Spralja v Bullard
[2018] VCC 437
•3 September 2018
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMON LAW DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-14-00707
| Steven Spralja | Plaintiff |
| v | |
| David Ernest Bullard & Ors | Defendants |
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JUDGE: | His Honour Judge Woodward | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27, 28 February, 1, 2 and 5 to 8 March and 6 April 2018 | |
DATE OF JUDGMENT: | 3 September 2018 | |
CASE MAY BE CITED AS: | Spralja v Bullard & Ors | |
MEDIUM NEUTRAL CITATION: | [2018] VCC 437 | |
REASONS FOR JUDGMENT
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Subject: TORTS
Catchwords: Negligence – duty of care – solicitor and barristers – failure to properly advise concerning settlement options – failure to secure clear instructions – assessment of prospects of success in original proceeding – issues of construction and repudiation – causation – loss of opportunity to run proceeding to trial and determination – advocate’s immunity in relation to advice on settlement
Legislation Cited: Wrongs Act 1958 (Vic) ss24AE, 24AF, 24AH, 24AI, 51, 52, 57-59; Fisheries Management Act 1991 (Cth); Fishing Levy Regulations 2005 (Cth) Regs 36, 42
Cases Cited:Goddard Elliott v Fritsch [2012] VSC 87; Dual Homes Pty Ltd v Moores Legal Pty Ltd (2016) 50 VR 129; Christodoulou v Christodoulou [2009] VSC 583; Studer v Boettcher [2000] NSWCA 263; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; R & A Cab Co Pty Ltd v Kotzman [2008] VSCA 68; Sopov & Anor v Kane Constructions Pty Ltd (2007) 20 VR 127; DTR Nominees Pty Ltd v Mona Homes (1978) 138 CLR 423; Harvey v Phillips (1956) 95 CLR 235; Gould v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490; Wallace v Kam (250) CLR 375; Richtoll Pty Ltd v WW Lawyers Pty Ltd (in liq) [2016] NSWCA 308; Badenach v Calvert (2016) 257 CLR 440; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Attwells v Jackson Lalic (2016) 259 CLR 1; Kendirjian v Lepore (2017) 259 CLR 275; Giannarelli v Wraith (1988) 165 CLR 543
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms G Berlic | Garland Hawthorn Brahe Lawyers |
| For the Defendants | Mr D Klempfner for the first defendant Ms A J Golding for the second and third defendants | Colin Biggers & Paisley Lawyers DLA Piper |
HIS HONOUR:
1 The plaintiff Steven Spralja is an 80-year-old retired fisherman from the seaside town of Lakes Entrance, Victoria. On 28 November 2005, Mr Spralja signed an agreement with Peter Kelly for the sale of Mr Spralja’s fishing permit and shark catch quota (“sale agreement”) for $645,000, plus GST. Within two weeks, Mr Spralja and Mr Kelly were in dispute over the terms of the sale agreement. The dispute escalated over ensuing months. On 17 August 2007, Mr Kelly commenced proceedings in this court seeking specific performance of the sale agreement and other relief. Mr Spralja counterclaimed, alleging Mr Kelly had repudiated the sale agreement and claiming damages (“original proceeding”).
2 On 19 February 2008, Mr Spralja signed terms of settlement of the original proceeding (“settlement terms”). This case concerns the legal advice Mr Spralja received (or, perhaps more importantly, did not receive) about those settlement terms. Mr Spralja’s solicitor and barristers considered that the settlement terms were within the range of what Mr Spralja might reasonably expect to recover in the original proceeding. His solicitor at the time was David Bullard, who had been retained only a week earlier in circumstances discussed below. Mr Bullard’s firm is the first defendant. Mr Spralja’s barristers were the second defendant Mr Casement and Mr Scarfo. Mr Scarfo is deceased and his wife Elizabeth Scarfo in her capacity as the holder of letters of administrator ad litem of her husband’s estate, is the third defendant. For convenience, I have not attempted to distinguish in these reasons between Mr Scarfo and his administrator, and refer below to Mr Scarfo and “the defendants” as if he were still the named third defendant. No disrespect is intended.
3 Mr Spralja says that the settlement terms were not in his interests and that his lawyers did not ensure that he understood the terms. He also alleges that his lawyers knew he was unwell at the time of the settlement and that they nevertheless forced him to sign the settlement terms. Mr Spralja claims damages, but orders were made in the proceeding on 16 October 2017 that the trial would proceed on liability only. Having said that, damage is an element of a cause of action in negligence, and so it cannot be entirely excluded from consideration. For the reasons below, I have found that the defendants are liable in negligence to Mr Spralja and will order that they pay one third each of any damages awarded in his favour.
4 The questions for determination in the proceeding are as follows:
(a) What were Mr Spralja’s prospects of succeeding in the original proceeding?
(b) What advice did each of the defendants give to Mr Spralja about his prospects in the proceeding up to and including 18 February 2008?
(c) Did Mr Spralja give instructions to accept a settlement offer from Mr Kelly on 18 February 2008?
(d) Was a binding settlement agreement reached between Mr Kelly and Mr Spralja on 18 February 2008?
(e) What advice did each of the defendants give to Mr Spralja on 19 February 2008?
(f) Was Mr Bullard’s conduct in relation to the settlement in breach of his retainer with Mr Spralja?
(g) Was the conduct of any of the defendants in relation to the settlement in breach of their respective duties of care to Mr Spralja?
(h) If so, did that breach cause loss to Mr Spralja?
(i) If so, are any of the defendants entitled to claim advocate’s immunity in respect of any such breach of retainer or negligence?
(j) If not, how should responsibility for the breach be apportioned among the defendants?
What were Mr Spralja’s prospects of succeeding in the original proceeding?
5 Bullards have submitted that because Mr Spralja has not called expert evidence with respect to his prospects of success in the original proceeding, “the Court must be cautious to ensure that it does not inadvertently assess Mr Spralja’s prospects of success in the Kelly Proceeding by reference to the evidence bearing upon the Kelly Proceeding adduced in the present proceeding”. Bullards further submitted as follows:
“Put simply, the Court is not in a position to determine the outcome of the Kelly Proceeding without the benefit of evidence from Mr Kelly and Mr Haslam and full articulation of all issues in dispute in the Kelly Proceeding. The real issue for determination is not so much Mr Spralja’s prospects of success in the Kelly Proceeding but whether the settlement of those proceedings was within the range of appropriate outcomes in all the circumstances. In seeking to impugn the settlement, it was incumbent upon Mr Spralja to call evidence from a suitably qualified expert to opine upon the reasonableness (or unreasonableness) of the settlement armed with the information available to Bullards as at February 2008.”
6 I assume for this purpose that the “range of appropriate outcomes in all the circumstances” means the range of outcomes:
· assessed in the circumstances existing on 18 or 19 February 2008; and
· that might reasonably have been expected had the original proceeding gone to judgment following a trial in about May 2008.
7 Counsel for Bullards developed these submissions in oral argument. He submitted that the many cases where the courts have said that there is no requirement for expert evidence, concerned evidence as to the duty itself. In this case, he submitted, the expert evidence that the plaintiff failed to adduce was as to the reasonableness or otherwise of the settlement that was struck in the light of the circumstances known to the defendants on 18 or 19 February 2008. He added:
“It is dangerous for Your Honour to come to a conclusion about the duty of care unaided by any expert evidence called on behalf of the plaintiff as to what a reasonably diligent or prudent practitioner would have done in the circumstances armed with the information known to the practitioners at that time”.
8 There are two difficulties with these submissions. First, whether the settlement terms were “within the range of appropriate outcomes”, is not the real issue for determination in this proceeding. The real issue, at least on the question of liability, is whether the conduct of the defendants in acting for Mr Spralja in relation to the settlement met the requisite standard of care.[1] In my view, conduct could fail to meet that standard and still result in a settlement within the range of appropriate outcomes. Put another way, even if the settlement terms represented an objectively reasonable outcome for Mr Spralja, it does not follow that there was no breach of duty by the defendants along the path to that outcome. Having said that, how the settlement terms compare to the range of outcomes that could reasonably have been expected had the proceeding gone to judgment, is likely to be relevant to causation and damages.
