Monica Frances Symonds and Gerald Symonds v Cedric Borsmann Vass and 24 Ors - [2007] NSWSC 1436

No judgment structure available for this case.

CITATION: Monica Frances Symonds and Gerald Symonds v Cedric Borsmann Vass and 24 Ors [2007] NSWSC 1436

HEARING DATE(S): 4/12 07

JUDGMENT DATE :
12 December 2007

JUDGMENT OF: Patten AJ at 1

DECISION: See paragraph 21

LEGISLATION CITED: Uniform Civil Procedure Rules
Civil Procedure Act 2005

CASES CITED: Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No2) (2006) 67 NSWLR 706;
Ambulance Service of NSW v Worsley (No2) (2006) 67 NSWLR 719;
Macquarie Radio Network Pty Ltd v Arthur Dent (No 2) [2007] NSWCA 339

PARTIES: Monica Frances Symonds and Gerald Symonds - Plaintiffs
Cedric Borsmann Vass and 24 Ors - Defendants

FILE NUMBER(S): SC 20994 of 2001

COUNSEL: Mr V Gray - Plaintiffs
Mr T Faulkner - Defendants

SOLICITORS: George Mallos - Plaintiffs
Mallesons Stephen Jacques - Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

Patten AJ

14 November 2007

No: 20994 of 01

Monica Frances Symonds – First Plaintiff
Gerald Symonds – Second Plaintiff
v
Cedric Borsmann Vass – First Defendant
and 24 Orss
JUDGMENT

INTRODUCTION:

1 The Plaintiffs sue their former solicitors in somewhat unusual circumstances.

2 Early in 1991 they contracted to purchase for $13m a waterfront property known as Paradis Sur Mer (hereafter “the Property”), 7 Wolseley Crescent, Point Piper, intending to subdivide and/or redevelop it. They claim that in doing so they relied on the advice and valuation of a valuer, Mr Frank Egan.

3 However, their scheme proved financially disastrous and, as seems to be common ground, the venture resulted in the loss of many millions of dollars.

4 Seeking to blame Mr Egan for the loss, they brought proceedings against him and a company, Egan National Valuers (NSW) Pty Ltd of which he was Managing Director (together hereafter “Egan”), in this court (the earlier proceedings) retaining for the purpose, the present defendants, at relevant times practising in partnership under the name Dunhill Madden Butler (I will hereafter refer to the Defendants as “Dunhill Madden”)

5 The earlier proceedings were listed for hearing by Dowd J, commencing 29 January 1996 with an estimate of 5 weeks. During that hearing there were pleading and procedural difficulties and interlocutory applications, including an excursion to the Court of Appeal, which occupied most of the allotted time. In the result, following advice from their senior and junior counsel and from Dunhill Madden, represented by Mr Stephen Klotz, the Plaintiffs agreed to a compromise on the basis that the earlier proceedings were dismissed with no order as to costs.

6 The Plaintiffs believing that Dunhill Madden breached the terms of their retainer and were negligent in and about the prosecution of the earlier proceedings and in and about the compromise of them, commenced these proceedings, primarily seeking, in effect, damages for the loss of the chance of a successful outcome.

7 They also pleaded as a separate cause of action an entitlement to repayment of certain of the monies paid by them on account of costs.

8 Before me, the Plaintiffs were represented by Mr V Gray of counsel. Mr R Weber SC with Mr T Faulkner represented Dunhill Madden. With one significant exception, for the most part, all the witnesses who could have given evidence in the earlier proceedings gave evidence before me, the exception being Mr Egan who had died in the meantime. However, a statement he made for the purposes of the earlier proceedings was admitted into evidence as exhibit 47.

THE PLAINTIFFS:

9 The Plaintiffs are husband and wife having married in 1958. They both lived in England before migrating to Australia in December 1981. In England, following their marriage, they successfully engaged as equal partners in property development.

10 In Australia they continued to exercise their expertise in property development, having by 1987 redeveloped four sites. From 1987 until 1990, however, Mr Symonds worked full time in charitable and community activities.

11 According to his evidence, prior to 1989 Mr Symonds had retained Mr Egan, an experienced valuer, on several occasions “to give selling prices of prospective developments and I respected his judgment and his advice”.

THE PLAINTIFFS ACQUIRE THE PROPERTY:

12 Towards the end of 1989, Mr Symonds was told by a real estate agent, Mr Peter Engel that the Property was on the market for tender. Mr Engel opined that it was worth $15m.

13 Following discussion between themselves, the Plaintiffs decided to seek the advice of Mr Egan. In the meantime on 12 December 1989 Mr Symonds prepared a memorandum which he said constituted “some preliminary calculations as the profits achievable on development of the property”. He gave a copy to his banker, Barclays Bank Australia Ltd (hereafter “the Bank”), in order to ascertain whether it was willing to fund the development. The memorandum which contained reference to the Plaintiffs’ current assets read:

Purchase of 7 Wolseley Crescent
15.000.000

Stamp duty
810,000

Interest for 2 years @18%
5,691,600

Building 3 houses of 5,000 sq ft each @ $200 per ft
3,000,000

Professional fees @ 6 ⅔ %
200,000

Landscaping, pools and marina
300,000

Selling Agent @1% on $30m
300,000

Legal costs
50,000

25,671,600

Profit
4,328,400

Income of 3 houses @ $10m each
30,000,000

Security offered:

“1/56 Wolseley Road
4,500,000

2/39 Elizabeth Bay Road - let @ $450p.w. (23,400 p.a.)
300,000

4/39 Elizabeth Bay Road – let @ $450 p.w.
300,000

13/39 Elizabeth Bay Road Restaurant @ $60,000 p.a
600,000

5,700.000

Note

1) 1/56 Wolseley Road will be sold now reducing the borrowing and saving $1,620,000 interest (18% over 2 years)

2) ..…may be able to sell Paradis Sur Mer now @ 12m, giving us one building block of 14,000sq ft @ $4m.

3) I shall supply valuation from Frank Egan.”

14 The Bank responded by letter to the Plaintiffs on 19 December 1989, the relevant portions of such letter being:

“We are pleased to advise that Barclays Bank Australia Limited (the Bank) is willing to provide Loan Facilities (the Facility) of up to $22,000,000 (Twenty Two Million Dollars) to Gerald and Monica Symonds or to a company acceptable to the Bank which they may nominate (the Customer) for the purchase and development of “Paradis Sur Mer”.

……………………………..

Purpose: To acquire and develop the property known as “Paradis Sur Mer” in accordance with a feasibility study which is to be provided to and found satisfactory to the Bank following approval by a firm of Quantitive Surveyors to be appointed by the Bank.

Security & Guarantors: Security for this Facility shall include:-

a) 1st mortgage over 1/56 Wolseley Road, Point Piper.

b) 1st mortgage over lots 2, 4 and 13/39 Elizabeth Bay Road, Elizabeth Bay.

c) 1st mortgage over the property to be developed and known as Paradis Sur Mer.

d) Letter of Credit from Barclays Bank PLC Jersey office for an amount of A$3,000,000 supported by a mortgage over freehold of Airways House Jersey

e) Should the Facility not be in the same name as the owner of any of the above properties, the Bank will require an unlimited guarantee from the said owner supported by the above mortgage.

a) The Bank will require professional valuations to be carried out for all real estate properties located within Australia. Such valuations are to be undertaken by a valuer nominated by the Bank at the expense of the customer and are to be undertaken to determine the market value for mortgage purposes

…………………………………

d) The feasibility study to be provided as detailed earlier is to include a cash flow forecast which incorporates timings of drawdowns and sales etc. This study will be subsequently discussed with another real estate agent familiar with this type of project prior to drawdown.

The Bank had approved these facilities subject to being provided with the valuations and feasibility study which must be found satisfactory. Once these have been provided together with the exact amount sought and advice as to the borrowing entity, we will issue a formal letter of approval for your acceptance which will detail all the terms and conditions applicable to the facilities proposed.”

15 On or about 18 December, Mr Symonds had a conversation with Mr Egan as a result of which they met on the Property on 19 December when, according to Mr Symonds, there was this conversation:

“Egan: I know the house well from a previous valuation about two years ago.

Symonds: There are several alternative developments. I could sell the old house with Lot E and one new house on Lot 2. I could demolish the old house and build two new houses, on Lot 1 and Lot E combined, and one on Lot 2. I could build two large houses and one small house on Lot E. I could subdivide Lots 1 and 2 into 3 in order to build three medium to large houses, or I could build town houses. I would like all of these options considered and compared for financial feasibility.”

16 On or about 4 January 1990, the Plaintiffs received from Mr Egan a document bearing that date which purported to be a Certificate of Valuation of the Property. The valuation stated that it was prepared “under instructions from Mr G Symonds” and that the valuation was assessed “for and on behalf of Barclays Bank Australia Limited”.

17 After noting that the Property was held in 3 parcels, the measurements of which were specified, and after recording the permitted uses under the relevant zoning viz Residential 2a within a Harbour Foreshore Scenic Protection Area, the valuation proceeded to record the benefits of the site and the nature of the current improvements.

18 It then discussed development options:

“Two major alternatives are obvious, firstly to sell the current building on Lot 1 with Lot E and sell Lot 2 as vacant land, or develop a major residence on Lot 2 and sell Lot 2 as an improved site.

Secondly, subdivide Lots 1 and 2 into three allotments. The most eastern allotment having an area of 993.6 square metres, the centre allotment having a similar area and the most western allotment having an area of 696.78 square metres but be developed in conjunction which Lot E which has an area of 259 square metres.

The centre and most eastern lots could be developed each with a residence of approximately 550 square metres, whilst the western allotment developed in conjunction with Lot E could be developed with a residence of approximately 525 square metres, or larger if the Council will recognise the area of Lot E.

Other alternatives are available as it would appear possible to subdivide Lot E and develop it individually, however, it is expected that some resistance may be encountered with the Local Authority and a Development Approval may need to be argued before the Land and Environment Court. As the valuation is being prepared for mortgage purposes I have not pursued this alternative, however, it is not considered unrealistic.

In considering the first alternative, it could be expected that the profit to the entrepreneur would be between $3 and $5 million.

The second alternative could realise a profit to the entrepreneur of approximately $4.8 million dollars.”

19 Before concluding that the value of the Property at 3 January 1990 was $15m, the valuation commented:

“At the time of valuation the turnover of Sydney and Australian real estate has slowed due to the high costs of mortgage finance. It is predictable that these conditions may remain for some time and its long term effect is difficult to predict, however, from past experience the real estate market has been revitalised with the lowering of mortgage finance.

Having regard to these conditions it is not possible to be dogmatic regarding the values of development of a future mansion on the subject site and in the attached calculation a number of selling prices have been considered in Option 1 and a conservative approach has been taken to the gross realisation in Option 2.

