely than not that the plaintiff would not have turned the chance into reality: Sellars (at 349) per Mason CJ, Dawson, Toohey and Gaudron JJ. The usual illustration of this proposition is Chaplin v Hicks [1911] 2 KB 786 where the plaintiff, having proved a breach of contract by the promoter of a talent contest, recovered damages for losing the chance of winning an engagement as an actress.

98 In such cases, the court approaches the hypothetical situation in terms of the degree of probability of it occurring. The court does not require the plaintiff to demonstrate that, to use the present case as a model, there was a 51 per cent chance of the respondents briefing Queensland solicitors if they had been properly advised. Rather the court takes the chance of that having happened into account even if it falls below 50 per cent, as long as it is not “so low as to be regarded as speculative”. In such cases, the court “assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability”: Malec (at 643); see also Commonwealth v Amann (at 118) per Deane J; Sellars (at 349).

99 In Sellars, for example, the trial judge, Justice French (as his Honour then was) found that as a result of a misrepresentation made by the respondents in breach of s 52 of the Trade Practices Act 1974 (Cth), the applicant lost the opportunity to enter into a contract with a third party under which contract it would have secured greater benefits than it secured under a later contract. However his Honour was not persuaded that all conditions precedent to the lost contract’s performance would have been satisfied. Accordingly he discounted the benefits the applicant’s expert calculated would have flowed from the lost contract to 40 per cent to allow for the probability that the agreement would not have proceeded: Adelaide Petroleum NL v Poseidon Ltd (1990) 98 ALR 431; see Sellars (at 347). The respondents’ appeals to the Full Federal Court (Poseidon Ltd v Adelaide Petroleum NL [1991] FCA 663; (1991) 105 ALR 25) and the High Court against the award of damages on the loss of opportunity basis were dismissed.

100 As I said earlier in these reasons, the object of an award of damages for breach of contract is to place the respondents in the position they would have been in if the appellants had performed their retainer. If the respondents established that, properly advised, they would have retained solicitors who would have charged them less for representing them in the Queensland proceedings, they were entitled to recover as damages “expenditure they wasted on account of the appellants’ non-disclosure”: Commonwealth v Amann (at 82).

101 The respondents sought to discharge their onus of proof on damages by contending that, if properly advised, they would have retained Mackay solicitors who would have charged them $117,823.16 less than the appellants did, a figure they sought to establish by MAG2.

102 The appellants assert in their notice of contention that his Honour’s reasons in respect of this claim should be upheld because the respondents did not adduce evidence to establish that, if properly advised, they would have instructed Queensland, let alone Mackay, solicitors, rather than New South Wales legal practitioners. This submission was made to the primary judge.

103 In response, Mr McClintock submitted at trial that by virtue of s 5D of the Civil Liability Act 2002 (NSW) the respondents could not have led evidence as to what they would have done if properly advised. When the primary judge pointed out that s 5D in terms referred to “negligence”, Mr McClintock drew attention to the fact that the Civil Liability Act applied to all claims however framed if they can be said, in substance, to be a claim for damages for harm resulting from negligence. I assume he was intending to refer to s 5A(1) which provides that Pt 1A of the Civil Liability Act “applies to any claim for damages for harm resulting from negligence, regardless of whether the claim is brought in tort, in contract, under statute or otherwise”: see Booksan Pty Ltd v Wehbe [2006] NSWCA 3; (2006) Aust Torts Rep ¶81 – 830 (at [167]) per Ipp JA (Giles and Tobias JJA agreeing). Mr McClintock also referred to judicial observations about treating with caution, in failure to warn cases, evidence from the plaintiff about what he or she would have done if the defendant had acted otherwise.

