Notaras v Hugh

[2003] NSWSC 182

CITATION:	Notaras & Anor v Hugh & Ors [2003] NSWSC 182
HEARING DATE(S):	17-20, 24-27 February 2003 3-6, 10, 11 & 13 March 2003
JUDGMENT DATE:	21 March 2003
JURISDICTION:	Common Law
JUDGMENT OF:	Sperling J at 1
DECISION:	See paragraph 2 of the judgment.
CATCHWORDS:	Evidence - admissibility of expert opinion evidence from a lawyer concerning breach of duty by a lawyer defendant
LEGISLATION CITED:	Evidence Act 1995, s56, s79, s80
CASES CITED:	Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (1996) 137 ALR 138 Boland v Yates Property Corporation Pty Ltd (1997) 145 ALR 169 Boland v Yates Property Corp Pty Ltd (1999) 74 ALJR 209 Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd (2001) 38 ACSR 404 MB v Protective Commissioner [2000] NSWSC 718 O'Brien v Gillespie (1996) 41 NSWLR 549 Yates Property Corp Pty Ltd (in liq) v Boland (1998) 85 FCR 84
PARTIES :	Irene Notaras Enijar Pty Ltd Robert Duncan Hugh, Justin Simon Adam, Robert Warwick Anderson, Michael John Astill, John Ashton Beardow, Jeremy James Bingham, Brian Harvey Davidson, Christopher Lee Davies, Sandra Katherine Dibella, Roger Andrew Fitzsimmons, Ronald William Forster, Andrew Dymock Forsyth, Ross Walter Forsyth, Terence Brian Grace, Robert Gordon Haines, Edward Lindsay Roux Houghton, Heather Patricia Irish, Stanley Simon Kalinko, Paul Joseph Larbalestier, Richard Geoffrey Lewis, Donald Gordon Mackay, Andrew John Tunmer Martin, Russell Victor Miller, Robert Keith Newton, Warwick Philip O'Rourke, Neal Findlay Shirras Parkinson, Mahla Liane Pearlman, Timothy George Peken, Warren James Pengilly, Martin Cassimer Przybylski, Graham Leonard Raffell, Michael Bernard Reymond, Barry Gordon Richardson, Peter Ronald Rigg, Paul William Robinson, Ross Edward Seller, Margaret Siddis, Ruth Lindsay Stringer, Mark Ferdinand Treffers, John Frederick Warburton, John Bede Weber, Jennifer Helen Wily, Ian Stuart Wylie & Michael Rodney Wynter t/a Sly & Weigall Solicitors (20217/98) Graeme Solomon Newman & Kosmas Psaltis t/a Newman Psaltis & Co (20212/98)
FILE NUMBER(S):	SC 20217/98; 20212/98
COUNSEL:	Mr R Evans with Mr J Whyte for the Plaintiffs Mr J Sackar QC with Mr R Hollo for the Defendants in 20217/98 Mr D Davies SC with Mr J Downing for the Defendants in 20212/98
SOLICITORS:	McKells Solicitors for the Plaintiffs Minter Ellison for the Defendants in 20217/98 Ebsworth & Ebsworth for the Defendants in 20212/98

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IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
Professional Negligence List

Sperling J

Friday, 21 March 2003

20217/98 Irene Notaras & Anor v Robert Hugh & Ors
20212/98 Irene Notaras & Anor v Graeme Newman & Anor

Judgment – On admissibility of Boyce evidence

1 His Honour: This witness’ evidence in chief was proffered in the form of an affidavit sworn on 27 February 2002.

2 A broad objection was taken to the affidavit on the basis that the kind of opinion evidence contained in it was inadmissible. Particular objections were notified in relation to certain paragraphs of the affidavit. I rejected the broad challenge to the affidavit. The more particular objections were then not pressed. What follows are my reasons for rejecting the broad challenge.