[1]Conveniently and comprehensively summarised in Goddard Elliot at [405]-[419]; see also Wrongs Act 1958 (Vic) ss57-59
9 Second, I do not agree that assessing the prospects of success in the original proceeding required either expert evidence or “evidence from Mr Kelly and Mr Haslam and full articulation of all issues in dispute” in the original proceeding. The proper approach to the conduct of the “trial within a trial” in cases such as the present, is usefully summarised by Bell J in Goddard Elliott v Fritsch[2] (“Goddard Elliott”), as follows:
“When conducting a notional trial of the claim, the court is not determining the actual outcome of the trial on the balance of probabilities as if the notional trial court were the actual trial court for the claim. It is determining what the plaintiff’s prospects of success were in that trial for the purposes of determining whether anything of value was lost by reason of the lawyer’s negligence. Therefore, the court does not have to make a binary choice between the plaintiff’s probable success or failure in the putative trial but rather must determine where in the spectrum of results the plaintiff’s prospects did lie. The value of the plaintiffs lost opportunity is then ascertained ‘by reference to the degree of probabilities or possibilities’ [citing Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355].”
[2][2012] VSC 87 at [847]
10 His Honour also noted that the authorities do not lay down any hard and fast rule as to what evidence has to be adduced in the notional trial where the plaintiff’s prospects of success are being examined. In cases where the position on prospects of success is not clear, depending on the circumstances, it has been emphasised that the “process of assessment may well require a broad-brush approach”.[3] In my view, Mr Spralja’s prospects in the original proceedings are not “very clear” in the sense discussed by Bell J in Goddard Elliot. But nor are they incapable of being assessed on the evidence adduced in this proceeding, noting that the task is not one of determining the actual outcome of the trial on the balance of probabilities.
[3]Goddard Elliott at [849], citing Johnson v Perez (1988) 166 CLR 351 at 367.
11 Counsel for Bullards submitted that expert evidence about the nature or extent of the duty in a particular case, is “not required”. Such evidence is more accurately described as inadmissible.[4] On the other hand, the authorities make clear that expert evidence may be admissible and relevant in a claim against lawyers where there is a question of particular practices.[5] However, while expert evidence may be admissible to establish the scope and alleged breach of the standard of care owed by the lawyer to the client, it does not follow that the evidence is necessary. It is well established that the court is able to determine those issues for itself.[6] In most cases involving claims against lawyers, “the Court presumably knows for itself what the ordinary reasonably prudent and careful solicitor ought to know and do”.[7]
[4]Midland Bank Trust Co v Hett, Stubbs & Kemp [1979] Ch 384 per Oliver J at 420, cited with approval in Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642, per Kirby P at 653
[5]Dual Homes Pty Ltd v Moores Legal Pty Ltd (2016) 50 VR 129, per Dixon J at [120]; Christodoulou v Christodoulou [2009] VSC 583, per Kaye J at [140]
[6]Goddard Elliot at [419]
[7]Neagle v Power [1967] SASR 373, per Bray CJ at 376, cited with approval in Fox v Everingham and Howard (1983) 76 FLR 170, per Woodward, Muirhead and Sheppard JJ at 179
12 And far from it being dangerous for me to reach conclusions unaided by expert evidence as to “what a reasonably diligent or prudent practitioner would have done in the circumstances armed with the information known to the practitioners at that time”, it seems the reverse is true. Kaye J in Christodoulou v Christodoulou[8] expressly held that: “The expert is not entitled to give evidence as to what he or she would or might have done in the circumstances of the case before the court”[9] (emphasis added). Even in relation to issues of professional standards or common practice, expert evidence is not essential. Where no expert evidence is called, it falls to the court to provide its definition of the scope of the duty of care owed by reference to general principles,[10] and to determine what, in the circumstances, an ordinary reasonably prudent and careful lawyer would have advised.[11]
[8][2009] VSC 583
[9]Christodoulou v Christodoulou [2009] VSC 583, per Kaye J at [140]
[10]Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642, per Kirby P at 654
[11]Christodoulou v Christodoulou [2009] VSC 583, per Kaye J at [142]
13 Against that background, an assessment of Mr Spralja’s prospects in the original proceeding is a necessary preliminary step in the analysis of the questions in this proceeding for two reasons. First, it provides important context for the examination of the defendants’ conduct in relation to the settlement of the original proceeding. Second, if a breach of duty by any of the defendants is established, the assessment will inform whether Mr Spralja lost something of value in acceding to the settlement and thus has a complete cause of action in negligence.
Events leading up to the original proceeding
14 Mr Spralja skippered his own fishing boat for about 20 years until 1990, when problems with his hearing led him to employ a skipper and run his fishing business on-shore. In 2004 he was diagnosed with prostate cancer and began a course of treatment. During 2005 Mr Spralja decided to retire entirely from fishing and began the process of selling the assets of his business. This coincided with the implementation of a number of changes in the regulation of off-shore fishing by the Commonwealth government, overseen by the Australian Fisheries Management Authority (“AFMA”).
15 As at early 2005, Mr Spralja was the holder of Fishing Permit 25644D (“Permit D”). Permit D covered all Mr Spralja’s State and Commonwealth fishing rights. In June 2005, Mr Spralja arranged for Melbourne Shipbrokers, a firm of fish quota and fishing vessel brokers, to apply to AFMA to split his State licence entitlement from his Commonwealth entitlements. On 24 August 2005, Mr Spralja’s Permit D was extinguished and he was issued with two new permits, being:
· Fishing Permit 25644E (Commercial Fishing & Southern & Eastern Scale Fish & Shark Fishery, Victorian Coastal Waters Sector, Trawling) (“Permit E”); and
· Fishing Permit 27325P (Commercial Fishing & Southern & Eastern Scale Fish & Shark Fishery, Gillnet, Hook & Trap Quota Species) (“Permit P”).
16 Mr Spralja had sold his fishing boat and his quota of scale fish earlier in 2005. This left him as at 24 August 2005 with his quota of shark (comprising Gummy Shark, Elephant Fish, Saw Shark and School Shark) (“Shark Quota”) that was then attached to his Permit P, and a recently created “Statutory Fishing Right” (“SFR”) known as a Gillnet Boat SFR 88 (“Boat SFR”). It was widely expected in the fishing industry by this time that AFMA would in due course introduce a further category of SFR in relation to Shark Quota (“Shark Quota SFR”). In the meantime, Mr Spralja had leased most of his Shark Quota for 2005 (through Melbourne Shipbrokers) to Kevin Haslam. AFMA also announced a buy-back scheme for Boat SFRs on 23 November 2005, and Mr Spralja gave evidence that he wanted to sell his Boat SFR into that scheme and that he thought it would be worth between $250,000 and $400,000. The true value of the Boat SFR under the buy-back scheme, and after that scheme ceased during in 2006, is unclear.
17 In around October 2005, Mr Spralja had discussions with Mr Haslam about Mr Haslam leasing more of Mr Spralja’s Shark Quota. Mr Spralja said he had no more to lease and that he was considering selling the quota. Later Mr Haslam met with Mr Spralja and said he had a mate named Peter Kelly from South Australia who had some shark entitlements and was interested in buying some more. Mr Haslam said Mr Kelly would buy Mr Spralja’s Shark Quota and Mr Haslam would later do a deal to buy half of the quota from Mr Kelly. Mr Spralja’s evidence was that the negotiations for the sale of the Shark Quota to Mr Kelly (including the price) were conducted with Mr Haslam until 18 November 2005. On that day, Mr Kelly called Mr Spralja to discuss the details to be put into the sale agreement. This was the first direct contact Mr Spralja had with Mr Kelly. Mr Kelly faxed a draft of the sale agreement to Mr Spralja the following day.
18 On 29 November 2005, Mr Kelly and Mr Haslam met with Mr and Mrs Spralja at the Spralja’s home in Lakes Entrance. Mr Kelly brought a truck and trailer and he and Mr Haslam loaded Mr Spralja’s fishing nets onto this. Mr Spralja had earlier agreed with Mr Haslam that he would sell his nets to Mr Kelly for $5,500 and Mr Kelly paid this sum to Mr Spralja by a personal cheque. Mr Haslam then left with the nets and Mr Kelly and Mr and Mrs Spralja went into the Spraljas’ home where Mr Kelly and Mr Spralja signed the sale agreement, with Mrs Spralja witnessing their signatures. Mr Kelly gave Mr Spralja a bank cheque for $64,500 for the deposit payable under the agreement.