In the alternatives considered a proposed purchase price of $15 million is justified and with an up turn in the economy the predicted profit could increase considerably.”

20 Thereafter, the Plaintiffs, through Mr Symonds, embarked upon negotiations with the vendor’s agent, which resulted in them exchanging contracts on 15 March 1990 for the purchase of the Property for the total price of $13m. As it transpired, there were 2 separate contracts, presumably to minimise stamp duty, one nominating a consideration of $10m and the other $3m, but nothing turns on this. The purchase was completed on 22 March 1990 and was wholly financed by the Bank, which took security over the Property and also over the other properties nominated in the Bank’s approval, which the Plaintiffs owned or controlled. The Plaintiffs, by deed dated 15 March 1990, declared that they purchased the property on trust for Gowrise Pty Ltd which agreed to provide the purchase price and to indemnify the Plaintiffs in respect of the Property, including under any mortgage secured over it. It is difficult to understand the purpose of this trust, which the Plaintiffs themselves seem to have substantially ignored, however, it proved to be a factor in their subsequent problems.

THE PLAINTIFFS REDEVELOP THE PROPERTY:

21 The Plaintiffs encountered difficulties in obtaining approval from Woollahra Council for their proposals regarding the Property. They sought further advice from Mr Egan which he gave by letter dated 30 August 1990, as follows:

“Re: Paradis Sur Mer

Following our recent discussions and inspection of your site, I wish to confirm that the property adjoining, No 9 Wolseley Crescent, was recently sold for $11,250,000.

No 9 Wolseley Crescent, had a land holding of approximately 10,000 square feet. I have had the opportunity to inspect this property during its construction and subsequently for a Mortgage Insurance company. My impression was that it was a specialised building and very well finished. However, the property only provided three certain bedrooms. The fact that it was a special design and had low sleeping accommodation, I believe adversely affected its market appeal.

Also, the property does not have direct water frontage.

To maximise the return from Paradis Sur Mer I believe that the property would be best developed with two large allotments each of 15,000 square feet with superior residences of a more universally accepted design and providing larger bedroom accommodation, living areas and outdoor facilities.

I believe that on completion these properties would attract a price between $13,000,000 and $15,000,000 each and I feel supported in this opinion by the sale of the adjacent property. If the two larger lots are chosen as the sub-division pattern they would be superior in all respect to No 9 Wolseley Crescent.”

22 By November 1990 the house erected on the Property had been demolished. In that month the Plaintiffs received an offer to purchase the Property for $13m. They decided to reject it. Thereupon the offer was increased to $14m but again it was rejected.

23 By March 1991, a house was in the course of construction on part of the property which was to be known as 7 Wolseley Crescent. On 5 April of that year, Mr Egan, at the request of the Bank wrote to it, with a copy to the Plaintiffs, in these terms:

“RE: Paradis Sur Mer, Wolseley Crescent, Point Piper.

Since my recent conversation with Steve Lawton, I have had the opportunity to meet Mr Symonds and inspect the plans for the house now being erected on the eastern lot.

From the plans each house will provide approximately 840 square metres or 9,000 square feet, and are of excellent architectural design.

Under these circumstances I would not alter my original estimate that the houses will retail for between $13 million and $15 million on completion. I base this assessment on the sale of 18 to 20 Carrara Road Vaucluse which sold on 3 April 1990 for $11 million and the sale of the adjoining property in 9 Wolseley Crescent which sold on 12 September, 1990 for $11,250,000. The subject properties will certainly be of better quality and design than No 9 Wolseley Crescent and the allotments have superior plottage.

Mr Symonds’ land has a high profile throughout Australia and overseas and would appeal to both the domestic and overseas market.

Proceedings have been commenced in the Land and Environment Court to obtain development approval for the construction of the second home on the western allotment. The development application is in similar terms to that eventually approved on the eastern allotment and should be successful.

It is proposed to commence the construction of both residences simultaneously for obvious building economy. On completion of the carcass of each building the eastern project will be “finished off” and occupied by Mr and Mrs Symonds. Then on completion of the eastern residence the remaining structure will be completed. On completion of both properties the marketing strategy will be decided. The completion of the bulk of both buildings at the same time will demonstrate to prospective purchasers that the view of each development will not be impaired by the other, and provide as a practical marketing aid, deemed necessary in the luxury residential market.

The proposal is logical as substantial savings in costs will be made, completing the “structure” of the building at the same time.”

24 The house known as 7 Wolseley Crescent was completed about January 1992. Mr Egan inspected it and on 6 February 1992, wrote this letter to Mr Symonds:

Thank you for the opportunity of viewing the recently completed residence on Lot 1 defined on Deposited Plan 205027.

The improvement comprise a multi level brick and Ferro concrete building providing 6 bedrooms, spacious living rooms, verandas, triple garage, in–ground swimming pool and extensive landscaped area.

The property has been architecturally designed to exploit the unique position of the land on the northern extremity of Point Piper. The property is of modern glass design, which has exploited the expansive views over Sydney Harbour. The building is of high quality finish with the best quality prime cost items and all modern innovation.

The land is a high profile site and probably one of the best known in Australia, it has a history of illustrious occupiers and has gained publicity through recent litigation. I personally do not know of a residence having the unique attributes that would form a realistic comparison for normal valuation procedures.

Due to the above attributes the property could be marketed throughout Australia and overseas particularly the South Pacific Basin Countries.

Having regard to its modern design the conservative section of the market could distance itself, however the magnificent vista could not be exploited with a conservative design

When regard is had to the sale of the adjoining property to the west, and the sale of approximately $11 million in Carrara Road at Vaucluse, and a possible impending sale of a large waterfront property in the Crescent at Vaucluse, I believe that a sell price of $15 million dollars is realistic on the current market conditions, with an appropriate selling strategy.”

25 According to Mr Symond’s statement of evidence, problems in obtaining the consent of Woollahra Council and delays with appeals in the Land and Environment Court in respect of the second house to be erected on the property, which was to be known as 6 Wolseley Crescent, resulted in cost overruns and the Plaintiffs experiencing cash flow difficulties. They suspended the building of 6 Wolseley Road in February 1992 and concentrated their efforts on marketing 7 Wolseley Crescent.

26 Successively Richardson & Wrench (Double Bay) and Laing & Simmons (Double Bay) were appointed as agents for the sale. As it appears, the Plaintiffs instructed them to seek a purchaser for $15m. A sale at this price was unable to be achieved and in June 1992, Mr Bart Doff of Laing & Simmons (Double Bay) told Mr Symonds that he did not think a sale could be effected at a better price than $8m.

27 In September 1992 number 7 Wolseley Crescent, remaining unsold, the Plaintiff recommenced the building next door of 6 Wolseley Crescent. By then Mr Symonds had concluded that the partially built house may have been hampering the sale of number 7. The Bank agreed to provide further accommodation.

28 Number 6 Wolseley Crescent was completed in June 1993. After being submitted to tender without success, it was offered for public auction but bidding reached $7.2m only and the property was withdrawn from sale. In November 1993, it was auctioned again at the direction of the bank and sold for $6.87m.

29 Number 7 Wolseley Crescent was sold at public auction in March 1994 again, at the direction of the Bank, for $7.25m. This left a relatively small part of the Property on a separate lot (the lot E previously referred to) remaining in the Plaintiffs‘ hands. They sold this as vacant land known as 8 Wolseley Crescent in December 1994 for $1,440,000, thus putting an end to all their proposals regarding the property.

30 The project resulted, on any basis, in very considerable financial loss reflected virtually wholly by the difference between the amount of the facility provided by the Bank and the proceeds of sale of Number 6, 7, and 8 Wolseley Crescent. The Bank commenced action to realise its collateral securities. It may be inferred that it also contemplated action against the Plaintiffs upon their personal covenants.

31 A matter, which subsequently loomed large, was that of the six properties over which the Bank took collateral security, only one was actually owned by the Plaintiffs or either of them. According to the evidence property 1/56 Wolseley Road Point Piper was owned by Senneh Pty Ltd; properties 2/39 Elizabeth Bay Road, Elizabeth Bay; 4/39 Elizabeth Bay Road, Elizabeth Bay and 13/39 Elizabeth Bay Road, Elizabeth Bay were owned by Tisete Pty Ltd and a property known as Airways House on the Island of Jersey was owned by Tabard (Jersey) Limited. The evidence, however, also suggested that the beneficial owner of each property was Mrs Symonds and that no one other than the Plaintiffs had an interest in the companies, although apparently there was an existing mortgage given by Tabard (Jersey) Ltd over Airways House to the Bank’s parent in England.

THE PLAINTIFFS TAKE LEGAL PROCEEDINGS:

32 In June 1993, before their loss was fully ascertained, the Plaintiffs turned their minds to the possibility of taking legal proceedings against Mr Egan and consulted, for that purpose, Mr Klotz, on 28 June.

33 Documentary material supplied by the Plaintiffs to Mr Klotz emphasises their asserted reliance upon the validity and accuracy of the valuation and letters emanating from Mr Egan referred to above. In his statement prepared for Mr Klotz, Mr Symonds under the heading “conclusion” said:

“Frank Egan knew that Monica and I relied upon his valuation and it appears to me that all of the points in “Shaddock’s case” (which I attach) are relevant. Even though we have not yet suffered damage, we know that there is likely to be a major loss on the development and sale of the two houses. However, all of this pales into insignificance compared with his unforgivable negligence in not delving deeply enough into s 94 (and to a lesser extent the F.S.B.L and height limit) in which case we would not have touched the deal with a barge pole. He charged us full scale fees for the Valuation which he reduced at his own suggestion. I had asked him for a full service which we could rely upon and I am sure this was not undertaken correctly.”

34 On or about 30 November 1993, the Plaintiffs signed an “Engagement Letter” from Dunhill Madden which, omitting formal parts, provided as follow:

“Thank your for engaging us to represent you in the above matter.

Set out below is some information which will explain the basis of our relationship. Please review this letter carefully and contact us promptly if you have any questions.

Who Will Provide the Legal Services?

Stephen Klotz will be responsible for and in control of the conduct of your matter. Some of your work may be performed by other solicitors within the firm, subject to the supervision of Mr Klotz. This delegation will allow us to provide services in the most efficient and timely manner.

Fees

The fees we charge will be determined by reference to time spent.

We will keep accurate records of the time we spend on your work, including conferences, negotiations, factual and legal research and analysis, document preparation and revision, travel and other related matters. We record our time in units of tenths of an hour.

The charge out rate for Mr Klotz is $270.00 per hour. Some of the work will be undertaken by other solicitors, at charge out rates of $120.00 to $270.00 per hour.

