Simply Irresistible Pty Ltd v Couper

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL & EQUITY DIVISION

S CI 2007 07076

SIMPLY IRRESISTIBLE PTY LTD (ACN 007 139 451)	Plaintiff
v
SAMUEL B COUPER AND OTHERS	Defendants

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JUDGE:	KYROU J
WHERE HELD:	Melbourne
DATES OF HEARING:	3-5, 8-11, 18 November 2010
DATE OF JUDGMENT:	17 December 2010
CASE MAY BE CITED AS:	Simply Irresistible Pty Ltd v Couper
MEDIUM NEUTRAL CITATION:	[2010] VSC 601

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LAWYERS – Proceeding by a former client against a solicitor alleging breach of retainer and negligence – Alleged failure to advise adequately about the exercise of an option to purchase land – Nature of duty of care – Whether client must establish vulnerability – Relevance of expert evidence – Duty to advise on comparative legal merits where alternative legal avenues are available – Role of solicitor to advise, rather than to make commercial decisions for client.

NEGLIGENCE – Breach – Relevance of client’s refusal to permit solicitor to brief counsel.

NEGLIGENCE – Duty to mitigate – Failure to accept settlement offers – Failure to commence proceedings expeditiously.

NEGLIGENCE – Causation – Whether client would have allowed the option to lapse irrespective of any advice from solicitor.

DAMAGES – Date for assessment where value of land is involved – Breach of retainer – No loss – Nominal damages.

REAL PROPERTY – Doctrine of merger.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D Bailey	Nevett Ford
For the Defendants	Mr P Booth	Obst Legal

TABLE OF CONTENTS

Introduction and summary......................................................................................................... 1

Background to the execution of the Agreement........................................................................ 2

Key provisions of the Agreement................................................................................................ 5

Three methods for Simply to re-acquire the Apartment under the Agreement................... 9

Facts that are not in dispute...................................................................................................... 10

Events prior to the engagement of Riordans on 19 March 2001.......................................... 10

Engagement of Riordans and events between 19 March 2001 and 9 July 2001.................. 18

Events between 9 July 2001 and 20 May 2004...................................................................... 27

Commencement of proceeding against the Millennium Group and Mr Brott............. 29
Mediation on 12 March 2003........................................................................................... 30
Settlement discussions after the mediation..................................................................... 31

Independent advice about possible claim by Maher Group against Riordans.................... 32

Osborn J’s judgment dated 20 May 2004 in the prior proceeding....................................... 32

Termination of Riordans’ retainer.......................................................................................... 33

Appeals against Osborn J’s judgment.................................................................................... 33

Commencement of this proceeding...................................................................................... 35

General comments on evidence and credit.............................................................................. 35

Patricia Maher......................................................................................................................... 35

Justice Maher.......................................................................................................................... 36

John Cicero.............................................................................................................................. 37

Stephen Curtain...................................................................................................................... 38

Sandra McColl, Kim Whitby and Peter Riordan SC............................................................ 38

Principles regarding solicitor’s duty of care in performance of retainer............................ 38

What tort duty did Riordans owe to Simply?......................................................................... 40

Did Simply have to establish that it was ‘vulnerable’?......................................................... 41

Issues in dispute......................................................................................................................... 41

What was the scope of Riordans’ retainer?............................................................................. 42

Riordans’ advice about the Option and the effect of the caveat............................................ 47

Did the lodgement of the caveat cause the Option to lapse?................................................ 53

Did Riordans breach their retainer?........................................................................................ 53

Absence of advice about obtaining a new planning permit................................................. 59

Relevance of the doctrine of merger...................................................................................... 60

Relevance of Patricia Maher’s refusal to permit Mr Curtain to brief counsel...................... 62

Expert evidence of Mr Cicero................................................................................................ 63

Riordans did not have a duty to decide for Simply whether to exercise the Option.......... 64

Did Riordans breach their tort duty in relation to the Option?........................................... 65

Did Riordans’ breaches of duty cause any loss to Simply?................................................... 65

Did Simply rely on the advice of other persons and not Riordans?..................................... 65

Evidence of Patricia Maher............................................................................................... 65
Evidence of Justice Maher................................................................................................ 67
Evidence of Mr Curtain.................................................................................................... 69
Evidence of Mr Whitby.................................................................................................... 71
My findings....................................................................................................................... 71

Would Simply have exercised the Option if properly advised by Riordans?...................... 76

Evidence of Patricia Maher............................................................................................... 76
Evidence of Justice Maher................................................................................................ 78
Evidence of Mr Curtain.................................................................................................... 79
My findings....................................................................................................................... 81

Overall conclusions: did Riordans’ breaches cause any loss to Simply?............................. 87

Did Simply fail to mitigate its loss?.......................................................................................... 88

Simply’s failure to accept offers of settlement....................................................................... 89

Simply’s delay in commencing this proceeding................................................................... 92

Conclusion in relation to mitigation of loss........................................................................... 94

Was Simply contributorily negligent?..................................................................................... 94

Damages....................................................................................................................................... 95

Principles for assessing damages in contract and in tort....................................................... 95

Award of $1 nominal damages.............................................................................................. 96

Assessment of damages on assumption award of nominal damages is incorrect................ 96

Current value of the Apartment............................................................................................ 97

Purchase price of the Apartment upon exercise of the Option............................................ 97

Borrowing costs or allowance for rent-free occupation of the Apartment........................... 98

Conveyancing costs................................................................................................................ 98

Items that I have not taken into account in assessing damages............................................ 99

Proposed order............................................................................................................................. 99

Glossary..................................................................................................................................... 100

HIS HONOUR:

Introduction and summary

Simply Irresistible Pty Ltd (‘Simply’) has sued its former solicitors, Riordan & Partners (‘Riordans’), alleging that they breached their retainer and/or their common law duty of care (‘tort duty’) by failing to advise it adequately, or at all, about the exercise of an option to re-purchase an apartment known as Unit 20, 50 Bourke Street, Melbourne (‘Apartment’) from Millennium Markets Pty Ltd (‘Millennium’).

The option was granted by cl 7 of an agreement dated 16 March 1999 between Simply, Millennium and other parties (‘Agreement’). The terms of the option are set out at [27] below (‘Option’). The Agreement was executed in the context of the sale by the Maher family and their associated companies (including Simply) of various properties to Millennium and its associated companies for the purpose of repaying loans from Westpac Banking Corporation Ltd (‘Bank’). The properties included the Apartment and land upon which a trash and treasure market known as the Bundoora All-Weather Market was conducted (‘Market Land’).

Clause 3 of the Agreement provided for the cancellation of the contract of sale of the Apartment and the re-transfer of the Apartment to Simply for nil consideration if, by the settlement date, a condition relating to the proposed uses of the Market Land was satisfied. If the condition was not satisfied prior to the settlement date, the Option allowed Simply to purchase the Apartment for $210,000 within two years after the settlement date. Settlement took place on 9 July 1999 (‘Settlement’). Simply did not exercise the Option and it lapsed on 9 July 2001.

Riordans claim that they advised Simply about the Option and deny that they breached any duties that they owed to Simply. In the alternative, they allege that, if they breached any duty that they owed to Simply, the breach did not cause any loss to Simply because it had no intention of exercising the Option. Riordans also allege that Simply failed to mitigate its loss and was contributorily negligent.

The issues that require resolution in this proceeding are:

(a)What was the scope of the retainer between Simply and Riordans?
(b)What advice did Riordans provide to Simply regarding the exercise of the Option?
(c)Did Riordans breach their retainer in relation to the Option?
(d)Did Riordans breach their tort duty in relation to the Option?
(e)If Riordans breached their retainer or tort duty, did the breach cause any loss to Simply?
(f)Did Simply fail to mitigate its loss?
(g)Was Simply contributorily negligent?
(h)What damages, if any, should be awarded to Simply?

For the reasons that follow, I have concluded that, although Riordans breached their retainer and tort duty, those breaches did not cause any loss to Simply. Simply’s claim in negligence will be dismissed and nominal damages of $1 will be awarded to Simply for Riordans’ breach of their retainer.

For convenience, I have included a glossary of defined terms and abbreviations at the end of this judgment.

Background to the execution of the Agreement

For many years, Patricia Maher and her sons, Justice Maher and Dominus Maher, (collectively, ‘the Mahers’) conducted a number of businesses and owned various commercial and residential properties either personally or through corporate entities, including Simply. I will refer to the Mahers and their corporate entities collectively as ‘the Maher Group’.

At all relevant times, Patricia Maher and Justice Maher were directors of Simply and other companies in the Maher Group, including Eighty-Sixth Eternity Pty Ltd (‘Eternity’), Bundoora All-Weather Market Pty Ltd (‘BAWM’) and Pamah Pty Ltd.

Prior to Settlement, the Maher Group owned the following properties:

(a)The Apartment. The Apartment was purchased by Simply in approximately 1990 for $650,000. Patricia Maher has lived in the Apartment since it was purchased. As discussed below, she continues to do so.
(b)The Market Land. This land is situated at 187 Settlement Road, Thomastown and was owned by Eternity. The Bundoora All-Weather Market was conducted on the Market Land by BAWM.
(c)The land situated at 161-167 Settlement Road, Thomastown, which was owned by Patricia Maher.
(d)The land situated at 169 Settlement Road, Thomastown, which was owned by Simply.
(e)The land situated at 14 Warranwood Place, Bundoora (‘Warranwood Land’), which was owned by BAWM.
(f)The land situated at Cannonvale, Queensland, which was owned by Pamah Pty Ltd.

All the properties listed at [10] above were mortgaged or charged to the Bank to secure loans that had been taken out by the Maher Group (‘Security Properties’). In 1998, the Maher Group encountered difficulties in servicing the loans and the Bank was exerting pressure on the Mahers to repay the loans. The Maher Group was able to service the interest on the loans, but was not able to reduce the capital amount, which totalled approximately $6.3 million. The Bank gave the Maher Group an opportunity to find a buyer for the Security Properties before the Bank took action to enforce its securities.

Following unsuccessful negotiations with potential purchasers and joint venture partners, in late January 1999, the Maher Group engaged Issac Brott to act as their solicitor in negotiations with the Bank. In February 1999, Mr Brott introduced the Maher Group to Myer Herszberg and, later, to Moishe Gordon.

On 1 March 1999, Mr Brott successfully negotiated an agreement with the Bank whereby the Bank agreed to accept the reduced capital amount of $5.8 million provided that all the Security Properties were sold as a group for not less than that amount.

Following extensive negotiations, Mr Herszberg and Mr Gordon agreed that their company, Millennium, would purchase the Security Properties and the businesses that were conducted on them for a total amount of $5.8 million. Graeme Efron of Efron & Associates acted for Millennium in relation to the transaction. I will refer to Millennium, Mr Herszberg and Mr Gordon collectively as ‘the Millennium Group’.

There were two key contentious issues that arose during the negotiations for the sale of the Security Properties to Millennium.

The first issue was Patricia Maher’s reluctance to sell the Apartment. The Apartment had been her home since 1990 and its sale would result in the loss of her place of residence.

The second issue was the uses to which the Market Land could be put. In 1999, the Market Land was being used as a trash and treasure market pursuant to two permits issued by the City of Whittlesea (‘Council’). Millennium indicated that it wished to explore a possible expansion of the uses of the Market Land to include shops and a supermarket. The Maher Group, principally through Justice Maher, informed Millennium that the Market Land could not be used for shops or a supermarket, but that it could be used for factory retailing outlets, a fruit and produce market, and a trash and treasure market (‘Proposed Uses’). As Millennium’s ability to use the Market Land for the Proposed Uses affected the price that it was prepared to pay for the Security Properties, it wanted to include the Apartment in the sale transaction to allow for the possibility that the Market Land could not be used for the Proposed Uses.