3 Mr Boyce’s qualifications are recorded in paragraphs 1-5 of the affidavit:

(1) I am a legal practitioner of the Supreme Court of New South Wales practising as a solicitor.
(2) I am also admitted to practice as a solicitor in the Australian Capital Territory and the State of Victoria. I hold a full practising certificate from the Law Institute of Victoria.
(3) I was first admitted to practice as a solicitor in New South Wales in February 1974. I was admitted to the partnership of Hunt & Hunt in 1977 and have remained a partner of that firm. I have conducted since the date of my admission a conveyancing and property law, mortgage, business and finance practice from the Sydney office of the firm.
(4) In 1976 I became a member of the Conveyancing Committee of the Law Society of New South Wales and remained a member of that Committee except for the years 1990-1992 until December 1997. I am a past Chairman of the Committee.
(5) I am a current member of the Advisory Committee on Property Law Accreditation to the Specialist Accreditation Board of the Law Society of New South Wales. I am accredited by the Specialist Accreditation Board of the Law Society of New South Wales as a specialist in the practice of Property Law.

4 Mr Boyce was retained by the defendants, Mr Newman and Mr Psaltis, in proceedings 20212/98. His affidavit evidence relates to their conduct as solicitors acting for the present plaintiffs.

5 Mr Boyce was briefed with a set of documents, a statement of claim, amended statement of claim and defence to the amended statement of claim, all filed in proceedings 20212/98; statements dated 5 April 2001 and 31 May 2001 by Ms Notaras and an affidavit by Mr Newman sworn 27 September 2001, all of which are in evidence in the present proceedings; together with a bundle of documents said to be a copy of Newman Psaltis’ original file, titled “Refinance of 397-403 Bourke St, Darlinghurst, and 17 Oxford St, Paddington”. The bundle of documents was not produced but no point was taken in that regard. I infer that it was common ground that Mr Boyce had the relevant documents.

6 Under the heading in his affidavit, “Standard to be applied”, Mr Boyce provided what was, in effect, a working definition of the phrase “the conduct of a competent solicitor” as that phrase was to be used subsequently in his affidavit. The following are the relevant paragraphs from the affidavit in that regard:

(8) In giving this opinion I have been asked to state what was in my opinion good practice of solicitors practising in the State of New South Wales and to state what was common practice among solicitors of good repute in the State of New South Wales in 1992.
(9) My experience has given me knowledge both of good practice throughout the legal profession in the State of New South Wales and common practice among solicitors of good repute in the State at the relevant time. To avoid unwieldiness in this statement I use the expression “the conduct of a competent solicitor” to describe conduct which was in my opinion both good practice throughout the legal profession in the State of New South Wales and conduct which was in my opinion common practice among solicitors of good repute in the State in 1992, in the circumstances facing the First Defendant.

7 I took that to mean that, where Mr Boyce subsequently referred to “the conduct of a competent solicitor”, he intended his opinion, in each instance, to be an opinion in relation to both limbs of his working definition.

8 An ultimate issue for the court is whether there was breach of duty by the defendants. The content of the duty is a question of law. It can be shortly stated, for the present purpose, as an obligation to do no less than the minimum which a solicitor of ordinary skill and competence practicing in the relevant field would have done, acting reasonably, and not to do what the hypothetical solicitor, acting reasonably, would have avoided doing, having regard to the interests of the client. Whether there was breach of that duty is a question of fact. In a jury trial, that is how the province of judge and jury respectively would be assigned.

9 Statements of the duty owed by a solicitor to a client in more particular terms relative to the facts of the case tend, to my mind, to confuse duty with breach of duty. Questions of breach then become subject to considerations applicable to duty such as the special role of the judge as the arbiter of the law for the purposes of the trial.

10 True it is that a judge is better equipped to decide unaided whether there has been breach of duty by a lawyer than whether there has been breach of duty by other professionals. And some judges may, by learning and experience, be as well equipped as any expert witness, depending on the field of practice. The better equipped by learning and experience the judge may be to make the decision unaided, the greater the reluctance to be concerned with expert evidence offered in aid of the process. But it is important to bear in mind that this has nothing to do with a judge’s special role in relation to matters of law, as distinct from the practice of lawyers, which involves questions of fact.