We are sometimes requested to estimate the amount of fees and costs likely to be incurred in connection with a particular matter. Whenever possible, we will furnish such an estimate based upon our professional judgment, but always with a clear understanding that it is not a maximum or fixed fee quotation. The ultimate costs may be more or less than the amount estimated. Our estimate for this matter is as set out in the attachment to this letter.

In certain cases, fees are fixed by prescribed scales. The Firm does not charge in accordance with any prescribed government or regulated scale and by signing this agreement, you will have waived any right to rely upon the scale in the event that our charges are in excess of those fixed by the scale.

Disbursements (Out of pocket Expenses)

We incur and pay on behalf of clients a variety of out of pocket expenses. Whenever such costs are incurred, we will carefully itemise and bill them on a monthly basis to you. Typical of such costs are court filing fees, witness expenses, travel expenses, charges made by barristers and outside consultants, long distance telephone charges, facsimile charges, courier and delivery charges and photocopy expenses.

Trust Deposits

All trust deposits we receive from you will be placed in a trust account for your benefit, the provisions of which are regulated by law. We will forward to you trust statements on a regular basis, as required by law.

We will ask you, at regular intervals, to deposit funds of up to no more that $85,000 into our trust account for payment of our fees and disbursements. We will ask you to make an initial deposit of $10,000 upon your acceptance of the terms of this engagement letter.

The moneys held on trust may, in accordance with your acceptance of the terms contained in this letter, be transferred from time to time and applied towards incurred and billed fees and disbursements.

Termination

You may terminate our representation at any time with or without cause, by notifying us. If this occurs, your papers and property will be returned to you promptly upon receipt of payment for outstanding fees and costs. Our own files pertaining to your matters will be retained. Your termination of our services will not affect your responsibility for payment of legal services rendered and out of pocket expenses incurred before termination.

Billing Arrangements and Terms of payment

We will bill you monthly for our fees and disbursements up to the amount of $85,000. Payment must be made within fourteen days of receipt of our invoice.

We will give you prompt notice if your account becomes overdue and, if this continues we reserve the right to terminate your representation and pursue collection of your account.

When the funds of $85,000, that will have been paid by you into our trust account, have been exhausted (whether applied toward incurred and billed fees and disbursements or reserved for anticipated disbursements, such as counsel’s fees and transcript for the hearing – at present, we intend reserving $25,000 for anticipated disbursements), we will bill you for any further fees upon the conclusion of the proceedings, whether by settlement, judgment or otherwise.

If the settlement or judgment amount is less than the amount of our further fees billed, we will not pursue collection of the difference between those amounts.

Preliminary Opinion by Counsel

Prior to the commencement of proceedings, we will obtain on your behalf a preliminary written opinion on your prospect of success from the barrister whom we would brief in the matter. We reserve the right to terminate or vary the basis of your representation upon consideration of counsel’s preliminary opinion.

Pre-Hearing Review

Prior to the hearing, we will reconsider the merits of your case (including if necessary, obtaining counsel’s written opinion). We reserve the right to terminate your representation at that time based upon that review.

Our termination of your representation at that time will not affect the billing arrangements set out above.

Service

We pride ourselves on our service. If you have any difficulties or you are not satisfied with the service being provided, please contact Stephen Klotz or our managing partner, John Churchill (224 9605)

If you are in agreement with the terms of this engagement letter, please sign at the foot of this letter, retain one copy and return the signed copy to us.”

35 Attached to the letter was a document, not entirely easy to understand, which seems to estimate the actual costs and disbursements of the matter, based on a 5 week hearing and including a provision for appeal costs at $141,050.

36 On or about 2 December 1993, Dunhill Madden delivered a brief to advise to Mr David Hammerschlag (as Hammerschlag J then was). The “observations” in the brief signed by Mr Klotz seem to have accurately summarised the nature of the legal proceedings then contemplated.

37 In January 1994 Dunhill Madden retained Mr Terry Davis as an expert valuation witness. They also, as it seems, thereafter kept their clients regularly informed of the progress of the matter. The Plaintiffs reciprocated by sending to Dunhill Madden throughout such progress a series of numbered memoranda. An example is the memorandum Number 7 dated 6 February 1994:

“I attach 2 page letter I obtained from Egan in August 1990 which has just come to light. It should be read in conjunction with Memo 2 of 11 January 1994.

It is important to understand what was happening in August 1990. We had decided at that time not to go ahead with Egan’s option 2 due to lack of council support and difficulties with section 94. We had been advised by Murray Tobias QC to develop the houses on their existing subdivisions. The position was similar to Egan’s option 1 except that we had demolished the old house and wanted Egan’s advice in the situation as it then existed. Nothing had been approved or built at that time.

I criticise his letter with the benefit of hindsight because (maybe) if the 2 new houses could have been magically produced at that moment his predictions might have been correct. However, he makes no allowance for what they might fetch and how long they might take to develop. Surely some very strong riders are missing here! If he had warned us of the difficulties we were to suffer, we had the option to get our money back at that time to sell the three blocks separately. However, with his reassurance and no warning we pressed on still believing that there was a large profit at the end.”

38 According to Mr Symonds, on 18 March 1994, he had a telephone conversation with Mr Klotz as follows:

“Klotz: Egan’s valuation and profit predictions of 4 January, 1990 were clearly misleading and deceptive and in contravention of the Trade Practices Act and the Fair Trading Act. But, we will have to careful as there is a three year limit under section 52.

I said: Well, Egan was continuing to predict a $15 million selling price right up to February 1992. Can’t we use this letter to get around the time limit?

Klotz: Maybe we can, I’ll think about it.

Me: The letter from Egan dated 6 February 1992 in my view is a very important addition to our case. The letter valued a completed house. We have a separate valuation which I relied on in our marketing of the finished house and which was important in my refusing an offer of $8 million for 7 Wolseley Crescent. I will send you a memo in relation to this.

Klotz: That would be helpful and I will think about it.”

39 The Plaintiffs followed up this telephone conversation with memorandum Number 10:

“This confirms our telephone conversation this afternoon when we discussed Mr Egan’s letter of 6/2/92. This is the letter when he inspected the finished house number 7 and predicted that it would sell for $15 million “on the current market condition”.

2. We relied upon his confirmation and as you know Mr Pillinger also confirmed reliance in his agency agreement. We received offers at that time of $8 million which we dismissed as “insulting” in the circumstances. Had we not been misled we possibly might have obtained a little more and, had $8 million been accepted and our borrowings reduced, we would have saved approximately $1 million per year of interest which would have been equivalent to $10 million now.

3. This might have some assistance on extending the 3 year limit under section 52 of the TPA.”

40 Although, so far as the evidence relates, Dunhill Madden did not obtain a written opinion from counsel as to the prospects of success of proceedings against Mr Egan, they wrote to the Plaintiffs on 7 April 1994 as follows:

“Claim Against Egan Valuers

You have asked us for a short opinion on your prospects of success in this matter. Our opinion follows.

As you know, there are never any guarantees of success in litigation, particularly where there are disputes of fact and conflicting expert opinions.

That having been said, we presently have no reason to believe that either the statements of fact with which you have instructed us or the preliminary opinion of the expert valuer retained by you will not be accepted.

If they are accepted, we consider that your action ought to succeed and that you ought to recover your damages.

Mr Hammerschlag, whom you know to be briefed at the hearing of this matter, shares our opinion.”

41 Mr Davis provided two reports. The first dated 22 April 1994 addressed the question whether “the Certificate of Valuation dated 4 January furnished by Mr F K Egan of Egan National Valuers in respect of the property at 7 Wolseley Crescent, Point Piper (The Preparation), fell short in any respect of the standard expected of a valuer of reasonable skill and competence and, if so in what respect.”

42 The report comprised some 35 pages. For reasons which he detailed, Mr Davis was critical of Mr Egan and his views are, I think, encapsulated by the following paragraphs under the heading “Conclusion”:

“I do not consider that the valuer’s valuation report is of an adequate standard as required of a reasonably competent valuer, having regard to the nature of the subject property and the instructions to the valuer.

The major factors which I have taken into consideration may be summarised as follows:

a) The report is unclear as to the details of instructions or purpose of valuation, and unsuccessfully attempts to combine the advisory/feasibility and mortgage valuation aspects of the instruction. The methodology is, therefore, flawed and the report structure does not adequately address the actual nature of the valuer’s instructions;

b) The valuer appears to have valued the property without discussing the matter in detail with the Town Planning Department at Woollahra Municipal Council;

c) The valuer did not internally inspect the existing improvements on the subject land at the time of his valuation. Such procedure is, in my experience, well short of the standards required for a valuation of this type. It is common for such exercises to be referred to as kerbside valuations where access is unavailable. The term ”valuation” would not normally be utilised in any report where important aspects such as internal inspection or Town Planning issues have not been adequately addressed.

d) The rationale for Options 1 and 2 does not allow for a number of relevant cost items (e g promotion for sale).

e) The report is inadequate in its use of market sales evidence to support key propositions, including the on-sale value of the existing house, Paradis Sur Mer, and the estimated sale prices of the proposed new dwellings.

f) The conclusions in the report are not cross-checked by any summation analysis.

There are a number of other matters upon which the report is open to criticism, and these are scheduled in the following section “Specific comments on the Egan Report”.

43 Shortly afterwards in May 1994, the Defendants commenced the earlier proceedings against Egan. They were commenced by summons in the Commercial Division but were subsequently removed to the Common Law Division where a Statement of Claim was filed. It pleaded causes of action in breach of contract and in negligence and under the Trade Practices Act and the Fair Trading Act, based on the valuation dated 4 January 1990. Breach of retainer and negligence were particularised as follows:

“The Defendant:

(a) failed to apply conventionally accepted valuation methodology;

(b) failed to have regard to relevant comparison sales information;

(c) failed to have due regard for prevailing and reasonably foreseeable economic and market trends and conditions;

(d) used the method of valuation being the hypothetical development method which was known to him or ought reasonably to have been known to him as perilous;

(e) failed to ensure that assumptions he made for the purpose of assessing the hypothetical development of the property were accurate:

(f) failed to adequately assess and advise upon matters which they knew or ought to have known would impact upon and restrict the form of the development of the property, being:

(i) the zoning of the property

(ii) the requirements of the Woollahra Local Environment Plan No 27;

(iii) the location of the site within a harbour foreshore scenic protection area;

(iv) the exact location and significance of the twelve metre foreshore building line;

(v) the Woollahra Municipal Council Residential Development Control Plan which came into effect on 1 December 1989;

(vi) the Woollahra Municipal Council Development Control Plan for the provision of and contribution towards the provision of public open space within the municipality of Woollahra, which came in to force on 10 July 1989;

(vii) the lack of access for services and utilities to Lot E of the property;

(g) failed to make any or any adequate enquiries of the Woollahra Municipal Council’s Town Planning Department as to the feasibility of the proposed alternative developments or as to any of the matters referred to in the preceding paragraph;

(h) relied solely on, or on an extract from, a Section 149 Certificate in respect of the property to describe and assess the town planning aspects of the proposed development.