104 The appellants did not as I understand their submissions at trial challenge Mr McClintock’s characterisation of the case as one to which the Civil Liability Act applied. On that basis s 5D precluded the respondents giving the sort of evidence of whose absence the appellants complained. But even if the Civil Liability Act did not apply, it should be borne in mind, as Campbell JA (Hodgson and McColl JJA agreeing) said in Kowalczuk v Accom Finance [2008] NSWCA 343 (at [319]) that:

Chappel v Hart

Rosenberg v Percival

Vairy v Wyong Shire Council

Baiyai Pty Ltd v Guy

Seaton v Burnand

; Cackett v Keswick

; Rosenberg v Percival

105 In the passage from Rosenberg v Percival [2001] HCA 18; 205 CLR 434 to which Handley AJA referred, McHugh J observed (at [25]) that in a failure to warn case, “where there is no direct evidence as to what the patient would have done, the judge may infer from the objective facts that the patient would not have undergone the procedure.”

106 If s 5D applied, then factual causation was to be determined absent direct evidence from the respondents and “subjectively in the light of all relevant circumstances”: s 5D(3)(a), Civil Liability Act. The same approach was available at common law. Accordingly I would reject the ground 3 in the appellants’ notice of contention.

107 The primary judge set out (at [160] – [164]) a number of reasons for his conclusion that he was “not persuaded” that he should allow the solicitor-client costs claim. Critical to his Honour’s conclusion in this respect were his statements that it was possible the respondents would have engaged Brisbane solicitors, and that whichever solicitors they engaged may have charged on a time rather than a task basis. In my view in saying he was “not persuaded” his Honour found that the respondents had not established either of the key factual premises underlying MAG2.

108 However, with respect, it is not apparent that in reaching his conclusion that he was “not persuaded”, that his Honour considered the degree of probability or possibility that, in the past hypothetical situation his Honour was contemplating, the respondents may have used Mackay solicitors who charged on the task-costed basis which underpinned MAG2. The language his Honour used, of being “not persuaded”, is that of the civil onus of proof – a standard which, as I have explained is inapt when dealing with past hypothetical situations.

109 In my view his Honour’s findings supported the proposition that it was at least possible, in the sense of not being regarded as speculative, that the respondents may have used Mackay solicitors. I base this conclusion on his Honour’s findings that the respondents were in no position to incur costs which were not recoverable (at [125]), and, it might be inferred, would not wish to incur greater costs than they might otherwise be charged.

110 In addition, it might be noted that the second respondent (Ms Kanuth) gave evidence that she had a telephone conversation with Ms Perry two or three days after the appellants were first consulted in which the former suggested the respondents retain a lawyer in Airlie Beach as that would be easier. Ms Perry also said she did not know any lawyers in Airlie Beach and could only recommend firms in Brisbane. The respondents then approached two law firms in Airlie Beach each of which declined to act for them as they had previously acted for Mr Beale. Ms Kanuth then called Ms Perry and said she (I infer she was speaking on behalf of the other respondent) wanted her to handle the case. She did not ask for the names of Brisbane firms. At trial, the appellants’ written submissions drew attention to the fact that despite Mr Beale being based at Airlie Beach, he retained Brisbane solicitors.

111 These were all objective circumstances to which the primary judge could have had regard in determining what the respondents would have done if properly advised. His Honour appears to have concluded it was possible the respondents would have engaged Brisbane solicitors because Mr Beale did so. The reason My Beale did so was not explained but the fact he used Brisbane solicitors did not, in my view, outweigh the evidence, for example, that the respondents’ first inquiries were directed to Airlie Beach solicitors. No doubt this was because Ms Perry suggested that course. However, taken with his Honour’s findings (at [125]), it was at least a possibility that the respondents would have used solicitors in Mackay, thus avoiding incurring agents’ fees.

112 It should also be borne in mind that a finding that it was possible the respondents would have used Brisbane solicitors, does not exclude the possibility that they would have used a Mackay firm. In the realm of lost opportunity, there may be a number of possibilities. As long as the court can be satisfied that it was possible that one of the courses for which the plaintiff contends would have been followed, other possible courses can be taken into account in assessing the degree of probability that the plaintiff would have adopted the course contended for.