11 In propounding the dual definition of “the conduct of a competent solicitor”, for the purpose of his affidavit, I took Mr Boyce to mean by “good practice throughout the legal profession in the State of New South Wales” the legal standard referred to above, set by reference to what a solicitor of ordinary skill and competence practicing in the relevant field would have done or not done, exercising reasonable care.

12 The second limb of the definition, “conduct which was in my opinion common practice among solicitors of good repute in the State in 1992” is (as it states) a standard set by practice, that is, by reference to what was and was not done by solicitors generally in the practice of their profession. Practice is not the legal test for breach of duty, but it is a consideration relevant to breach of duty.

13 So, in each of the instances reviewed by Mr Boyce, he gives his opinion, at one and the same time, on whether the defendants’ conduct, conformed with the common practice of solicitors in the circumstances of the case (which is relevant to breach of duty) and on the ultimate issue of whether the defendants’ conduct was in breach of duty.

14 Having defined his terminology, which includes the legal standard, that is, the content of the duty owed by a solicitor to the client, Mr Boyce’s affidavit is all about whether there was breach of that duty, an ultimate question of fact for determination by the court.

15 Mr Boyce then gave a summary of events which he assumed to be the fact for the purpose of providing his opinion. There was no challenge to Mr Boyce’s summary as a materially accurate and materially complete account of the facts relevant to the case against Newman Psaltis.

16 An important aspect of the facts assumed by Mr Boyce is his understanding of the instructions received by Mr Newman when initially retained in relation to the plaintiffs’ dealings with the State Bank, on or about 5 March 1992. His assumption concerning those instructions is taken from paragraph 29 of Ms Notaras’ statement of 5 April 2001, as follows: “to refinance the bank loan and prevent the bank from moving on the properties whilst these negotiations were proceeding”.

17 Mr Boyce gave his opinion as to what “the competent solicitor” would have done in the circumstances of the case. The following is a summary of paragraphs 29-34 of the affidavit.

(a) Obtain relevant documents and determined the role and status of the receivers, Ferrier Hodgson.

(b) Ascertain the attitude of the Bank generally to any proposal that might be made.

(c) Advise the client to instruct an accountant to audit the bank statements in relation to interest and bank charges. Determine whether those entries were in accordance with the loan documents. Advise the client that a detailed and verified response to the Bank was necessary.

(d) Write to the Bank as Mr Newman did on 12 March 1992 [Ex D, 2/146].

(e) Advise the client that the letter of 16 March 1992 from Reinvest Pty Ltd [Ex D, 2/108; in fact, dated 14 March 1992 but faxed on 16 March 1992] was not an approval likely to persuade the Bank to withhold action for the reasons given by Mr Strasser at the conference with him on 19 March 1992.

(f) Advise the client that, regardless of errors concerning interest and depending on the terms of the loan agreement and mortgage, the Bank might be entitled to proceed to sale if the principal debt was not paid.

(g) Advise the client that, in view of the Bank’s response on 12 September 1992, it was essential to obtain refinance to pay out the Bank.

(h) Having briefed counsel to advise concerning any application for an injunction, counsel and Mr Newman having given such advice and the client having accepted that advice, no more was required in that regard other than confirming the advice in writing.

18 Mr Boyce offered no opinion in relation to the defendants’ conduct under what he referred to as “the second retainer”, that is, to act for the plaintiffs in the subsequent litigation in which Ms Notaras was sued by the Bank for a shortfall in the debt after the sale of the Oxford St and Bourke St properties. He said he was not qualified to do so, presumably because he does not practice in litigation.

19 Absent authority, I would have thought that this evidence was plainly admissible as relevant opinion evidence pursuant to ss56 and 79 of the Evidence Act 1995. By reason of s80, it is no longer an objection to such evidence insofar as it goes to an ultimate issue for determination by the court.

20 Of the relevant decisions decided after introduction of the Evidence Act 1995, I refer, first, to the decision of Lindgren J, ruling on the admissibility of expert evidence concerning foreign law, in Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (1996) 137 ALR 138.