(i) failed to assess adequately or at all the size of the market for properties of the order that were contemplated to be sold;

(j) failed to exercise due skill and competence in analysing the alternative development proposed;

(k) failed to allow for a number of matters in advising upon the proposed alternative developments, including:

(i) in relation to the first alternative development, (i) agent’s commission on the sale of the second proposed house, (ii) legal fees on the sales of the then existing and the new houses, (iii) advertising and promotion of the properties or (iv) restoration of the then existing house;

(ii) realistic agent’s commission;

(iii) realistic professional fees;

(iv) in relation to the second alternative development, a realistic monetary contribution to the Woollahra Council in lieu of contribution of land for public open space;

(v) statutory holding costs (land tax, local council rates, water rates);

(l) failed to assess adequately or at all the time frames within which the development of the property might be executed.

44 As to the causes of action under the Trade Practices Act and the Fair Trading Act, it was pleaded that there was no reasonable basis for making the representations in the valuation upon which the Plaintiffs relied.

45 It is noteworthy and a matter which subsequently became of contention between the Plaintiffs and Dunhill Madden that the Statement of Clam made no mention of Mr Egan’s three subsequent letters, respectively dated 30 August 1990, 5 April 1991 and 6 February 1992.

46 Mr Davis furnished a further report dated 21 August 1994. He noted that his instructions were:

“..to prepare a retrospective valuation of the subject property for the following purposes;

a) Providing advice and feasibility analysis in respect of alternative development proposals for the subject land;

b) Preparing a retrospective valuation of the freehold interest in the subject property, as a 4 January 1990, for the purposes of security on first mortgage advance.

It is noted that we have been unable to inspect the property in its January 1990 form as the improvements at that date have since been demolished. We have sought out and been provided with various information as to the size, state, condition, layout and general nature of the improvements at the valuation date and have had to rely on this data in coming to our valuation of the property.

In addition, our town planning enquiries, which are also retrospective, have been made with the relevant current officers at Woollahra Municipal Council and are not the same personnel as were employed at the valuation date.

We inspected the site on 22 February 1994.”

47 Mr Davis proceeded to value the freehold of the property as at 4 January 1990 at $12.5m. He also expressed his opinion upon a “Feasibility Analysis” in these terms:

“In addition to our formal valuation of the subject property we have analysed two alternative forms of development suggested by Mr G Symonds.

We note that these alternatives do not represent the only forms of possible development of the site, and that in our opinion the highest and best use of the land as at the valuation date is perceived to be as a prestige home on the existing land holding.

Our feasibilities have been prepared in conjunction with available market evidence. Whilst the subject land has potential for further development and/or subdivision our analysis concludes that neither of the suggested projects adds value to the property in its existing form.”

48 In the course of his report, Mr Davis described the nature of the Property, its location, its improvements and topography in detail. He also recorded the applicable planning and legislative provisions and proceeded to discuss at length the 2 options initially suggested by Mr Symonds, namely

“Option 1 Utilise the Existing form of subdivision of the subject property and either:

i) Retain existing improvements, refurbish and on-sell, together with adjoining vacant block (Lot 2)

ii) Demolish existing improvements and develop 2 new dwellings on Lots 1 and 2 and on-sell.

Option 2 Subdivide existing Lots 1 and 2 into three separate building allotments, and redevelop with new dwellings (Lot E to be sold with adjacent allotment).

49 After closely analysing these options, Mr Davis opined that the proposals were of “questionable viability”. He remained convinced, as I understand his report, that the highest and best use of the Property would have been to erect a single prestige home on the Property as it stood after demolishing existing improvements.

THE PLAINTIFFS ARE RELEASED FROM PERSONAL LIABILITY:

50 During 1994, and before all its security was realized the Bank, apparently as an act of good will towards the Plaintiffs, agreed, in effect, to release them from personal liability over and above the proceeds of sale of the properties mortgaged which, of course, included the houses known as 6 and 7 Wolseley Crescent Point Piper, and the vacant land known as 8 Wolseley Crescent. This agreement was embodied in deeds executed by all relevant parties and it was common ground that the Plaintiffs were, albeit conditionally, effectively released from further personal liability.

51 It is unnecessary to refer to the deeds in detail. The conditions for the most part required the Plaintiffs’ cooperation in the sale of the secured properties and the bank subsequently acknowledged that all the conditions had been fulfilled. I will hereafter refer to the deeds as “the deeds of release”.

52 Dunhill Madden acted for the Plaintiffs and their interests in relation to the deeds of release.

THE EARLIER PROCEEDINGS PROGRESS TO HEARING:

53 Although the earlier proceedings were transferred to the Common Law Division they were nonetheless managed under the Differential Case Management Scheme and were granted a degree of expedition such that towards the end of 1995 they were fixed for a hearing to commence on 29 January 1996.

54 No particulars of damages were given in the Statement of Claim but nonetheless the case seemingly proceeded towards hearing without undue difficulty. Egan by their defence put in issue the allegations of negligence and breach of contract against them and denied reliance by the Plaintiffs upon their advice. Specifically, in respect of the allegations in relation to the valuation of 3 January 1990, Egan pleaded:

“As to paragraph 9 of the Statement of Claim, the Second Defendant on behalf of the First Defendant admits that he was of the opinion that the value of the Property as at 3 January 1990 for mortgage purposes was $15m as referred to in the Valuation Report and further admits that subject to the assumptions and qualifications contained in the Valuation Report and provided that the Property was developed pursuant to either of the two Options referred to in the Valuation Report that profits within a range of $4,325,500 and $6,325,500 in respect to Option 1 and that a profit of $4,805,000 in respect to Option 2 could be realised but otherwise denies the residue of the contents of that paragraph.”

55 Egan also denied that any representations made by them were false or misleading and denied that the Plaintiffs suffered any damage as a consequence of any action or conduct by Egan.

56 The final paragraphs of the defence dated 6 June 1994 pleaded:

“In further answer to the whole of the Plaintiffs’ claim, the Defendants expressly limited and qualified the Valuation Report by reference to the possible impact of present and future economic forces on the Property specifically and the property market generally at the time of the Valuation Report in relation to the development of the Property as referred to in Option 1 and Option 2 contained in the Valuation Report.

In further answer to the whole of the Statement of Claim the Defendants say that if any loss or damage has been suffered by the Plaintiffs arising out of their acquisition of the Property and their subsequent development of the Property (which loss or damage is not admitted) such loss or damage was caused by matters unrelated to the Valuation Report prepared by the Defendants.

Particulars

(a) The unforeseen drop in the property market.

(b) The delay in realising the sale of the Property or any development thereon caused by the litigation between the Plaintiffs and the neighbouring owners and Woollahra Council.

(c) Failure to follow a sound strategy for sale of the Property and any development thereon so as to realise a profit.

(d) Acting in reliance on their own investigation and enquiries as experienced property developers

(e) Acting against the advice of the Defendants contained in the Valuation Report in the development of the Property.

(f) Acting in reliance upon the advice and information of others.

Further and in the alternative the Defendants allege that if the Plaintiffs have suffered loss or damage (which loss or damage is denied) such loss or damage was brought about by the Plaintiffs’ own negligence.

Particulars

(a) Failing to heed the warning signals contained in the Valuation Report.

(b) Acting in reliance on their own investigations and enquiries as experienced property developers.

(c) Acting in reliance upon the advice and information of others.

(d) Failure to follow a sound strategy for sale of the Property and any development thereon so as to realise a profit.

(e) Acting against the advice of the Defendants contained in the Valuation Report in the development of the Property.”

57 The pleadings remained in that form namely the Statement of Clam filed 24 May1994 and the Defence filed 6 June 1994 until the commencement of the trial.

58 The Plaintiffs continued to remind Dunhill Madden of the omission from the Statement of Claim of any reference to Mr Egan’s letters including those of 30 August 1990 and 6 February 1992 and of a valuation report dated 28 February 1992, notwithstanding that Dunhill Madden had sent copies of those documents to Egan’s solicitors as early as April 1994. On 14 June 1994, the solicitors Phillips Fox enquired of Dunhill Madden:

“Is it alleged that the Plaintiffs relied upon these documents? If so, please identify the nature of such alleged reliance.

We note the strict timetable which has been ordered in respect of these proceedings following your clients’ Motion for Expedition. Accordingly, we look forward to your response as a matter of urgency.

59 Dunhill Madden’s subsequent reply of 9 August 1994, upon the subject of reliance stated:

“The Plaintiffs executed the development of the property in reliance upon the advice contained in the letter dated 30 August 1990.

In reliance upon the advice contained in the letter dated 6 February 1992, the Plaintiffs determined to ask for $15 million as the selling price of the completed residence on Lot 1 (7 Wolseley Crescent).”

60 In November 1994, Phillips Fox, having learned of the deeds of release from an inspection of documents at the office of the Plaintiffs’ accountant, Mr Golan, wrote to Dunhill Madden seeking Discovery of those deeds.

61 A conversation occurred thereafter between Mr Symonds and Mr Klotz as follows, according to Mr Symonds:

“Me: Stephen, I just received the fax in relation to the Barclays Deed. What do you think we should do about it?

Klotz: I do not think the deed has any relevance to your claim and that we do not need to give them a copy. Anyhow, it is not finalised yet and will not be until all the mortgaged properties are sold. I shall send you a draft of my proposed rely for your information.

Me: Thank you, I look forward to seeing your reply.”

62 A number of other matters arose between November 1994 and the hearing date during which period the Plaintiffs continued to take a close interest in the case, sending Dunhill Madden a stream of memoranda. These other matters included notification by Phillips Fox of an intention to make amendments to the defence and a lengthy letter by Phillips Fox pointing up the asserted strength of Egan’s case and offering as a compromise that they would bear their own costs if the proceedings were dismissed and the Plaintiffs gave an appropriate release.

63 Letters from Phillips Fox brought forth memorandum No. 44 from the Plaintiffs, which vehemently re asserted their position and included the following:

“We believe that if the above letters are taken into consideration, nearly all of the points that Phillips Fox raise have no substance. However, we should like to respond to some of their allegations:-

1. Delays caused by council and neighbours.

No need to be on the defensive here. Egan should have warned us only to buy property subject to DA as Ponton and Ingham advised.

Their argument is a nonsense if one takes into account (a) we had no reason to “cut our losses” at that time because (b) we had Egan’s letter of August 30 confirming all was well and (c) we still expected to make a substantial profit.

