Shann v Talbot and Olivier
[2003] WADC 198
•12 SEPTEMBER 2003
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: SHANN & ANOR -v- TALBOT & OLIVIER [2003] WADC 198
CORAM: DEANE DCJ
HEARD: 21-24 JANUARY 2002 & 5-6 JUNE 2002
DELIVERED : 12 SEPTEMBER 2003
FILE NO/S: CIV 4074 of 1999
BETWEEN: IAN DAVID SHANN
First Plaintiff
DEBORAH JANE COWLING
Second PlaintiffAND
TALBOT & OLIVIER
Defendant
Catchwords:
Fiduciary duty solicitor/client relationship - Allegation of undue influence against first and second plaintiffs by third parties - First and second plaintiffs seek legal advice from defendant - Nature of retainer - Whether breach of fiduciary duty raised on instructions - Whether defendant negligent - Whether first and second plaintiffs relied and acted on advice given to their detriment - Nature and extent of damages claimed by first and second plaintiffs - Counterclaim by defendant - Turns on own facts
Legislation:
Nil
Result:
Defendant failed to exercise reasonable skill and care in acting for and advising first and second plaintiffs
Defendant's counterclaim dismissed
Damages assessed
Representation:
Counsel:
First Plaintiff : Mr P G Clifford
Second Plaintiff : Mr P G Clifford
Defendant: Mr J A Chaney SC
Solicitors:
First Plaintiff : Paiker & Overmeire
Second Plaintiff : Paiker & Overmeire
Defendant: Freehills
Case(s) referred to in judgment(s):
Carradine Properties Ltd v DJ Freeman & Co (a firm) (1999) L1 Rep PN 483
Chappel v Hart (1998) 195 CLR 232
Clare v Joseph [1907] 2 KB 369
Craig v Troy (1997) 16 WAR 96
Delta Corporation Ltd v Davey [2002] WASCA 125
Heydon v NRMA Ltd (2000) 51 NSWLR 1
Law Society of New South Wales v Harvey [1976] 2 NSWLR 154
Maguire & Tansey v Makaronis (1997) 188 CLR 449
Midland Bank Trust Co Ltd v Hett, Stubbs and Kemp [1979] Ch 384
Norwest Refrigeration Services Pty Ltd v Bain Dawes (WA) Pty Ltd (1984) 157 CLR 149
O'Reilly v Law Society of New South Wales (1988) 24 NSWLR 204
Pegrum v Fatharly (1996) 14 WAR 92
Poseidon Ltd & Sellars v Adelaide Petroleum (1994) 179 CLR 332
Solicitor, Re a [1975] QB 475
Spector v Ageda [1973] Ch 30
Wakim v McNally [2002] FCAFC 208
Willis v Barron [1902] AC 271
Wood v Apple Introductions (Brisbane) Pty Ltd (in liq) (1990) ANZ ConvR 518
Wright v Carter [1903] 1 Ch 27
Case(s) also cited:
Astley v Austrust Ltd (1999) 197 CLR 1
Bank of Credit and Commerce v Abooby (1989) 2 WLR 729
Bowlay Logging Ltd v Domtar Ltd (1978) 87 DLR (3d)
Bristol and West Building Society v Mothew [1998] Ch 1
CCC Films (London) Ltd v Intact Quadrant Films Ltd [1985] 1 QB 16
Commercial Union Assurance Co of Aust Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64
Dawson, Re: Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211
Emanuele v Hedley & Ors, unreported; Fed Ct of Australia; Library No BC9802580; 19 June 1998
Fink v Fink (1946) 74 CLR 127
Fortune v Bevan [2001] QCA 378
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Gore v Montague Mining Pty Ltd [2001] ANZ ConvR 8
Heytesbury Pty Ltd v Kelly, unreported; SCt of WA; Library No 970161; 15 April 1997
JLW (Vic) Pty Ltd v Tsiloglou (1993) ATPR 41-257
Johnson v Perez (1988) 166 CLR 351
Jones v Dunkel & Anor (1959) 101 CLR 298
L Albert & Sons v Armstrong Rubber Company (1948) 178 F2DR 182
March v E & MH Stramare Pty Ltd (1991) 171 CLR 506
Meadows v Ferguson [1961] VR 594
Medlin v State Government Insurance Commission (1995) 182 CLR 1
National Westminster Bank v Morgan Plc [1985] AC 626
Nationwide v Balmer Radmore [1999] Lloyds Law Reports 241
Permanent Building Society (in liq) v Wheeler & Ors (1994) 14 ACSR 109
Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10
PMD Australia Ltd v MMI General Insurance Ltd & Ors [2001] QSC 288
Purkess v Crittenden (1965) 114 CLR 164
RAI Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) ATPR 41-225
Ridehalgh v Horsefield & Ors [1994] Ch 205
Salford Corporation v Lever [1891] 1 QB 168
Smith's Newspapers Ltd v Becker (1932) 47 CLR 279
State Bank of NSW v Brown [2001] NSWCA 223
State Rail Authority of New South Wales v Wiegold (1991) 25 NSWLR 500
Ted Brown Quarries Pty Ltd v General Quarries (Gilston) Pty Ltd (1977) 16 ALR 23
Trust Co of Australia v Perpetual Trustees WA (1997) 42 NSWLR 237
Unioil International Pty Ltd & Ors v Deloitte Touche Tohmatsu & Ors, unreported; Sct of WA; Library No 970352; 18 July 1997
Watts v Rake (1960) 108 CLR 158
Yager v Fishman & Co and Teff & Teff (1994) All ER 552
DEANE DCJ: In this action both liability and quantum of damages are in dispute. Before moving to a consideration of the issues raised on the pleadings and the evidence before the court it is necessary to make some brief comments about the parties and certain material by way of background. The first plaintiff Mr Shann is a solicitor and the second plaintiff Ms Cowling is now his wife. Mr Shann gave evidence in these proceedings in effect both on his own behalf and that of Ms Cowling. Therefore when reference is made to the situation and evidence of the plaintiffs it will be on this basis. At all relevant times the defendant was a firm carrying on business as solicitors and it was in this capacity that Mr Staude, a partner in the defendant firm at the material time, gave evidence. When Mr Shann consulted the defendant it was Mr Staude with whom he dealt.
As from 1 January 1992 the plaintiffs took a 20 year lease on a property at Ubud in Bali Indonesia with a option for a further extended lease of 10 years. Whilst it is unnecessary to go into detail, the evidence suggested that non‑Indonesian residents are not permitted to own property in fee simple in that country, but rather any interest they can have in property is usually by an arrangement analogous to a lease or mortgage with a lease back arrangement. In May 1992 the plaintiffs left Indonesia and returned to Western Australia to live. At that time Mr Shann was practicing as a solicitor and was a partner with the firm Disspain Hughes. He was dealing with two particular clients of that firm, a Mr Wiltshire and a Ms Rowland who was apparently in a relationship with Mr Wiltshire. Mr Shann as Mr Wiltshire's solicitor was advising him relevant to the setting up of a wine sales venture in Bali. Mr Wiltshire had been referred to Mr Shann by Mr Dudley Rowland, the father of Mr Wiltshire's partner. At about this time Mr Shann also provided some advice to Ms Rowland regarding a matrimonial matter, although Mr Shann's recollection was that his dealings with Ms Rowland in relation to that matter were on a some-what informal basis and he did not recall charging her for his advice.
In the course of their professional relationship and after seeing photographs of the property in Ubud at Mr Shann's office, Mr Wiltshire indicated to Mr Shann that he was interested in acquiring from the plaintiffs their rights with respect to the property lease hold in Bali. The property had a house erected on it and in numerous copies of correspondence that were tendered in evidence during the course of trial, the property was sometimes referred to as the "Penestanan" property. The material surrounding this aspect of the matter will be referred to in greater detail in an examination of Mr Shann's evidence, but the evidence revealed that it was eventually agreed that Mr Wiltshire and Ms Rowland would acquire those rights by way of an assignment of lease from the plaintiffs for the purchase price of US $90,000 or Aus $134,000 in cash.