The Maher Group and the Millennium Group agreed to resolve the above issues as follows:

(a)The Apartment would be included in the sale of the Security Properties to Millennium, but only by way of ‘securing’ that the Market Land could be used for the Proposed Uses.
(b)If, prior to Settlement, it was established that the Market Land could be used for the Proposed Uses, the contract of sale of the Apartment to Millennium would be cancelled and Simply would be entitled to the re-transfer of the Apartment for nil consideration.
(c)If, prior to Settlement, it was not established that the Market Land could be used for the Proposed Uses, Simply would have a two-year option to purchase the Apartment for $210,000.
(d)The two-year option would include a provision whereby, if a planning permit for the use of the Market Land for the Proposed Uses was obtained within the two-year option period, Simply could re-purchase the Apartment for $10,000 plus the costs of obtaining the permit.

The above arrangement was embodied in the Agreement.[1] Concurrently with the Agreement, separate contracts of sale were executed for each of the Security Properties. The contract of sale for the Apartment specified a sale price of $300,000. This price was part of the total amount of $5.8 million for the sale of all the Security Properties.
[1]A third contentious issue was the Mahers’ reluctance to sell the Warranwood Land, which was used by Dominus Maher as his home. This issue was resolved by the inclusion of a provision in the Agreement which entitled BAWM to request that the contract of sale of the Warranwood Land be cancelled unconditionally at Settlement.

I will now consider the key provisions of the Agreement.

Key provisions of the Agreement

The Agreement was in the form of a deed. The parties to the Agreement were Millennium (which was described as the ‘Purchaser’), BAWM, Simply, Eternity, Justice Maher, Mr Herszberg and Mr Gordon.

Clause 3 of the Agreement provided for the cancellation of the contract of sale of the Apartment in the event that it was established prior to Settlement that the Market Land could be used for the Proposed Uses. Clause 3 was in these terms:

3. Cancellation of Apartment Contract
At Simply’s request, and despite the fact that the Apartment Contract has been exchanged just before, or simultaneously with, exchange of parts of this Deed, Simply and the Purchaser hereby agree that, provided that the Market Land can be used for the Proposed Uses without breaching the provisions of the planning scheme that affects the Market Land (including without limitation the Whittlesea Planning scheme) by the due date for settlement thereunder (whether because of a rezoning of the Market Land and/or by the grant of planning permits on terms reasonably acceptable to the Purchaser) with effect as and from the time that settlement occurs … the Apartment Contract is hereby cancelled and they hereby acknowledge that neither of them will, as from the time that the cancellation takes effect, have any rights under it save and except that the deposit paid or payable by the Purchaser under its terms must forthwith be refunded to the Purchaser.

I will refer to the proviso in cl 3 of the Agreement about the Proposed Uses as the ‘Proposed Uses condition’.

Clause 1.8 of the Agreement defined ‘Proposed Uses’ as follows:

1.8‘Proposed Uses’ means the use of the Market Land for the following:
1.8.1    including without limitation factory retailing outlets;
1.8.2    a fruit and produce market; and
1.8.3    a trash and treasure market;
with the ability to grant leases (or at the Purchaser's option licences) for tenancies.

An earlier draft of the Agreement included the following sub-clauses in the definition of ‘Proposed Uses’ in cl 1.8:

1.8.1shops (as defined in the Whittlesea Planning Scheme) including without limitation factory merchandise outlets;

1.8.2    a fruit and produce market;
1.8.3    a trash and treasure market; and
1.8.4    supermarket
with the ability to grant leases (or at the Purchaser's option licences) for tenancies.

These sub-clauses were amended by hand at the request of the Mahers – principally Justice Maher – to accord with the final version set out at [24] above.

Clause 6 of the Agreement dealt with the procurement of a planning permit in relation to the Proposed Uses. It was in these terms:

6. Proposed Uses
6.1Justice convenants with the Purchaser that he will use his best endeavours to procure the issue to the Purchaser of a town planning permit that allows the Market Land to be used for the Proposed Uses.
6.2Subject to the Purchaser being reasonably satisfied that the expenditure is warranted and justified and that the issue of a town planning permit for the Proposed Uses is likely to be attained, the Purchaser will spend an amount of up to $200,000.00 in paying for Consultants to assist in procuring the issue to the Purchaser of a town planning permit, so that the Market Land can be legally used for the Proposed Uses.
6.3The choice of Consultants shall be at the complete discretion of the Purchaser and shall be reasonable.
6.4The Purchaser shall have the conduct of all proceedings and meetings in relation to the matters referred to in this Clause 6 and Justice acknowledges and agrees that he must, in relation to those matters, only act under, and in accordance with, the directions and instructions of the Purchaser.
6.5Justice acknowledges that he has no power or authority to pledge the credit of, or make commitments or give undertakings or enter into agreements on behalf of, the Purchaser.

The Option was set out in cl 7 of the Agreement and was relevantly in the following terms:

7.Option to purchase the Apartment
7.1Grant of Option
Subject to the Purchaser completing its purchase of the Apartment under the Apartment Contract, and in consideration of the [sum] of $1.00 (the ‘Option Fee’) now paid by Simply to the Purchaser (the receipt of which the Purchaser hereby acknowledges) the Purchaser irrevocably grants to … Simply an option (the ‘Option’) to purchase the Apartment from the Purchaser for the Apartment Purchase Price, and upon and subject to terms and conditions contained in … a contract of sale (‘Sale Contract’) to be prepared by the Purchaser’s solicitors … The Sale Contract shall provide that the Apartment Purchase Price is to be paid as to a 10% deposit on exercise of the Option and as to the balance 60 days thereafter.
7.2Exercise of Option
The Option can be exercised at any time on any day during the period of time (‘the Option Period’) commencing on the date of this Deed and ending at 5 pm on the second anniversary of the date on which the Purchaser becomes entitled to possession of the Apartment … under the Apartment Contract (‘the Expiration Time’) by Simply delivering to the Purchaser:
7.2.1.written notice to that effect executed by or on behalf of … Simply ( … ‘the Exercise Notice’); and
7.2.2.a cheque payable to the Purchaser’s solicitors named in the Sale Contract for the deposit …

…
7.7No caveat
7.7.1.Simply (for itself and its nominee) undertakes to the Purchaser that Simply must not lodge, cause or allow to be lodged at the Land Titles Office a caveat in respect of its interest in the Apartment created by this Clause 7 or otherwise until after registration of a mortgage over the titles to the Apartment given by the Purchaser in favour of its banker or financier to secure (amongst other things) funds provided for the purchase of the Apartment by the Purchaser.
7.7.2.Simply (for itself and its nominee) undertakes to the Purchaser that, if (after Simply or its nominee have lodged or caused or allowed to be lodged at the Land Title Office a caveat in respect of its interest in the Apartment created by this Clause 7 or otherwise) the Purchaser requests Simply (or its nominee) to consent to lodgment or registration of a mortgage over the titles to the Apartment, Simply will procure that the appropriate consent, acceptable to the Land Titles Office and the mortgagee, is given to the Purchaser within 3 days after a written request is made for it.

7.8Consequences of caveat
If Simply (or its nominee) breaches Clause 7.7, then the Option lapses on the date that the caveat is lodged at the Land Titles Office or (in the case of a request under Clause 7.7.2) at 9 am on the day that is the fourth day after the request is given to Simply.

…

Clause 1.2 of the Agreement defined ‘Apartment Purchase Price’ as follows:

1.2 ‘Apartment Purchase Price’ means:
1.2.1.if by the Expiration Time, the Market Land cannot be lawfully used for the Proposed Uses, $210,000.00; or
1.2.2.if by the Expiration time, the Market Land can be lawfully used for the Proposed Uses, the lesser of:
1.2.2.1.$210,000.00; or
1.2.2.2.the sum of:
1.2.2.2.1.$10,000.00; plus
1.2.2.2.2.all monies spent, and expenses incurred, by the Purchaser for Consultants (including expenses and disbursements charged by the Consultants) in relation to the matters referred to in Clauses [6.1] and [6.2] hereof …

Clause 8 of the Agreement conferred on Patricia Maher a right to occupy the Apartment rent free during the ‘Option Period’. Pursuant to cl 10, BAWM agreed to make available to Millennium the services of Justice Maher and his wife, Helen Maher, to assist in the operation of the Bundoora All-Weather Market.

Three methods for Simply to re-acquire the Apartment under the Agreement

Under the Agreement, there were three methods by which Simply could re-acquire the Apartment.

The first method was for Simply to satisfy the Proposed Uses condition by 9 July 1999. If this occurred, cl 3 of the Agreement provided that the contract of sale of the Apartment would be cancelled.

The second method was for the Market Land to satisfy the Proposed Uses by 9 July 2001. If this occurred, cll 1.2.2, 6 and 7 of the Agreement provided that Simply would have to pay $10,000 plus the costs incurred in satisfying the Proposed Uses, which were capped at $200,000. Clause 6 contemplated that the second method would involve the issue of a new planning permit by 9 July 2001.

The third method was for Simply to exercise the Option in cl 7 of the Agreement prior to 9 July 2001 and to pay $210,000 under a new contract of sale of the Apartment from Millennium to Simply. Clauses 7 and 1.2.1 contemplated that the Option would be exercised if the Market Land did not satisfy the Proposed Uses by 9 July 2001.

Facts that are not in dispute

Much of the evidence in this proceeding was documentary and not in dispute. Large parts of the oral evidence were also not contested. Set out below are relevant events which were not in dispute.

Events prior to the engagement of Riordans on 19 March 2001

In relation to the Market Land, the Council issued planning permit number P3405 on 8 May 1990 and planning permit number 704159 on 6 March 1998. Those permits authorised the Market Land to be used ‘as a trash and treasure market’ and stipulated that the authorised use had to ‘comply with the provisions regarding Trash and Treasure Market as defined in the Whittlesea Planning Scheme.’ Until 8 July 1999, the Market Land was zoned ‘Reserved Light Industrial Zone’.

Shortly after the Maher Group engaged Mr Brott in late January 1999, they agreed to pay him a lump sum of $40,000 for his legal fees. After Mr Brott introduced Mr Herszberg and Mr Gordon to the Mahers, he negotiated an arrangement whereby the Bank paid $5,000 towards the amount of $40,000 and Mr Herszberg paid the balance. In addition, Mr Herszberg agreed to pay Mr Brott a ‘procurement fee’ of $150,000 (‘procurement fee’) by instalments. The procurement fee was disclosed to the Maher Group.

Shortly after the execution of the Agreement, a dispute arose between the Maher Group and Millennium as to whether the Proposed Uses condition had been satisfied.

On 28 March 1999, Justice Maher wrote a letter to the Council – on BAWM’s letterhead – in which he referred to some of the then current uses of the Market Land, gave details of proposed renovations to the property, and sought ‘confirmation of this use on our permit’ so that the proposed ‘upgrading [of] the Market’ could commence. The Council responded by letter dated 14 April 1999, which relevantly stated that BAWM was required to lodge a plan highlighting the proposed changes.

Under cover of a letter dated 30 April 1999, BAWM lodged with the Council amended plans and an application for a planning permit for ‘building alterations’. The covering letter described the proposed changes as ‘building extensions’, ‘a new Foodhall store’, ‘[replacing] existing offices … with car parking’ and ‘[enhancing] further the existing landscaping with new ground cover and fencing’. The Council responded by letter dated 5 May 1999 in which it stated that the application could not be processed until the application fee was paid. Justice Maher gave evidence that the fee was $280 and that Mr Gordon had refused his request for that amount. The fee was never paid and, accordingly, the application did not proceed.