113 In my view, having found (at [125]) the appellants would, if properly advised, have used Queensland solicitors, being in no position to incur irrecoverable costs (and, I infer, being in no position to incur costs they could avoid), his Honour ought to have concluded that it was possible they would have used Mackay solicitors, an opportunity they lost by reason of the appellant’s breach of retainer.

114 The position in relation to the basis on which the appellants might have been charged even if they had used Mackay solicitors, is not clear-cut. It is apparent, as the primary judge observed (at [160]) that the basis of charging would have turned on those solicitors’ assessment of the complexity of the case, the FIRB issues, the need for refinancing and the like – and that that would have led to such solicitors seeking to charge on a time-costed basis. However the possibility that Mackay solicitors would charge on a task-costed basis as Mr Garrett assumed, again, in my view, could not be excluded as speculative. As his Honour said (at [160]), task-based costing was usual in Mackay.

115 Accordingly, in my view, the primary judge erred in holding that his finding that the two factual premises underpinning MAG2 had not been established on the civil onus was the end of the enquiry.

116 It is unnecessary, however, to seek to quantify in Malec, Commonwealth v Amann and Sellars terms the probability that the respondents would have acted in the manner assumed by Mr Garrett in preparing MAG2. This is because, for the reasons which follow, I am of the view that the primary judge did not err in concluding (at [162]) that one of the reasons he could not make a broad estimate of the amount which may be recoverable was because he could not isolate the work “fairly referable to the Court action”. In short, MAG2 included items for non-litigious costs and the respondents did not identify for the primary judge (or in this Court) any basis upon which those amounts could be fairly and reliably isolated from the other amounts.

117 Mr McClintock originally contended that, despite his Honour’s concerns that MAG2 included items for non-litigious costs, his Honour ought nevertheless to have assessed damages on a “broad rule of thumb” basis.

118 There are cases in which courts will estimate damages despite a dearth of evidence. The basic principle was explained in Commonwealth v Amann (at 83) by Mason and Dawson JJ as follows:

Fink v Fink

McRae v Commonwealth Disposals Commission

Chaplin v Hicks

Jones v Schiffmann

Biggin & Co Ltd v Permanite Ltd

119 Devlin J’s complete statement in Biggin & Co Ltd v Permanite Ltd [1951] 1 KB 422 (at 438) was: “[W]here precise evidence is obtainable, the court naturally expects to have it. Where it is not, the court must do the best it can.” (emphasis added) After referring to this statement with apparent approval in State of New South Wales v Moss [2000] NSWCA 133; (2000) 54 NSWLR 536 (at [72]) Heydon JA added:

Nilon v Bezzina

‘The degree of precision with which damages are to be proved is proportionate to the proof reasonably available’

Ratcliffe v Evans

As much certainty and particularity must be insisted on … in … proof of damage, as is reasonable, having regard to the circumstances and the nature of the acts themselves by which the damage is done.’

Commonwealth v Amann

120 In JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 (a claim for damages for alleged misleading representation inducing entry into a lease) Brooking J reviewed the principles concerning the circumstances in which a court may assess damages notwithstanding a lack of evidence. His Honour referred (at 241 – 242) to the passage from Ratcliffe v Evans [1892] 2 QB 524 (at 532 - 3) cited by Heydon JA in Moss (at [72]), as meaning “the amount of the damage must be proved with certainty, but this only means as much ‘certainty’ as is reasonable in the circumstances”. His Honour distinguished cases such as Chaplin v Hicks where “[t]he nature of the damage may be such that the assessment of damages will really be a matter of [permissible] guesswork” from cases where “precise evidence is obtainable” (Biggin), where guesswork is not permissible. His Honour observed (at 243):

Permanite Case

Enzed Holdings Ltd v Wynthea Pty Ltd

Permanite Case

Biggin

121 His Honour accepted (at 245 –246) the view expressed by Pincus J in Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275 (at 319) that “if the evidence called by the plaintiff fails to provide any rational foundation for a proper estimate of damages the court should simply decline to make one”.