The plaintiffs' case was that Mr Shann made it clear to Mr Wiltshire and Ms Rowland that he was not acting for them as their solicitor in relation to the assignment of lease transaction, although he was at all times acting on behalf of both himself and Ms Cowling relevant to it. However, at Mr Wiltshire's request Mr Shann drafted an assignment of lease document and declaration with respect to the acquisition of property rights and the use that could be made of the property by non-residents. He was not paid by Mr Wiltshire or Ms Rowland for undertaking this task and said he either advised or suggested to Mr Wiltshire that he obtain independent legal advice as to the transaction. It was the plaintiffs' case that Mr Shann offered this advice or suggestion out of prudence, rather than because he knew or had a concern that in the particular context he owed a fiduciary duty to Mr Wiltshire and Ms Rowland. To the contrary it was the plaintiffs' case that it was not until a considerable time later that Mr Shann became aware that a solicitor in fact owes a fiduciary duty to a client.
At the time of the completion of the transaction with Mr Wiltshire and Ms Rowland, the plaintiffs' property in Bali was in fact leased by them for a two year period from 26 August 1992. The monthly rental was agreed at US $1,050 with the Bali International School (BIS) which had installed their headmaster, Dr Van Kampen, as a tenant in the property. Difficulties arose as between BIS and Dr Van Kampen regarding his employment contract which BIS terminated in March 1993. Dr Van Kampen refused to vacate the premises which caused some difficulties for the plaintiffs. Exhibit P2 is the lease agreement between the plaintiffs and BIS.
Although Mr Shann had travelled to Bali in early September 1993 and removed Dr Van Kampen's goods and his servants from the property in his absence, once Mr Wiltshire and Ms Rowland moved into the property on 12 September 1993, Dr Van Kampen appeared and demanded that he be permitted to retake possession of the premises. When this was refused he left, but installed two of his servants in the house along with those of Mr Wiltshire and Ms Rowland.
As a result of their dissatisfaction with the situation in which they found themselves Mr Wiltshire and Ms Rowland caused their solicitors Sly & Weigall to write a letter dated 3 November 1993, Exhibit P8, to the plaintiffs alleging inter alia that Mr Shann had exerted undue influence upon them relevant to the assignment of the lease of the premises, which was said to have arisen out of Mr Shann's solicitor/client relationship with Mr Wiltshire and Ms Rowland.
It was at this point that Mr Staude became involved because Mr Shann sought legal advice from Talbot & Olivier stemming from the concern he had on receipt of that letter. This consultation was on 5 November 1993. Counsel for the plaintiffs stressed that it was critical to their case that at no time between the initial meeting of 5 November 1993 to approximately September 1994, was advice given to the plaintiffs to the effect that they were at risk with respect to allegations of undue influence and/or breach of fiduciary duty claims. It was the plaintiffs' case that the first occasion upon which these matters were mentioned and Mr Shann was further advised that a claim by Mr Wiltshire and Ms Rowland was likely to succeed, was in a conference with senior counsel Mr Buss QC on 28 July 1994, after he had been retained to advise the plaintiffs. A writ had been issued against them by Mr Wiltshire and Ms Rowland on 11 July 1994.
In simple terms the plaintiffs claim that if they had been advised of the risk of a claim against them by Mr Wiltshire and Ms Rowland in the circumstances, or even the probability of such a claim succeeding against them, they would have pursued a very different course of action from that which they did. The plaintiffs claim that in the light of this omission or failure by Mr Staude they pursued a course of action of defending the allegations of Mr Wiltshire and Ms Rowland and further to the best of the plaintiffs ability they attempted to assist Mr Wiltshire and Ms Rowland to perfect their interest in the Bali property by a number of means, including negotiations with various persons in Indonesia and attempts to evict Dr Van Kampen. It is these actions which involved incurring expense and loss, that are in part the subject of the damages claimed by the plaintiffs in this action. In 1998 the plaintiffs regained the property from Mr Wiltshire and Ms Rowland for payment of Aus $160,000 by way of an express deed of settlement. The sum of Aus $135,000 which in essence was repayment of the purchase price by the plaintiffs, is not claimed as part of their damages but the sum of Aus $25,000 being Sly & Weigall's legal costs with a modest additional amount by way of stamp duty, is claimed as part of the damages. Some further associated costs by way of legal advice from various counsel are also claimed.
It is common ground that the relationship between a solicitor and a client is fiduciary in nature and there is a duty imposed upon the solicitor to look after the client's interests, even at the expense of the interest of the solicitor himself or herself. This reflects the important policy consideration that the relationship is one of trust, faith and confidence. The plaintiffs accept that Mr Shann did engage in a business transaction with a client or clients, although not one in which Mr Shann accepts that he was advising them in the capacity as a solicitor. Nonetheless it is accepted Mr Shann had a duty or it was incumbent upon him to act in the best interests of Mr Wiltshire and Ms Rowland at all times.
An examination of the evidence, which came in the form of sworn testimony by Mr Shann on behalf of the plaintiffs and Mr Staude on behalf of the defendant, as well as numerous documentary exhibits tendered in the course of the trial, reveals that there is considerable conflict as to the precise nature and extent of the instructions that were given by Mr Shann to Mr Staude on behalf of himself and Ms Cowling. It is the plaintiffs' case that those instructions were detailed with respect to all material facts, including the contents of Sly & Weigall's letter of 3 November 1993. As a result it is submitted that there was an obligation imposed upon the defendant to advise the plaintiffs, as any reasonably prudent or competent solicitor would or should have done, with respect to the risk the plaintiffs were at in the light of the alleged breach of fiduciary duty which allegation the plaintiffs say was clearly contained in Sly & Weigall's first letter to the plaintiffs.
For a number of reasons the plaintiffs contend that the claim for damages is not confined to the period November 1993 to July 1994. Once again it is not necessary to go into excessive detail but the thrust of Mr Shann's evidence in part was that property rights in Bali, being a specific reference to Ubud in the Ginyar province, are enforced through the local Balinese police. In certain circumstances if those persons take the view that the relevant paperwork demonstrates that an individual, for example Dr Van Kampen, is entitled to occupy particular premises then the police or local officials will not undertake or attempt to remove the person from the property in question. For a variety of reasons, which Mr Shann referred to in his evidence, the plaintiffs encountered considerable and protracted difficulties in not only regaining the lease hold of the property in Ubud, but also in evicting Dr Van Kampen from it. These difficulties it is said resulted in further expenses being incurred by the plaintiffs beyond July 1994, which is reflected in the damages claimed, including a significant claim for loss of rental relevant to the house at Ubud. Mr Shann on behalf of the plaintiffs contended that had he known earlier, being in November 1993 or shortly thereafter, of the significant risk of losing any action based on an allegation of breach of fiduciary duty or undue influence claim against the plaintiffs, he would have moved with far more haste than he did in order to settle the claim made by Mr Wiltshire and Ms Rowland, so that the plaintiffs could regain the rights to the property in Bali with the view to evicting Dr Van Kampen and either re-renting it or re-selling the leasehold rights to another party.
The defendant's position is in effect that in all of the circumstances Mr Shann on behalf of the plaintiffs knew and assumed the risk of losing the claim by Mr Wiltshire and Ms Rowland based on the fiduciary duty they alleged was owed to them by Mr Shann. The defendant submits whatever may have been said at the conference attended by Mr Shann and Mr Staude with Mr Buss QC on 28 July 1994, it would not have altered the sequence of events which followed in any significant way so as to lead to the plaintiffs suffering loss and damage. Even if one were to arrive at the point of assessing damages the defendant argues that there is a distinct probability when one examines the history of the matter as it unfolded in evidence, that Dr Van Kampen would have proved extremely difficult to remove or evict from the property in Ubud, whether or not the plaintiffs commenced efforts to do so as distinct from those undertaken on behalf of Mr Wiltshire and Ms Rowland in November 1993.
They suggest that on the evidence it simply cannot be said that anything done in late 1993 or even early 1994, would have produced a more successful result than that which eventuated in 1998 when the plaintiffs finally settled the matter as to occupancy of the property with Dr Van Kampen and he vacated it. In that sense it is put that at best the plaintiffs lost a chance to attempt to remove Dr Van Kampen earlier than they eventually did, which may have resulted in for example a loss of chance of re-selling the lease to the property or re-renting it earlier to a paying tenant, but such loss, even if it occurred, the defendant says cannot be assessed as there is no evidence as to it.