3. Changes to Concept / Architects Etc.

No need to be on the defensive here (a) we purchased in March (b) Option 2 DA was submitted immediately (c) Option 1 DA withdrawn due to reasons already stated (d) Option 1 DA submitted in August when Egan’s advice was forthcoming ---- Less that 5 months elapsed for the final concept to be created and this was not excessive in any way bearing in mind that we wished to maximise the full potential of the site.

This is not true. The DA for number 7 was supported. The second DA for number 6 was supported. The DA for number 8 was supported. It was only the first DA for Number 6 that was not supported and our architect led us to believe that we would win it on Appeal. If Berk now asserts that he advised differently – where is his correspondence? Bear in mind that he is now a hostile witness and we can produce all of the letters and findings of the Board of Architects confirming that he was found guilty of unprofessional conduct.

5. We Should Have Asked Egan’s Advice Before Purchase.

Only two months passed between the date of his Valuation and our purchase. He knew we were interested and one could ask, “Why didn’t he tell us if he knew there were any disadvantageous signs?” We did ask his advice prior to his letter of August 30 and he did not see fit to sound any alarm bells then. (Ingham, Gothard and Ponton all saw fit to warn their clients).

6. Bad Choice of Design.

Egan’s letters (as above) all confirm good design and I do not think that Bill Bridges hindsight or views will carry much weight.

7. Our General Reliance.

Although this point does not relate to Phillips Fox letter specifically, I should like to repeat the following so that it can be added or considered in our cross-examination:-

1. Egan knew we had carried out no developments in Woollahra since 56 Wolseley Road. This DA was approved in six weeks and included all the similar considerations to PSM. Additionally, the DA for 9 Wolseley Crescent was approved in five weeks which contained all the elements of PSM including the obstructions caused by the Renoufs which were as vehement as the O’Neils against us. What has this got to do with Egan you might ask. It has got to do with Egan that he knew Peter Jensen (previous Town Planner) had been replaced by Woodhams and the times taken for approvals of DAs had lengthened and become inordinately more difficult to obtain. We did not know this and Egan failed in his duty of care to warn us not to proceed unless we had a DA. We were naïve and ignorant and he owed us a duty of care to guide us.”

64 In November 1994, Dunhill Madden wrote to Phillips Fox regarding damages in these terms:

“We note that our clients have recently entered into two deed with Barclays Bank PLC. Presently, however, neither deed affects our clients’ damage.

We provide updated particulars of damage, taking into account the sale of Lot E, as follows:

Development Costs $28,963,081.13

$15,560,000.00

65 On 19 December 1995, Phillips Fox wrote to Dunhill Madden in effect asserting that the deeds of release “to the extent that they have been fulfilled or are capable of fulfilment limit the level of damages which may be claimed by your clients”.

66 According to Mr Symonds, on several occasions thereafter he raised with Mr Klotz his failure to reply to Phillips Fox’s letter and received the reply “Don’t worry Gerald, it’s a simple matter, just some housekeeping to be sorted out on the first morning of the trial”.

67 Mr Symonds said that at a conference with Mr Hammerschlag and Mr Klotz on 24 January 1996, there was this conversation:

Me: How are we getting on, are we ready for the hearing even though we have not yet replied to the Phillips Fox letter of the 19 December 1995?

Hammerschlag : You should not worry, things are going on well and we are ready for the hearing. You should not concern yourself about the Phillips Fox letter I agree with Stephen that everything can be sorted out on the first morning of the trial.

Me: What are our prospects for success?

Hammerschlag: Good but nothing is ever certain in litigation.

THE HEARING BEFORE DOWD J:

68 The earlier proceedings were called on for hearing before Dowd J on 29 January 1996. Mr Hammerschlag announced his appearance for the Plaintiffs and Mr R Stitt QC with Mr J Simkins for Egan.

69 Before Mr Hammerschlag was called upon to open the Plaintiffs’ case, some preliminary matters were raised, including the following as recorded by the transcript:

“Mr Stitt sought leave to file in court an amended defence, and noted that the amendments were opposed. He referred His Honour to the statement of claim, which alleged damages for negligence as a valuer of real estate, and that the valuation was negligently and incompetently prepared, and that the plaintiffs had relied on the valuation of the defendants and sought to develop the property and had suffered loss.

He referred in particular to page 3 of the statement of claim and noted that par 11 of the amendment to the defence sought to raise the issue of the capacity in which the property was purchased by the plaintiffs, whether in a beneficial or in some representative capacity. He submitted that documents had been discovered which made it plain that the plaintiffs had not purchased this particular lot with a beneficial interest to them. He further referred to par 17 of the amendment to the defence which raised a limitation point in respect of the Trade Practices Act.

Mr Hammerschlag submitted it came as a surprise to the plaintiffs that the capacity in which the property was purchased was an issue in the case. He submitted Mr Stitt was seeking to withdraw an admission which was in the pleadings.

On the second question, the statue of limitations, he opposed that amendment on the basis that it was futile and late, and on the face of it was defective.

(He noted he would like to take instructions on the capacity point.)

Mr Stitt sought to raise another matter before Mr Hammerschlag continued with his opening, that on 19 December his instructing solicitor, Phillips Fox, had written a letter to the plaintiffs’ solicitors, Dunhill Madden, seeking further and better particulars. He submitted this arose from discovered documents which disclosed there was a deed between Barclays Bank and the plaintiffs and other parties. He submitted that in light of this deed the plaintiffs could not pursue their claim for $15,000,000 as it was presently framed.

He stated the letter of 19 December requesting the particulars had not been answered, and requested a direction from His Honour that the plaintiffs answer that letter within the nest day or two, as it was relevant to how the plaintiffs put their claim for damages.

His Honour read the letter requesting particulars. Mr Hammerschlag stated he could have an answer to the request for particulars by close of business tomorrow. His Honour noted he would not make a formal order, but noted Mr Hammerschlag’s statement that the answer to particulars would be received by 5pm tomorrow.”

70 Mr Hammerschlag then opened the Plaintiffs’ case. Although the opening was not transcribed verbatim, the transcript indicates that during it there was debate involving both Dowd J and Mr Stitt regarding the effect of the deeds of release. Mr Hammerschlag maintained the position that the deeds of release had no impact upon the Plaintiffs’ damages.

71 There was also debate as to the significance of the fact that companies associated with the Plaintiffs, as opposed to the Plaintiffs themselves, had given third party mortgages to the Bank, the realization of which by the Bank formed part of the Plaintiffs’ claim for damages. In relation to this, the transcript records that Mr Hammerschlag said to his Honour:

“Mr Hammerschlag submitted that if some of the relevant properties were held by corporate entities, they were entities whose shareholdings were held by the plaintiffs, and reflected solely the value of the properties. He submitted the correct method for calculation of damages in this case would be, what position would the Plaintiffs be in had they not embarked upon the development. Further discussion ensued.

Mr Hammerschlag submitted that if the issue regarding beneficial interest was taken, the plaintiffs would say the value of the shareholding equalled the value of the property, and that he would endeavour to persuade his Honour on the financial data that that was so. He requested Mr Stitt clarify his position on the issue of capacity.”

72 During further discussion Dowd J suggested an adjournment until 2pm the following day in order that Mr Hammerschlag might provide further particulars and Mr Stitt might clarify his position in relation to the matters raised.

73 Mr Hammerschlag told his Honour that if necessary he would apply to join as parties the companies which had provided security and the transcript then records:

“His Honour noted concern as to whether the issue of tax loss value of the corporations would arise, and that the trial should be starting without these matters being resolved.

Mr Stitt reiterated his position, that he was confronted with a five week trial without having information regarding these properties, particularly property in Jersey which apparently had not been sold, and submitted he could not say he was ready to proceed because he did not know what Mr Hammerschlag was going to tell him in the answers to particulars.”

74 Mr Hammerschlag continued his opening during the course of which, as it seems, there was further debate about the matters raised earlier by Mr Stitt the detail of which was not transcribed. In the result, after Mr Hammerschlag tendered without objection the Plaintiffs’ “bundle of documents”, the hearing was adjourned until 2 pm the following day January 30.

75 When the hearing resumed, Dowd J delivered judgment on the application by Mr Stitt to amend his client’s defence. The application was granted. In his reasons Dowd J explained the basis of the amendment sought:

“In this matter the defendants seek to amend the defence originally filed in the proceedings on 7 June 1994. The first of the two amendments is to paragraph 11 of the defence, the original form of paragraph 11 of the defence said, “ As to paragraph 12 of the statement of claim the defendants admit that the plaintiffs purchased the property for a price of $13,000,000, but otherwise deny the contents of that paragraph”. The amended defence deletes from the word “admit” to the word “otherwise”.

The substance of the amendment constitutes a withdrawal of the amendment (sic admission) contained in the original defence, and the consequences of the amendment would thereby put the plaintiffs to the proof of the purchase of the property by the plaintiffs for the price of $13,000,000.

This application for amendment was made prior to the opening by counsel for the plaintiffs, Mr Hammerschlag, and I had the advantage of hearing the opening in order to outline the nature of the claim and to understand the issues involved. There was a degree of discussion, primarily generated by the court, in order to precisely delineate the nature of the issues involved.

The application for the amendments arise out of documents which were not discovered to the defendants but were obtained through the use of a subpoena to the accountants for the defendants, and give rise to certain references in the documents produced on subpoena that could lead to the inference that some of the properties were not beneficially owned.

It is for that reason that the defendants seek to amend the defence, in order that the issue of the plaintiffs‘ actual acquisition of the property beneficially can be explored which is a matter going not only in part to the cause of action, but goes to the quantum of damages which may result in the event of the plaintiff establishing its cause of action.”

76 Later in the judgment his Honour said:

“Having examined the matters put in opening and the discussion between counsel and the court which ensued, it seems to me that the issue of the extent of loss in the event of the plaintiff establishing its cause of action is a matter which will require examination of the question of beneficial ownership and the involvement of the corporations listed in a Deed of Release which has been executed subsequent to the institution of these proceedings, which Deed of Release is relevant to the quantum of damages which the plaintiffs may record insofar as the Deed of Release involves several companies which are wholly owned or controlled by the plaintiffs and are parties to that release, and that release is taken into account as part of the mitigation of the damages sustained by the plaintiffs if the cause of action is made out.”

77 One other matter of substance covered by the amended defence allowed by Dowd J was a defence raising the limitation provisions of the Trade Practices Act.

78 According to the transcript of proceedings on 30 January 1996, which again is not a verbatim record, there was further argument as to the significance in the case, not only of the companies which had provided third party mortgages but of Gowrise Pty Ltd under the declaration of trust earlier referred to.