On 18 May 1999, Mr Brott wrote a letter to Mr Efron in which he asserted that the Proposed Uses condition had been ‘satisfied in full’. Mr Efron replied by letter dated 2 July 1999 in which he stated that the Maher Group had ‘not provided sufficient evidence to assure [Millennium] that the Market land can be lawfully used for the Proposed Uses’ and that, accordingly, the contract of sale of the Apartment ‘has not been cancelled’. Mr Brott responded by letter dated 2 July 1999 in which he stated that the contents of Mr Efron’s letter were ‘false and unacceptable’ and that the Maher Group ‘will not proceed unless all terms are met.’

On 8 July 1999, a notice of the approval of a new Whittlesea Planning Scheme was published in the Victoria Government Gazette.[2] The new Scheme, which commenced immediately, had the effect of including ‘trash and treasure market’ within the definition of ‘Market’, and of changing the zoning to ‘Industrial 1 Zone’.
[2]Victoria, Victoria Government Gazette, No G 27, 8 July 1999, 1607 (‘Gazette Notice’).

At Settlement on 9 July 1999, the Security Properties were transferred to Millennium and its associated companies. On the same day, Mr Brott wrote a letter to Mr Efron in which he asserted that the Proposed Uses condition had been satisfied and that Millennium had wrongfully refused to cancel the contract of sale of the Apartment. In the letter, Mr Brott stated that a caveat would be lodged over the title to the Apartment and that proceedings would be instituted if the dispute was not settled within 14 days.

On 14 July 1999, Justice Maher instructed Mr Brott to lodge a caveat over the title to the Apartment.

On 23 July 1999, Mr Brott wrote to Mr Herszberg and attached a copy of the Gazette Notice. The letter asserted that the Maher Group had satisfied the conditions of the Agreement and that Millennium had wrongfully refused to cancel the contract for the sale of the Apartment. The letter ‘called upon’ Millennium to perform the terms of the Agreement.

On 2 September 1999, Mr Brott lodged a caveat, in his own name, over the title to the Apartment. On 15 November 1999, following a requisition from the Land Titles Office, Eternity was substituted as the caveator. The caveat claimed that the caveator had an interest in fee simple under the Agreement.

According to the evidence of Patricia Maher, prior to lodging the caveat, Mr Brott warned her that the lodgement of the caveat would cause the Option to lapse. She said that Mr Brott did not want to lodge the caveat, but that she insisted that he do so. Justice Maher’s evidence was that Mr Brott never advised him that the lodgement of the caveat would cause the Option to lapse.

In mid October 1999, Patricia Maher engaged Kim Whitby of McKean & Park to provide independent advice in relation to Mr Brott’s handling of the dispute with Millennium concerning the Apartment. According to Mr Whitby’s file note dated 21 October 1999, he had a conference with Patricia Maher at which she informed him that she wanted him ‘to brief Counsel for the purpose of ascertaining whether or not it is possible for her to take action against [Millennium] and the likelihood of success.’ According to the file note, Patricia Maher ‘wishe[d] to have a second opinion in relation to the likelihood of success’.

On 22 October 1999, Justice Maher wrote a letter to Mr Brott in which he stated that the Mahers ‘are very concerned about the delay in … receiving the title of the [Apartment].’ The letter requested an update on the ‘current situation’.

On 25 October 1999, Mr Brott wrote a letter to Patricia Maher in which he advised her that he was ‘of the view that the purchasers have acted improperly and, further, that you would certainly be successful in a litigation.’

On 9 November 1999, Patricia Maher, Justice Maher and Mr Whitby attended a conference with Nick Jones of counsel. Mr Whitby gave evidence that both he and Mr Jones advised that, on the balance of probabilities, any court would consider that the Proposed Uses condition had been met and that the Apartment should have been reconveyed to the Mahers. Mr Jones suggested that it might be worthwhile for the Mahers to write to the Council to seek confirmation that the Proposed Uses were permitted.

On 10 November 1999, Mr Whitby settled a draft letter from BAWM to the Council that had been drafted by Justice Maher. That letter, in the form in which it was sent to the Council on 10 November 1999, relevantly stated: [3]
[3]All errors in original.

We have sold the [Market Land] to new owners and they wish us to define, the uses of the land they have purchased, could you please confirm the following.
a.        Can the stall operators in the Market sell by Retail.
b.        Can the stall operators in the Market sell by Wholesale.
c.        Can the stall operators in the Market sell Fruit and Produce.
d.        Can the stall operators in the Market sell Trash and Treasure.

We are requesting verification of these uses from you, which we understand were confirmed in the Government Gazette dated 8^th July 1999.
We recognize shops and supermarket are not included in the uses specified.

The Council responded by letter dated 23 November 1999 in which it stated:

(a)The permit for the Market Land authorised the use ‘Trash and Treasure Market’, which was defined as ‘land where vendors of goods temporarily occupy an area or stall for a fee.’
(b)Under the new Whittlesea Planning Scheme, which was approved on 8 July 1999, the Market Land was zoned ‘Industrial 1’, but ‘the permit allows a Trash and Treasure market only and all goods sold must conform to this primary use.’
(c)Retail sales of trash and treasure items are allowed from the market stalls.
(d)The endorsed plan for the Market Land limits the areas where fruit and produce can be sold. In general terms, fruit and produce are food items, rather than trash and treasure items.
(e)The term ‘wholesale’ means the sale of goods and materials to be sold by retail. This generally implies that goods are sold in quantities which exceed what could be stored in a temporary stall. Although the wholesale of trash and treasure items is not prevented, it was not anticipated as being possible from the stalls shown on the approved plan.

On 26 November 1999, Justice Maher asked Mr Whitby whether or not the Proposed Uses condition had been satisfied. Mr Whitby responded, ‘Well, from our point of view the answer is yes.’ Justice Maher asked Mr Whitby to confirm this advice in writing.

On 30 November 1999, Mr Whitby wrote a letter to Patricia Maher, which relevantly stated:

We … believe that provided no permanent structure is erected inside the trash and treasure market then all of the purposes outlined can be met. It is our view therefore that the refusal of the purchasers to return your property [to] you is a breach of the contract and that you should be in a position to take legal proceedings successfully against them.
We would however suggest that the independent opinion of a Town and Country Planning expert be obtained. It will be necessary in the future that such expert advice be given to the Court in the event that you proceed with proceedings. The Court will have to be satisfied that under the normal course of events the Plaintiffs would have been able to use the premises for the use which you agreed could be done. Therefore expert advice should be obtained and you should be prepared to call the Planning Officers from the relevant Council to establish that they would have no objection to the uses as anticipated by the contract.
Under the circumstances we believe our Retainer is complete as you really wished a second opinion as to whether or not you should proceed with this matter.
Subject to the qualifications above we believe that you should speak to Mr Brott and request that he proceed to seek enforcement of the contract as soon as possible, or alternatively seek damages.

As a result of Mr Whitby’s advice, the Maher Group decided that Mr Brott should continue to act for them.

On 7 December 1999, Patricia Maher wrote to Mr Brott and instructed him to commence proceedings for ‘”specific performance” of the [Agreement] relating to [the Apartment]’. Similar instructions were given by Justice Maher in a letter to Mr Brott which was apparently faxed to Mr Brott on 25 January 2000.

In May 2000, Justice Maher met with Mr Brott. According to Justice Maher’s evidence, he told Mr Brott that he was concerned that time was running out and asked him whether the Maher Group should consider exercising the Option in order to keep the Apartment. Mr Brott told him that the Maher Group did not need to pay to get back the Apartment. On the basis of Mr Brott’s advice, the Mahers did not exercise the Option.

On 18 May 2000, Mr Brott wrote a letter to Mr Efron in which he stated that the Maher Group intended to commence proceedings ‘to enforce the [Agreement] as a result of [Millennium’s] default in cancelling the contract [of sale of the Apartment], and not ensuring effective transfer to [the Maher Group of] proprietorship of the [Apartment].’

On 8 June 2000, Justice Maher wrote a letter to Mr Brott in which he stated that Millennium’s refusal to ‘return’ the Apartment constituted a breach of the Agreement because the statements that had been made in the Agreement about the uses of the Market Land had been substantiated. The letter asserted that Mr Brott had ‘always said [that the Maher Group] would get [the Apartment] returned, even if it meant resorting to the law’ and requested Mr Brott to ‘attend to this problem urgently’.

Some time in 2000, Mr Herszberg and Mr Gordon had a falling out. Mr Herszberg and his associated companies retained the Market Land, while Mr Gordon and his associated companies retained all the other Security Properties. Millennium, which came to be controlled by Mr Gordon, continued to own the Apartment.

On 30 June 2000, Mr Brott briefed Daryl Dealehr of counsel to advise in conference and to draft documents for the commencement of proceedings against Mr Gordon and his associated companies – but not against Mr Herszberg and his associated companies – for the transfer of the Apartment. Mr Dealehr advised in conference that the Maher Group had a good case for specific performance. Mr Dealehr prepared a draft statement of claim naming Simply as plaintiff and Millennium as defendant, but that document was never settled. No proceedings were commenced.

At some time prior to 30 January 2001, on the instructions of the Maher Group, Mr Brott made a demand upon Mr Efron that Millennium transfer the Apartment to Patricia Maher at no cost.

Mr Efron responded by letter dated 30 January 2001. In that letter, Mr Efron stated that it was his ‘considered view that the market land could not be used for the Proposed Uses by the due date for settlement’ and that a new planning permit had not been issued ‘to allow the Market Land to be used for the Proposed Uses.’ The letter went on to say:

If your client’s position is that the Market Land can be used for the Proposed Uses, please provide written evidence in support of such proposition by return.
In the alternative, if you are unable to do so, our client’s position is clear, that being that subject to the exercise of the option the Apartment purchase price is $210,000.

Mr Brott forwarded Mr Efron’s letter to Patricia and Justice Maher under cover of a letter dated 11 February 2001 in which he described Mr Efron’s letter as ‘absurd’ and ‘dribble’, and asserted that the Mahers had ‘demonstrated that the usage was for a market of the type required by the agreement’.[4]
[4]Emphasis in original.

In February 2001, the Maher Group terminated Mr Brott’s retainer and engaged Bernard Balmer of Balmer & Associates Pty. Mr Balmer organised a conference with Laurence Maher of counsel (who was not related to the Mahers) to discuss the restoration of the Maher Group’s ownership of the Apartment. The conference was held on 23 February 2001 and was attended by Patricia Maher. On 1 March 2001, Laurence Maher provided a short memorandum of advice. The thrust of the memorandum was that Laurence Maher needed further information before he could provide any substantive advice.

Laurence Maher’s memorandum relevantly stated:

5Mrs Maher considers that she is entitled to have ownership [of the Apartment] restored by enforcing [the Agreement].
…
7It appears that Mrs Maher will only achieve her objective if she can [get] relief by way of specific performance of the [Agreement].
…
14It seems clear enough that one central aspect of the case will, or would, be the interpretation of the [Agreement]’s provisions about permitted use of the market premises. The resolution of this issue would, in all likelihood, require expert town planning evidence.
15Accordingly, my impression is that Mrs Maher could easily spend $5,000-$6,000 on an investigation of the liability issue without any assurance that it would lead to advice that she had a good arguable case.

On 15 March 2001, Mr Balmer informed Patricia Maher that, due to his other commitments, he was not able to assist her further in relation to the Maher Group’s dispute with Millennium. He recommended that she engage Stephen Curtain, a partner of Riordans.

Engagement of Riordans and events between 19 March 2001 and 9 July 2001

Patricia Maher’s first contact with Mr Curtain was on 19 March 2001, when she telephoned Mr Curtain to ask him to act for the Maher Group. Mr Curtain agreed to act. There is a dispute between the parties about the scope of Riordans’ retainer. This issue is discussed separately below.

Within Riordans’ internal file-keeping records, the subject matter of the new file was described as ‘Breach of Agreement’.