Whilst the defendant admits that Sly & Weigall wrote a letter to the plaintiffs of 3 November 1993 on behalf of Mr Wiltshire and Ms Rowland, they deny that the plaintiffs sought advice on the issue of undue influence presumed from the solicitor/client relationship which subsisted between Mr Shann and Mr Wiltshire at the time. Further it is said that this was never an issue in the matter nor was it an issue in respect of which the defendants advice was sought. As a result there is considerable conflict as to the nature of the retainer by the plaintiffs to the defendant and also as to the nature of the instructions issued by the plaintiffs to Mr Staude, in particular at the initial meeting of 5 November 1993 and at a further consultation on 11 November 1993. The details of that conflict will emerge when the respective evidence of Mr Shann and Mr Staude is examined. Relevant to the allegation of undue influence the defendant denies that Mr Staude ever advised the plaintiffs that it was of no substance. The defendant admits that through Mr Staude it did not advise the plaintiffs of the existence of the fiduciary relationship and consequent presumption of undue influence between Mr Shann and Mr Wiltshire and Ms Rowland, nor did it advise as to the weakness of the plaintiffs' case against the allegations of Mr Wiltshire and Ms Rowland prior to obtaining the advice of Mr Buss QC. Further the defendant says that it was never requested to advise in relation to such matters nor was it necessary to do so. Alternatively the position of the defendant is that is was not necessary to give such advice prior to the receipt of the writ of summons and statement of claim issued in July 1994. The reasons for this are articulated in par 9 of the defence, namely that being a solicitor Mr Shann was aware of these matters which were stated in Exhibit P8. Further Mr Shann instructed he had recommended to Mr Wiltshire that he obtain independent legal advice as to the transaction. In addition Mr Wiltshire and Ms Rowland did not seek to terminate the contract on or before 28 July 1994.
The plaintiffs plead that it was an implied term of their retainer that the defendant would exercise reasonable skill and care in acting for and advising the plaintiffs and would carry out their instructions. Alternatively the plaintiffs contend that the defendant owed them a duty of care to exercise reasonable skill and care in relation to, inter alia, the advice given in accordance with what they say were Mr Shann's instructions to Mr Staude. It is claimed that the defendant at all material times knew or ought to have known that in the absence of exercising reasonable care in acting upon the instructions of the first plaintiff, and in advising the plaintiffs in relation to the matter in issue, that damage or injury would or might result to the plaintiffs. In the alternative it is stated that in carrying out the instructions, Mr Shann conveyed to it, the defendant owed a duty of care to the plaintiffs as they were persons in respect of whom it was reasonably foreseeable that if they were to act upon the advice of the defendant in relation to the matters in issue as they did, that, in the absence of reasonable care and skill on the part of the defendant, damage or injury would or might result to the plaintiffs.
The defendant denies these assertions and also denies that it knew or ought to have known that it's advice, or more particularly the advice given by Mr Staude to the plaintiffs, would encourage them not to settle the claim with Mr Wiltshire or Ms Rowland and that as a result the plaintiffs would suffer damage and/or injury. As to its response to par 24 of the statement of claim, counsel for the defendant advised the Court that it is not denied that a solicitor generally owes a fiduciary duty to a client in the terms pleaded, being to act in good faith towards and in the best interests of the plaintiffs and serve them with fidelity, but rather it is a denial to the extent that par 24 seeks to provide a basis for the duty arising from pleaded instructions by the plaintiffs to the defendant, which as has been previously noted are in issue. For this reason it follows that the defendant denies breaching the fiduciary duty in the manner pleaded.
Finally the defendant in its counterclaim contends that the plaintiffs were negligent, as they did not provide it with written instructions. The defendant further asserts that insofar as the plaintiffs failed to receive advice, which they allege they requested (which is denied), the plaintiffs were negligent in not obtaining the advice and moreover they were negligent in not knowing the duties of, and risks to, a solicitor when transacting business with the solicitors own client. It is said that the plaintiffs were negligent in failing to settle the action by Mr Wiltshire and Ms Rowland for a proper amount. To the extent the plaintiffs' claim is not based in contract, the defendant asserts that their conduct as pleaded in the counterclaim, caused or contributed to the losses suffered by the plaintiffs so that any damages found to be recoverable by the plaintiffs should be reduced in an appropriate manner to reflect this.
A considerable number of issues fall to be determined on the evidence before the Court in this matter. There is an issue as to whether Mr Shann knew and assumed the risk of liability to Mr Wiltshire and Ms Rowland based upon allegations of fiduciary duty and undue influence contained in the Sly & Weigall letter of 3 November 1993. Aligned with this question is whether Mr Shann knew of the presumption of undue influence which flowed from the solicitor/client relationship, where the solicitor engages in business with that particular client. A determination as to what instructions were given by Mr Shann to Mr Staude must be made and then in the light of that decision it may be relevant to consider, depending upon what the instructions were, whether they fairly raised the possibility of a breach of the fiduciary duty owed by Mr Shann not to engage in a business transaction with clients without fully protecting the clients' interests. Clearly a finding must be made as to what advice Mr Staude gave to the plaintiffs and whether or not in fact they were advised by him there was no substance in the claims made by Mr Wiltshire and Ms Rowland.
An issue is raised on the pleadings at least, as to whether Mr Shann instructed Mr Staude that he was aware of the relevant presumption in the circumstances where a solicitor engages in a business transaction with his client. In considering the issue of fiduciary duty, there is also a question as to whether the defendant in its capacity as the plaintiffs' solicitor owed a duty to the plaintiffs. Relevant to the issue of damages a determination must be made as to whether the plaintiffs relied and acted upon the advice of the defendant to their detriment, and if they did so, the nature and extent of any damage or loss sustained to the plaintiffs as a result of the conduct of the defendant.
The evidence of Mr Shann
Relevant to the plaintiffs' claim a degree of emphasis was placed upon Mr Shann's limited experience as a solicitor dealing directly with clients. For this reason it is necessary to briefly turn to his evidence regarding his history within the legal profession. He graduated in the Australian Capital Territory in 1972 with an Arts/Law Degree and did his articles with the Victorian Commonwealth Crown Solicitor's Office which led to his admission in that State in February 1974. Between 1974 and 1975 he worked within the Legal and Treaties Branch of the Department of Foreign Affairs in the Australian Capital Territory and in 1975 joined the Diplomatic Corps, which as I understand it was within that same office. Thereafter he worked variously in West Africa, New Zealand and the South Pacific before returning to Australia in 1979 where he was engaged working in commercial enterprises. Up until 1985 he was employed and working, although there was no detail as to in what particular capacity, on development projects on the Gold Coast. In 1986 he came to Western Australia to investigate the feasibility of a development project before taking up employment as the CEO of Cable Water Ski Company in Western Australia. It was in this position he travelled to Bali to examine the feasibility of a similar enterprise and whilst there he became involved in an aqua culture project. For this reason between 1989 and 1992 Mr Shann lived and worked in Bali before returning to Western Australia where, as has been noted, he joined the firm Disspain Hughes. Based on this history Mr Shann's evidence was that for a period of approximately 20 years from the date of his admission to practice he acquired no real knowledge regarding the fiduciary duty owed by solicitors to their clients. He also claimed it was his understanding that the duties a solicitor owed to a client were distinguishable between a duty‑duty conflict and a duty‑interest conflict.
Prior to taking up employment with Disspain Hughes, Mr Shann said he had undertaken no refresher courses in the law but was aware that a solicitor had to avoid conflicts of interests and he also knew that it was incumbent upon a solicitor to make full disclosure. His evidence was he viewed a primary conflict of interest as "being not acting for someone when you have acted for or had an involvement with somebody else" in relation to the same or a related matter. He further stated that as at August and November 1993 his understanding was as long as one made appropriate and full disclosure that this would effectively satisfy any potential difficulties in relation to a client and that if he was asked to act in a matter against someone, if he knew that person socially he would disclose that relationship to the potential client, to afford them the opportunity of seeking alternative legal representation. He accepted that he understood the importance of a solicitor avoiding any interest which might compete with the interests of his or her client.