79 As to the position of Gowrise Pty Ltd, the transcript states:

“Copy of Trade Credits Ltd v Baillieu Knight Frank (NSW) Pty Limited handed up. Discussion ensued. Mr Hammerschlag submitted that the question of tax losses would not arise as Gowrise Pty Limited never traded, and the trust deed was never implemented; the tax returns and balance sheets were always nil and the company later was deregistered.

He noted that the contracts were entered into by Mr and Mrs Symonds or nominee or that it was intended with respect to Lots 1 and E that that would be a commercial development and they would live in a new residence on lot 2. The original plan was to sell number 7 for $12,000,000 and to build a house on the western block. They intended Gowrise to be the nominee, but on advice that double stamp duty may be payable, and that the deed did not revoke that, they did not allow the deed to come into existence.

His Honour noted that the deed was signed sealed and delivered and as a declaration of trust it did not need to be executed by the beneficiary. Mr Hammerschlag maintained that the deed by a consensus had been terminated, and did not proceed so far as Mr and Mrs Symonds were concerned.

80 Further problems arose for the Plaintiffs:

“Mr Hammerschlag noted in regard to the restaurant at 13/39 Elizabeth Bay Road that Mr and Mrs Symonds had discharged the mortgage with the bank and still owned the restaurant. His Honour noted that in that event the value of property became irrelevant. Mr Hammerschlag agreed that the loss in respect of this property was limited to the amount the bank accepted in discharge of the mortgage.

Mr Stitt noted that as at the date of loss, which he submitted was the relevant date, Mrs Symonds did not own the property 1/56 Wolseley Road. Secondly in relation to Tisete, he noted that Mr Hammerschlag had indicated that it was a bare trustee. Mr Stitt submitted no documents had been discovered in relation to the trusts, and that they were entitled to discovery of those documents before the taking of any evidence in the proceedings. Mr Hammerschlag indicated there was no problem with full unrestricted access to all documents held by the accountant.

Thirdly in relation to Tabard Mr Stitt noted the shares were said to be owned entirely by Mrs Symonds and submitted there had been no discovery of relevant documents in relation to this company. He submitted that in the plaintiffs’ particularisation of their loss, nowhere was there any claim for loss by the first plaintiff, and consequently made application under Part 8 Rule 6 that the first plaintiff be struck out of these proceedings.

Mr Stitt submitted the first plaintiff’s causes of action were negligence, breach of the Trades Practices Act, and breach of contract, and that damage was an element in the first two causes of action, however, no damage was claimed or alleged by the first plaintiff and therefore the cause of action was incomplete.

He noted the cases of Mr Symonds and Mrs Symonds were different and separate. He foreshadowed difficulties as to the admissibility of evidence. He noted as an example the statement by Mr Hammerschlag that Gowrise played no role in the matter, and submitted that was incorrect because Gowrise had borrowed the money from Barclays Bank, and that it was incorrect to say the borrowers of the relevant funds were Mr and Mrs Symonds personally. He noted an account had been established in the Barclays Bank in the name of Gowrise Pty Limited, and monies were deposited to that account, but that subsequently Mr and Mrs Symonds had asked the bank to reverse the transaction, and the borrowings were placed in the names of Mr and Mrs Symonds, apparently for reasons of commercial advantage.

As to the third cause of action, breach of contract, Mr Stitt submitted that if there had been no loss or damage suffered then any breach of contract could only give rise to nominal damages, which would not warrant a five weeks hearing. He noted the application was also made under part 13 Rule 5.

His Honour noted if there was no damage suffered he would need to reconsider the whole of the material in a new light. Mr Stitt referred also to Mr Hammerschlag’s foreshadowing of amendment to the statement of claim relating to further allegations and subsequent losses.

Mr Hammerschlag indicated there had been an error made in the hurried preparation of exhibit B, and that in fact certificates of title indicated that 1/56 Wolseley Road was owned jointly by Mr and Mrs Symonds at the date of loss, but that at the date of the loan it was apparently owned by Senneh Pty Limited. In order to clarify the position he handed up certificate of title and associated documents.

His Honour noted that although the document was registered on 29 May 1991 that in fact it was undated, and therefore he could not be certain as to when the document came into existence.

Mr Stitt submitted that it was unfair to the defendant to be expected to meet the case whilst it was imprecise and unclear, and made formal application that Mr Symonds be dismissed from this suit and requested that Mr Hammerschlag be directed to put on whatever he relied upon.

Mr Hammerschlag indicated he wished to avoid the case going off on some synthetic or technical question as to the parties, and that the substance of the case was that Mr and Mrs Symonds had had properties which they had lost.

His Honour indicated that the changes that had occurred in the plaintiffs’ case in the last two days made it difficult to understand what the issues were which needed adjudication, and that he had not been told with any precision the facts within the case. Mr Hammerschlag submitted the fact evidence was in Mr Symond’s statement and that of Mrs Symonds.

His Honour noted that much of Mr Symonds’ evidence was based on his reliance, and that if he had suffered no damage resulting from that reliance he had no cause of action. His Honour indicated that before the case could proceed he needed to know – precisely in legal and fiscal terms the nature of the plaintiffs’ claim and inquired when Mr Hammerschlag could produce this. He inquired whether the amendment to the statement of claim now involved other issues of reliance in terms of the 1992 reaffirmation of the value. Mr Hammerschlag foreshadowed that it would and that he would be moving the court to join as plaintiffs Senneh Pty Limited in the light of his Honour’s preliminary view as to the Limitation Act evidence.

Mr Hammerschlag made application that Mr Stitt’s application be dismissed, and that he be given leave to file and serve amended statement of claim consequential upon Mr Stitt’s amendments and any further evidence.

His Honour noted he could not deal with the application to dismiss a party until it was clear who the parties were. He proposed adjourning proceedings until the matters could be clarified. Further discussion ensued.

Mr Hammerschlag made application for the proceedings to be adjourned until 10 o’clock Thursday, 1 February 1996, and that he be ordered to put on an amended statement of claim with such additional parties as were required. He indicated he would not oppose an appropriate order as to costs. Discussion ensued.”

81 The hearing was then adjourned until Thursday 1 February 1996.

82 Unsurprisingly Mr Hammerschlag was concerned at the way the case was proceeding. In his statement of 14 July 2004, exhibit 27, he described the events of the first two days of the trial as follows:

“From the moment I commenced to open the case, things did not go well.

Upon commencing my opening, I handed to Mr Justice Dowd, and to Mr Stitt, a chronology and a slim bundle of key documents.

My purpose in handing up this bundle was to have the key documents conveniently assembled so that the Judge could turn them up as I referred to them in my opening. In my experience, such use of a bundle of key documents is common.

When I handed up the bundle Mr Stitt objected and an exchange to the following effect took place:

Stitt: “It is totally unacceptable that I have been given a bundle of documents for the first time”

DJH: All the documents in this bundle are either attached to affidavits or have been discovered. There can be no possible objection.

Judge: You cannot run cases using bundles you have not provided to the other side previously”.

I was interrupted by the presiding judge many times. I recall an exchange to the following effect.

Judge: “This case involves companies. No one informed me that I was to hear a case involving companies”

DJH: Whether or not companies are involved, the case remains a simple case about negligent advice.”

The judge then raised his voice and said:

“It may be simple to you but it is not simple to me.”

I continued the opening on the second day and there was further debate about a number of things. The court adjourned early. By the end of the second day’s proceedings I had formed the view that it was in my clients’ interest that someone more senior to me be briefed to lead me in the proceedings – if possible, someone of equivalent seniority to counsel for the defendants.

When the matter adjourned, I had a conversation with Mr Klotz at which Mr and Mrs Symonds were present. I said words to the following effect:

83 In the result, Mr Spender QC was retained to lead Mr Hammerschlag and he announced his appearance when the case resumed on 1 February. Mr Spender sought to amend the Statement of Claim by including additional claims based on Egan’s letters of 30 August 1990 and 5 April 1991 and by joinder as plaintiffs of the 3 corporations, which had provided security.

84 There followed an exchange with Dowd J, which, while not transcribed verbatim, occupied in summary form several pages of transcript. Mr Stitt. when called upon, submitted that leave to amend the Statement of Claim should be refused. He contended, according to the transcript, that “the amendments were neither accurate nor precise and did not outline the cause of action and the basis upon which the alleged loss was calculated”.

85 The problems which the Plaintiffs faced in seeking to raise causes of action allegedly vested in companies were highlighted by the transcript’s record of Mr Stitt’s submissions:

“As to the proposed addition of the three corporate plaintiffs, Mr Stitt submitted Senneh Pty Ltd was pleaded as a company which had as its share capital one share held by Tisete in trust for the second plaintiff and one share held by the daughter Michelle in trust for the second plaintiff. He submitted it followed that the first plaintiff had no beneficial or equitable interest in Senneh, and had never had such at any relevant time, that he was a director but had no beneficial interest. He noted Senneh was said to be a trustee company and that that was the way in which the beneficial interest in the shares was structured.

As to Tisete Pty Ltd, Mr Stitt submitted it was a company in which one share was held by the first plaintiff and one by the second plaintiff, and was again a trustee company so far as the relevant properties were concerned. He noted it was pleaded that Tisete held the subject properties 2/39, 4/39 and 13/39 Elizabeth Bay Road as trustee for the second plaintiff and not for the first plaintiff, and that it also held a share in Senneh, which was again a company, in which the first plaintiff had no beneficial interest.

As to Tabard (Jersey) Pty Ltd, he noted this was a company in which neither plaintiff was a director, that the first plaintiff held no beneficial interest in the company, the second plaintiff held shares in her own right, and the rest of the shares were held by individuals who presumably were residents of Jersey. He submitted the important fact was there was no beneficial interest held in that company by the first plaintiff.

He submitted Tabard was not a company registered in New South Wales as a foreign company. He submitted that paragraph 4 (d) asserted that Tabard acted in accordance with the directions of the first and second plaintiffs, but that that was a matter about which there would have to be discovery because it was not self-evidenced that that was so. He submitted paragraph (e) was simply incorrect as a statement of fact it would again be a matter about which discovery should be given.

He noted that the whole question of reliance would be very large in these proceedings. His Honour noted the secondary question of knowledge for what purpose. Mr Stitt submitted there was no evidence that the valuations were ever shown to the directors of Tabard or that the directors of Tabard relied upon the valuation or any representation. He submitted that the proposition that Tabard was said to be owed a duty of care, and secondly that such duty could be breached, was entirely speculative.

……………………………………..

[91]

148 In separate judgments Mc Hugh and Callinan JJ upheld the immunity claimed. Kirby J dissented.

149 In Giannarelli v Wraith (1988) 165 CLR 543 the issue concerned whether a Victorian barrister was liable in negligence to his clients who were tried and convicted of perjury, the negligence alleged being his failure to advise them that they had a good defence and his failure to object to certain inadmissible evidence essential to the Crown case.