According to Mr Curtain’s file note of his telephone conversation with Patricia Maher on 19 March 2001, Patricia Maher gave him detailed background information about the Maher Group’s dealings with the Bank, Mr Brott and Millennium, and about the contractual arrangements between the Maher Group and Millennium and its associated companies. The file note attributed to Patricia Maher the following statements:

(a)‘I now owe $210K’ and ‘if not what we say it is will have to pay … $210K towds / cost of making it what we said the mkt was’. I infer from these statements that Patricia Maher was aware of the availability of the Option and that she explained to Mr Curtain that the need to pay $210,000 pursuant to the Option would arise if the Market Land could not be used for the Proposed Uses.
(b)‘We altered contract to what cd do’. I infer from this statement that Patricia Maher informed Mr Curtain that the Maher Group had altered the definition of ‘Proposed Uses’ in the Agreement so that it coincided with the uses to which the Market Land could be put.
(c)‘IB telling me will get my house back free’ and ‘IB says we’ll win hands down’. I infer from these statements that Patricia Maher informed Mr Curtain that Mr Brott had advised her that the Maher Group would get the Apartment back for nil consideration and that any proceeding brought by the Maher Group against Millennium to recover the Apartment for nil consideration would be successful.
(d)‘Sue for specific perf. of contract to get my apartment back’, ‘IB says will not sue Herzberg – friend of long standing’, ‘IB says /y’ll settle’ and ‘Sue them and /y’ll settle @ / door – IB says /re’s a lot /y won’t want to come out’. I infer from these statements that Patricia Maher informed Mr Curtain that the Maher Group wanted to sue Millennium for specific performance of the Agreement in order to get the Apartment back; that Mr Brott had advised her that, if proceedings were instituted, Mr Herszberg and Mr Gordon would settle at the door of the Court because they did not want damaging evidence to be presented; and that Mr Brott had refused to sue Mr Herszberg because he was a longstanding friend.
(e)‘IB has a file a foot long – won’t give file to me – but to my son – who has copied most dox’, ‘Brott won’t let him take originals’ and ‘IB w’dn’t provide all papers’. I infer from these statements that Patricia Maher informed Mr Curtain that Mr Brott had an extensive file and that Mr Brott was permitting Justice Maher to copy some of the documents, but was refusing to release the whole file.
(f)‘McKean & Park said we’d win.’ I infer from this statement that Patricia Maher informed Mr Curtain that McKean & Park had advised her that the Maher Group would succeed in any proceeding against Millennium to recover the Apartment.
(g)‘Apartment $650K’. I infer from this statement that Patricia Maher informed Mr Curtain that the Apartment was worth $650,000.

On 22 March 2001, Patricia Maher met Mr Curtain and provided information about her dealings with Mr Herszberg, Mr Gordon and Mr Brott regarding the Apartment. Mr Curtain’s file note attributes to Patricia Maher the statement: ‘Effect of gazettal is to make it comply with what we said we were selling.’ I infer from this statement that Patricia Maher told Mr Curtain that the new Whittlesea Planning Scheme made the Proposed Uses accord with the permitted uses of the Market Land.

At Patricia Maher’s first meeting with Mr Curtain, she gave him copies of some of the relevant documents, including the Agreement. The Maher Group did not have all the relevant documents at that stage because Mr Brott was refusing to release his file.

On 23 March 2001, Mr Curtain sent a letter to Patricia Maher (‘retainer letter’). The retainer letter was headed ‘Millennium Markets Pty Ltd and Others’ and commenced by thanking Patricia Maher for her ‘instructions in this matter’. Although the retainer letter made subsequent reference to the word ‘matter’, it did not define that word. The retainer letter relevantly stated:

Professional fees
Stephen Curtain will be the partner responsible for the matter and will charge at the rate of $275 per hour plus GST for professional fees until the matter becomes litigious in which case we will charge you according to the appropriate Court scale. … Without [having] considered all the material and taken detailed instructions from you, we envisage that if we advise you not to pursue the matter the costs will be in the vicinity of $2,000. If you decide to take legal action professional fees would be in the vicinity of $30,000. If it becomes apparent at any stage that this estimate is no longer accurate, we shall advise you as soon as practicable of any substantial change.
Disbursements
…
We anticipate disbursements for the purposes of providing you with advice as to whether to take action will consist principally of Counsel’s fees and be in the vicinity of $1,000. If the matter proceeds to Court disbursements could be $20,000. Should it appear that substantial additional disbursements need to be incurred, we shall advise you as soon as practicable. …
…
We would anticipate at this early stage your case could run between 2 and 3 days although this may change as the hearing approaches due to the number and complexity of issues involved.
…
Total Costs
It is difficult to provide you with an accurate estimate of the total costs but on the basis of these estimates the total costs should range between $3,000 and $50,000, if the matter proceeds to a hearing.
… If you do not succeed in the action you can expect the court to order you to pay the other side’s party and party costs and disbursements which are likely to be comparable to yours.

On 23 April 2001, Mr Curtain met with Patricia Maher. She provided further factual information. Mr Curtain’s file note states, ‘Gazette allows MKT to do what we put in the cont.’, which I infer means that Patricia Maher informed Mr Curtain that the new Whittlesea Planning Scheme that was gazetted on 8 July 1999 permitted the Market Land to be used for the Proposed Uses that were set out in the Agreement.

On 30 April 2001, Riordans rendered their first tax invoice to Patricia Maher. It was headed ‘Property Sales’.

On 9 May 2001, Mr Curtain had a conference with Patricia Maher and Justice Maher. Justice Maher discussed the operation of the Bundoora All-Weather Market, his correspondence with the Council and whether leases could be granted to stallholders. According to Mr Curtain’s file note, he was instructed to ‘[t]ell Efron [the Mahers] want the apartment back’.

According to a more detailed typed file note relating to the conference that Mr Curtain prepared on 10 May 2001, ‘Justice advised that he was working in Town Planning with Whittlesea for 12 years.’ Justice Maher gave evidence that the typed file note was inaccurate because he had never been employed by the Council. Mr Curtain conceded that the statement in the file note was ambiguous. In my opinion, the statement in the file note meant that Justice Maher informed Mr Curtain that, over a 12-year period, he had dealt with the Council in relation to town planning matters.

On 13 June 2001, Patricia Maher telephoned Mr Curtain to enquire about progress. During this discussion, Patricia Maher asked Mr Curtain to find out the intentions of ‘the other side’ in relation to the Apartment. Mr Curtain’s file note records that he told Patricia Maher that the ‘2 yr contract comes up shortly’ and that she told him, ‘Don’t brief’.

On 18 June 2001, Mr Curtain telephoned Patricia Maher. According to Mr Curtain’s file note, Patricia Maher told him that the uses of the Market Land were no different from previously and that they already had retail outlets and fruit and vegetables there. The file note also stated that the Maher Group had been informed that Mr Herszberg was ready to return the Apartment at the end of June 2001 and that they had received two opinions stating that the Apartment was recoverable. Mr Curtain was instructed to write to Millennium to request that the Apartment be returned to the Maher Group.

On 19 June 2001, on his own initiative, Mr Curtain sent a letter of advice to Patricia Maher. As this letter is of critical importance, it is set out in full below:

I refer to our discussions in this matter. I enclose copy letter I propose to forward to Millennium Markets Pty Ltd and its solicitors relating to the Apartment Contract.
On a plain reading of the contract I consider there are some difficulties associated with having the Apartment Contract cancelled.
I understand your instructions to be that you understood that as long as the amended Whittlesea Planning Scheme did not materially change the permitted use of the Market Land you would be entitled to have the Apartment Contract cancelled because no more than existing uses were required by the contract with Millennium Markets.
However, the proviso in clause 3, requiring the land to be used for the Proposed Uses, states with reference to the proposes uses, whether because of a rezoning of the Market Land and/or by the grant of planning permits on terms reasonably acceptable to the Purchaser. This suggests that some change was necessary to facilitate the Proposed Uses. Furthermore, it is arguable whether the land can be used for factory retailing outlets, fruit and produce market with the ability to grant leases. The most significant concern in this regard is the ability to grant leases when, according to the City of Whittlesea the permit allows a use which is defined as ‘land where vendors of goods temporarily occupy an area or stall for a fee’.
I note your advice in this regard that some stall holders did have leases and the Council effectively sanctioned those leases by granting shop permits to them.
However, the grant of leases involves entitlement to the land which is greater than the right to temporarily occupy it for a fee and the fact that the Council overlooked the difference does not have the effect of allowing a grant of a lease where no such power existed.
In relation to the use as a fruit and produce market, the explanatory memorandum to the definitions related to use of premises under the Planning Scheme states that Trash and Treasure has its ordinary meaning and fruit and produce may well not constitute Trash and Treasure. Further in its letter of 23 November 1999, the City of Whittlesea notes that the endorsed plan for the site limits the areas where fruit and produce can be sold and also points out that the permit allows a Trash and Treasure Market only and all goods sold must conform to this primary use.
On the other hand, I understand your instructions to be that the premises has operated as a fruit and produce market for some time. Furthermore, a Trash and Treasure Market is included in the definition of Retail Premises which is described as land used to sell goods, including foodstuffs from stalls.
In summary, it appears that without objection from the City of Whittlesea, and perhaps with its sanction, the Market Land has been put to a use which does not accord with the permit.
I understand your instructions to be that these issues [were] known to the directors of Millennium Markets Pty Ltd and that the real agreement between the parties was that if the market could continue to operate in the way that you had operated it for some time, then the ‘Proposed Use’ provision had been satisfied and the Apartment Contract could be cancelled.
Courts are able to look beyond the written word of a contract where the words are capable of ambiguity. You will have the burden of showing not only that the existing uses continued and were legal but also that the discussions that you had with the directors of Millennium Markets were such that they were agreeing to accept the existing uses of the Market Land.
Will you kindly confirm that the enclosed letter to Millennium Markets is acceptable to you and I will forward it to that company.[5]

[5]Emphasis in original.

Mr Curtain’s letter of 19 June 2001 attached a draft letter from Riordans to Millennium. The draft letter was prepared in accordance with Patricia Maher’s instructions of 18 June 2001 and was in the following terms:

We act for Simply Irresistible Pty Ltd. We note that by a contract dated 16 March 1999 between, inter alia, your company and our client, it was agreed, by clause 3, that provided the Market Land (as defined in the contract) could be used for the Proposed Uses (as defined) without breaching the provisions of the planning scheme that affects the Market Land by the due date for settlement of the Apartment Contract (as defined), the Apartment Contract was thereby to be cancelled and the deposit repaid to your company.
We are instructed that on 8 July 1999 approval of the Whittlesea Planning Scheme was gazetted in the Victoria Government Gazette and no material change was made which affected use of the Market Land.
We are also instructed that at all times your company well knew the permitted use of the premises and it was not expected that any other use would be obtained. Representatives of your company had visited the market on several occasions and your company’s solicitor had also visited it.
Furthermore, on our instructions the requirement that title to the [Apartment] be provided was to enable you to use the property as security for finance and that this aim has now been fulfilled and satisfied.
Accordingly, our client requires the Apartment Contract to be cancelled and we request that you provide us with a duly executed transfer of the [Apartment] … Our client would like to have the matter resolved by 30 June and we request you provide us with your response by 5.00pm Friday 22 June accordingly.

On 20 June 2001, Mr Curtain spoke to Patricia Maher by telephone. According to Mr Curtain’s file note, Patricia Maher informed him that the Gazette Notice brought the Bundoora All-Weather Market under the ‘Market’ umbrella, clarified what the Maher Group had said about ‘shops etc’ and reinforced their understanding. Patricia Maher also informed Mr Curtain that Mr Brott had guaranteed her that the Maher Group would get the Apartment back as Millennium wanted to know that it could do what it wanted to do with the Market Land. Mr Curtain’s file note also states: ‘Advised of option – right to e’cise’.