21 Evidence was offered by an American lawyer concerning the content of American law relevant to the matter in hand. The lawyer’s statement went on to offer an opinion that certain persons were liable under the United States statute to certain other persons in the circumstances that had occurred. That part of the evidence was ruled to be inadmissible. That was, in his Honour’s view, because it was “expert legal opinion which impinges upon the essential curial function of applying law, whether domestic or foreign, to the facts”. Section 80 did not, in his Honour’s view, make evidence admissible which was inadmissible on that ground.

22 The evidence in question in Allstate was an opinion concerning a question of legal liability to be resolved by the application of the foreign law, as proved by expert evidence, to the facts of the case. As to that, Lindgren J said, at 142:

It is fundamental that the ascertainment of the law relevant to a matter before a court and its proper application to the facts of the particular case are of the essence of the judicial function and duty. Although those processes are properly the subject of submission, evidence of opinion, whether as to the identification of the relevant law or as to its proper application, is not admissible. The rationale underlying this fundamental principle may be expressed in various closely related ways: to admit such evidence would be to permit abdication of the judicial duty and usurpation of the judicial function; such evidence cannot be allowed to be probative or to rise higher than a submission; such evidence is necessarily irrelevant. [Emphasis in original]

His Honour went on to say that, notwithstanding that foreign law was to be proved as a fact, foreign law was to be applied by the court in the same way as domestic law.

23 I have no difficulty with this approach. It is of the essence of the curial process that the court decides what the law is and also decides any question as to rights and liabilities by applying the law to the facts as found. The court receives submissions to assist it in that regard. It would be anathema to the role and function of the courts to receive opinion evidence from lawyers as to how a question as to rights and liabilities should be decided by the application of the law to the facts, and to be influenced by such evidence. Such evidence is, therefore, not relevant and should not be admitted.

24 That situation is, however, to be distinguished from the present case, where the opinion offered is not as to rights or liabilities arising at law, but as to whether there has been breach of an assumed duty of conduct imposed by law.

25 In O’Brien v Gillespie (1996) 41 NSWLR 549, Levine J rejected the evidence of a solicitor as to whether there existed a retainer of the relevant defendants, who were also solicitors, and, secondly, the existence of a duty of care owed by them. His Honour rejected the evidence for the reasons stated by Lindgren J in Allstate and as also stated other cases, decided before commencement of the Evidence Act 1995, to which I have not found necessary to refer.

26 This decision may be distinguished from the present case. In O'Brien, the opinion offered by the witness was, in essence, whether the defendants owed a duty of care to the plaintiffs, a question which may fairly be categorised as one of law. In the present case, the relevant question being whether there was a breach of duty by the defendants, the matter in question is one of fact.

27 In Boland v Yates Property Corporation Pty Ltd (1997) 145 ALR 169, the plaintiff sued its solicitor and counsel who had acted for the plaintiff in litigation. At first instance, Branson J found for the defendants. That decision was reversed by the Full Court of the Federal Court. The High Court reversed that decision, reinstating the determination by Branson J.

28 At the trial, opinion evidence was led by both sides concerning the conduct of the defendants, without objection. A question arose, on appeal, concerning the way Branson J had used that evidence. The following is an extract from her judgment (at 198):

In the circumstance that no expert has expressed a view which I regard as plainly out of line with the established authorities, I have considered it appropriate to place reliance principally on the expert evidence in considering the issue of whether the conduct of the respondents in failing to advise of the existence of, or to propound or cause to be propounded on behalf of [Yates] before the Land and Environment Court, a head start claim, conformed to the standard of reasonable care demanded by the law, of competent legal representatives in their respective positions.
Having regard principally to the expert evidence, but attaching weight also to my own reading of the authorities, I have formed the view that no negligence has been established against any respondent in connection with the alleged head start claim of [Yates].

29 In the Full Court of the Federal Court, the line of authority referred to by Lindgren J and Levine J was cited. The following is an extract from the judgment of the Court (Yates Property Corp Pty Ltd (in liq) v Boland (1998) 85 FCR 84 at 111):

If by reason of s80 of the Evidence Act such evidence is tendered then the only appropriate use to which the evidence should be put is to confirm the views of the Court on a particular issue rather than to inform those views.