150 After referring to the independent judgment which a barrister must exercise in conducting a trial, Mason CJ stated the reason for advocates immunity:

“There is a real risk that, if counsel were exposed to liability in negligence, the existence of that potential liability would influence the exercise of his independent judgment by making him more mindful of the need to avoid any possibility of liability to his client. In some situations, in order to avoid that possibility, counsel would pursue matters which he would not otherwise pursue if the exposure to liability in negligence did not exist. To expect that counsel's conduct of a case would not be influenced by his exposure to such a potential liability would be little more than a pious hope. Inevitably some counsel would be more inclined to act as mere agents of their clients to the detriment of the interests of the court and of the administration of justice generally. Insurance might alleviate but would not eliminate the problem. Counsel would naturally be concerned to avoid allegations of negligence.

151 Later, Mason CJ discussed the limits of the immunity in these terms:

Saif Ali

San Sebastian Pty Ltd v Minister Administering Environmental Planning and Assessment Act 1979

Hawkins v Clayton

Hedley Byrne & Co Ltd v Heller & Partners Ltd

Rees v Sinclair

Saif Ali

152 Brennan J referring to the position of a solicitor made this observation:

“On the other hand, it is now seen that at common law there is no liability in a solicitor for anything done or omitted in the conduct of a client's case in court or in the making of preliminary decisions affecting the way in which the case is to be conducted when it comes to court. (I leave aside liability for failure to carry out preliminary decisions, whether made by the solicitor or by counsel briefed by the solicitor, when that failure impairs the conduct of the case in court in the way intended.) I would therefore take the common law as this court declares it today to be the common law of 1891.”

153 In my opinion, advocate immunity clearly applied to everything which occurred after the commencement of the proceedings before Dowd J. The immunity, for the reasons made clear in the passages quoted above, prevents any attack upon anything done by counsel or by Mr Klotz in that period including the advice which led to a compromise of the action.

154 I am, in any event, satisfied that Mr Spender and Mr Hammerschlag, during the course of the proceedings before Dowd J, gave honest and dispassionate advice to the Plaintiffs. To the extent that Mr Klotz participated in that advice, it is hard to escape the feeling that his attitude may have been affected by a conflict of interest arising out of the terms of the retainer agreement. If, in truth, Dunhill Madden were committed to absorb even their own costs, let alone disbursements until the end of the trial no matter how long that took, they had an obvious interest in bringing the matter to a close as quickly as possible. However, I am satisfied that the Plaintiffs, in the end, whilst undoubtedly under stress were not subjected to duress and made an informed decision to terminate the proceedings. That decision, its implementation and the discussions and advice which preceded it were, in my opinion, protected by advocate immunity.

ARE THE PLAINTIFFS OTHERWISE ENTITLED TO SUCCEED?

155 In my opinion the Plaintiffs established breach of contract and negligence by Dunhill Madden as alleged in the Statement of Claim.

156 In particular, I find that the Plaintiffs proved the breaches alleged in paragraph 27 (a) (b) (c) (d) (e) (f) (g) (h) (i) and (k) set out above. They failed to prove breaches or negligence as particularised in paragraphs (l) and (m). It would not necessarily, in my view, be negligent or constitute a breach of retainer for an experienced solicitor not to obtain an advice on evidence from counsel, provided that the solicitor was in truth capable of providing such advice himself.

157 Obviously some of the breaches were more significant than others. I am satisfied, in particular, on the probabilities that Mr Klotz failed to apply his mind to the significance to the case of the companies Senneh Pty Ltd, Tisete Pty Ltd, Tabard (Jersey) Limited and Gowrise Pty Ltd, and as to how the involvement of those companies could impact upon the pleading of the Plaintiffs causes of action. He also failed to give adequate or any consideration to the proper quantification of the Plaintiffs damages, including as to the impact upon those damages of the deeds of release. As a consequence, Dunhill Madden also failed to provide proper particulars to Egan’s solicitors.

158 In my opinion, the case against Egan was not ready for hearing and Dunhill Madden were negligent and in breach of their contractual obligations when they accepted a date for hearing and thereafter failed to apply for vacation of the hearing date.

THE LIMITATION DEFENCE:

159 As stated above, it was pleaded that s14 of the Limitation Act bars any claim in respect of breaches of retainer and breaches of fiduciary duty committed prior to 13 December 1995.

160 Some of the breaches alleged were continuing breaches such as paragraphs 27 (c) (d) (e) (f) and (i) in the Statement of Claim and those breaches continued to be committed each day after 13 December 1995 until the commencement of the trial. The defence did not relate to the cause of action pleaded in negligence, presumably because it is accepted by Dunhill Madden that the Plaintiffs suffered no damage before 29 January 1996.

CAUSATION:

161 Causation is a question of fact to be decided by the application of common sense (March v E & MH Stramare Pty Ltd [1991] 65 ALJR 334). On the fact of this case, it seems to me both foreseeable and a matter of common sense that Dunhill Madden’s breach of duty would cause delay and disruption in the conduct of the trial, the very situation which came about. The same consequences naturally flowed, in my view, from Dunhill Madden’s breaches of retainer.

162 In my opinion, the Plaintiffs are entitled to damages representing the loss flowing from such delay and disruption. They are not so precluded, in my view, by the principle of advocate immunity because the negligence of Dunhill Madden and their breaches of retainer were not, in my opinion, intimately connected with the conduct of a case in court as that expression has been interpreted in cases such as Keefe v Marks (1989) 16 NSWLR 713 and Yates Property Corporation Pty Ltd v Boland 145 ALJR 169 (per Branson J whose approach was expressly approved by Gleeson CJ in Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209).

163 Keefe was a personal injuries case in which the Statement of Clam made no claim for interest, nor was any such claim made at trial, with the consequence that Master Greenwood awarded no interest. The solicitor was subsequently sued and the claim against him was compromised. He then sued in the District Court the barrister who conducted the case before Master Greenwood. His Statement of Claim was struck out by Mahoney DCJ.

164 The Court of Appeal (Gleeson CJ, Priestley and Meagher JJA) dismissed (Priestley JA dissenting) an application for leave to appeal from the decision of Mahoney DCJ and held that advocate immunity applied. In the course of his judgment Gleeson CJ said:

“The substance of the complaint that was made against the barrister is, in my view, simple and clear. It is that, having been briefed to act as counsel for Mr Tehfe in his action for damages for personal injuries, he did not at
any relevant time, either prior to the commencement of the hearing, or during the hearing, direct his mind to the desirability of making on his client's behalf a claim for interest or take the steps necessary to propound
such a claim and that his neglect in that regard produced the result that Master Greenwood failed to award interest and the Court of Appeal declined to intervene. As a consequence, it is alleged, Mr Tehfe did not recover his full entitlement. That, it is claimed, gave rise to a liability on the part of the opponent to Mr Tehfe, and the claimant seeks contribution or indemnity based on the existence of that liability. The question is whether a claim of that nature is within the area of immunity to which reference has earlier been made. Whatever may be the answer to that question, it does not appear to me that it could depend upon the detail of the evidence adduced at a hearing of the District Court action. Indeed, the relevant principle of immunity would be capricious in its operation if its application in a case
such as the present were made to depend upon the precise history or circumstances of the communications and dealings between the barrister and his solicitor and lay client. A rule of law which is said to be based upon considerations of public policy should not depend for its practical operation
upon chance. Furthermore, it does not seem to me that a plaintiff can circumvent the immunity, simply by constructing allegations of damage in a manner which attempts to relate the harm suffered as a consequence of a barrister's alleged negligence to that aspect of his conduct furthest removed
from physically standing up and speaking in Court. The statement of claim is to be read as a whole, and there is no doubt about what it is the barrister is said to have done that was wrong, or what form of harm befell his client.
The barrister's alleged negligence involved a continuing course of conduct, or inaction, which extended up until the conclusion of the hearing before Master Greenwood and manifested itself in a failure to make a claim for
interest, and to apply for any necessary amendment to the pleadings in order to enable that claim to be pursued.

Giannarelli v Wraith

Saif Ali v Sydney Mitchell & Co (A Firm)

“However, the grounds for denying liability for in-court negligence have no application to work done out of court which is unconnected with work done in court.”

165 Yates v Boland concerned the liability of solicitors in respect of a case conducted in court by barristers instructed by those solicitors, and is thus more akin to this case.

166 In relation to the position of solicitors Her Honour said:

Donellan v Watson

(a) wasted significant costs and other moneys attempting to value the [subject] land based upon the notional capitalised income stream referred to in para 65 hereof [ie costs resulting from the hearing time before the Land and Environment Court being extended];

(b) lost the opportunity in the Land and Environment Court proceedings to formulate and prove its claim for special value in accordance with the proper principles and practice of valuation law based on the matters pleaded in paras 43-51 inclusive hereof [ie head start]; and

Each of the above matters relates to the in-court conduct of the applicant's claim for compensation upon the resumption of the subject land.

Giannarelli v Wraith

“It would be an anomalous and unjustifiable distinction if, in respect of advice and decisions affecting the conduct of proceedings, counsel should have immunity but the solicitors should not where both are held to be obliged to give the same type of advice in respect of the conduct of the proceedings.”

167 This case, in my view, fits neither Keefe nor Yates. The problem which arose here did not derive from a predetermined decision to conduct the case in a particular way as in both of those cases, but rather from Mr Klotz’s failure to apply his mind to the many difficulties inherent in the case. Rather, this case seems to fit the category mentioned in parenthesis by Brennan J in the passage from his judgment in Giannarelli quoted above.

168 Moreover, in no way, in my view, could it be said that the failure to provide proper particulars, the acceptance of a trial date for a case, in truth, unready for trial and the failure to seek vacation of the hearing date were matters intimately connected with the conduct of the case in court. In my opinion, advocate immunity does not protect Dunhill Madden from liability in respect of the matters referred to in this and the preceding paragraph.

DAMAGES:

169 As I have already indicated advocate immunity applies to the conduct of the proceedings before Dowd J and to the settlement of the proceedings on 28 February 1996. That settlement, so far as it terminated the Plaintiffs’ right of action against Egan, was, as I have found, an act of the Plaintiffs’ freewill and must, I think, in relation to the negligence and breach of retainer of Dunhill Madden, be regarded as a novus actus interveniens connected to the non actionable conduct of the Plaintiffs‘ counsel and solicitors in the trial before Dowd J.