19 The recitals to the sale agreement were as follows:
“1.The Vendor agrees that he is the holder of fishing permit number 25644D.
2.The Vendor agrees that he is entitled to 25701.00 units (19989.07kg) of Gummy Shark. 925.00 units or (499.14kg) of School Shark. 5287 units or (6626.00kg) of Saw Shark. 784.00 units or (1106.55kg) of Elephant Fish (referred to as “the quota”).
3.The Purchaser desires to purchase and the Vendor desires to sell the permit and the quota.”
20 The sale agreement itself comprised only nine clauses. Relevantly, these included clauses 1, 4 and 6 as follows:
“1.The Vendor does hereby sell and the Purchaser does hereby purchase for the consideration here and (sic) expressed the permit and the quota.
4.The Purchaser agrees to pay the permit levy of Tier 1 of ONE THOUSAND THREE HUNDRED AND NINETY-TWO DOLLARS AND NINETY-FOUR CENTS ($1392.94). And any levy payable in Tier two of Shark Quota Unit Species referred to Southern and Eastern Scalefish and Shark Fishery Levy 2005-2006 financial year.
6.The Vendor as being the quota and permit holder agrees to execute all such documents as may be necessary for the quota and permit to be transferred to the Purchaser.”
21 On 10 December 2005, Mr Spralja wrote to Mr Kelly explaining that three days after they signed the sale agreement, someone had threatened to “put an injunction on me” relating to the sale. The letter also referred to anticipated changes by AFMA in the kilos of permitted catch for some shark species and offered to “dissolve our contract and renegotiate again”. However, the letter continued:
“I have read the contract between you & I many times. Whatever is in the contract I will honour that. Whatever is not I will not. For instance, Extract of Register of Statutory Fishing Rights Southern and Eastern Scalefish and Shark Fishery is not written into the contract and I will not consider putting it into the contract. If you are not happy with this Peter, we can dissolve our contract peacefully on 12th Dec 2005. If you go along with this letter I will get you to sign next to my signature and fax it back to me. If you disagree let me know.”
Mr Spralja gave evidence that the “Extract of Register of Statutory Fishing Rights Southern and Eastern Scalefish and Shark Fishery” mentioned in the letter was a reference to his Boat SFR.
22 Mr Kelly responded to this letter by letter dated 12 December 2005. That letter essentially confirmed Mr Kelly’s intention to proceed with the agreement in its current form, and included the paragraph:
“I believe and suggest to you that when we first negotiated to purchase this permit and quota (25644D) that all fishing rights including statutory fishing rights was included as a package deal, which I believe you agreed upon.”
23 On 16 December 2005, Mr Kelly’s solicitors (then Stringer Clark) sent a follow-up letter, threatening legal proceedings and stating: “our client is willing to waive any claim they have against you if you complete the Agreement plus transfer the Statutory Fishing Rights together with payment in the sum of $50,000”. The letter went on to assert that if Mr Spralja did not accept this offer “our client will require compensation of the sum of $150,000 which is payable by no later than 22 December 2005”. The demand for payment of $50,000 and assertion that failure to accept the “offer” would give rise to an obligation to pay compensation to Mr Kelly of $150,000, were without apparent foundation (none was stated) and, in my view, extortionate.
24 Mr Spralja’s solicitors (then Wards) responded on 19 December 2005 confirming that Mr Spralja would comply with the sale agreement and transfer both the fishing permit and Shark Quota, although at this stage Wards was asserting that the correct permit number was Permit E. Mr Spralja gave evidence that this was a mistake by Wards. The letter reiterated that the sale agreement “clearly does not include sale or transfer of our clients statutory fishing rights”. Mr Spralja’s evidence was that this was a reference to the Boat SFR. The letter continued:
“Our client has received by facsimile on 11th December 2005 from your client the Application to Transfer Quota Shark and Deep Water Species form. Our client will complete same and lodge with the Australian Fisheries Management Authority.”
25 Wards sent a further letter to Stringer Clark on 21 December 2005, this time referring to and attaching a copy of Permit P, but repeating the assertion that the permit Mr Spralja had agreed to transfer under the sale agreement was Permit E. Stringer Clark responded by letter dated 24 January 2006, asserting that neither Permit P nor Permit E was the permit to be transferred under the sale agreement, and the correct permit was Permit D: “There is no typing error in the agreement”. The letter repeated the threat that: “in the event that your client is not prepared to complete the agreement plus transfer the statutory fishing rights together with the payment of $50,000 our client has instructed us to issue proceedings against your client”. Again, the letter provides no justification for the demand for the $50,000 payment.
26 The next letter in this exchange of correspondence in late 2005 and early 2006 is important. In a letter dated 25 January 2006, Wards made an unqualified offer to Mr Kelly on behalf of Mr Spralja to complete the sale agreement on terms that would have effected the transfer of the Shark Quota to Mr Kelly, and thus put him in a position to take the full benefit of the Shark Quota SFR following the “snapshot date”, in the circumstances described below.[12] The letter also accurately identified what later was confirmed to be the correct position in relation to the various permits. On this issue, it stated:
“Accordingly, our client has now received his Fishing Permits for 1st January 2006 to 31 December 2006. Our client’s State Fishing License Fishing Permit No. 27325P (attached) is the Fishing Permit from which the quota will be transferred to your client. Your client will then be entitled to Australian Fisheries Management Authority issuing a new Fishing Permit to your client with the inclusion of the quota purchased from our client. Our client’s State Fishing License Permit No. 27325P will then be cancelled by the Australian Fisheries Management Authority.”
[12]At [38]
27 The letter went on to explain that Permit E was Mr Spralja’s Commonwealth Statutory Fishing Rights License and was not the subject of the sale, as it did not have attached to it the quota that Mr Kelly purchased under the sale agreement. By the time Mr Kelly commenced the original proceeding against Mr Spralja, he had accepted this position and included in that proceeding a claim that the sale agreement be rectified by substituting Permit P for Permit D. The letter attached completed and signed transfer documentation to effect the transfer of Mr Spralja’s Shark Quota to Mr Kelly.
28 It is not in dispute that had Mr Kelly at this point accepted the validity of Mr Spralja’s assertions in relation to Permit P and the Boat SFR and signed and lodged the transfer documentation enclosed with the letter, the sale agreement would have completed and his dispute with Mr Spralja would have resolved. Regrettably, however, Mr Kelly did not take that course. Instead, he continued to seek a transfer of Permit D and claim Mr Spralja’s “statutory fishing rights”. In a letter dated 17 February 2006, Stringer Clark reasserted Mr Kelly’s entitlement to Permit D and offered Mr Spralja three options, each of which was effectively premised on the assumption that Mr Kelly was entitled to the Boat SFR. Further, options 1 and 2 sought an “allowance” of $45,000 in favour of Mr Kelly for “loss of income”.
29 To the extent that there was any uncertainty in the earlier correspondence about whether the references to “statutory fishing rights” were to the Boat SFR or prospective Shark Quota SFR, in my view this letter puts the issue beyond doubt. Both the phrasing of the letter generally (in particular, the references to statutory fishing rights as rights then in existence) and the proposed “Option 1” offer, to my mind confirm that the references are to Boat SFR. In particular, Option 1 purports to ascribe a value to Mr Spralja’s statutory fishing rights independently of his Shark Quota, by offering a discounted price for the Shark Quota without the statutory fishing rights. The only statutory fishing rights that Mr Spralja then held independently of his Shark Quota was his Boat SFR. It is worth noting in passing that the value Mr Kelly ascribed to the Boat SFR under his Option 1 was $62,604.89 (ex-GST).