As indicated above, that is not what Branson J had done. In the High Court, Gleeson CJ quoted a passage from Branson J’s judgment which included the passage I have quoted. He continued as follows ( Boland v Yates Property Corp Pty Ltd (1999) 74 ALJR 209 at [51]):

In summary, Branson J, having regard to her own understanding of the authorities on the relevant valuation issues, and the evidence before her, including the evidence of Mr Simos and Mr Davison, came to the view that the approach taken by the legal representatives of Yates in their presentation of the special value claim was orthodox, that it was not unreasonable of the legal representatives of Yates to have presented their case as they did, that it was not unreasonable of them to have called the valuation evidence that was called, that the proper performance of their professional duty did not require them to attempt to argue a “head start” claim of the kind for which Yates was now contending, and, that such a claim had the potential to undermine other aspects of Yates' case.

30 Gleeson CJ offered no criticism of the way in which Branson J had used the evidence. One would also have thought that, if receiving expert evidence from lawyers concerning breach of duty by lawyer defendants was anathema to the curial process, the members of the High Court who decided this case would have taken the opportunity to say so. None did.

31 In MB v Protective Commissioner [2000] NSWSC 718, a decision by Hodgson CJ in Eq at first instance, evidence was tendered from an investment consultant and trustee advisor, consisting of opinions as to what a prudent and competent trustee would do in certain circumstances. His Honour admitted the evidence. His reasons were as follows.

32 His Honour referred to O’Brien (supra) and another earlier case. His Honour said:

[4] In my opinion, it is clear that a qualified person can give evidence of general practices of professionals, that is, evidence of what professionals generally do in specified circumstances. It is less clear that a qualified person can give evidence of the general practice of competent and careful professionals in specified circumstances; but my opinion is that evidence of that nature can be given. Plainly, the evidence must not be evidence of a legal standard, and on that matter I agree with the decision in O’Brien ; but if evidence of that general type is taken simply as an opinion as to what in fact a competent and careful professional could be expected to do, this leaves it open to the court, firstly, to decide whether or not to accept that evidence and, secondly, to decide what legal standard should be applied.
[5] Both those cases that I have referred to are cases of evidence of what is in fact done as matters of practice. Those cases must deal with regularly occurring circumstances, so that there can be a general practice as to what professionals actually do in those circumstances. However, the position is less clear again when the evidence tendered concerns not regularly occurring circumstances as to which there is a general practice, but rather, specific hypothetical circumstances in relation to which an opinion is expressed as to what a careful and competent professional would do.
[6] In relation to that kind of evidence, there are a number of problems that could arise.
[7] Firstly, as before, there is the problem of separating out the legal standard, which is a matter for the court, from the question which might be regarded as one of fact, namely what a competent and careful professional could be expected to do. However, in my opinion, that problem is not insuperable or fatal to the admissibility of the evidence.
[8] Secondly, there may be a problem of lack of clarity as to the circumstances being addressed. If hypothetical circumstances are fully stated by the professional in the opinion, then it will be reasonably clear to what circumstances the opinion applies. However, if the witness merely says that, in the circumstances faced by the person whose conduct is in issue, a careful and competent professional would act in a certain way, there is the problem that those circumstances may be determined by the court differently from the circumstances which the witness had in mind. For that reason at least, I think evidence in that form should normally be rejected. Even if it were technically admissible it would, in my opinion, be unfair to give the other party the task of teasing out all the circumstances that the witness had in mind, so that rejection under section 135 of the Evidence Act would be justified.
[9] The third problem with this sort of evidence is that there can be a real question as to the qualification of the witness. In many cases, just the ordinary training and experience of a professional in the field would not be sufficient to justify admission of that person’s opinion as to what a competent and careful professional would do in hypothetical circumstances. For that kind of opinion, I think one needs some additional and special qualification. In that respect also, I agree with what was said in O’Brien .
[10] In those views that I have expressed, there may be some residual disagreement with what was said in O’Brien . Certainly I would not exclude the evidence on the ground that it is part of the ultimate issue to be decided by the court; and I do remain of the view that, so long as the evidence is not directed at the legal standard to be applied, so long as it is based on fully stated hypothetical facts, and so long as the witness is properly qualified, then an opinion can be given as to what a competent and careful professional would do in those stated hypothetical circumstances.
[Emphasis in original]