It was in this context that on 11 August 1993 Mr Shann wrote to Mr Wiltshire relevant to a proposed investment in the wine industry in Indonesia, indicating that before he provided formal advice to Mr Wiltshire relevant to the proposal, it was important that Mr Shann disclose to him that Mr Shann had previously met Mr Dudley Rowland in May 1992 when he was asked by him to advise in relation to that same proposed project in Indonesia, but he ceased providing advice due to non-payment of accounts. Mr Shann also advised Mr Wiltshire in the letter Exhibit P4 that Mr Rowland had expressed an interest in taking over the lease of the property in Ubud. The letter then deals specifically with matters related to the proposed project in Indonesia and Mr Shann's recommendations regarding it. He indicated that whilst he could prepare detailed advice regarding doing business in Indonesia and what was legal and what was not, that of itself would not satisfy Mr Wiltshire's requirement for protection regarding representations which had been made to him concerning the project.
Mr Shann said he was not aware when having discussions with Mr Wiltshire regarding the proposed assignment of the lease of the property in Bali, that he was acting in any capacity at all and he told Mr Wiltshire that it would be a good idea to have another person look at the documentation which Mr Shann had been asked to prepare, as he was not experienced in property law. Mr Wiltshire, however, pressed him to undertake the task immediately in order that he and Ms Cowling could sign the documentation. The assignment of the lease, Exhibit D5, is dated 26 August 1993. In conjunction with that document Mr Shann prepared for the assignees Exhibit D6, being a statement of circumstances. That document sets out the history of Mr Shann and Ms Cowling's involvement with the property and how it came to be leased to BIS. The document confirms that Mr Wiltshire was advised that the plaintiffs would arrange for the existing tenant, Dr Van Kampen, to vacate the property within a reasonable time after 28 August 1993 and that to the best of the plaintiffs' knowledge the arrangements entered into with the owner of the land regarding the lease were legitimate in Indonesian law. The statement confirms that the plaintiffs act as trustees of Third Wave Pty Ltd as trustee for the Shann Trust but that the plaintiffs agree to be personally responsible and liable for any damages or losses suffered by Mr Wiltshire, if representations as to the right and title to the property proved to be incorrect.
Once Mr Shann was alerted by Mr Wiltshire as to the difficulties he was having with Dr Van Kampen wishing to re-enter the property, he explained the situation to Dr Van Kampen's lawyer, Mr Siregar. Mr Shann was aware that the result of certain legal action by Dr Van Kampen against BIS was that they were obliged to provide Dr Van Kampen with accommodation, but not specifically within the house at Ubud. Throughout October 1993 Mr Shann attempted, according to his evidence, to assist Mr Wiltshire and Ms Rowland to resolve the problems they were experiencing with Dr Van Kampen, but to no avail.
It was against this background that Mr Shann received the letter from Sly & Weigall of 3 November 1993, Exhibit P8. The contents of that letter are of considerable importance and so it will be referred to in some detail. The letter asserts that at the time Mr Shann prepared the assignment of lease and statement of circumstances Mr Wiltshire was his client and did not receive independent legal advice with respect to the transaction. The document asserted that no steps had been taken to perfect Mr Wiltshire and Ms Rowland's interests under Indonesian law, thereby breaching cl 1 of the assignment of lease. It further stated that the plaintiffs had taken no steps through Indonesian lawyers to assist the assignees to regain possession of the premises and that Mr Shann had previously advised Mr Wiltshire that no documentation or steps were required to be taken in Indonesia to perfect the interests in the lease, so there was no necessity to instruct a lawyer in Indonesia. This, it said was a failure to comply with an obligation pursuant to part of the statement of circumstances provided to Mr Wiltshire. On their instructions Sly and Weigall alleged that:
(A)The plaintiffs procured the signing of a defective contract by the use of undue influence which is presumed from the solicitor/client relationship which subsisted between Mr Shann and Mr Wiltshire,
(B)The plaintiffs had in any event breached that contract, and
(C)Mr Shann made misrepresentations or negligently gave wrong or inadequate advice (or both) to Mr Wiltshire and Ms Rowland and that he generally failed to take proper steps for the protection of those two persons.
As a result of the difficult position in which Mr Wiltshire and Ms Rowland found themselves they were obliged to take steps which the plaintiffs or at least Mr Shann should have taken and in that regard they reserved all rights against the plaintiffs and advised them of their intention to issue proceedings against both the plaintiffs, Mr Shann and Disspain Hughes. The letter concluded by advising in particular (but without limiting their other remedies) Mr Wiltshire and Ms Rowland reserved the right to rescind the contract and recover the price paid and damages, if the steps they were to take did not produce a satisfactory outcome.
Mr Shann's evidence was that when he received and read the letter he decided to obtain legal advice as to its contents, because although he did not understand the allegations, the contents of the letter generally caused him grave concerns regarding his legal position. He therefore consulted Mr Staude on 5 November 1993 and provided him with a copy of the letter from Sly & Weigall as well as documents regarding the lease of the Bali property, including the assignment of lease to Mr Wiltshire and Ms Rowland and the statement of circumstances. He said he provided oral instructions to Mr Staude regarding the ambit of the Sly & Weigall letter and requested Mr Staude advise him in relation to the contents of the letter and Mr Shann's position. He further agreed to provide Mr Staude with a draft proof of evidence, Exhibit P9. His recollection was that at that first consultation Mr Staude enquired if Mr Wiltshire had obtained independent legal advice with respect to the relevant transaction and Mr Shann informed him he had told Mr Wiltshire generally that it was a good idea to obtain such advice, however Mr Shann's impression was that Mr Wiltshire did not do so. He claimed he informed Mr Staude that he had not practised law for 20 years and essentially was at that time engaged in the practice of family law and had no knowledge of the law with respect to matters of the nature referred to in Sly & Weigall's letter. He informed Mr Staude that Mr Wiltshire was not justified in claiming that he got less than he had paid for.
Exhibit P9 is an extremely detailed proof of evidence with annexures. Paragraph 24 states that BIS confirmed to Mr Shann that Dr Van Kampen had no right to remain at the property until August 1995 as Dr Van Kampen asserted and that once Mr Shann had repurchased the unexpired portion of the lease from BIS, all rights and responsibilities of tenure would be returned to him as at 28 August 1993. The document details the circumstances surrounding the eviction of Dr Van Kampen from the premises in September 1993, before turning to the question of Mr Wiltshire as a client of Disspain Hughes. In par 43 Mr Shann stressed that he did not offer the house in Bali for sale to Mr Wiltshire nor did he raise the subject in conversation with him. The context of the relevant conversation was in a social setting and did not involve Mr Shann's professional opinion being sought. Mr Wiltshire persisted in pursuing his interest in the property in Ubud but was not charged by Mr Shann for the time they spent discussing the matter. In par 48 Mr Shann conceded that although Mr Wiltshire was at the time of these discussions a client of Mr Shann, they also had a social relationship as distinct from a professional one. Paragraph 52 of the proof states in part:
"I said that I would draft something up but that he ought to get an independent opinion on what the agreement was all about. He said that it did not matter as he was satisfied with the arrangements."
In par 54 of the proof Mr Shann said he showed the proposed assignment of lease to Mr Wiltshire and again asked him if he wished to have someone check it but Mr Wiltshire did not consider this necessary. In par 56 Mr Shann referred to the statement of circumstances he prepared for Mr Wiltshire and Ms Rowland itemising what representations had been made to Mr Wiltshire because Mr Shann was concerned that the circumstances should be clearly set out on paper and acknowledged by all parties. Mr Shann denied that he made the statements contained in Exhibit P9 because he knew he, Mr Wiltshire and Ms Rowland were in a solicitor/client relationship relevant to the transaction and it was important to stress that he suggested independent legal advice be obtained. He believed he had discharged his duty to avoid a conflict of interest and had made full disclosure, despite not acting as their solicitor in the transaction.
Mr Shann then went on to detail the circumstances of Mr Wiltshire going to Bali and Mr Shann evicting Dr Van Kampen. The problems with Dr Van Kampen are referred to in some detail in Exhibit P9 and in that context Mr Shann advised Mr Wiltshire in effect to maintain his position and be patient as the matter would be resolved eventually. He suggested Mr Wiltshire contact an Indonesian lawyer to protect his position but claimed Mr Wiltshire seemed unwilling to help himself, regarding it as someone else's problem. He continued to advise Mr Wiltshire on how best to deal with the difficulty he faced regarding occupation of the property. Mr Shann claimed that Mr Wiltshire's negative reaction to his attempts to assist him resulted in a realisation that it is untenable for him to continue acting for Mr Wiltshire relevant to the proposed investment in the wine business project and their professional relationship in that matter was terminated around 18 September 1993.