30 In March 2006, Mr Spralja was given advice in writing by barrister Andrew Larkin. Mr Larkin’s memorandum of advice is dated 15 March 2006 and sets out in some detail the background to the dispute with Mr Kelly and explains the interplay between statutory fishing rights and fishing permits under the Fisheries Management Act 1991 (Cth). The advice confirms that Mr Spralja was at the time the owner of a statutory fishing right (being the Boat SFR) as well as the holder of Permit P and Permit E. In relation to the permits issue, Mr Larkin advised that the quotas that were the subject of the proposed sale were those applicable to Permit P. He then advised that:
“If my understanding is correct, then there seems to be considerable force in the client’s argument that he was simply selling quota under one of the permits and it was never the intention that the statutory fishing right be sold.”
31 On 20 March 2006, Mr Spralja himself wrote to Mr Kelly, care of Stringer Clark. I pause at this point in the narrative to note that Mrs Spralja’s evidence was to the effect that these handwritten letters were largely dictated by Mr Spralja, written out by Mrs Spralja in draft, discussed between them and then re-written by her in a form suitable to be sent. In this letter, Mr Spralja again referred to and explained why the reference in the sale agreement to Permit D was in error and stated: “if we use this number on the transfer papers, AFMA cannot transfer the quota from Spralja to Kelly”. He also repeated that he did not agree under the sale agreement to transfer the Boat SFR to Mr Kelly. He said: “Nobody can see where SFRs is included in the contract, including our lawyer”. The letter noted that the sale agreement provided that Mr Kelly was obliged to pay the “levy for 2006” and that Mr Spralja had already paid the first instalment of that levy, being $5,670. He asserted that the contract was void, but nevertheless offered to give Mr Kelly until 1 April 2006, “to go ahead with the contract and take the quota and pay the money”.
32 Mr Spralja wrote again to Mr Kelly on 1 May 2006 (more than a month after the 1 April 2006 deadline set in his earlier letter) stating that 90 days was more than sufficient to finalise the sale agreement. The letter also asserted that Mr Spralja had lost a lot of money and that if Mr Kelly still wished to buy the Shark Quota, the price was now $700,000 plus GST. Mr Kelly replied on 2 May 2006, reiterating his “3 options” offer from 17 February and again asserting that Mr Spralja did have Permit D. Mr Spralja sent a lengthy reply on 3 May 2006, confirming that Mr Kelly’s “3 options” were outside the terms of the sale agreement and repeating his offer to accept $700,000 plus GST for the Shark Quota. The letter continued: “As I have already stated, the agreement has definitely lapsed, and I cannot accept $645,000 anymore and I will not accept any more delaying tactics”.
33 Mr Kelly sent two letters in response dated (respectively) 3 and 6 May 2006. It appears from the second of these letters that Mr Kelly is for the first time acknowledging that the permit referred to in the sale agreement should have been Permit P, not Permit D. This was confirmed in a lengthy letter dated 14 July 2006 to Mr Spralja from Mr Kelly’s new solicitors, Fitzpatrick Teale. The letter attached transfer forms executed by Mr Kelly “in order to complete the agreement” and requested that Mr Spralja sign the forms and also pay to Mr Kelly $47,041, “being the amount which he would have obtained by the lease of the 2005 shark quota in the marketplace”.
34 The letter does not explain the basis upon which Mr Kelly was demanding compensation for being unable to lease out the Shark Quota for the 2005 year, a claim that was later restated in Mr Kelly’s particulars of loss and damage in the original proceeding, delivered in February 2010. There was no suggestion that Mr Kelly was to take a transfer of the Shark Quota until December 2005 (the end of the 2005 season), at the earliest. Further, Mr Spralja’s evidence was to the effect that the transfer was not to take effect until January 2006 in any event, primarily because Mr Spralja had leased the Shark Quota to Mr Haslam for the whole of the 2005 calendar year. In my view, this demand for compensation (like the earlier ones) was baseless.
35 This was followed by further lengthy correspondence between Mr Spralja and Fitzpatrick Teale over ensuing months. Relevantly for present purposes, Mr Spralja continued to assert in effect that Mr Kelly had been given the opportunity by the Wards letter of 25 January 2006 and the attached signed transfer papers, to complete the agreement and had failed to do so, with the result that the sale agreement was at an end. For example, in his letter of 1 September 2006 to Fitzpatrick Teale, Mr Spralja stated: “We are closing the agreement between myself – Steve Spralja and Peter Kelly, and I declare the agreement invalid”. Fitzpatrick Teale continued to demand that Mr Spralja transfer the Shark Quota and the “statutory fishing rights” and continued to assert a right to claim damages from Mr Spralja for Mr Kelly’s inability to lease out the Shark Quota in the 2005 year.
36 In relation to the continuing demand for the “statutory fishing rights”, in a letter dated 16 October 2006, Fitzpatrick Teale noted that Mr Spralja disputed having sold the statutory fishing rights and proposed the following:
“To accommodate your position and without any admission on behalf of our client, our client is prepared to pay a further $65,000 (being an appropriate market value for the statutory fishing rights if sold separately) to be held in our trust account pending the resolution of legal proceedings (or otherwise by agreement) in relation to who is entitled to the statutory fishing rights”.
Again, to my mind, this can only be a reference to the Boat SFR. By this time, the creation of the Shark Quota SFR was more visibly on the horizon, but the snapshot date (22 December 2006) was still to be set, and only Boat SFR could be “sold separately” from Shark Quota. Mr Casement agreed in evidence that he also read this proposal as referring to the Boat SFR.
37 The last event of substance before the original proceedings were commenced by Mr Kelly in August 2007, occurred in late October 2006. On or shortly before 31 October 2006, Mr Kelly signed and lodged for registration with AFMA the signed transfer papers that Mr Spralja had supplied under cover of the letter from Wards dated 25 January 2006. AFMA initially registered the transfer but then reversed the registration, after Mr Spralja learnt of the registration and contacted AFMA. AFMA later wrote to Fitzpatrick Teale setting out what had occurred in terms as follows:
“I note that AFMA registered the transfer from Mr Spralja to your client on 31 October 2006. In doing so, AFMA overlooked correspondence from Mr Spralja received in July 2006 in which he advised that AFMA should not proceed with any transfer of his shark quota units.
On the basis of this earlier correspondence, AFMA considered that the transfer should not have been actioned, as it made clear that the Transfer Application form received from you in late October 2006 (which we note had been signed by Mr Spralja on 19 January 2006) no longer represented Mr Spralja’s intentions. That is, AFMA considered that the requirements of section 32 of the Fishery Management Act 1991 (the Act) for the quota to be transferred did not exist. Therefore, immediate action was taken to reverse the transfer as you were advised by facsimile on 31 October 2006.
Having carefully reviewed the matter, and the requirements of the Act, AFMA remains of the view that the action taken to reverse the transfer was correct. Accordingly, in the absence of a court order, no action will be taken in relation to the transfer application (I refer you in this respect to section 54 of the Act).
It follows that Mr Spralja remains the holder of the Individually Transferable Quota Units [a reference to the Shark Quota] on the snapshot date of 22 December 2006, and as such, any Statutory Fishing Rights granted in respect of these quota units will be granted to him.”
38 Mr Kelly’s decision to sign and lodge the transfer documentation in October 2006, could be seen as a belated acknowledgment by Mr Kelly that the provision of those forms to him on 25 January 2006 amounted to satisfaction of Mr Spralja’s obligations under the sale agreement, except for the claim to the Boat SFR. It is also notable that AFMA initially registered the transfer, and only reversed it when its attention was drawn to the correspondence from Mr Spralja received by AFMA in July 2006. It follows that if Mr Kelly had submitted the signed forms to AFMA before July 2006, he would have been registered by AFMA as the holder of the Shark Quota as at the snapshot date of 22 December 2006, and any Shark Quota SFR would thereafter have been granted to him. The snapshot date was the statutorily pre-determined date on which holders of shark quota became entitled to shark quota SFR in lieu of their shark quota.