122 In Troulis v Vamvoukakis [1998] NSWCA 237 (at 13) Gleeson CJ (Mason P and Stein JA agreeing) referred to Tsiloglou with approval as setting out the principles governing the approach a court should take when there had been a failure by a party carrying the onus to establish the extent of damage suffered as a result of a breach of contract or tort. Troulis was an action for damages pursuant to s 68 of the Fair Trading Act 1987 (NSW) in respect of the sale of a take-away food shop. The plaintiffs/purchasers established that the defendants/vendors had misrepresented the takings of the business and that that misrepresentation had induced them to purchase the business. The defendants were unsuccessful in challenging that finding on appeal. The damages to which the purchasers were accordingly entitled was the difference between what they had paid for the goodwill of the business and its true value at the date of purchase (Gleeson CJ at 8). There was no evidence of that value. Gleeson CJ held (at 13) that in such circumstances there were “limits to the lengths to which a court may properly go in ‘doing the best it can’ to assess damages”. His Honour observed that the case did not involve damages which were “inherently difficult to quantify, or which involve[d] estimating a risk, or measuring a chance, or predicting future uncertain events.” Although the plaintiffs/purchasers had not shown the goodwill was valueless, his Honour said (at 13) that it was necessary for them “to provide some evidence upon which a rational assessment of value could be made.”

123 Gleeson CJ concluded (at 14) in substance, that where the damages were susceptible of evidentiary proof, and there was “an absence of the raw material to which good sense may be applied … [j]ustice does not dictate that … a figure should be plucked out of the air.”

124 In Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 77 ALJR 768 (at [38]) Hayne J (Gleeson CJ, McHugh, and Kirby JJ agreeing) postulated that there may be a distinction between cases where a plaintiff cannot adduce precise evidence of what has been lost (in which “estimation, if not guesswork, may be necessary in assessing the damages to be allowed”) and cases where, although apparently able to do so, the plaintiff has not adduced such evidence. His Honour suggested that references to “mere difficulty in estimating damages not relieving a court from the responsibility of estimating them as best it can” might be more apt in the former rather than the latter class of case.

125 In Durban Roodepoort Deep Ltd v Newshore Nominees Pty Ltd [2005] WASCA 231 (at [39]) after referring to this passage from Placer (at [38]), McLure JA (as her Honour then was, and with whom Steytler P and Murray AJA agreed) observed:

“39. Cases of the former kind to which Hayne J referred would include claims where the loss was hypothetical or prospective: see Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 at 643 per Deane, Gaudron and McHugh JJ. Cases where courts have awarded no, or only nominal damages, for insufficiency of evidence are collected and reviewed by the Court in JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 at 241–246. In general terms, that outcome results where the relevant events on which proof of damage depends occurred prior to trial and the damage can be proved with relative precision.

McGregor on Damages

126 In Zorom Enterprises Pty Ltd v Zabow [2007] NSWCA 106; (2007) 71 NSWLR 354 Campbell JA accepted (at [82]) in some circumstances it was appropriate for a court assessing damages or compensation to adopt

“a figure which is little more than a guess, in circumstances where the evidentiary basis for adopting a particular figure is very thin, but where it would be wrong to use the thinness of the evidence as a reason for valuing that head of damages or item of compensation at zero.”

The use of the word ‘guess’ in some of these authorities should not be taken as detracting from the obligation of the judge to adopt a reasoning process that has a rational basis, to the extent that the evidence presented, and the intrinsic nature of the materials and subject matter under consideration, permit.

127 Mr McClintock submitted that the present circumstances were akin to those set out at [82] - [83] of Zorom v Zabow where damages should be awarded even where there was less than determinative evidence as to quantum. He submitted that the case fell within that class of case where the court is permitted to engage in a degree of speculation because of the hypothetical nature of the situation with which the solicitor-client costs claim was concerned. That submission was correct as I have already held insofar as the location of the alternate solicitors and the costs regime are concerned – although I would not characterise the conclusion the Court reaches in such instances as a product of “speculation” – rather than being the process of reasoning on a rational basis to which Campbell JA referred.