On 21 June 2001, Justice Maher telephoned Mr Curtain to discuss the draft letter to Millennium. According to Mr Curtain’s file note, Justice Maher informed him that BAWM gave a lease to a fruiterer, that the lease was upheld as a valuable item and that the Council was giving them annual licences which were not temporary. Justice Maher also told him that the new Whittlesea Planning Scheme had brought trash and treasure markets within the definition of ‘Market’.

During the telephone discussion, Justice Maher requested that the following changes be made to Mr Curtain’s draft letter to Millennium:

(a)in the first paragraph, deletion of the words ‘and the deposit repaid to your company’;
(b)in the second paragraph, substitution of the words ‘which included the uses set out in the contract’ for the words ‘and no material change was made which affected use of the Market Land’; and
(c)in the third paragraph, substitution of the words ‘that you would approach Council for any changes in use’ for the words ‘it was not expected that any other use would be obtained’.

On 21 June 2001, Mr Curtain sent the final version of his letter to Millennium and forwarded copies to Patricia Maher, Mr Efron and Richard Szental, who acted for Mr Herszberg. On 22 June 2001, Mr Efron responded to Riordans’ letter on behalf of Millennium. He requested proof that the Whittlesea Planning Scheme was gazetted on 8 July 1999 and that it ‘included uses set out in the [Agreement].’ He said that ‘[t]o date we are unaware that the Market Land can be used for the Proposed Uses’ and that Millennium had instructed ‘that the Market Land cannot be put to the Proposed Uses.’

Mr Curtain provided a copy of the Gazette Notice to Mr Efron under cover of a letter dated 26 June 2001. The letter referred back to Riordans’ letter of 21 June 2001, stated that the gazettal did not result in any ‘detrimental change to the uses’ and requested Mr Efron to advise whether Millennium ‘will cancel the Apartment Contract by midday Friday 29 June 2001.’

On 25 June 2001, Riordans rendered their second tax invoice to Patricia Maher. It was headed ‘Millennium Markets Pty Ltd – Agreement’ and included the following narration: ‘reviewing relevant material including permitted uses and effect of gazettal’.

On 28 June 2001, Mr Efron wrote a letter to Riordans in which he stated that, while Riordans had provided proof that the Whittlesea Planning Scheme had been gazetted, they had ‘not proved that it includes uses as set out in the [Agreement].’ The letter reiterated Mr Efron’s and Millennium’s view that the Market Land could not be used for the Proposed Uses and concluded as follows:

We require specific proof that the land can be used for the Proposed Uses and thus far you have failed to demonstrate that. We await proof of such from you.

On 29 June 2001, Mr Curtain telephoned Mr Efron to discuss Mr Efron’s letter of 28 June 2001. According to Mr Curtain’s file note, Mr Efron told him that the Proposed Uses did not ‘comply’ in relation to ‘[l]eases, etc’ and that the Maher Group ‘must make [an application] to make [them] comply’.

On 29 June 2001, Mr Curtain telephoned Patricia Maher to advise her of his discussion with Mr Efron. According to Mr Curtain’s file note, Patricia Maher disagreed with Mr Efron. She said that shops and supermarkets had been crossed out of the definition of ‘Proposed Uses’ and that this might make a difference. She also said that leases had been granted. Mr Curtain explained to Patricia Maher that he had doubts about whether leases could be granted. Patricia Maher instructed Mr Curtain to write to Mr Szental because he was ‘softer’.

On Saturday, 30 June 2001, Mr Curtain commenced annual leave, returning to work on Monday, 23 July 2001. The steps that were taken by Riordans during Mr Curtain’s absence on leave are set out below:

(a)on 2 July 2001, another lawyer at Riordans sent to Patricia Maher Mr Efron’s letter of 22 June 2001 and Mr Curtain’s reply dated 26 June 2001; and
(b)on 3 July 2001, Riordans sent a letter to Mr Szental asking whether Mr Herszberg ‘will cancel the apartment contract and transfer the [Apartment] to [Simply]’ and also sent a copy of that letter to Patricia Maher under cover of a letter which stated that Patricia Maher would be informed as soon as Riordans received a reply.

There is no documentary evidence that the Mahers contacted Riordans in the period from 30 June 2001 until 9 July 2001.

As at 9 July 2001, Riordans had not received Mr Brott’s file.

On 9 July 2001, the Option lapsed.

Events between 9 July 2001 and 20 May 2004

According to the documentary evidence, the Mahers contacted Riordans on two occasions while Mr Curtain was on leave. The two occasions are recorded in two entries in Riordans’ ‘Matter Transaction Report’. The first entry is dated 10 July 2001 and states: ‘[telephone call from] client, would like a copy of the letter to Szental faxed to her.’ The second entry is dated 16 July 2001 and states: ‘[telephone call from] client, we may receive a call from Szental. See notes on file.’ The notes to which reference is made in the second entry have not been tendered.

On the day that Mr Curtain returned from leave, 23 July 2001, Patricia Maher telephoned him to discuss Millennium’s refusal to pay an electricity bill for the Apartment. Patricia Maher instructed Mr Curtain to tell Millennium that the Maher Group would sue for specific performance. Mr Curtain’s file note does not refer to the Option.

Mr Curtain spoke to Patricia Maher by telephone on 26 July 2001. Mr Curtain’s file note does not refer to the Option.

On 27 July 2001, Mr Curtain met Patricia Maher. According to Mr Curtain’s file note, Patricia Maher informed him that the Apartment was worth between $450,000 and $650,000, and that she would not buy the Apartment for $250,000, but that she would buy it for ‘$10K+’. There is a subsequent statement in the file note that indicates that Patricia Maher informed Mr Curtain that the Apartment was worth between $400,000 and $450,000. The only reference to the Option in Mr Curtain’s file note was the following statement that was attributed to Patricia Maher: ‘Option clause included because worried that [they would] get me out’.

On 30 July 2001 and 9 August 2001, Mr Curtain spoke by telephone to Patricia Maher. Mr Curtain’s file notes do not refer to the Option.

On 2 and 3 August 2001, Mr Curtain inspected Mr Brott’s file at Mr Brott’s office. Riordans did not receive the file until after 30 October 2001.

As the dispute between the Maher Group and Millennium over the Apartment could not be resolved, Patricia Maher instructed Mr Curtain to obtain written advice from a town planner, Matrix Planning Australia Pty Ltd (‘Matrix’). In a draft report dated 8 August 2001, Matrix advanced arguments as to why the Proposed Uses condition had been satisfied.

On 13 August 2001, Mr Curtain met the Mahers and obtained information from them for the purposes of the proposed proceedings against Millennium. According to Mr Curtain’s file note, the Mahers told him that ‘[Mr Brott] said not to e’cise the option’ and that they were ‘[n]ot prepared to pay $210K’, but ‘[w]ould pay $10K’.

On 30 August 2001, Riordans rendered their third tax invoice for work performed in the period from 25 June 2001 until 29 August 2001. For the period from 25 June 2001 until 9 July 2001, the tax invoice referred to telephone discussions and correspondence in which Riordans had engaged.

The Mahers instructed Mr Curtain to brief Peter Riordan SC with a view to commencing proceedings against Millennium. On 27 September 2001, Peter Riordan SC provided a memorandum of advice, which relevantly stated:

35.Such an argument [namely, that the contract of sale of the Apartment had been cancelled prior to Settlement] would be predicated on the fact that the requirement with respect to the Proposed Uses had been fulfilled. This is a matter that appears to be unclear and subject to argument. In particular, it would be dependent upon findings about the following:
a.Can ‘factory retail outlets’ be operated from stalls or do they require shop premises.
b.Is there an ability to grant leases of the market area.

These appear to be imprecise matters and matters about which experts disagree. For example, see the letter of 7/7/99 from Szental who asserts that factory retail outlets require shop premises and the deed of 16/3/99 contemplated rezoning or a new permit.

…
40.Further, the filing of the caveat resulted in the loss of the opportunity to buy the Bourke Street apartment, by exercising the option, for $210,000 when it is apparently valued at $600,000.

Commencement of proceeding against the Millennium Group and Mr Brott

On 21 December 2001, in accordance with their instructions from the Maher Group, Riordans commenced in this Court proceeding number 8883 of 2001 (‘prior proceeding’) on behalf of the Mahers, Simply, Eternity, BAWM and Pamah Pty Ltd (‘plaintiffs in the prior proceeding’). The defendants were the Millennium Group and Mr Brott (‘defendants in the prior proceeding’).

In the prior proceeding, the principal claim was against Mr Brott. It was alleged that he breached his retainer and acted negligently in advising the plaintiffs in the prior proceeding in relation to the execution of the Agreement and the contract of sale of the Apartment. It was also alleged that he breached his fiduciary duty to the plaintiffs in the prior proceeding by accepting the procurement fee[6] from Mr Herszberg in circumstances which gave rise to a conflict of interest (‘Fee Claim’).
[6]The procurement fee of $150,000 is discussed above at [36].

The main claims against the Millennium Group in the prior proceeding were that they knowingly participated in Mr Brott’s breach of fiduciary duty and that they demanded the transfer of the Apartment in circumstances which amounted to economic duress, unconscionable dealing and a breach of s 51AA of the Trade Practices Act 1974 (Cth).

The relief that was sought in the prior proceeding included an order setting aside the transfer of the Apartment from Simply to Millennium and an order that Mr Brott pay the procurement fee to the plaintiffs in the prior proceeding. Millennium made a counter-claim against Patricia Maher for possession of the Apartment.

On 8 August 2002, Patricia and Justice Maher met with Mr Gordon. Mr Gordon offered to settle the prior proceeding on the basis that Patricia Maher would be given a life tenancy in the Apartment (‘Life Tenancy Offer’). On 9 August 2001, Patricia Maher telephoned Mr Curtain and advised him of the offer. Mr Curtain’s file note attributes the following statements to Patricia Maher: ‘Believe will offer to take apartment back + will sue Brott for damages + legal costs’ and ‘[b]elieves they will give us the apartment’.

On 22 August 2002, Mr Curtain telephoned Patricia Maher to discuss settlement options. Mr Curtain’s file note records that, in response to his advice that she would have to do more than to agree to bear her own costs to secure a settlement, Patricia Maher said that she ‘won’t give more’. The ‘Matter Transaction Report’ records that Patricia Maher told Mr Curtain that ‘she would settle on the basis she would walk away and retain the apartment’, but that she was ‘not prepared to move on this position.’

Mr Curtain had a further discussion with Patricia Maher on 30 August 2002. His file note records that, in response to his urging her to consider a compromise, she said that she ‘won’t settle for less than the ownership of the apartment’. The ‘Matter Transaction Report’ records the following: ‘I suggested she should be prepared to compromise to some extent e.g. by paying some money for the apartment – perhaps something recovered from Brott. She does not want to do this. She wants it made clear that she wants the apartment and nothing less.’

Mediation on 12 March 2003

On 12 March 2003, a mediation took place in relation to the prior proceeding.[7] At the mediation, the plaintiffs in the prior proceeding were represented by Patricia Maher, Justice Maher, Mr Curtain and Peter Riordan SC. A junior solicitor from Riordans, Sandra McColl, also attended the early stages of the mediation. Mr Brott attended the mediation with Howard Obst and Anna Skreiner, who were the solicitors engaged by Mr Brott’s professional indemnity insurer. The Millennium Group were represented by Mr Efron, Mr Herszberg and Mr Gordon.
[7]On 8 November 2010, I ruled that evidence about the making of offers of settlement at the mediation and after the mediation was admissible pursuant to s 131(2)(g) of the Evidence Act 2008 (Vic). See Simply Irresistible Pty Ltd v Couper [2010] VSC 505 (8 November 2010).