33 The same approach was taken by Bryson J in Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd (2001) 38 ACSR 404. His Honour said at [378] – [381];

[378] Maronis called the expert evidence of Mr West, a solicitor of considerable commercial experience. Counsel for Clayton Utz submitted that no weight should be given to Mr West’s evidence because it was not evidence of the existence of any relevant practices. In his report of 25 November, 1998 under “Scope of this opinion” Mr West stated that he had been asked to report as to
“(a) What the common practice of solicitors was at the relevant times...and
(b) what a reasonably prudent solicitor would have done in the relevant circumstances.”
[379] The report does not deal with what the common practice of solicitors was by establishing any instances of relevant practices. In paragraph 10 the report states Mr West’s opinion about a number of matters which a reasonably prudent solicitor would know and at paragraph 14 gives an opinion about the conduct of a reasonably prudent solicitor. The report goes on to speak at a number of points in terms of giving Mr West’s opinion about what the conduct of a reasonably prudent solicitor would be in relation to a number of matters.
[380] It is well established that evidence of the existence of relevant practices among solicitors of good repute is admissible and can be established by expert knowledge, but that the expert’s evidence of what he himself would have done is not admissible. See Permanent Trustee v. Boulton (1994) 33 NSWLR 735 at 738 (Young J), and his Honour’s reference as Young AJA, to Permanent Trustee Australia v Boulton and other authorities in the Court of Appeal in MacIndoe & Anor v. Parbery (1994) Aust Torts Reports 61,534 at 61,543. Priestley JA concurred in these reasons: see 61,535. In my view this does not exhaust the scope of expert evidence which may be given about solicitors’ practice; Young AJA did not express the view that the means that were referred to were exhaustive. In MB v. Protective Commissioner [2000] NSWSC 718, in a ruling on the admissibility of evidence, Hodgson CJ in Eq referred to his Honour’s holding in Rabelais Pty Limited v Cameron (8 February 1993 unreported), that evidence could be admitted of opinion as to what a reasonably careful and competent solicitor would or should do in specified circumstances. His Honour referred to Permanent Trustee Australia Limited v. Boulton and to O’Brien v. Gillespie (1996) 41 NSWLR 549 but adhered to his earlier view. In paragraph 4 to 10 his Honour reviewed the forms of evidence which might be offered, but concluded at paragraph 10:
“...I do remain of the view that, so long as the evidence is not directed at the legal standard to be applied, so long as it is based on fully stated hypothetical facts, and so long as the witness is properly qualified, then an opinion can be given as to what a competent and careful professional would do in those stated hypothetical circumstances.”
[381] I admitted the significant passages in Mr West’s evidence over objection because I am of the same view as Hodgson CJ in Eq. The exception to the hearsay rule stated in s 79 of the Evidence Act, 1995 indicates the limited circumstances in which expert evidence is admissible; but if those circumstances are made out, there is in my opinion no reason why specialised knowledge based on the witness’s training study or experience should not equip the witness to have a view about what a competent and careful professional person would do in stated hypothetical circumstances. An expert witness is not in a position to present as an expert view a conclusion which involves the application of the legal standard or test. I understand that in O’Brien v. Gillespie (1996) 41 NSWLR 549 at 557-558 Levine J acted on the view that s.80 of the Evidence Act did not authorise admissibility of expert evidence about the application of legal tests; I am of the same view. Mr West did not speak in such terms. I admitted the evidence because I was of the view that Mr West was shown to have specialised knowledge based on training and experience about the subjects to which his opinions related. However the evidence when admitted remains subject to my consideration of its weight, and the absence of proof of practical instances where solicitors have conducted business in a way which contributed to the basis of Mr West’s opinion is a factor in appraising its weight.

34 The authorities confirmed rather than detracted from what I would have regarded as the effect of the relevant provisions of the Evidence Act 1995, as stated earlier in this judgment, with the result that there was no basis for the general objection to Mr Boyce’s evidence in the present case by reason of the nature of that evidence.

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Last Modified: 03/27/2003