128 However the submission cannot be accepted insofar as the preparation of MAG2 was concerned. In my view this is a case where precise evidence of the damage the respondents had suffered as a result of the breach of retainer could have been adduced. It was not that class of case where precise evidence could not be adduced. It was also possible, as Mr Garrett accepted and the appellants submit in their notice of contention, for MAG2 to have been prepared on a time-costed basis, although this fact is not relevant having regard to my conclusion that a finding Mackay solicitors may have charged the respondents on a task basis was open.

129 The expression “solicitor and client costs” refers to the costs payable by the client to the solicitor on an assessment between them, sometimes referred to as “solicitor and own client costs”: Bouras v Grandelis [2005] NSWCA 463; (2005) 65 NSWLR 214 (at [18], [19]), per Giles JA; Basten JA agreeing. It is self-evident that costs of that nature are capable of precise proof. Accordingly it ought to have been possible for Mr Garrett to prepare MAG2 on a basis which excluded the non-litigious items. As I have said, the Court gave the respondents leave to file and serve further submissions addressing the “non-litigious” items issue.

130 This brings me to the respondents’ supplementary submissions and the amended notice of cross-appeal bearing a court stamp indicating it was filed in the Court Registry on 17 November 2009.

131 The document should not have been so filed. Part 19 of the Uniform Civil Procedure Rules 2005 (NSW) which deals with amendments applies to a notice of appeal in the same way it applies to the amendment of a statement of claim: UCPR 51.23. The rules relating to a notice of appeal extend to a notice of cross-appeal with necessary modifications: UCPR 51.3. Save as to the title of the document, there are no “necessary modifications” for the present purposes. UCPR 19.1 enables a plaintiff, without leave, to amend a statement of claim once within 28 days after the date on which it was filed but precludes a plaintiff, unless the court otherwise orders, from effecting an amendment after a date has been fixed for trial.

132 Accordingly, it was not open to the respondents to amend their notice of cross-appeal without leave, once the appeal was listed for hearing and, axiomatically, once the appeal had been heard. The amended notice of cross-appeal as filed, should, in my view, be treated as a nullity.

133 Further, I would refuse the respondents leave to amend their notice of cross-appeal. To give such leave would not facilitate the just, quick and cheap resolution of the real issues in the proceedings: s 56, Civil Procedure Act 2005 (NSW); see also Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175. The proposed amended notice of cross-appeal and the supplementary submissions in support of it put forward a new position not explored at trial about whether the FIRB application (and matters such as financing the acquisition of the property) was connected to the litigation. The respondents should not be able to raise these issues for the first time on appeal: Suttor v Gundowda [1950] HCA 35; (1950) 81 CLR 418 (at 438).

134 The respondents’ supplementary submissions in support of the proposed new ground 1(h) ought also not be entertained for the following reasons.

135 I have already set out the basis upon which the Court granted leave to the respondents to file further written submissions. In short, the point on which the Court sought further assistance was as to how the respondents contended the primary judge could, and should, have excised from MAG2 the items for non-litigious work. As will be apparent from the summary of the supplementary submissions I have set out above, those submissions do not address that point. Rather, they seek to challenge the proposition which was, in my view, accepted both at trial and on the hearing of the appeal, that MAG2 did contain non-litigious items and that the respondents could not recover damages to the extent that MAG2 included such items. Mr Garrett himself described the FIRB and refinancing applications as “not necessarily required for the litigation but which related to the Plaintiffs’ claim against the property”.

136 A similar situation arose in Notaras v Waverley Council [2007] NSWCA 333; (2007) 161 LGERA 230 (Special leave refused: Notaras v Waverley Municipal Council [2008] HCATrans 232). In that case, Tobias JA (with whom Mason P and Hodgson JA agreed) said:

Carr v Finance Corporation of Australia Ltd [No 1]

In the matter of an application by the Chief Commissioner of Police (Vic)

Dwyer v Commonwealth of Australia

Kirwan v Cresvale Far East Ltd (In liq)

Chapmann v Caska

Carr

ex parte the Commissioner of Police

137 This statement applies with equal force to supplementary submissions which do not address the issue for which leave to make further submissions was given. In Bull v Lee (No 2) [2009] NSWCA 362, after extracting the passage from Notaras set out above, the Court (Allsop P, Campbell and Young JJA) added:

Cross-appeal: conclusion

138 The respondents’ failure to address the issue on which the Court sought assistance in relation to MAG2 means the Court is in no better position than the primary judge was in isolating the non-litigious costs from those which could properly be said to have been incurred as a result of the breach of retainer. To accede to the respondents’ submission that the Court adopt a broad rule-of-thumb approach would involve impermissible guesswork.