In par 88 of Exhibit D9 Mr Shann instructed that at no stage had Mr Wiltshire or anyone else informed him that the contract was not regarded as valid or that Mr Wiltshire wished Mr Shann to take back the property. Apart from demanding that Mr Shann "fix" the problem, Mr Wiltshire had not asked Mr Shann to do anything or give effect to any particular requirement. Mr Shann's impression was that Mr Wiltshire and Ms Rowland did not wish to stay in the property nor did they have any intention, having vacated it, of returning there. As a result Mr Shann was concerned that having been abandoned, the property would be subject to damage and the continued occupation by Dr Van Kampen. He believed it was Mr Wiltshire's responsibility, as the legal occupant, to take action to remove Dr Van Kampen but that Mr Wiltshire was not doing so in order to maximise the damages he may have suffered as a result of Dr Van Kampen's actions and in order to provide a pretext for Mr Wiltshire rescinding the contact with the plaintiffs.
As to the contents of the Sly & Weigall letter, Exhibit P8, Mr Shann's specific responses encompassed a concession of preparing the assignment of lease but not in the capacity of a solicitor, as he was acting for Mr Wiltshire specifically with respect to the proposed investment in the wine project only. He confirmed that he had suggested that it might be appropriate for Mr Wiltshire and Ms Rowland to seek independent legal advice regarding the assignment. He specifically denied advising Mr Wiltshire to instruct a lawyer in Indonesia, as Mr Shann considered that pursuant to their agreement the interest to which Mr Wiltshire was entitled was perfected on its completion. He specifically denied the allegations contained in paragraphs (A), (B) and (C) of Exhibit D8, explaining why he adopted that position.
At a second consultation on 11 November 1993 Mr Shann said he informed Mr Staude there was no difficulty in obtaining a statement from the landlord confirming the assignment of the lease to Mr Wiltshire and Ms Rowland was proper and in accordance with the landlord's requirements, to which course of action Mr Staude agreed. He had no recollection of Mr Staude raising with him the issue of any fiduciary duty Mr Shann may have owed to Mr Wiltshire and Ms Rowland and said Mr Staude led him to believe there would not be a problem if Mr Shann had advised Mr Wiltshire to obtain independent legal advice as to the reassignment of the lease from the plaintiffs.
Prior to travelling to Bali to obtain this document from the landlord, Mr Shann perused the proposed draft reply from Mr Staude to Sly & Weigall's letter Exhibit P8 and made suggestions concerning it which are contained in Exhibit P13, dated 18 November 1993. In Exhibit P13 Mr Shann expressed the view that he believed it was inappropriate to advise Sly & Weigall or Mr Wiltshire that he intended travelling to Bali to obtain the proposed document from the landlord, as in the light of that knowledge Mr Wiltshire might attempt to frustrate the purpose of the visit in order to create further circumstances to avoid his obligations under the contract. As a result of those instructions Mr Staude forwarded Exhibit P14, being a reply to the allegations to Sly & Weigall. The reply noted that not only was there a specific denial of the allegations made but that the suggestion of unprofessional conduct on the part of Mr Shann was totally unfounded. A request was made for notice should Mr Wiltshire and Ms Rowland propose legal action or request that the plaintiffs do anything.
Mr Shann could not recall Mr Staude providing him with detailed advice as to the allegation of undue influence arising out of the relationship with Mr Wiltshire and Ms Rowland. In fact he said on both consultations in November 1993 Mr Staude advised him that if the transaction where Mr Shann acted for Mr Wiltshire was not the same transaction involving the assignment of the lease, there were different considerations with respect to Mr Shann's legal position. If they were two separate transactions Mr Shann had different responsibilities with respect to them. He said Mr Staude's advice was the best course of action was for Mr Shann to effect the transfer of the lease to defuse the allegations against him. He agreed Mr Staude warned that litigation had the potential to be very damaging to him in his capacity as a solicitor as it involved allegations of undue influence.
On 28 November 1993 when Mr Shann provided Mr Staude with the document signed by the landlord, he instructed further that he saw no good reason for providing Sly & Weigall with documentation regarding his dealings with BIS, Dr Van Kampen or the landlord as he considered that they were on a fishing trip searching for a cause of action. He responded in some detail to further concerns and allegations regarding the transaction which had been raised by Sly & Weigall in the interim on their client's behalf.
By late November 1993 Mr Shann said Mr Staude had not advised him in any detail relevant to the risks of any action which might arise from the allegation he owed Mr Wiltshire and Ms Rowland a fiduciary duty, but that Mr Staude's advice had been if Mr Shann could perfect the assignment of the lease, his position with respect to those claims was or would be very strong. Mr Shann could not recall Mr Staude suggesting that a possible solution to the problem may be for him to cancel the contract and return the purchase price to Mr Wiltshire and Ms Rowland. Pursuant to Mr Shann's instructions Mr Staude wrote to Sly & Weigall on 6 December 1993 advising inter alia that it would be inappropriate for Talbot & Olivier to accept service of proceedings when they were unaware of their nature. Between this time and early March 1994 nothing further was heard from Sly & Weigall and so Mr Staude informed Mr Shann it would be appropriate to consider closing the file.
Shortly thereafter, however, on 15 March 1994 Sly & Weigall sent a letter, Exhibit P18, to Mr Staude setting out reasons why Mr Wiltshire and Ms Rowland had engaged in a transaction with the plaintiffs which fell well short of what they had bargained and paid for, reiterating that Mr Shann's conduct as a vendor did not meet the requirements of the law and further that it fell short of the conduct required of a solicitor towards his client. The letter outlined reasons for why this view was taken. Exhibit P18 expressed the opinion that the contract was presumed to have been procured as a result of the exertion of undue influence both as a presumption of law and matter of fact and that Mr Shann in his capacity as a solicitor had breached his fiduciary duty towards Mr Wiltshire and Ms Rowland and was therefore liable for damages in tort, if not contact, and further that he had breached s 52 of the Trade Practices Act. Mr Wiltshire and Ms Rowland demanded the return of the purchase price paid under the contract in addition to Aus $30,000 damages and equitable compensation, failing payment of which proceedings would be issued.
Mr Shann's evidence was that Mr Staude showed little concern regarding these allegations of breach of fiduciary duty and undue influence, persisting in the view that if the transaction involving the assignment of the lease was not one where Mr Shann was acting as Mr Wiltshire's solicitor, he was not at risk. Mr Shann enquired as to whether the allegations had direct implications for Disspain Hughes and whether its professional indemnity insurers should be contacted, Exhibit P19. Mr Staude said he would consider this aspect of the matter but in response to Exhibit P19 provided no specific advice regarding Mr Shann's prospective liability relevant to the breach of fiduciary duty allegations. He did however write to Mr Shann, Exhibit P20, on 11 April 1994 indicating that some interesting issues requiring careful consideration had now been raised by Sly & Weigall in their March correspondence, Exhibit P18. Mr Staude advised they appeared to be having difficulty in determining what Mr Wiltshire and Ms Rowland were entitled to claim and the basis for the claim. As no notice of rescission had been given the claim was one for damages. No claim had been made to have the agreement for the assignment of lease set aside, despite early indication of reservation of rights to rescind the contract to recover the purchase price.
Mr Staude noted the allegation of undue influence could ground a claim for rescission. He further noted that it seemed the only arguable damage suffered by Mr Wiltshire and Ms Rowland was loss stemming from the difficulty they had and continued to have in evicting Dr Van Kampen and in effect suggested those damages would not be significant. At that point Mr Staude's view was that the claim involving damages for negligence or misleading and deceptive conduct would probably be met by the indemnity insurer, but that a claim in contract would be of a personal nature and there would be an overlap in damages if misrepresentation was alleged. Mr Shann on receipt of this advice said he had no concern regarding allegations made against him or any obligation he had flowing from a fiduciary duty owed to Mr Wiltshire and Ms Rowland. In fact his response was to consider counterclaiming for malicious prosecution and damage to his professional reputation.