Commencement of the original proceeding
39 The original proceeding was commenced by Mr Kelly against Mr Spralja by writ dated 17 August 2007, with a statement of claim annexed. It was issued in this court, in what was then the Commercial List Pilot. The statement of claim began by alleging a partly oral, partly written and partly implied agreement between Mr Kelly and Mr Spralja made on 18 November 2005 (defined as the “oral agreement”), said to arise primarily from a telephone conversation between Mr Kelly and Mr Spralja that day. According to the statement of claim, pursuant to the oral agreement, Mr Spralja agreed to sell to Mr Kelly his “permit in the Southern and Eastern Scalefish and Shark Fishery together with his entitlement to fish a quota of school shark, gummy shark, saw shark and elephant shark and statutory fishing rights attaching to that permit”, defined as the “permit package”.
40 The next substantive allegation in the statement of claim was that, by the written sale agreement dated 29 November 2005 (defined as the “written agreement”), Mr Kelly and Mr Spralja “purported to record the oral agreement” for the sale by Mr Spralja to Mr Kelly of Permit D and Mr Spralja’s Shark Quota, on the terms set out in the sale agreement. It was then alleged that the reference to Permit D in the sale agreement was incorrect and it should have referred to Permit P. The statement of claim sought rectification of the sale agreement to delete the reference to Permit D and substitute Permit P. It also asserted that Mr Spralja had breached “the agreement” and that Mr Kelly had at all times been ready willing and able to perform “the agreement” (whether these references were to the alleged oral or written agreement is not stated). The statement of claim made an ancillary claim of a false and misleading statement by Mr Spralja in respect of the permit number appearing in the written agreement.
41 Mr Kelly claimed relief in the statement of claim comprising specific performance of “the oral agreement alternatively the written agreement”, damages and associated declarations and injunctions, costs and interest. I infer that Mr Kelly asserted the existence of an earlier partly oral agreement for the sale of the alleged “permit package”, because the terms of the written sale agreement did not suit the case Mr Kelly sought to advance in two important respects. First, it identified Permit D rather than Permit P. And, second, it made no express provision for the transfer to Mr Kelly of the Boat SFR.
42 Shortly after being served with the writ and statement of claim, Mr Spralja retained Geoff R Wigney of Warren Graham & Murphy (“WGM”) in Lakes Entrance as his solicitors in the original proceeding. Mr Wigney wrote to Mr Spralja on 5 September 2007 setting out Mr Wigney’s preliminary understanding of the issues in the case. Among other things, Mr Wigney expressed the view that the sale agreement “does not support the view of Mr Peter Kelly that he was also purchasing your Statutory Fishing Rights. This is a separate entitlement and has its own value”. Mr Wigney noted in the letter that Mr Spralja had decided to rescind the sale agreement on the basis that it was void for uncertainty, and stated:
“It is our assessment at this stage that the most likely outcome is that the County Court would find that the Agreement is void for uncertainty and is therefore of no legal effect. If the Court did decide the case on this basis, then the Agreement would be at an end… The Court would also consider any Counterclaim that you may have whereby you have suffered financial loss arising from this incident involving Mr Peter Kelly.”
43 The letter also indicated that Mr Wigney proposed to brief Mr Casement to prepare the defence and any counterclaim. The letter stated: “As you are aware, Mr Glenn Casement has particular knowledge about the fishing industry including the Law with respect to Statutory Fishing Rights, Quota and Fishing Permits, etc”. The evidence was that Mr Casement had served his articles under Mr Wigney at the Lakes Entrance office of WGM and later worked there as a solicitor from the time of his admission to practice in 2001 until commencing his practice at the Victorian Bar in 2003.
44 On 7 September 2007, Mr Wigney sent a brief to Mr Casement to prepare the defence and counterclaim. The brief included a detailed proof of evidence from Mr Spralja taken by Mr Wigney (running to some 10 pages) and instructions that Mr Spralja was seeking an order that the sale agreement was void for uncertainty: “Our client does not wish the transfer to proceed. Certainly, Mr Spralja has no intention of transferring his Statutory Fishing Rights to Mr Peter Kelly”. A letter from Mr Wigney to Mr Spralja dated 12 October 2007 suggests that Mr Spralja had a conference with Mr Casement in Melbourne on 11 October 2007. The notice of defence and counterclaim drawn by Mr Casement was filed and served on 12 October 2007.
45 The notice of defence and counterclaim drawn by Mr Casement in substance:
· denied the existence of the oral agreement alleged by Mr Kelly;
· admitted the sale agreement and the terms of that agreement, including the terms for the sale of the Shark Quota, and confirmed that there was no reference to “Statutory Fishing Rights” in the sale agreement;
· alleged that on about 11 December 2005 Mr Spralja confirmed to Mr Kelly that statutory fishing rights were not included in the sale agreement;
· pleaded that Mr Spralja was at all material times ready willing and able to perform the sale agreement;
· alleged that by the letter from his solicitors dated 17 February 2006, Kelly indicated that he did not intend to continue with the sale agreement, because he had requested the transfer of Permit D, which did not exist, and offered three alternative options, including an option offering a lower price for the Shark Quota with no statutory fishing rights; and
· alleged that by reason of Mr Kelly’s indication that he did not intend to perform the sale agreement, Mr Kelly had repudiated the agreement and Mr Spralja had suffered (unparticularised) loss and damage.
46 Mr Kelly later filed a defence to the counterclaim, but this essentially did no more than join issue on the allegations in the counterclaim.
47 Thus the issues in the original proceeding were:
· whether there was any oral agreement entered into between Mr Kelly and Mr Spralja on 18 November 2005 and the terms of any such agreement;
· the proper construction of the written sale agreement and, in particular, whether it included the sale of Mr Spralja’s Boat SFR;
· whether Mr Kelly was entitled to orders rectifying the sale agreement by substituting the reference to Permit D with a reference to Permit P;
· whether Mr Kelly’s conduct in insisting on the transfer of Permit D and offering only a discounted price for the sale of the Shark Quota without any statutory fishing rights, amounted to a repudiation of the sale agreement.
Mr Spralja’s prospects in the original proceeding
48 Before embarking on the examination of this issue, it is important to note that a finding that the settlement terms did not adequately reflect Mr Spralja’s prospects of success in the original proceeding, is not decisive on the question of breach of duty. A competent practitioner will consider more than just a client’s rights, obligations and hopes in advising the client to accept a settlement. It is also important to avoid the wisdom of hindsight: “…hindsight is no touchstone in negligence. The standard of care to be expected of a professional man must be based on events as they occur, in prospect and not in retrospect”.[13]
[13]Duchess of Argyll v Beuselinck [1972] 2 Lloyd’s Rep 172, per Megarry J at 185, cited with approval in Goddard Elliott at [410]
49 These principles are conveniently encapsulated in the following passage from the decision of the NSW Court of Appeal in Studer v Boettcher:[14]
“Advice to compromise is not negligent merely because a court subsequently considers that a more favourable outcome would or might have been obtained if the original dispute had been litigated to judgment (or a more favourable compromise would or might have become available later). As Anderson J said in the Ontario High Court in Karpenko v Parvian, Courey, Cohen and Houston: (1981) 117 DLR (3d) 383, 397. See also Chancellor etc of Oxford University v John Steadman Design Group (1991) 7 Cons. LJ 102, 107; Finmore [sic – Finnimore] v Slater & Gordon (1994) 11 WAR 250.
‘.. an industrious and competent practitioner should not be unduly inhibited in making a decision to settle a case by the apprehension that some Judge, viewing the matter subsequently, with all the acuity of vision given by hindsight, and from the calm security of the Bench, may tell him he should have done otherwise.’
[14][2000] NSWCA 263 per Fitzgerald JA at [62]; see also at [63]
50 That said, for the reasons that follow, I consider that the actions and advice of the defendants in relation to the settlement was deficient in two respects. I discuss these below in dealing with the issues of breach of retainer and duty.
The alleged oral agreement
51 Returning to the issues in the original proceeding listed above, it is not possible to reach a definitive view on the putative oral agreement without hearing evidence of at least Mr Kelly. It is possible that Mr Haslam’s evidence would also have been relevant, given that he appears to have been representing Mr Kelly’s interests up to the point of the telephone conversation between Mr Kelly and Mr Spralja on 18 November 2005 said to constitute part of the oral agreement. However, given that Mr Haslam did not take part in that telephone conversation, his evidence would have been peripheral at best. Mr Spralja’s evidence was to the effect that the telephone conversation was primarily about what details Mr Kelly should put in the written agreement which he later faxed to Mr Spralja.