170 Relevant principles are discussed by Mason CJ in March v EH & M Stramare under the heading “Novus Actus Interveniens”:

“In similar fashion, the “but for” test does not provide a satisfactory answer in those cases in which a superseding cause, described as a novus actus interveniens , is said to break the chain of causation which would otherwise have resulted from an earlier wrongful act. Many examples may be given of a negligent act by A which sets the scene for a deliberate wrongful act by B who, fortuitously and on the spur of the moment, irresponsibly does something which transforms the outcome of A's conduct into something of far greater consequence, a consequence not readily foreseeable by A. In such a situation, A's act is not a cause of that consequence, though it was an essential condition of it. No doubt the explanation is that the voluntary intervention of B is, in the ultimate analysis, the true cause, A's act being no more than an antecedent condition not amounting to a cause. But this explanation is not a vindication of the adequacy of the “but for” test.

The facts of, and the decision in, M'Kew illustrate the same deficiency in the test. The plaintiff would not have sustained his ultimate injury but for the defendant's negligence causing the earlier injury to his left leg. His subsequent action in attempting to descend a steep staircase without a handrail in the normal manner and without adult assistance resulted in a severe fracture of his ankle. This action was adjudged to be unreasonable and to sever the chain of causation. The decision may be explained by reference to a value judgment that it would be unjust to hold the defendant legally responsible for an injury which, though it could be traced back to the defendant's wrongful conduct, was the immediate result of unreasonable action on the part of the plaintiff. But in truth the decision proceeded from a conclusion that the plaintiff's injury was the consequence of his independent and unreasonable action.

The fact that the intervening action is deliberate or voluntary does not necessarily mean that the plaintiff's injuries are not a consequence of the defendant's negligent conduct. In some situations a defendant may come under a duty of care not to expose the plaintiff to a risk of injury arising from deliberate or voluntary conduct or even to guard against that risk: see Chomentowski v Red Garter Restaurant Ltd (1970) 92 WN(NSW) 1070. To deny recovery in these situations because the intervening action is deliberate or voluntary would be to deprive the duty of any content.

Chapman v Hearse

M'Kew,

Caterson v Commissioner of Railways

Dorset Yacht

“But if the intervening action was likely to happen I do not think that it can matter whether that action was innocent or tortious or criminal. Unfortunately, tortious or criminal action by a third party is often the ‘very kind of thing’ which is likely to happen as a result of the wrongful or careless act of the defendant. “

Much the same approach was adopted by this court in Caterson where Gibbs J (with whom Barwick CJ, Menzies and Stephen JJ agreed) pointed out (at 110) that, if the plaintiff's action in jumping from the train was, in the ordinary course of things, the very kind of thing likely to happen as a result of the defendant's negligence and was not unreasonable, the jury was entitled to find that the plaintiff's injuries were caused by the defendant's negligence. The finding that the plaintiff's action was not unreasonable was then essential to that conclusion because contributory negligence was a defence in New South Wales at the relevant time. See also Chapman v Hearse , at 124–5; and note the reference in Mahony (CLR at 529) to the acceptance by Gibbs J in Dillingham Constructions Pty Ltd v Steel Mains Pty Ltd (1975) 132 CLR 323 at 329–30 ; 6 ALR 171 , of the suggestion that, if a pedestrian were run over by two drivers consecutively and both were negligent, the injuries caused by the second driver would be damage for which both drivers were liable if those injuries were also the foreseeable consequence of the first driver's negligence.

novus actus interveniens

171 Consistently with the quoted observations of Mason CJ, in my opinion, the compromise of the action in the way it occurred was not a reasonably foreseeable consequence of Dunhill Madden’s breaches, nor was it, in the ordinary course of things, something likely to happen. But even if that were not so, in my opinion, advocate immunity prevents the Plaintiffs from relying on the compromise of the earlier proceedigns as a component of their damages. Consequently, in light of the findings I have made, I would exclude from the Plaintiffs’ damages an assessment of the value of their lost chance of success in the proceedings against Egan.

172 I have reached the conclusions earlier expressed as to liability and damages largely upon what I regard as incontrovertible facts based on contemporary documentation, including the transcript of proceedings before Dowd J. It has thus been unnecessary to evaluate the credibility of the witnesses whose evidence was significantly challenged, namely the Plaintiffs and Mr Klotz. In fairness to them, however, I think I should say that, in my opinion, they gave evidence honestly and did what they could to assist the court. However, it must be borne in mind that they were giving evidence as to events and conversations which occurred a long time ago, most or all of which would not, at the time, have appeared particularly significant. In those circumstances it would be surprising if there were not some degree of reconstruction.

173 It has also been unnecessary for me to assess the Plaintiffs’ prospects of success in the litigation against Egan. I observe, however, that it was intrinsically a very difficult piece of litigation which required extremely careful consideration, particularly on the issues of negligence and reliance. Only partly with the benefit of hindsight, I would have assessed its prospect of success at very much less that 50%. If I may say so, in my view, the sanguine terms of Mr Klotz’s letter of 7 April 1994 were quite unjustified by reality. Indeed, a large part of the closing submissions made by counsel for Dunhill Madden was devoted to establishing why the proceedings against Egan, which their own clients had advised, were doomed to fail. There was, I think considerable force in those submissions.

174 It seems to me that the loss which the Plaintiffs did suffer as a result of Dunhill Madden’s breaches of retainer and negligence may appropriately be related to the fees which were paid to the firm. In effect, the Plaintiffs were deprived of the benefit of a very large proportion of those fees.

175 According to Mr Symonds Statement as at 28 February 1996, the Plaintiffs had paid to Dunhill Madden the total sum of $171,148.79 and that evidence was not challenged. Of course not all the sum paid was wasted and indeed part related to the costs of Dunhill Madden acting in connection with the deeds of release. Moreover, even during the trial itself, the application to the Court of Appeal seeking the disqualification of Dowd J and for leave to appeal against his interlocutory rulings was not, I think, a foreseeable consequence of Dunhill Madden’s wrongful conduct but rather the product of decisions taken by counsel during the course of the trial.

176 There is of course no way of calculating the Plaintiffs‘ loss accurately using the basis I have suggested. Doing the best I can, on the evidence, I assess such loss at $140,000.

THE CLAIM FOR BREACH OF FIDUCIARY DUTY:

177 The nub of this claim is that Dunhill Madden sought from the Plaintiffs and received, in breach of fiduciary duty, substantial sums in excess of the amount of $85,000 referred to in the retainer agreement.

178 The retainer agreement, I think, makes it tolerably clear that prior to the conclusion of the proceedings Dunhill Madden was not entitled to require of the Plaintiffs that they pay more than $85,000. In my view, if the case had not been settled Dunhill Madden were obliged to continue acting for the plaintiffs until the action concluded without an entitlement to more than $85,000. Whether they then would have been required to absorb such items as counsels’ fees themselves if the action did not result in a substantial verdict in the Plaintiffs’ favour remains, I think, a moot question. It depends upon the proper interpretation of the somewhat ambiguous terms of the paragraphs under the heading “Billing Arrangements and Terms of Payment”. It is unnecessary for me to decide this question.

179 Whenever a solicitor negotiates the payment of fees with a client or potential client there is always scope for a conflict of interest to arise. A fortiori, where as in this case there is an existing agreement the terms of which the solicitors are seeking to alter.

180 The relationship between solicitor and client is undoubtedly a fiduciary one. A request or demand by Dunhill Madden for payment of monies in excess of those provided for by the retainer agreement involved a conflict of interest which, in my view, required Dunhill Madden to act in perfect good faith, to make a frank disclosure of their interests, and to advise the Plaintiffs to seek independent advice (See for instance Law Society of NSW v Harvey (1976) 2 NSWLR 154 and O’Reilly v Law Society of NSW (1988) 24 NSWLR 204).

181 There is no evidence in this case that Mr Klotz tendered to the Plaintiffs the advice which he was, in my view, obliged to give and, indeed, he admitted that such advice was not given.

182 If it had been necessary, I would have found a breach of Dunhill Madden’s fiduciary duty constituted by them calling upon the Plaintiffs to pay further sums of money, contrary to their contractual obligations, without full and frank disclosure and a recommendation that they seek independent advice. However, in light of the way I have approached the issue of damages, the question does not arise.

INTEREST:

183 There is, in my opinion, no reason why the Plaintiffs should not be entitled to interest upon their damages pursuant to s100 of the Civil Procedure Act. By the end of July 1994, the Plaintiffs had paid $70,000. By 28 February 1996, they had paid $171,148.79. I think it would be just to allow interest from 1 January 1995 on the amount of the assessed damages viz $140,000 at 10% p.a. Such interest to date amounts to $180,198.

184 Orders:

1. Verdict and judgment for the Plaintiffs against the Defendants in the sum of $320,198, inclusive of interest to date.

2. Defendants to pay Plaintiffs costs.

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Citations

Monica Frances Symonds and Gerald Symonds v Cedric Borsmann Vass and 24 Ors [2007] NSWSC 1436

Cases Citing This Decision

0

Cases Cited

12

Statutory Material Cited

2

Giannarelli v Wraith [1988] HCA 52

Pateman v Daw Koh [2007] WASCA 85

CITATION:	Monica Frances Symonds and Gerald Symonds v Cedric Borsmann Vass and 24 Ors [2007] NSWSC 1436
HEARING DATE(S):	4/12 07
JUDGMENT DATE :	12 December 2007
JUDGMENT OF:	Patten AJ at 1
DECISION:	See paragraph 21
LEGISLATION CITED:	Uniform Civil Procedure Rules Civil Procedure Act 2005
CASES CITED:	Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No2) (2006) 67 NSWLR 706; Ambulance Service of NSW v Worsley (No2) (2006) 67 NSWLR 719; Macquarie Radio Network Pty Ltd v Arthur Dent (No 2) [2007] NSWCA 339
PARTIES:	Monica Frances Symonds and Gerald Symonds - Plaintiffs Cedric Borsmann Vass and 24 Ors - Defendants
FILE NUMBER(S):	SC 20994 of 2001
COUNSEL:	Mr V Gray - Plaintiffs Mr T Faulkner - Defendants
SOLICITORS:	George Mallos - Plaintiffs Mallesons Stephen Jacques - Defendants

Purchase of 7 Wolseley Crescent	15.000.000
Stamp duty	810,000
Interest for 2 years @18%	5,691,600
Building 3 houses of 5,000 sq ft each @ $200 per ft	3,000,000
Professional fees @ 6 ⅔ %	200,000
Landscaping, pools and marina	300,000
Selling Agent @1% on $30m	300,000
Legal costs	50,000
25,671,600
Profit	4,328,400
Income of 3 houses @ $10m each	30,000,000
Security offered:
“1/56 Wolseley Road	4,500,000
2/39 Elizabeth Bay Road - let @ $450p.w. (23,400 p.a.)	300,000
4/39 Elizabeth Bay Road – let @ $450 p.w.	300,000
13/39 Elizabeth Bay Road Restaurant @ $60,000 p.a	600,000
5,700.000