After contacting Mr Staude on receipt of the writ issued against the plaintiffs in July 1994 Mr Shann agreed with the suggestion that senior counsel, Mr Buss QC, be engaged to deal with the matter as it concerned issues of property law. At the conference with Mr Buss QC on 28 July 1994 Mr Shann's recollection was that counsel began by making immediate reference to Law Society of New South Wales v Harvey [1976] 2 NSWLR 154. Mr Buss QC expressed considerable reservations regarding the plaintiffs' prospects of success in defending a claim against them and was of the view that given a fiduciary duty existed, unless every salient point was found in the plaintiffs' favour it was most unlikely that they could resist the claims of undue influence and breach of fiduciary duty. In view of that, Mr Buss QC advised that the plaintiffs do everything possible to regain possession of the property in Bali in order to either re-lease, re-assign or sell it.
Mr Shann said he was most surprised at that meeting when Mr Staude indicated to Mr Buss QC that he was in complete agreement with both the concerns and advice expressed by Mr Buss QC. This was particularly so, according to Mr Shann, because immediately preceding the conference Mr Staude had informed him that he considered the matter to be something of a mess and did not believe that the plaintiffs had anything in particular about which to be concerned. Following that meeting Mr Shann's recollection was that he left with Mr Staude and in the lift Mr Staude said words to the effect of "I would understand if you sacked me." It does not appear from Mr Shann's evidence that he responded to this alleged remark. He and Mr Staude then proceeded to briefly discuss what should be done in the light of the advice received from Mr Buss QC. Following this on 29 July 1994 on instructions Talbot & Olivier wrote to Sly & Weigall accepting repudiation of the contract with Mr Wiltshire and Ms Rowland, Exhibit P24.
On 19 August 1994 Mr Shann wrote to Mr Staude, Exhibit P26, indicating that he was somewhat perplexed about the situation and stating he was considerably taken aback that the weakness of his position on the fiduciary duty and undue influence issue seemed to be one about both which Mr Staude and Mr Buss QC agreed, yet the conference was the first occasion on which the matter had been raised as a major and likely terminal weakness in the plaintiffs' case. He queried whether in part the importance of the fiduciary relationship and its existence had been overlooked. Mr Shann requested written advice from Mr Buss QC. About this time Mr Shann also met and spoke with Mr McCormack, a barrister, who suggested an opinion on the matter be obtained from Mr Heenan QC. Mr Shann as a result of discussion with Mr McCormack queried with Mr Staude by letter as to whether the plaintiffs were constructive trustees for Mr Wiltshire and Ms Rowland and whether they would have to repay them the purchase price for the assignment of the lease on demand. Mr Staude wrote to Mr Shann on 26 August 1994, Exhibit P28, confirming an appointment with Mr Heenan QC who was to advise on the merits of the plaintiffs' case generally and further to specifically advise what action they should take with respect to the property, given that it had been vacated by Mr Wiltshire and Ms Rowland.
In the course of that letter Mr Staude confirmed that in order to successfully defend the claim all critical facts would have to be found in favour of the plaintiffs and it was Mr Staude's opinion that any doubts would be resolved in favour of the plaintiffs. He further stated:
"This accorded with my impression that if the matter went to trial a District Court Judge would bend over backwards to find for the plaintiffs. I thought that if the transaction was found to be tainted in any way then it would be set aside and you would face enormous expense in terms of returning the purchase price with interest and bearing legal costs on both sides. Added to this was the risk of damage to your professional standing and reputation."
Mr Staude stated that by accepting repudiation the plaintiffs would then be in a position to be able to deal with the property expeditiously and thus avoid further expense and risk. Mr Shann's evidence was that prior to that letter he had not received advice with respect to fiduciary duties at any time directly from Mr Staude. The advice from Mr Heenan QC was essentially that the matter should be settled as expeditiously as possible on the best terms the plaintiffs could obtain and further he was in agreement with Mr Buss QC's advice regarding the matter of fiduciary duty owed, Exhibit P32.
Mr Shann went to Bali in early September 1994 in an attempt to regain his interest in the property and deal with Dr Van Kampen who was still in residence. It would appear that Dr Van Kampen had been ejected from the house but when permitted to return to collect some belongings the police allowed him to remain in residence and informed Mr Shann that he would have to take action to prove that the plaintiffs had a right to the property. As a consequence when Mr Shann left Bali after that visit, Dr Van Kampen was still ensconced in the house. On 13 September 1994 Talbot & Olivier wrote to Mr Shann, Exhibit P33, advising that a defence and counterclaim on his behalf had been filed and served. Three days later Mr Shann wrote to Mr Staude, Exhibit P34, terminating his instructions and stating that when he first consulted Mr Staude he was advised that the allegations made by Mr Wiltshire and Ms Rowland were hollow and without substance and therefore need not concern him. He believed in hindsight this advice, which persisted until the meeting with Mr Buss QC, was incorrect and that the plaintiffs were vulnerable in particular with respect to the issue of the fiduciary relationship. No mention was made in that letter of the comment allegedly made to Mr Shann by Mr Staude in the lift after the conference with Mr Buss QC.
Mr Shann said he decided to settle the action with Mr Wiltshire and Ms Rowland because he had been informed by two senior counsel he could not successfully defend it. Further his evidence was that if greater concern regarding the merits of the allegations made by Mr Wiltshire and Ms Rowland and the corresponding vulnerability of his position had been expressed to him in November 1993, he would possibly have sought the advice of senior counsel earlier.
Therefore Mr Shann's position was that if in November 1993 when he consulted Mr Staude he had been advised of the serious risk that he would be unable to successfully defend the allegations made by Mr Wiltshire and Ms Rowland then he would have attempted immediately to settle the matter with them and would have travelled to Bali in an endeavour to recover the property at Ubud. Another solicitor, Mr Shane Brennan, was then engaged to act for the plaintiffs, who offered to settle the litigation pursuant to the advice received and as a result Exhibit P39, a Deed of Compromise, was entered into by the parties on 18 November 1994. The basic terms of the settlement have been referred to earlier in this judgment.
The plaintiffs' evidence as to the damages claimed
Mr Shann gave considerable evidence relating to the damages claimed on behalf of the plaintiffs, supporting documentation for which was contained in a booklet, Exhibit P41, and in relation to which for convenience sake, a further reamended damages schedule was given to the court. The damages claimed essentially fall into four categories being:
(A)legal expenses,
(B)damage relevant to the payment of Sly & Weigall's legal fees and stamp duty on the Deed of Compromise,
(C)income loss comprising loss of monthly rental on the property in Bali at US$1,050 between the period December 1993 and September 1998. Mr Shann also claimed damages for loss of income from his practice during periods in 1994 and 1995 when he said he was obliged to travel to Bali in order to attempt to rectify problems connected with this claim,
(D)Indonesian travel expenses relevant to the above periods when Mr Shann travelled to Bali. Some of the damages are claimed in Australian dollars, some are claimed in Indonesian rupiah and as is evident some are claimed in US dollars and relevant to this Exhibit P44 was tendered being a two page document of daily exchange rates of the Australian dollar against the US dollar for the period 30 November 1993 to 30 September 1998 (by consent).
As to (C) Mr Shann said that relevant to the loss of rental for the period claimed Dr Van Kampen was effectively in residence throughout that time paying no rent, and the plaintiffs were unable to evict him so as to deal further with the property themselves. The plaintiffs' attempts to recover the property involved a number of legal proceedings within the Indonesian judicial system including some with Dr Van Kampen's lawyer Mr Siregar. Dr Van Kampen eventually left the premises in September 1998 after the plaintiffs negotiated with his lawyer that if they paid the bulk of the compensation of Aus $15,000, which an Indonesian court ordered Dr Van Kampen to pay to the plaintiffs by way of compensation, to Mr Siregar to cover his legal fees, then Dr Van Kampen would vacate the premises. In 1999 Mr Shann undertook some repairs to the property and rented it on a short term basis until 29 October 1999 when the remainder of the lease was reassigned to purchasers for the sum of Aus $25,000.