During the mediation, Mr Obst offered to pay the plaintiffs $150,000 in relation to the claims against Mr Brott other than the Fee Claim. Mr Obst informed Peter Riordan SC that Mr Brott was uninsured in respect of the Fee Claim. Mr Brott refused to make any offer in relation to the Fee Claim. Millennium offered to sell the Apartment to the plaintiffs for $400,000. The combined effect of these offers was that Simply was given the opportunity to purchase the Apartment for a net outlay of $250,000. I will refer to the offers collectively as ‘the First Joint Mediation Offer’.

The plaintiffs in the prior proceeding rejected the First Joint Mediation Offer. There is a dispute about the advice that Peter Riordan SC and Mr Curtain provided to the plaintiffs about whether they should accept the offer. That issue is discussed separately below.

At the mediation, the plaintiffs in the prior proceeding made a counter-offer that Millennium transfer the Apartment to the plaintiffs for nil consideration and that it pay to the plaintiffs $190,000. Millennium rejected this counter-offer.

Millennium made a counter-offer according to which Patricia Maher would pay $100,000 for a life tenancy in the Apartment. The offer of $150,000 from Mr Brott’s insurer also remained open for acceptance. I will refer to these offers collectively as ‘the Second Joint Mediation Offer’.

At the conclusion of the mediation, Mr Efron and Mr Obst made it clear that the First Joint Mediation Offer remained open for acceptance notwithstanding that the offer had already been rejected by the plaintiffs in the prior proceeding. The offer was never accepted.

Settlement discussions after the mediation

On 30 September 2003, the Mahers met with Mr Gordon. Mr Gordon offered to return the Apartment for $1 provided that the Maher Group agreed that the Millennium Group could take over, and partly fund, the Maher Group’s claims against Mr Brott and retain part of any amount recovered from Mr Brott (‘the $1 Plus Assignment Offer’). Mr Gordon did not quantify the amount that the Millennium Group would retain. On 13 October 2003, Patricia Maher telephoned Ms McColl and informed her of the $1 Plus Assignment Offer. Patricia Maher did not seek Ms McColl’s advice on whether the offer should be accepted. Ms McColl did not provide any advice on the offer; nor did Mr Curtain, once he became aware of the offer. Ms McColl’s file note attributes the following statement to Patricia Maher: ‘She’d rather get a sum out of Brott’s insurer and then haggle with Gordon and Herszberg over what they’ll accept for the [Apartment].’

On 11 November 2003, Patricia Maher telephoned Ms McColl and informed her that the Millennium Group had made an offer to settle all claims between the Maher Group and the Millennium Group on the basis that the Millennium Group would retain the Apartment and the parties would bear their own costs (‘Walk Away Offer’). Patricia Maher did not accept the offer.

Independent advice about possible claim by Maher Group against Riordans

On 25 February 2004, Patricia and Justice Maher sought independent advice from Anthony Strahan of counsel. In his memorandum of 1 March 2004, Mr Strahan relevantly stated:

7.The instructions provided by the Mahers in conference suggest that they did not get advice from Riordan & Partners about … exercising the option. …
…
10.If Riordan & Partners failed to advise about this option it is possible that the Mahers may have a claim against them. …

Notwithstanding Mr Strahan’s advice, Riordans continued to be retained for the purposes of the prior proceeding.

Osborn J’s judgment dated 20 May 2004 in the prior proceeding

The prior proceeding was heard by Osborn J in March and April 2004. In his judgment dated 20 May 2004 (‘Osborn J’s judgment’),[8] Osborn J upheld the Fee Claim against Mr Brott and ordered him to pay to the plaintiffs in the prior proceeding the amount of $150,000 together with $42,290 in interest, a total of $192,290. His Honour dismissed all other claims against Mr Brott and the other defendants, and ordered Patricia Maher to deliver possession of the Apartment to Millennium and to pay to Millennium $10,260 together with interest of $264 and $60 per day until possession was delivered. His Honour also made costs orders, which, as discussed below, were the subject of taxation or agreement between the parties.
[8]Maher v Millennium Markets Pty Ltd [2004] VSC 174 (20 May 2004) (‘Maher’).

Osborn J’s judgment contains a detailed discussion of whether the Proposed Uses condition had been satisfied as at Settlement on 9 July 1999. His Honour concluded that the existing permits for the Market Land did not enable the Proposed Uses to be conducted lawfully on 9 July 1999.[9]
[9]Maher [2004] VSC 174 (20 May 2004) [162].

Termination of Riordans’ retainer

In early August 2004, the Maher Group engaged Coadys to represent them. Coadys wrote to Riordans on 6 August 2004 and put them on notice that the Maher Group might make a claim against them. The Maher Group terminated Riordans’ retainer on 9 August 2004.[10]
[10]The Riordans partnership was reconstituted and changed its name on 1 July 2004. These changes do not have any bearing on the issues in this proceeding.

Following the termination of Riordans’ retainer, a dispute arose with the Maher Group about outstanding legal fees. That dispute was settled on 26 July 2007. On that day, the parties signed terms of settlement pursuant to which the Maher Group agreed to pay to Riordans the amount of $71,848.41. The total amount that the Maher Group paid to Riordans for work done pursuant to the retainer was $270,528.02.

Recital A to the terms of settlement dated 26 July 2007 described Riordans’ retainer as follows:

On 19 March 2001 the Mahers instructed Riordan & Partners to provide legal advice concerning agreements entered into by the Mahers with Millennium Markets Pty Ltd, Myer Herszberg and Moishe Gordon and the Mahers’ claim arising from entry into those agreements against their former solicitor Issac Brott (‘the Retainer’).

Clause 5 of the terms of settlement provided that Riordans would deliver their file to the Maher Group at the time that the payment of $71,848.41 was made.

Appeals against Osborn J’s judgment

On 11 June 2004, Mr Brott appealed to the Court of Appeal in respect of Osborn J’s judgment.

On 15 June 2004, the plaintiffs in the prior proceeding cross-appealed against Osborn J’s judgment in so far as it related to the orders that were made in favour of the Millennium Group. On 5 October 2004, Patricia Maher and Simply discontinued the cross-appeal. As a result of the discontinuance, on 11 October 2004, the Court of Appeal made an order for costs against the plaintiffs in the prior proceeding.[11]
[11]Brott v Maher [2004] VSCA 186 (11 October 2004) [7], [10].

On 27 October 2006, Master Wood assessed at $56,005.53 the costs of the plaintiffs in the prior proceeding that Mr Brott was ordered to pay pursuant to Osborn J’s judgment. This amount was arrived at after setting off certain costs that were awarded in favour of Mr Brott.

All outstanding claims between the Maher Group and the Millennium Group were settled by a deed dated 11 November 2004. The deed relevantly provided that:

(a)the plaintiffs in the prior proceeding agreed to pay to Mr Gordon the amount of $150,000 and to assign to him the amount of $170,000 out of the judgment for $192,290 that they were awarded as against Mr Brott;
(b)Millennium agreed to grant to Patricia Maher a licence to occupy the Apartment rent free until 11 November 2014 or the date that she ceases to reside there or the date of her death, whichever occurs first; and
(c)the parties agreed to mutually release each other of all liabilities, including all orders made in the prior proceeding.

On 8 December 2004, Mr Brott’s appeal to the Court of Appeal was dismissed with costs.[12] The costs of the plaintiffs in the prior proceeding were subsequently assessed at $60,000. On 29 April 2005, an application by Mr Brott to the High Court for special leave to appeal was dismissed.
[12]Brott v Maher [No 2] [2004] VSCA 220 (8 December 2004).

Commencement of this proceeding

This proceeding was commenced on 5 July 2007 by way of a generally indorsed writ. The writ was served in July 2008 and a statement of claim was filed on 22 August 2008.

General comments on evidence and credit

Simply called three witnesses: Patricia Maher, Justice Maher and an expert town planning lawyer, John Cicero. Riordans called four witnesses: Mr Curtain, Ms McColl, Mr Whitby and Peter Riordan SC. In addition, Riordans tendered expert reports from two valuers, Perron King and Saviour Vella.

As the evidence on some of the critical issues in the proceeding was in dispute, the credit of the main witnesses assumed obvious significance. In this part of the judgment, I will make some general comments on the credit of the witnesses who gave oral evidence and set out my broad conclusions about the veracity of their evidence. More specific findings about their evidence are set out below in my discussion of particular issues in dispute.

Patricia Maher

Patricia Maher is 79 years of age. It was apparent that her age affected her ability to recollect some details, such as the dates of meetings and telephone discussions and whether she was present at particular meetings. It was also apparent that she had difficulty hearing some questions.

It follows that, at the time of the mediation on 12 March 2003, Simply was aware not only of the risks of seeking relief under cl 3 of the Agreement, but also of the delays and the costs associated with litigation. By the time of the mediation, Simply was fully aware of the matters upon which Mr Curtain had failed to advise in June 2001. As discussed at [113] and [114] above, at the mediation, Simply rejected the First Joint Mediation Offer, which effectively gave it the opportunity to purchase the Apartment for a net outlay of $250,000. The fact that Simply rejected the First Joint Mediation Offer and made a counter-offer which involved a re-transfer of the Apartment for nil consideration supports my conclusion that, prior to 9 July 2001, Simply would not have paid any amount close to $210,000 for the Apartment, even if Mr Curtain had provided advice along the lines set out at [234] above.[111]
[111]As appears from [384] below, I have concluded that Simply’s rejection of the First Joint Mediation Offer did not constitute a failure to mitigate any loss it allegedly suffered as a result of Riordans’ breaches of their retainer and tort duty. That is a different issue, however, from the issue of whether any inferences about Simply’s state of mind at an earlier time can be drawn from the rejection of the offer.

My conclusion is also supported by the fact that the Maher Group did not accept the $1 Plus Assignment Offer. It will be recalled from [118] above that, on 30 September 2003, Mr Gordon offered to return the Apartment for $1 provided that the Maher Group agreed that the Millennium Group could take over the Maher Group’s claims against Mr Brott and retain part of any amount that was recovered from him. Given that the Apartment was then worth approximately $650,000,[112] on 30 September 2003, the Maher Group let pass an opportunity to re-acquire for $1 a substantial asset that was also Patricia Maher’s long-standing home together with a share in the proceeds of the litigation against Mr Brott, the future costs of which would be borne partly by the Millennium Group. Although the $1 Plus Assignment Offer was not sufficiently certain to be capable of creating a binding contract upon its acceptance, the Maher Group did not act on the offer by seeking Riordans’ assistance in negotiating a binding settlement that included a transfer of the Apartment to Simply for $1.
[112]Patricia and Justice Maher gave evidence that, in July 2001, the Apartment was worth $650,000.

The only evidence that supports the Maher Group’s contention that they would have exercised the Option if Riordans had not breached their retainer and tort duty was that of Patricia and Justice Maher. As discussed at [136] to [155] above, I have concluded that Patricia and Justice Maher were unreliable witnesses, that Mr Curtain was a reliable witness and that I would not hesitate to accept Mr Curtain’s evidence in so far as it was inconsistent with the evidence of Patricia and Justice Maher.

The thrust of the evidence of Patricia and Justice Maher was that they would have exercised the Option if Riordans had advised that they ‘exercise the Option’ or that they ‘should exercise the Option’ or that exercising the Option was ‘the only way’ of recovering the Apartment. Their evidence was almost to the effect that they would have exercised the Option only if Riordans had advised them to do so because they had no other choice. Prior to 9 July 2001, Riordans could not responsibly have advised that exercising the Option was the only way of recovering the Apartment. Nor did they have a duty to make a commercial decision that the Maher Group should exercise the Option.