52 Notwithstanding the absence of evidence from Mr Kelly about the telephone conversation, there are good grounds for expecting Mr Kelly would have failed to establish the existence of the oral agreement. Those grounds include:
· it is consistent with Mr Kelly faxing a draft of the written agreement to Mr Spralja a few days after the telephone conversation, that the discussion was primarily directed to what should be included in the written agreement;
· although the written agreement is of short compass, it descends to a level of detail that is unlikely to have been the subject of a concluded agreement during an unsolicited phone call from Mr Kelly to Mr Spralja (which was also their first direct communication);
· there is no aspect of the transaction that points to any need to have a concluded agreement on 18 November 2005, which was to be confirmed or re-stated in a later written agreement;
· there is no pleading or evidence of any consideration moving from Mr Kelly for any purported agreement made on 18 November 2005;
· the written agreement itself is entirely self-contained and makes no reference in the recitals even to an earlier discussion, much less any pre-existing agreement; and
· the pleading of the oral agreement itself is highly problematic – in particular, the alleged oral agreement purportedly made on 18 November 2005 is particularised as partly oral, partly in writing and partly to be implied. The oral part is the telephone conversation, but the written part is said to be the written agreement itself, dated over 10 days later. The part said to be implied is circular and nonsensical.
53 Apart from acknowledging that the allegation of the oral agreement was made in the original proceeding, the defendants make no submission suggesting there was any real merit in the allegation. Nor was there evidence that any of the defendants saw any merit in the allegation at the time of the settlement of the original proceeding. In addition to being likely to fail, the allegation of an earlier oral agreement also suggests that Mr Kelly and his advisers lacked confidence in succeeding on a claim for Permit P and the Boat SFR relying on the written agreement alone. For the reasons discussed below, it seems they would have been justified in holding this view.
Construction of the written sale agreement
54 This is an issue where any oral evidence in the original proceeding is likely to have had diminished importance. As more recent decisions of the High Court and the Court of Appeal have confirmed, it has been well established since long before the original proceeding would have come to trial in 2008, that the circumstances which a contract addresses and the commercial purpose or objects to be secured by it, are ordinarily identified by reference to the contract alone.[15] Although, of course, this extends beyond the text of the contract to “surrounding circumstances known to the parties, and the purpose or object of the transaction”.[16] In the present case, this would relevantly include the statutory licensing regime for the coastal fishing industry.
[15]Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, per Mason J at 352; affirmed in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, per French CJ, Nettle and Gordon JJ at [48]-[52]
[16]Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ at [40]
55 Further, where the contractual language is ambiguous, evidence of events, circumstances and things external to the contract is permissible.[17] But again, the events, circumstances and things external to the contract to which recourse may be had is objective, and they must be known to both contracting parties at the time of entry into the contract.[18]
[17]Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24, (1982) 149 CLR 337, per Mason J at 352
[18]Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24, (1982) 149 CLR 337, per Mason J at 352; affirmed Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, per French CJ, Hayne, Crennan and Keifel JJ at [35] and [48], see also the additional pre-2008 cases cited at fn(60), also Apple and Pear Australia Ltd v Pink Lady America LLC (2016) 343 ALR 112; [2016] VSCA 280, per Tate JA at [102]
56 It is clear from the express terms of the sale agreement that only two items were sold under the agreement, namely, Permit D and the Shark Quota; there is nothing in those terms to suggest that the sale extended to the Boat SFR. Indeed, the two items to be sold under the sale agreement could hardly be expressed any more plainly.[19] Thus to succeed on his argument that the written agreement extended to the Boat SFR, Mr Kelly would either have had to point to an objective feature of the surrounding circumstances known to the parties (such as an aspect of the fishing licensing regime) or some ambiguity elsewhere in the sale agreement, in order to establish that either the “permit” or the “quota”, should be read more expansively to include the Boat SFR. And it is important to bear in mind that Mr Kelly bore the onus of proof on all these issues.
[19]See the definition of the permit and the quota in the recitals to the sale agreement at paragraph 19 above
57 In their written submissions,[20] Mr Casement and Mr Scarfo cited four reasons for there being a “real risk that the Boat SFR would have been found to have been included in the sale agreement”. The reasons were premised on the assumption that the sale agreement was rectified to substitute Permit P for Permit D. They were:
[20]At [14]; the first defendant adopted the second and third defendants’ submission on this issue.
· the tier 1 levies referred to in paragraph 4 of the sale agreement as being referable to a Gillnet Boat SFR (referencing reg 42 of the Fishing Levy Regulations 2005 (Cth));
· Permit P was merely an administrative permit for the purposes of attaching quota and was of little or no value;
· the value of Permit P when compared with the purchase price under the sale agreement of $709,500 (including GST); and
· Mr Kelly alleged that he had agreed to purchase the permit “package” in an oral agreement on 18 November 2005.
58 Mr Casement’s evidence was that the first of these reasons was something that concerned him in assessing Mr Spralja’s prospects in the original proceeding. In summary, his evidence about this was that there were two levies mentioned in clause 4 of the sale agreement. He was not concerned about the tier 2 levy, because that was consistent with Mr Spralja’s position that the deal was for the Shark Quota only. But he considered that the tier 1 levy for $1,392.94 was the payment of a levy for an “access right” and that this was a problem. He continued:
“That levy was heavily reflective of not just a permit which was only there for administrative purposes to hang on to the quota, and really of perhaps not much value to anybody else apart from Mr Spralja, you wouldn't be paying levies of $1300 a year for such a permit. What that figure suggested to me was that that was a levy that belonged to the payment of something else and was heavily suggestive to me that that was the boat SFR.”
In my view, this evidence and Mr Casement and Mr Scarfo’s submissions both overstate the potential significance in the construction of the sale agreement to the reference in clause 4 to the tier 1 permit levy.
59 I accept that reg 42 of the Fishing Levy Regulations 2005 imposes a levy of $1,392.94, being the amount of the tier 1 levy that Mr Kelly agreed to pay pursuant to clause 4 of the sale agreement. But that is where the similarity between clause 4 and reg 42 ends. Clause 4 expressly refers to a “permit” levy, whereas reg 42 uses the language “leviable SESSF gillnet boat SFR”. Regulation 42 makes no reference to levies on permits. Further, clause 4 expressly identifies two tiers of levy; one being the “permit levy of Tier one of…$1,392.94” and the other being “any levy payable in Tier two of Shark Quota Unit Species”. Regulation 42 identifies only one levy.
60 In contrast, reg 36 uses the language “leviable SESSF GHT fishing permit” (and is thus a permit levy consistently with clause 4), sets that levy in the sum of $1,392.94 (being the figure in clause 4) and has a second tier of levy referable to quota units of shark species. Counsel for Mr Casement and Mr Scarfo said in oral submissions that the levies referred to in clause 4 could not be derived from reg 36 of the Fishing Levy Regulations 2005 (Cth), because that regulation concerned State waters and Permit P related to Commonwealth waters only. The difficulty with that submission is that the evidence shows that, when the sale agreement was prepared by Mr Kelly (or on his instructions) in around November 2005 (and for some months thereafter), Mr Kelly believed that the relevant permit was Permit D. The evidence also shows that Mr Kelly had information at that time as to what Permit D covered - letters to Mr Spralja from Mr Kelly dated 2 May 2006 and from Mr Kelly’s solicitors Fitzpatrick Teale dated 14 July 2006, confirm that this information came from Mr Haslam, who had leased the quota from Permit D from Mr Spralja for the 2005 calendar year.
61 In those circumstances, it seems likely that clause 4 of the sale agreement was prepared on the assumption that the permit to be transferred was Permit D, which covered both State and Commonwealth fishing rights. This, in turn, explains the reference in clause 4 to the concepts of a “permit” levy and the two tiers of levy found in reg 36. It follows that there were good grounds for Mr Spralja to argue in the original proceeding that clause 4 of the sale agreement was derived not from reg 42 of the Fishing Levy Regulations 2005 (Cth), but from reg 36. Further, that reg 36 was concerned with levies on the transfer of the permit and had nothing to do with access rights. Such an argument would also have meant that clause 4 could be read harmoniously with the description of the two items being sold under the agreement (not including the Boat SFR) in the recitals to the sale agreement.