Relevant to the legal expenses claimed Mr Shann agreed that Talbot & Olivier's account for Aus $757.50 of 1 March 1994 was paid by Third Wave Pty Ltd in May that year and explained that Third Wave was the corporate trustee of the Shann Family Trust which held the property in Ubud as an asset. The plaintiffs were the only directors and shareholders in that company, the funds for which he said came from the plaintiffs. He was unable to say however whether the account was paid from funds of Third Wave Pty Ltd or the plaintiffs. His evidence was that he signed cheques relevant to Talbot & Olivier's fees of Aus $3,218.50 in March 1994, Mr Buss QC's fees of Aus $850 and Mr Heenan QC's fees of Aus $3,700. Of that last amount a balance of Aus $700 was paid by Mr Shann in 1996 on a personal cheque but he had had no documentary evidence of that payment. Nor did he have any bank details relevant to a payment to Mr McCormack for legal fees of Aus $250 but he agreed that on 8 December 1994 the District Court ordered Talbot & Olivier to pay the plaintiffs Aus $75 being the costs of attendance relevant to an application for an extension of time for lodging of a request for an itemised account.
In relation to item A(10) miscellaneous legal expenses, the plaintiffs claim approximately Aus $3,000 by way of damages. Mr Shann explained that this sum related to moneys he sent to an Indonesian associate, Mr Johan, for what he termed "administrative payments". A sum of Aus $15,000 was sent to this person but as he was unable to achieve the desired result he refunded the payments of Aus $12,000. As I understand the evidence Mr Johan was not a lawyer but was endeavouring by some unspecified means to have legal proceedings issued by the plaintiffs in Indonesia relevant to Dr Van Kampen, allocated an early listing and hearing date in the Indonesian courts. Mr Shann was unable to say what Mr Johan spent the Aus $3,000 on, if anything, and he had no paperwork which might explain what payments were made, to whom, and for what purpose. Item A(11) Mr Shann explained was relevant to disbursements of an Indonesian legal firm Saritaksu, again with respect to dealing with matters in Indonesia relevant to the plaintiffs' attempts to regain possession of the property and evict Dr Van Kampen.
Relevant to category (C) Mr Shann explained the basis on which he calculated lost practice income for the periods he was obliged to travel to Indonesia in an effort to regain the property and resolve the problems with it. Assuming an eight hour day at $175 per hour charge out rate Mr Shann then reduced that to a four hour day, being his assessment of effective billing time, and he reduced that amount again by 50 per cent to take account of funds which had to be allocated to the running costs of the practice. He agreed that the resulting figures made no allowance in relation to taxation payments which he would be obliged to make. With respect to the Indonesian travel expenses claimed in category (D) Mr Shann explained that relevant to the claim for 21 November 1994 he, and a number of companions, from Western Australia travelled to Bali in order to attempt to evict Dr Van Kampen from the premises with his airfare alone costing Aus $890. Relevant to a claim for travel and accommodation in Indonesia from 9 May 1995 Mr Shann agreed that Mr Disspain initially met that cost of Aus $890 with Mr Shann agreeing to repay him, however he had no documentary evidence with respect to having done so.
Mr Shann agreed that relevant to Exhibit D2, a facsimile he sent to Dr Van Kampen in May 1993 he proposed to Dr Van Kampen that he purchase the balance of the lease of the premises for US$65,000 after he was dismissed by BIS. Apparently Dr Van Kampen was not in a position to do so at that time as he was awaiting payment of a compensation claim he had against the BIS. Thereafter in August 1993 BIS offered to sell the balance of their lease back to the plaintiffs after dismissing Dr Van Kampen, on the understanding that the plaintiffs would be responsible for evicting him. Although the repurchase price offered by the school had increased, the plaintiffs agreed to the proposal because Mr Shann had by that time agreed to sell or assign the balance of the lease to Mr Wiltshire and Ms Rowland and he found himself in a situation where he had not at that time completed buying back the lease from BIS. The plaintiffs' negotiations with BIS were finalised on 28 August 1993. When Mr Shann evicted Dr Van Kampen in his absence in September 1993, he advised Dr Van Kampen's lawyer, Mr Siregar, of this fact.
In the end Mr Shann accepted that he could only find receipts or documentation in relation to the sum of AUS$4,899.73 as distinct from a larger amount he had claimed earlier relevant to this head of damages. He could point to documentary evidence of expenditure totalling AUS$2,389.53 but he believed that the balance of the sum he was claiming was spent in relation to the proceedings against Dr Van Kampen as Saritaksu was acting as a go between with Hardoyo. He could not, however, say or prove in what manner that money was spent. Again the unsatisfactory nature of this evidence in my view does not establish the claim and was in a state that precluded the defendant from properly testing the extent and reasonableness of the claim. For these reasons I am of the view that the whole amount claimed under item A(11) should be disallowed.
Item D – Indonesian travel expenses
This category of claimed damages relates to Mr Shann's travel to Indonesia on four occasions, being 11 September 1994, 21 November 1994, 7 April 1995 and 9 May 1995. They relate to claims for both travel and accommodation and some supporting documentation for the claim is found at Exhibit P41(21). It is alleged that each of the trips were for the purpose of attempting to recover the property at Ubud and by implication to evict Dr Van Kampen.
The claims in item D(1-4) are claimed in Australian dollars, although some of the documentation refers to the cost of items in rupiah. Although Mr Shann's passport does not confirm each one of these trips I have no hesitation in accepting that he travelled on the dates nominated and was out of Australia in Bali for the periods nominated being four days, 17 days, five days and four days respectively.
In relation to the accommodation in Bali for the period 21 November to 7 December 1994 Mr Shann's evidence was that his legal partner, Mr Disspain, paid the bill which was rendered to Mr Shann for accommodation in Bali and in relation to the account rendered Mr Shann agreed that there appeared to be some pages missing from it.
In relation to the claimed travel to Indonesia which commenced on 21 November 1994 with Mr Shann returning to Australia 17 days later he said he went with three other men who were apparently friends of his and there is a claim for their airfares as well. Mr Shann's airfare and that of two of his companions are claimed at AUS$890 each and the fourth person's airfare is claimed at AUS$769.
Mr Shann's evidence was that those persons accompanied him to Bali for the purpose of assisting in the removal or eviction of Dr Van Kampen from the premises and one of the persons was to remain in the house after possession was regained. With respect to another travel document dated 8 September 1994 Mr Shann believed it was incorrect in that his recollection was it related to a departure on 11 September 1994 returning on 14 September 1994. It was his evidence that he travelled on that occasion with Mr Disspain although I note on the schedule provided item D(1) seems to claim $890 only which apparently relates to Mr Shann's airfare and accommodation.
In relation to the account paid by Mr Disspain, Mr Shann said there was an agreement between Mr Disspain and himself that the bill be rendered to Mr Shann as the documents demonstrate, but Mr Disspain would pay it and Mr Shann would reimburse him when Mr Shann returned to Australia. Mr Shann, however, had no documentation which proved that he had done so.
Put shortly, I am in no way persuaded that the negligent advice provided to Mr Shann is in any way responsible for or causally linked to the losses claimed in item D. Mr Shann was fully aware prior to consulting Mr Staude that Dr Van Kampen was very resistant to vacating the premises and that he was engaged in an argument with BIS relevant to this matter. His attitude thereafter must have made it plain to Mr Shann that Dr Van Kampen had little or no intention of vacating the premises and that he would prove very difficult to evict. Regardless of any advice provided to him by Mr Staude, this situation was not going to alter. In any event as previously noted there are difficulties with some of the claims in that it cannot be shown that Mr Shann or the plaintiffs personally paid the amounts in question.
Finally, it was entirely Mr Shann's decision to travel to Indonesia on one occasion in company with three other persons in order to attempt to regain possession of the property and evict Dr Van Kampen. I cannot see that the advice provided to Mr Shann by Mr Staude could in any way be causally related to this claim insofar as it relates to either Mr Shann's decision to travel as he did or the expenses of the other three persons involved. For these reasons I disallow each of the claims in item D(1).