In any event, I reject the evidence of Patricia and Justice Maher that they would have exercised the Option if they had been advised to do so. The matters that I have set out at [339] to [353] above overwhelmingly indicate that, irrespective of any advice from Riordans, Patricia and Justice Maher would not have exercised the Option. This is because they believed that the Maher Group would obtain a re-transfer of the Apartment for nil consideration either by Millennium agreeing to do so or by a court order for the specific performance of cl 3 of the Agreement.

The simple fact of the matter is that Patricia and Justice Maher made a commercial decision not to spend $210,000 to re-acquire the Apartment pursuant to the Option based on their own assessment of the prospects of ‘getting back’ the Apartment without paying anything for it.[113] Riordans played no part in that assessment. The Mahers were not relying on Mr Curtain for any advice about the exercise of the Option because they had decided not to exercise it long before they engaged him. They were also not relying on Mr Curtain for advice about whether the Proposed Uses condition was satisfied. Indeed, when he volunteered such advice, they brushed it aside. If Mr Curtain had provided advice to the Maher Group along the lines set out at [234] above, they would not have altered their chosen course.
[113]See above [315].

Patricia and Justice Maher are not willing to accept the legal and financial consequences of their commercial decision not to exercise the Option. In the prior proceeding, they sought to blame Mr Brott for those consequences and failed. They now seek to blame Mr Curtain for those consequences and ask this Court to hold him and his partners liable on the basis of evidence that was not only materially different from the evidence that they gave in the prior proceeding, but that was also demonstrably untrue in important respects.

Overall conclusions: did Riordans’ breaches cause any loss to Simply?

It follows from the above discussion that, if Riordans had not breached their retainer and tort duty, and had given advice to the Maher Group along the lines set out at [234] above, the Maher Group would not have changed their position. In particular, the Maher Group would not have exercised the Option because:

(a)they had decided, irrespective of Riordans’ views on the matter, that they had satisfied the Proposed Uses condition and were entitled to recover ownership of the Apartment for nil consideration;
(b)they believed that Millennium would agree to re-transfer the Apartment for nil consideration; and
(c)they were not willing to pay $210,000 for the Apartment.

As the Maher Group would not have altered their position if Riordans had not breached their retainer and tort duty, the breaches did not cause any loss to Simply. The sole cause of Simply’s loss was the Maher Group’s commercial decision not to pay $210,000 to re-acquire the Apartment pursuant to the Option. The legal consequences of this finding are discussed below under the heading ‘Damages’.

Did Simply fail to mitigate its loss?

My conclusion that Simply did not suffer any loss as a result of Riordans’ breaches of the retainer and tort duty makes it unnecessary for me to consider Riordans’ defence that Simply failed to mitigate its loss. However, in case my conclusion is wrong, I will set out brief reasons for my opinion that Simply did not fail to mitigate its loss.

The classic statement of the principle of mitigation was made by Viscount Haldane LC in British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd:[114]

The fundamental basis [for awarding damages for breach of contract] is … compensation for pecuniary loss flowing from the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps.[115]

[114][1912] AC 678.

[115][1912] AC 678, 689.

Although this statement was made in the context of a claim in contract, the principle is equally applicable to claims in tort.[116]
[116]See, eg, Richardson v Schultz (1980) 25 SASR 1, 19-20.

Riordans relied on the following matters in support of their contention that Simply failed to mitigate its loss:

(a)Simply failed to accept the following offers of settlement which, if they had been accepted, would have reduced its loss:
(i)the First Joint Mediation Offer;[117]
(ii)the Second Joint Mediation Offer;[118]
(iii)the $1 Plus Assignment Offer;[119]
(iv)the Life Tenancy Offer;[120] and
(v)the Walk Away Offer.[121]

(b)Simply should have commenced this proceeding on 11 November 2004 or on 27 October 2006. If Simply had done so, it would have obtained judgment approximately two years from those dates – namely, on 11 November 2006 or on 27 October 2008 – when the value of the Apartment was $650,000 and $790,000, respectively, compared to its current value of $925,000.[122]

[117]See above [113].

[118]See above [116].

[119]See above [118].

[120]See above [109].

[121]See above [119].

[122]See below [410], [411].

I will discuss these issues in turn.

Simply’s failure to accept offers of settlement

It was common ground between the parties that the First Joint Mediation Offer was made at the mediation on 12 March 2003. There was a dispute, however, about whether Mr Curtain and Peter Riordan SC advised the Maher Group not to accept the offer.

Mr Bailey tendered three pages of handwritten notes and a one-page diary entry that had been prepared by Justice Maher. Justice Maher gave evidence that he wrote the notes during the course of the mediation and made the diary entry subsequently, possibly on the same day.

The diary entry contains the following notes:

(a)‘Peter/Stephen offer unreasonable, wanted to Walk Out Peter’;
(b)‘Advice Peter/Stephen offer completely unacceptable Must litigate to get Unit back’; and
(c)‘RIORDANS ADVICE LITIGATE NO OTHER OPTION’.

The handwritten notes contain the following statement: ‘Riordans Advice Must Litigate OFFERS NOT REASONABLE RIORDANS’.

Justice Maher gave evidence that was consistent with his notes and diary entry. According to that evidence, Peter Riordan SC said, ‘Absolutely no’ to the First Joint Mediation Offer and told the Mahers to get up and walk out of the mediation. Mr Curtain said that the offer was unreasonable. As the mediation progressed, Peter Riordan SC and Mr Curtain advised that the Maher Group must litigate to get back the Apartment.

Patricia Maher gave evidence that Peter Riordan SC advised the Maher Group not to accept the First Joint Mediation Offer and that they rejected the offer on his advice. Mr Curtain did not advise them that the offer was a good deal and that they should accept it.

Mr Curtain’s file note of the mediation does not record the advice, if any, that he gave to the Mahers about the First Joint Mediation Offer.

Mr Curtain gave evidence that he recalled advising Patricia Maher that the First Joint Mediation Offer was a good deal and that she should accept it. He believed that Peter Riordan SC would have given the same advice. If Peter Riordan SC had given different advice, he would have regarded that fact as significant and would have recorded it.

Mr Curtain said that Patricia Maher rejected the First Joint Mediation Offer because she wanted money for a claim relating to a quarry. He and Peter Riordan SC advised her that the quarry claim had little or no merit and that she should accept the First Joint Mediation Offer. He did not recall seeing Justice Maher taking any notes at the mediation.

Mr Curtain denied that Peter Riordan SC had advised the Mahers to walk out of the mediation.

Ms McColl gave evidence that Justice and Patricia Maher rejected the First Joint Mediation Offer because they wanted to receive payment for the quarry claim. Her file note does not record any advice given by Mr Curtain on whether the offer should be accepted. Ms McColl recalled that Patricia Maher said that she did not want to have to pay for the return of the Apartment.

Peter Riordan SC gave evidence that, while he had no specific recollection of any advice that he gave about the First Joint Mediation Offer, it is likely that he advised the Mahers to reject the offer and to make a counter-offer so that a negotiated settlement could be reached. He had no recollection of ever saying that the Mahers should walk out of the mediation. He would be surprised if he had done so, as that would have brought the negotiations to an end. He strongly believed that he would not have said, ‘Must litigate to get unit back’. He could not recall ever saying that to any client. In any event, he certainly doubted that he would have made such a comment to the Mahers, as it was his understanding that the Maher Group did not have the capacity to fund the litigation.

Peter Riordan SC said that he did not believe that Mr Curtain gave any advice independently of him at the mediation.

For the reasons discussed at [145] to [151] above, I reject Justice Maher’s evidence about the advice that Mr Curtain and Peter Riordan SC provided concerning the First Joint Mediation Offer because it was not corroborated by any independent evidence.

Based on Mr Curtain’s evidence that he did not see Justice Maher taking any notes at the mediation, I have reservations about whether Justice Maher’s diary entry and three-page document were written on 12 March 2003. Some of the words in the diary entry were written in blue pen, whereas others were written in black pen. Some words were spaced normally, whereas others were spaced tightly together, suggesting that the contents were written on separate occasions. For these reasons, I am not satisfied that the diary entry or the three-page document accurately record what Mr Curtain and Peter Riordan SC said to the Mahers at the mediation.

In the absence of any support for Mr Curtain’s evidence about the advice that was given to the Mahers concerning the First Joint Mediation Offer in his or Ms McColl’s file notes, the most reliable evidence about that advice was that of Peter Riordan SC. In accordance with that evidence, I make the following findings:

(a)Peter Riordan SC advised the Mahers not to accept the First Joint Mediation Offer and to negotiate for a better offer;
(b)Peter Riordan SC did not advise the Mahers to walk out of the mediation or that they must litigate; and
(c)Mr Curtain did not give any advice that differed from Peter Riordan SC’s advice. In particular, he did not advise that the First Joint Mediation Offer was a good deal and that Patricia Maher should accept it.

It was not unreasonable for the Maher Group to accept Peter Riordan SC’s advice to reject the First Joint Mediation Offer and to negotiate for a better offer. This is particularly the case having regard to the fact that Riordans did not advise Simply to accept the First Joint Mediation Offer.

I am satisfied that Simply did not act unreasonably in rejecting the other offers of settlement. The Second Joint Mediation Offer, the Life Tenancy Offer and the Walk Away Offer would not have resulted in Simply attaining ownership of the Apartment. The $1 Plus Assignment Offer was not in a form that would have enabled a binding contract to result from its acceptance. Furthermore, as Riordans did not provide any advice to the Maher Group about the merits of the offer, it is difficult to see how they can rely on the Maher Group’s rejection of the offer as a breach of Simply’s duty to mitigate its loss.

For the above reasons, in my opinion, Simply’s failure to accept the offers of settlement that were made after 9 July 2001 did not constitute a failure to mitigate any alleged loss arising from Riordans’ breaches of their retainer and tort duty.

Simply’s delay in commencing this proceeding

Mr Booth submitted that Simply should have commenced this proceeding on 11 November 2004 when all outstanding issues in the prior proceeding were settled,[123] rather than waiting until 2007 to do so. In the alternative, he submitted that the proceeding should have been commenced on 27 October 2006 when Mr Brott made payments pursuant to costs orders.[124]
[123]See above [131].
[124]See above [130].

Justice Maher gave evidence that there was a delay between the termination of Riordans’ retainer in 2004 and the commencement of this proceeding in 2007 because of the dispute between the Maher Group and Riordans over unpaid fees. The dispute delayed the delivery of Riordans’ file to the Maher Group’s new lawyers, Coadys, until approximately July 2007.[125] Coadys went into receivership in late 2007 and had to be replaced by the Maher Group’s current lawyers.
[125]See above [125]-[127].

I reject Justice Maher’s evidence that the Maher Group’s delay in commencing this proceeding was causally related to Riordans’ refusal to deliver their file to Coadys. This is because the proceeding was commenced before Riordans delivered their file to Coadys.

Nevertheless, I have not been persuaded that Simply acted unreasonably in delaying the commencement of this proceeding until 2007. The fact that all outstanding issues in the prior proceeding were settled on 11 November 2004 does not mean that Simply had the financial resources to commence the proceeding at that time; nor does the fact that the Maher Group received some costs on 27 October 2006. I would need to know more about Simply’s financial position and the other pressing financial needs of the Maher Group before I could conclude that Simply was able to fund the litigation in 2004 or 2006.

Accordingly, Simply’s failure to commence this proceeding prior to 2007 did not constitute a failure to mitigate any alleged loss arising from Riordans’ breaches of their retainer and tort duty.

I note, in passing, that Mr Booth was not able to refer me to any case in which it was held that a plaintiff’s decision to delay the commencement of a proceeding constituted a failure to mitigate its loss. Litigation that was previously unviable may become viable at a later time. Where the plaintiff commences a proceeding within the limitation period and the nature of the proceeding is such that the relief sought is not discretionary, it is not clear to me why his or her damages should be reduced merely because the time at which the proceeding was commenced was determined by reference to his or her interests, rather than those of the defendant. However, it is not necessary for me to express a final view on this issue.