139 I would dismiss the cross-appeal.

Orders

140 I propose the following orders:

1. Appeal allowed with costs.

2. Order that order 1 of the orders made on 23 March 2009 by Smart AJ in the Court below be varied so that the respondents have judgment in the sum of $152,691.97 together with interest thereon from 20 March 2009 accordance with section 101 of the Civil Procedure Act 2005 (NSW).

3. Order that order 2 of the orders made on 23 March 2009 by Smart AJ in the Court below be varied so that the appellants pay the respondents’ costs in the Court below as agreed or assessed on the ordinary basis other than those costs incurred by the respondents in relation to the award of damages in the amount of $22,694 for the decrease in the plaintiffs’ party-party costs.

141 The orders will be entered forthwith in the court’s computer system: UCPR 36.11. Any notice of motion to vary them must be filed within 14 days of such entry: UCPR 36.16(3A).

142 CAMPBELL JA: I agree with McColl JA

: I agree with McColl JA

**********

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Citations

McCrohon v Harith [2010] NSWCA 67

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Cited Sections

CITATION:	McCrohon v Harith [2010] NSWCA 67
HEARING DATE(S):	4 November 2009
JUDGMENT DATE:	8 April 2010
JUDGMENT OF:	McColl JA at 1; Campbell JA at 142; Handley AJA at 143
DECISION:	1. Appeal allowed with costs. 2. Order that order 1 of the orders made on 23 March 2009 by Smart AJ in the Court below be varied so that the respondents have judgment in the sum of $152,691.97 together with interest thereon from 20 March 2009 in accordance with section 101 of the Civil Procedure Act 2005 (NSW). 3. Order that order 2 of the orders made on 23 March 2009 by Smart AJ in the Court below be varied so that the appellants pay the respondents’ costs in the Court below as agreed or assessed on the ordinary basis other than those costs incurred by the respondents in relation to the award of damages in the amount of $22,694 for the decrease in the respondents’ party-party costs. 4. Cross-appeal dismissed with costs.
CATCHWORDS:	CONTRACT – breach – damages – time for assessment – relevance of post-breach events - TORT – breach of duty of care – damages – time for assessment – relevance of post-breach events - FIDUCIARY DUTY – breach – equitable compensation – time of determination of quantum - DAMAGES – contract – tort – breach of fiduciary duty – whether innocent party entitled to choose most advantageous remedy - CONTRACT – breach – damages – deprivation of opportunity – standard of proof applicable where innocent party seeks to establish future possibilities and past hypothetical situations - CONTRACT – breach – damages – where evidence called by innocent party fails to provide rational foundation for proper estimate of damages - EVIDENCE – admissibility of evidence from innocent party as to conduct if breach of contract had not occurred – s 5D Civil Liability Act 2002 (NSW) - PROCEDURE – notice of appeal – status of amended notice of appeal filed without leave after judgment reserved - PROCEDURE – submissions – where limited leave granted to submit further submissions on certain points after judgment reserved – where further submissions exceed scope of leave granted without further leave applied for or given
LEGISLATION CITED:	Civil Liability Act 2002 (NSW) Civil Procedure Act 2005 (NSW) Fair Trading Act 1987 (NSW) Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules 2005 (NSW) Uniform Civil Procedure Rules 1999 (Qld)