Item C – Income loss
Items C(2) to items C(5) all relate to claimed loss of practice income for the four periods in item D that Mr Shann was absent from his practice having travelled to Bali in order to recover his house in Ubud and evict Dr Van Kampen. Mr Shann's evidence regarding the basis for these calculations has been referred to previously in these reasons. He conceded that this was a rough calculation but it was the best he could do under the circumstances. He also conceded that the income loss he claims makes no allowance in relation to a taxation component. It is not the lack of precision as to the basis for these claims that poses a bar to their recovery in my view but rather the fact that on a similar basis as with two of the items claimed in D(1) that the loss claimed is not causally related to any advice given by Mr Staude to Mr Shann. For this reason I disallow the claims made in items C(2) to C(5).
The remaining claim and the largest component of the claim for damages is to be found in item C(1) being for rental loss or loss of income from the property in Ubud between December 1993 and September 1998. The claim is based on the fact that at the relevant time when the reassignment of the lease was negotiated, the property was rented for US$1,050 per month. The further re‑amended schedule of damages claims the sum of AUS$84,020.62 for this item. Exhibit P2 being the lease agreement between Mr Shann and Ms Cowling and the BIS refers. This claim for loss of rental income goes beyond July 1994 because the plaintiffs argue that it took some years to regain possession of the premises and evict Dr Van Kampen who during that period of time was paying no rent.
In assessing income loss from loss of rental counsel for the plaintiffs argues that the focus must be on the question of the causal nexus between the finding of liability and the issue of quantum. The possibility that such a nexus exists, it is argued, is sufficient for an award of damages to be made under this head. Clearly in the circumstances it was not possible for the plaintiffs to obtain evidence or lead evidence as to the income from rental in the future even that the claim covers the period December 1993 to September 1998.
Counsel for the plaintiffs suggests that there are a number of approaches that can be taken relevant to assessing this claim if that point is arrived at. The Court can reach a conclusion on the balance of probabilities that the property could have been rented and this finding it is said can be concluded from the evidence by way of inference. One can then look at the issue of assessing compensation relevant to the unavailability of the property whether it be the amount of monthly rental applying at the time or less or more than that amount.
On the other hand it is suggested one could adopt an approach whereby the period for which the property could have been rented is assessed, making an allowance or reduction for the period of time it would have taken to evict Dr Van Kampen and release the property for rental or sale on the open market. The desirability of the property it is argued is demonstrated by the evidence that BIS had leased it for two years at US$1,050 a month and they in turn had installed Dr Van Kampen in the property. It is suggested that Dr Van Kampen's attitude and actions lead to the inference that he regarded it as a desirable property as did Mr Wiltshire and Ms Rowland who were very willing to enter into negotiations to purchase the remainder of the lease.
In Exhibit D2 Mr Shann wrote to Dr Van Kampen on 5 May 1993 offering to sell him the interest in the remaining lease. In part of that letter Mr Shann asserts "it is a relatively easy house to rent and the returns are very good". The weight that can be attached to this statement I consider is not great and does not prove the assertion being made. Moreover it is precisely what one would anticipate a would be vendor might say to a prospective purchaser in the circumstances.
Whilst the plaintiffs claim entitlement to US$1,050 per month it is conceded that if damages are awarded under this head there could well be a discount applied for contingencies such as the financial crisis which arose in Asia during the period in question, as well as factors such as the cost of property maintenance and the question of whether or not the property could have been rented continuously or whether there would have been periods when it was vacant. In regard to these matters, however, counsel for the plaintiffs stresses that a one year deduction in a sense has already been made in relation to this claim because in fact the property was not returned to the plaintiffs until 1999 and their claim runs to September 1998 only.
The plaintiffs' position is that there was a delay between settling the claims of Mr Wiltshire and Ms Rowland in September 1998 and November 1993 when it is said that the plaintiffs could have settled the claim with them had they been properly advised by Mr Staude. During this period of time, which spans approximately five years, the plaintiffs argue that they suffered loss because they were unable to rent the property and derive income from it as they were doing up to the point when the lease was reassigned to Mr Wiltshire and Ms Rowland.
Mr Shann gave evidence that had Mr Staude advised him as he should have done regarding relevant matters in November 1998 the plaintiffs would have immediately attempted to settle the matter with Mr Wiltshire and Ms Rowland and furthermore Mr Shann would have immediately travelled to Indonesia in order to regain possession of the property with a view to re‑letting it as soon as possible.
The plaintiffs face considerable difficulties and in my view insurmountable in establishing their claim for damages under this head. There is no evidence which suggests, even on the balance of probabilities, that this scenario would have come to pass in or about November 1993 when quite obviously on the evidence it could not be achieved in 1994 or up until 1999. There is abundant and extremely persuasive evidence demonstrating that as early as April 1993 Dr Van Kampen was proving extremely difficult and intransigent in terms of persuading him to vacate the property.
Even prior to the plaintiffs reassigning the lease to Mr Wiltshire and Ms Rowland the BIS were experiencing considerable difficulties in evicting Dr Van Kampen after they terminated his contract. BIS and Dr Van Kampen were in fact engaged in litigation over that particular matter. Dr Van Kampen was it seems in the enviable situation of living rent free in the property and furthermore it seems that he had the full support of the local police and authorities. It is telling that Mr Shann only managed to evict Dr Van Kampen in his absence in September 1993. Dr Van Kampen's determination to maintain his position and continue occupying the property is demonstrated by the fact that shortly thereafter he managed to regain residency over and above the objections of Mr Wiltshire and Ms Rowland. He also demonstrated considerable cunning and determination in re‑installing himself at another time when he was supposed to return to collect some personal goods but failed to leave the premises. It is evident that the legal proceedings in which he was involved made it difficult for any resolution to be reached until the various Indonesian courts involved made determinations. The evidence demonstrates this was an extremely slow and protracted process.
Mr Shann's own evidence was to the effect that this process in Indonesia was very slow and considerably different in nature from that which applies in this jurisdiction. In the light of this evidence it is simply not possible to be persuaded that Dr Van Kampen would have agreed to vacate the premises in about November 1993 or would have been readily evicted from the house. Despite Mr Shann's somewhat determined efforts by way of travelling to Indonesia himself and his attempts to engage the services, support and assistance of various persons in Indonesia, he made no headway at all in either persuading Dr Van Kampen to leave the premises or in evicting him.
In the final result the only way in which the plaintiffs could achieve their aim in regaining possession of the property and ensuring that Dr Van Kampen left it, was by negotiating with Dr Van Kampen's legal adviser and agreeing to pay his legal fees using an amount of funds payable to the plaintiffs by way of compensation from Dr Van Kampen. Negotiations with the legal adviser could possibly have been undertaken by the plaintiffs considerably earlier, but I accept the submission that that is in no way the responsibility of the defendant.
Even accepting that the plaintiffs were given negligent advice by Mr Staude as to certain matters that in no way caused this loss or damage to the plaintiffs. As at both September and November 1993 it was the plaintiffs' responsibility to permanently evict Dr Van Kampen and for the reasons canvassed earlier it was highly unlikely that Dr Van Kampen would have willingly vacated the premises prior to this time or at that time. Assuming that Dr Van Kampen could have been removed or evicted from the premises earlier than he was, there is little beyond Mr Shann's assertion that the property could have been rented for the amount claimed or less or more.
In his initial discussions Mr Shann could not recall telling Mr Staude that if he was obliged to resell the property in Ubud he would not obtain as good a price. He did concede he would in all likelihood have told Mr Staude that this course of action would involve re‑entering the marketplace and reselling the property, which was not an avenue which Mr Shann particularly wanted to pursue. It is not possible to say with any degree of certainty whether if he had regained possession of the property and evicted Dr Van Kampen about November 1993, Mr Shann would have resold the lease to the property rather than continuing to rent it, but on his own evidence his indication to Mr Staude in November 1993 was that he was considering the possibility, albeit that it was not a desirable one, of reselling the property if it came to, that rather than continuing to rent it, if the transaction with Mr Wiltshire and Ms Rowland could not be protected.
For these reasons I would disallow the claim for damages made in item C(1).
The plaintiffs are therefore awarded the sum of AUS$25,844.75 which is rounded up to AUS$25,845. Interest on this amount should be calculated at 6 per cent per annum. Taking into account the sum of Sly & Weigall's legal fees and stamp duty paid in in November 1994 and the portion of the legal fees paid to Mr Heenan QC in February 1996 the interest awarded is AUS$13,857.30. The total award of damages is AUS$39,700.
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