Conclusion in relation to mitigation of loss

For the above reasons, if, contrary to my finding at [360] above, Simply suffered a loss as a result of Riordans’ breaches of their retainer and tort duty, I would not have reduced the award of damages on the basis that Simply had failed to mitigate its loss.

Was Simply contributorily negligent?

Mr Booth’s submission that Simply was contributorily negligent was based on the same matters as those upon which he based his submissions that Simply had not relied on Riordans’ advice and had failed to mitigate its loss.

As contributory negligence relates to the plaintiff’s conduct before the defendant’s breach, whereas mitigation relates to the plaintiff’s conduct after the defendant’s breach,[126] Simply’s failure to accept the settlement offers and its delay in commencing the proceeding cannot constitute contributory negligence.
[126]Richardson v Schultz (1980) 25 SASR 1, 19-20.

My conclusion that Simply did not suffer any loss as a result of Riordans’ breaches of their retainer and tort duty renders it unnecessary for me to reach a conclusion on whether Simply was contributorily negligent. I would only note that, if Simply had relied on Riordans for advice about the Option and had suffered loss as a result of Riordans’ negligent provision of that advice, it would have been difficult to justify any reduction in the damages that Simply could have recovered on the basis of contributory negligence.

Damages
Principles for assessing damages in contract and in tort.

In an action for breach of contract, damages are awarded with the object of placing the plaintiff, as nearly as possible, in the position in which he or she would have been had the contract been performed.[127]
[127]Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 80, 98, 116-17, 134, 148, 161; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 11-12; Johnson v Perez (1988) 166 CLR 351, 371, 386.

In an action in tort, damages are awarded with the object of placing the plaintiff, as nearly as possible, in the position in which he or she would have been had the tort not been committed.[128]
[128]Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 12; Johnson v Perez (1988) 166 CLR 351, 355, 371, 386.

A party that has breached a contract is liable to pay at least nominal damages, even if the breach has not caused any loss.[129]
[129]See, eg, Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286, 305, 311-12; Huppert v Stock Options of Australia Pty Ltd (1965) 112 CLR 414, 424, 431; Chappel v Hart (1998) 195 CLR 232, 270 [93], 290 [149].

The general, although not universal, rule is that damages in tort or in contract are assessed as at either the date of the breach or the date when the cause of action accrued.[130]
[130]Johnson v Perez (1988) 166 CLR 351, 355-6, 367, 370, 380; Wenham v Ella (1972) 127 CLR 454, 473. Subject to one exception that is not relevant to this case, where these dates are different, it is more accurate to refer to the date when the cause of action accrued: see M J Tilbury, Civil Remedies (Butterworths, 1990) vol 1, 166 [3224].

This general rule is applied more strictly in contract than in tort.[131] It will yield if, in the particular circumstances of the case, another date for the assessment of damages is necessary to provide adequate compensation to the plaintiff.[132] As Brennan J explained in Johnson v Perez:[133]

The general rule as to the date at which damages are to be assessed is subject to the principle governing the measure of damages. A plaintiff who has suffered damage as a result of a defendant’s tort or breach of contract is entitled to such a sum as will, so far as possible, put him in the same position as he would have been in but for the tort or breach of contract … The time at which damages are assessed must be so fixed as to give effect to the governing principle.[134]

[131]Johnson v Perez (1988) 166 CLR 351, 356.

[132]Johnson v Perez (1988) 166 CLR 351, 355-6, 367, 371, 380.

[133](1988) 166 CLR 351.

[134](1988) 166 CLR 351, 371.

In the same case, Mason CJ said:

the principles governing the assessment of damages do not permit the application of rigid rules based on categories of actions. Instead, the injured party’s intentions and the surrounding circumstances must be considered in light of the underlying principles in order to do justice between the parties. Where mitigation is possible, an early date for assessment may be appropriate. Where mitigation concerns are not relevant and the circumstances indicate that the injured party would have maintained possession of the goods had the accident not occurred, the date of judgment is the most appropriate date for assessment.[135]
[135]Johnson v Perez (1988) 166 CLR 351, 360.

Award of $1 nominal damages

At [360] above, I concluded that Riordans’ breaches of their retainer and tort duty did not cause any loss to Simply.

As stated at [397] above, a party in breach of contract is liable to pay at least nominal damages.

Accordingly, Simply will be awarded nominal damages of $1 for Riordans’ breach of their retainer.

Assessment of damages on assumption award of nominal damages is incorrect

In case my conclusion that Simply did not suffer any loss is wrong, I will provide brief reasons for my conclusion that, if Simply did suffer loss, its loss amounted to $575,070.

The amount of $575,070 is calculated as follows:

(a)$925,000, representing the current value of the Apartment; less
(b)$210,000, representing the purchase price of the Apartment under the Option clause of the Agreement; less
(c)$130,000, representing borrowing costs on the amount of $210,000 for the period from 9 July 2001 until the date of judgment; less
(d)$9,930, representing conveyancing costs.

I will discuss each of these amounts in turn.

Current value of the Apartment

At [361] to [391] above, I concluded that Simply did not fail to mitigate its loss.

Patricia Maher gave evidence that she wanted to recover ownership of the Apartment because it was her home, and that she wanted to live there for the rest of her life. I have inferred from this evidence that, if Simply had recovered ownership of the Apartment, the Apartment would have been retained at least for the rest of Patricia Maher’s life.

In accordance with the principles set out at [400] above, in assessing damages, the most appropriate value of the Apartment is its value at the date of judgment.

Riordans tendered, without objection, expert witness reports prepared by Mr King. Those reports express the following opinions:

(a)the value of the Apartment on 11 November 2006 was $650,000;
(b)the value of the Apartment on 27 October 2008 was $790,000;
(c)the value of the Apartment on 5 July 2009 was $830,000; and
(d)the value of the Apartment on 10 March 2010 was $925,000.

The parties agreed that I can accept the accuracy of the above evidence for the purposes of this proceeding. The parties also agreed that the current value of the Apartment is the same as its value as at 10 March 2010, namely, $925,000.

Purchase price of the Apartment upon exercise of the Option

The amount of $210,000 is contained in cl 1.2 of the Agreement, which is set out at [28] above.

Borrowing costs or allowance for rent-free occupation of the Apartment

As discussed at [322] and [325] above, Patricia and Justice Maher gave evidence that Simply would have borrowed money to fund the purchase of the Apartment if Simply had exercised the Option.

Mr Booth submitted that an amount of $130,000 was a reasonable estimate for the interest that Simply would have paid between 9 July 2001 and the date of judgment on the amount of $210,000. He based this calculation on average rates of interest during that period. Mr Bailey did not dispute Mr Booth’s estimate.

In the alternative, Mr Booth submitted that an allowance should be made for the value of Patricia Maher’s rent-free occupation of the Apartment since 9 July 2001. He tendered an expert witness report prepared by Mr Vella, which listed the rent being paid by tenants of other units in the Apartment’s building at 50 Bourke Street, Melbourne. The parties agreed that, on the basis of Mr Vella’s report, I can make the following findings about the market rent of the Apartment:

(a)the market rent for the Apartment in the period from 2001 until 2003 was $1,200 to $1,600 per month; and
(b)the market rent for the Apartment in the period from 2003 until the date of judgment was $1,600 to $2,255 per month.

In the light of the imprecision in these rental figures, I am of the opinion that it is more appropriate to make an allowance for borrowing costs.

Conveyancing costs

The parties agreed that Simply would have incurred conveyancing costs of $9,930 if it had exercised the Option on 9 July 2001. The costs would have comprised $8,260 for stamp duty, $725 for Land Titles Office registration fees and $945 for reasonable legal costs and disbursements.

Items that I have not taken into account in assessing damages

The parties agreed that:

(a)during the retainer, the Maher Group paid to Riordans the net amount of $154,522.49;
(b)the Maher Group paid to Coadys the amount of $139,206.66 in relation to Mr Brott’s appeal and the Maher Group’s cross-appeal, and in obtaining the file from Riordans;
(c)the Maher Group paid a net amount of $107,760 to the Millennium Group under the deed of settlement dated 11 November 2004;[136] and
(d)Millennium paid to the Maher Group the amount of $71,113.61 representing costs that were recovered from Mr Brott.

[136]See above [131].

In my opinion, the amounts referred to at [418] above (which total $330,375.54) should not be taken into account in assessing damages because there is no causal relationship between them and Riordans’ breaches of their retainer and tort duty. This is because the evidence overwhelmingly indicates that, if Simply had exercised the Option, it would also have instituted the prior proceeding. The events that occurred following the commencement of the prior proceeding – including the incurring of various costs – were caused by the commencement of that proceeding and by the decisions that the Maher Group made in relation to that proceeding, and not by any antecedent breach of duty by Riordans.

Proposed order

Riordans will be ordered to pay to Simply nominal damages of $1 for breach of contract.

I will hear from the parties on the precise form of the orders to be made by the Court and on the question of costs.

Glossary

Agreement	Agreement dated 16 March 1999 between Simply, Millennium and other parties.
Apartment	Unit 20, 50 Bourke Street, Melbourne.
Bank	Westpac Banking Corporation Ltd.
BAWM	Bundoora All-Weather Market Pty Ltd.
Council	City of Whittlesea.
defendants in the prior proceeding	The Millennium Group and Issac Brott.
Eternity	Eight-Sixth Eternity Pty Ltd.
Fee Claim	The claim to which reference is made at [106].
First Joint Mediation Offer	The offer to which reference is made at [113].
*Gazette* Notice	The notice of the making of a new Whittlesea Planning Scheme that was published in the Victoria Government Gazette on 8 July 1999. See [41].
Life Tenancy Offer	The offer to which reference is made at [109].
Maher Group	The Mahers and their corporate entities, including Simply.
Mahers	Patricia Maher, Justice Maher and Dominus Maher.
Market Land	The land situated at 187 Settlement Road, Thomastown, upon which a trash and treasure market known as the Bundoora All-Weather Market was conducted.
Matrix	Matrix Planning Australia Pty Ltd.
Millennium	Millennium Markets Pty Ltd
Millennium Group	Millennium, Myer Herszberg and Moishe Gordon.
Option	The option to re-purchase the Apartment that is contained in cl 7 of the Agreement, the terms of which are set out at [27].
Osborn J’s judgment	Maher v Millennium Markets Pty Ltd [2004] VSC 174 (20 May 2004).
plaintiffs in the prior proceeding	The Mahers, Simply, Eternity, BAWM and Pamah Pty Ltd.
prior proceeding	Supreme Court proceeding number 8883 of 2001 commenced on 21 December 2001 by the plaintiffs in the prior proceeding against the defendants in the prior proceeding.
procurement fee	The fee of $150,000 to which reference is made at [36].
Proposed Uses	Use of the Market Land for factory retailing outlets, a fruit and produce market, and a trash and treasure market.
Proposed Uses condition	The proviso in cl 3 of the Agreement about the Proposed Uses.
retainer letter	Letter dated 23 March 2001 from Mr Curtain to Patricia Maher. See [73].
Riordans	Riordan & Partners.
Second Joint Mediation Offer	The offer to which reference is made at [116].
Security Properties	The properties listed at [10].
Settlement	9 July 1999.
Simply	Simply Irresistible Pty Ltd
the $1 Plus Assignment Offer	The offer to which reference is made at [118].
tort duty	Riordans’ common law duty of care to Simply.
Walk Away Offer	The offer to which reference is made at [119].
Warranwood Land	The land situated at 14 Warranwood Place, Bundoora.

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[2010] VSC 601

17 December 2010