62 None of the defendants have pointed to any other aspect of the fishing licensing regime as it existed in November 2005 that would support an argument that the sale agreement extended to the Boat SFR. Neither has my own review of that regime identified any basis for that argument. In particular, there is no provision (or other evidence) that would support a contention that Mr Kelly needed Mr Spralja’s Boat SFR to enjoy the benefits of Mr Spralja’s Shark Quota or either Permit D or Permit E. Indeed, the evidence was to the contrary. For example, in the document that Mr Spralja gave to Mr Bullard in their meeting on 13 February 2008 headed “Points Important To Us”, Mr Spralja made the point that Mr Kelly already owned a boat SFR and therefore had no need for a second boat SFR.
63 The next two matters raised in Mr Casement and Mr Scarfo’s written submissions make essentially the same point; namely, that Permit P had only a nominal value and the purchase price of $709,500 (including GST) suggested something of significantly higher value was being transferred. This argument is misconceived – it ignores that the sale agreement also involved the sale of the Shark Quota, which probably accounted for the whole of the agreed price. Mr Spralja’s uncontradicted evidence was that the sale price agreed with Mr Kelly was “arrived at with reference to other offers that I had been offered [for the Shark Quota] but was roughly based on the rate per kilogram for each species”.
64 If anything, the price set in the sale agreement supports a contrary conclusion. If evidence was adduced in the original proceeding consistent with Mr Spralja’s evidence that the Shark Quota alone had a market value of around $709,500 (including GST), such evidence would provide clear objective support for a finding that the sale agreement did not include the Boat SFR. It was not in dispute that the Boat SFR had a value independently of Permit D and the Shark Quota, particularly as at November 2005 when the government buy-back scheme was open. Mr Kelly apparently ascribed a value to the Boat SFR in mid-2006 of around $65,000.[21] Mr Spralja believed he could sell it into the government buyback for between $250,000 and $400,000.[22] Even at Mr Kelly’s figure, the sale agreement price less $65,000 would seem to materially under-value the Shark Quota. This is essentially the point made in Mr Wigney’s initial letter of advice referred to above.[23]
[21]See [29] and [36] above
[22]See [14] above
[23]At [42]
65 The fourth matter referred to in Mr Casement and Mr Scarfo’s written submissions concerns Mr Kelly’s allegation of an oral agreement. I have dealt with this above,[24] including by noting that reliance on an earlier oral agreement suggests that Mr Kelly and his advisers lacked confidence in succeeding on a claim for Permit P and the Boat SFR based on the written agreement alone. I am satisfied that any such lack of confidence was justified. In my view, Mr Kelly’s prospects of satisfying a court that the sale agreement included the Boat SFR were very poor. Moreover, the analysis informing that conclusion is one that could have been undertaken at least by Mr Casement and Mr Scarfo on the information and instructions available to them in the period leading up to 18 February 2008.
[24]At [0] to [53]
66 A further issue on the question of construction that emerged during the evidence of Mr Casement, concerned the agreement between Mr Kelly and Mr Haslam dated 29 November 2005 (“Kelly/Haslam agreement”). That agreement provided in substance for the on-sale by Mr Kelly to Mr Haslam of a one-half share of the quota and permit purchased by Mr Kelly from Mr Spralja pursuant to the sale agreement of the same date. Mr Casement’s evidence concerning the Kelly/Haslam agreement was as follows:
“Your Honour, on page 3 of that agreement you can see there is a reference to - sorry, on page 2 of the agreement, at the bottom of page 2, second line up, ‘Full costs of purchasing permit, $39,039.75.’ Your Honour, the concern that I had was that this was a contemporaneous document with the agreement and suggested that what was occurring as between Kelly and Haslam is that they believed that they were purchasing something from Mr Spralja - this is the evidence, I thought they were purchasing something from Mr Spralja to the value of almost $40,000, $39,039.75. Again, Your Honour, the reason why I had that concern is that that couldn't be a reference or heavily suggestive that it was not a reference to a mere permit which only attached the quota to it, and was again heavily suggestive that what was bargained for was an access right which was the boat SFR. Now, that was what gave me a concern in reading these documents and seeing the contemporaneous notes with them.”
67 Mr Casement’s concern was misconceived. It was not in dispute that Mr Spralja first became aware of the terms of the Kelly/Haslam agreement in around February 2008 at the earliest. As discussed above,[25] the law is (and was at the time) clear: matters external to a contract can only be relevant to a question of construction (if at all), if they are known to both parties at the time the contract was entered into (in this case, on 29 November 2005). Thus the terms of the Kelly/Haslam agreement might have informed Mr Kelly’s subjective understanding of the effect of the sale agreement, but are wholly irrelevant to the construction of that agreement.
[25]At [55]
68 Bullards submitted on this issue (footnotes omitted) that:
“While the Haslam/Kelly Agreement could not have been tendered to prove whether the Boat SFRs were included in the Sale Agreement between Mr Kelly and Mr Spralja, the agreement between Mr Kelly and Mr Haslam was directly relevant to proof of the loss and damage claimed by Mr Kelly in the Kelly Proceeding. Once the Haslam/Kelly Agreement was tendered in evidence in the Kelly Proceeding, it could have been relied upon for all purposes and gave credence to Mr Casement’s concerns about the use which might have been made of it by Mr Kelly’s lawyers in the Kelly Proceeding.”
I reject that submission. The Kelly/Haslam agreement may have been admissible on the issue of damages, but it does not follow that it could then be “relied upon for all purposes”. In particular, as discussed above, it is directly contrary to clear and binding authority to suggest that a court determining the original proceeding could properly have regard to the Kelly/Haslam agreement on the issue of construction of the sale agreement.
Rectification and Permit P
69 Mr Kelly’s rectification case was perhaps stronger than his construction argument, but it was by no means bound to succeed. In particular, as discussed above,[26] there is evidence that Mr Kelly had information concerning Permit D at the time he arranged the preparation of the sale agreement and this was the permit he intended to purchase. Thus, it is far from clear that he was acting under an operative mistake. There is also the question of whether Permit P was transferable at all and, if not, how that might have affected Mr Kelly’s claim for relief in relation to the alleged mis-description of Permit P in the sale agreement. This evidence suggesting that Permit P could not be transferred,[27] was available to the Spralja camp as at 18 November 2008 and had considerable force.
[26]At [60]
[27]Identified in Mr Spralja’s written submissions at [28] and
70 Having said that, very little (if anything) turns on whether or not Mr Spralja would ultimately have been ordered to transfer Permit P to Mr Kelly, whether because of an order for rectification, a finding of misleading and deceptive conduct or otherwise. Mr Spralja’s consistent (and probably correct) view was that the permit was irrelevant, as once the Shark Quota had been transferred to Mr Kelly, Mr Kelly would be entitled to a new permit and Mr Spralja’s Permit P would be cancelled.[28] It was the claim for the Boat SFR that was at the heart of Mr Spralja’s resistance to Mr Kelly’s demands.
[28]See, for example, paragraph [26] above
Repudiation
71 Mr Spralja submitted that (omitting footnotes):
“Kelly had repudiated the Sale Agreement as he did not pay the clause 4 levy; maintained an incorrect interpretation of the Sale Agreement (in the face of communication from Spralja pointing out the error); and evinced an intention not to perform the contract according to its terms.
Once a Court found there was no transfer of the Boat SFR, Spralja had a strong repudiation case.
Spralja also attempted to perform the contract in January 2006.”
72 In their submissions, Mr Casement and Mr Scarfo summarised “the relevant principles concerning repudiation” relying on the (unreported) decision of the Victorian Court of Appeal in R & A Cab Co Pty Ltd v Kotzman[29] (“Kotzman”) and then submitted that (omitting footnotes):
Mr Spralja's solicitors (Wards) sent signed transfer forms for the ITQs to Mr Kelly on 25 January 2006 but maintained that the Boat SFRs were not included in the Sale Agreement. Mr Kelly’s solicitors replied by letter dated 17 February 2006 that completion of the Sale Agreement required signed transfer forms for permit 25664D, failing which they proposed 3 settlement offers. Mr Spralja did not accept any of the 3 offers. At this point Mr Kelly appears to be still labouring under the (honestly held) misapprehension that the relevant permit is 25644D. Mr Kelly’s stance also needs to viewed in the context that Mr Spralja himself had earlier tried to get out of the Sale Agreement by saying the Tom Davis had threatened to injunct him and AFMA were changing their ideas daily as to the allowances for the following year.