CATEGORY:	Principal judgment
CASES CITED:	Adelaide Petroleum NL v Poseidon Ltd (1990) 98 ALR 431 Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1 Baiyai Pty Ltd v Guy [2009] NSWCA 65 Biggin & Co Ltd v Permanite Ltd [1951] 1 KB 422 Booksan Pty Ltd v Wehbe [2006] NSWCA 3; (2006) Aust Torts Rep 81 – 830 Bouras v Grandelis [2005] NSWCA 463; (2005) 65 NSWLR 214 Bull v Lee (No 2) [2009] NSWCA 362 Bwllfa and Merthyr Dare Steam Collieries (1891) v Pontypridd Waterworks Co [1903] AC 426 Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 Chaplin v Hicks [1911] 2 KB 786 Durban Roodepoort Deep Ltd v Newshore Nominees Pty Ltd [2005] WASCA 231 European Bank Limited v Robb Evans of Robb Evans & Associates [2010] HCA 6; (2010) 264 ALR 1 Gagner Pty Ltd trading as Indochine Cafe v Canturi Corporation Pty Ltd [2009] NSWCA 413; (2009) 262 ALR 691 Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1 Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] UKHL 12; [2007] 2 AC 353 Harith & Kanuth v Beale [2003] QSC 411 Harith & Kanuth v McCrohon [2009] NSWSC 111 Henderson v Merrett Syndicates Ltd [1994] UKHL 5; [1995] 2 AC 145 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640 JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351 Kizbeau Pty Ltd v WG & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281 Kowalczuk v Accom Finance [2008] NSWCA 343 Malec v J C Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638 Miliangos v George Frank (Textiles) Ltd [1976] AC 443 Narni Pty Ltd v National Australia Bank Ltd [2001] VSCA 31 Nikolaou v Papasavas Phillips & Co [1989] HCA 11; (1989) 166 CLR 394 Nocton v Lord Ashburton [1914] AC 932 Notaras v Waverley Council [2007] NSWCA 333; (2007) 161 LGERA 230 O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 77 ALJR 768 Poseidon Ltd v Adelaide Petroleum NL [1991] FCA 663; (1991) 105 ALR 25 Poseiden Ltd & Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 Ratcliffe v Evans [1892] 2 QB 524 Rosenberg v Percival [2001] HCA 18; 205 CLR 434 Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275 State of New South Wales v Moss [2000] NSWCA 133; (2000) 54 NSWLR 536 Suttor v Gundowda [1950] HCA 35; (1950) 81 CLR 418 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272 Target Holdings Limited v Redferns (a firm) [1996] 1 AC 421 The Commonwealth of Australia v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 Todorovic v Waller [1981] HCA 72; (1981) 150 CLR 402 Troulis v Vamvoukakis [1998] NSWCA 237 United States Surgical Corp v Hospital Products International Pty Ltd [1982] 1 NSWLR 766 Wertheim v Chicoutimi Pulp Co [1911] AC 301 Willis v Commonwealth [1946] HCA 22; (1946) 73 CLR 105 Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 Zorom Enterprises Pty Ltd v Zabow [2007] NSWCA 106; (2007) 71 NSWLR 354
TEXTS CITED:	Equity Doctrines & Remedies, 4th ed (2002) Butterworth’s LexisNexis
PARTIES:	Peter McCrohon - First Appellant Karin Bergseng - Second Appellant Christine Louise Perry - Third Appellant Paul Antoni Harith - First Respondent Elizabeth Gay Kanuth - Second Respondent
FILE NUMBER(S):	CA 40123 of 2009
COUNSEL:	S A Kerr SC with T J Breakspear for the Appellants B R McClintock SC with PD Doyle Gray for the Respondents
SOLICITORS:	Paul Bard Lawyers for the Appellants Searle & Associates Lawyers for the Respondents
LOWER COURT JURISDICTION:	Supreme Court
LOWER COURT FILE NUMBER(S):	SC 20238 of 2005
LOWER COURT JUDICIAL OFFICER:	Smart AJ
LOWER COURT DATE OF DECISION:	5 March 2009
LOWER COURT MEDIUM NEUTRAL CITATION:	[2009] NSWSC 111