Further, Mr Spralja did not then accept the repudiation of the contract. He threatened to, but did not, sell the quota to other parties. He also refused to return the deposit.
Viewed in all of the circumstances set out above, Mr Kelly’s conduct cannot be viewed as clearly repudiatory.
Further, this court has not had the benefit of hearing from Mr Kelly and Mr Haslam.”
[29][2008] VSCA 68, per Ashley JA at [44] to [49]
73 Bullards’ submissions in reply made a number of the same points as were made by Mr Casement and Mr Scarfo and added:
[T]he correspondence shows that Mr Spralja kept dealing with Mr Kelly as if the sale agreement was still on foot. In this regard, it must be recalled that Mr Kelly was suing Mr Spralja for rectification and specific performance of the sale agreement. Mr Kelly’s claim for specific performance of the sale agreement was entirely inconsistent with the notion of him having brought that agreement to an end through repudiation… [T]here was a very real risk that the Court would conclude that Mr Spralja was a serial opportunist who sought to back away from his agreement with Mr Kelly to further his own advantage.
…
The Plaintiff’s submissions do not cite any authority in support of the contention that the wrong interpretation of an agreement may constitute a repudiation. The Plaintiff must show not only that such a proposition of law exists but that its application was so clear as to have inevitably resulted in the success of his counterclaim in the Kelly Proceeding.”
I note that in later oral submissions, counsel for Bullards corrected the submission concerning Mr Spralja’s failure to cite authority. I discuss the authorities relied on by the parties below.
74 In broad terms, I accept Mr Spralja’s submissions over those of the defendants for the reasons that follow. Obviously, whether it is correct to assert that Mr Spralja had a “strong” repudiation case, or something less than that (and, if so, how much less), is a nuanced question and reasonable views may differ. It is sufficient for present purposes to say that, in my view, Mr Spralja’s repudiation case had significant merit and warranted far greater credence than was apparently afforded to it by the defendants.
75 Turning first to the authorities, although Mr Spralja also cites the Court of Appeal decision in Kotzman, he cites in addition the (reported) decision of the Court of Appeal in Sopov & Anor v Kane Constructions Pty Ltd[30] (“Sopov”), decided the year before. For reasons that are not entirely clear, Ashley JA in Kotzman does not refer directly to Sopov, although His Honour does mention the “cases such as those mentioned in Talacko & Ors v Talacko”,[31] which in turn has a passing reference to Sopov.
[30](2007) 20 VR 127
[31]At [51], footnoting, “[2008] VSC 128, [170]-[176]”
76 To the extent that there is any divergence in the two decisions (and it is far from clear that there is), I prefer to be guided by Sopov. Sopov (unlike Kotzman) is a reported decision in respect of which an application for special leave was refused. Further, Ashley JA in Kotzman was summarising in general terms the principles emerging from the authorities on repudiation, and refers only in passing to the principles applying where the defaulting party was acting on an erroneous interpretation of the contract. In Sopov, the Court (Maxwell P and Kellam JA) devotes an entire section of their judgment to this issue,[32] under the heading “Adopting an incorrect interpretation of the contract”, and were clearly setting out to definitively clarify the state of the law in this discrete area.
[32]At [7]-[18], in which their Honours approve the findings of fact of Whelan JA. Whelan JA does not examine the authorities in the same detail. All judges of the Court agreed in the outcome (see at [6])
77 Their Honours commence their examination of the issue as follows:[33]
An issue which arose at trial, and again on the appeal, concerned the significance of the adoption by the alleged repudiator of an incorrect interpretation of the contract. Of what significance is it if the repudiatory party acts in accordance with a bona fide belief as to the correctness of its interpretation?
This is an important topic. As a practical commercial matter, contracting parties need to know what will — and will not — count as repudiatory conduct. As this case illustrates, such judgments typically have to be made in circumstances of commercial and financial pressure. The applicable principles need, therefore, to be stated as simply and clearly as possible.
[33]At [7]-[8]
78 Having set their task, their Honours proceed to deal unequivocally with the issue of the state of mind, including “honest belief” (citations omitted):[34]
“In our view, the objective test of repudiation, as stated by Brennan J in Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (“Laurinda”), leaves no room for consideration of whether the party in breach — the alleged repudiator — held the honest belief that its action was justified by the contract. Axiomatically, the repudiator’s state of mind is irrelevant. What matters is the character of the repudiator’s conduct.
…
That the touchstone is conduct, not state of mind, emerges clearly from the authorities dealing with erroneous interpretation.”
[34]At [9] and [11]
79 After citing at length the decision of the High Court in DTR Nominees Pty Ltd v Mona Homes,[35] their Honours summarised the effect of that decision as follows:[36]
“What mattered was not the (bona fide) belief of the alleged repudiator but the character of its conduct: rather than “persisting willy nilly”, the repudiator was engaging in genuine disputation with the other parties about the true construction of the contract. The inference of repudiation could not reasonably be drawn.
In the same way, it is immaterial whether the alleged repudiator acts in accordance with legal advice.”
[35](1978) 138 CLR 423
[36]At [15]-[16]
80 Their Honours conclude with a summary of the distinctions drawn in the cases, as follows (citations omitted):
“1.For party A merely to assert, or argue for, a wrong interpretation of the contract will usually not be enough to justify party B drawing an inference of repudiation. The reason for this is that party A may be:
‘willing to perform the contract according to its tenor. He may be willing to recognise his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him.’
Thus the inference of repudiation should not readily be drawn where, for example:
(a)party A makes ‘contentious observations in the course of discussions or arguments’; or
(b)party A’s conduct amounts to engaging in ‘a bona fide dispute as to the true construction of a contract expressed in terms which are by no means clear’.
2.The inference of repudiation can more readily be drawn when the interpretation relied on by party A is clearly or obviously untenable and party A:
(a)acts (or threatens to act) unilaterally on the basis of the interpretation; or
(b)persists in the interpretation in the face of communications from party B pointing out the error.”
81 Based on this analysis, Mr Casement and Mr Scarfo’s reference to Mr Kelly appearing to be under the “(honestly held)” misapprehension concerning the relevant permit, is irrelevant. Further, the relevance of any evidence that Mr Kelly and Mr Halsam might have given on this issue is doubtful. The examination is of objective conduct, not subjective belief or understanding. To the extent that Ashley JA in Kotzman says anything different,[37] (noting, again, that I am not satisfied that His Honour does so), the clear statements in Sopov above are to be preferred.
[37]Notably, at [49]
82 In my judgment, Mr Spralja had good prospects of establishing in the original proceeding that the conduct by and on behalf of Mr Kelly in the period after the signing of the sale agreement on 29 November 2005 summarised above,[38] amounted to a repudiation of the sale agreement. I accept that Mr Spralja began the exchange in his letter of 10 December 2005 by referring to the threat of an injunction against him. However, I do not agree with Mr Casement and Mr Scarfo’s characterisation of this letter as showing that Mr Spralja “tried to get out of the Sale Agreement”. On the contrary, it offers Mr Kelly the option of “dissolving” the agreement and then expressly says (in substance) that Mr Spralja intends to honour the sale agreement in accordance with its terms. Mr Kelly’s response of 12 December 2005 first raised the “package deal” assertion (including the Boat SFR), which was restated in the letter from Stringer Clark, together with the unjustified and extortionate demand for an additional $50,000.
[38]Commencing at [22]
83 The next significant communication was the letter from Wards on behalf of Mr Spralja to Stringer Clark dated 25 January 2006. I described this letter above as important. This is because, in my view, it constitutes a clear statement about Mr Kelly’s error in relation to the sale agreement (including by attaching a copy of Permit P) and thus (based on the summary from Sopov above) opens up the circumstances where the inference of repudiation can more readily be drawn. In addition, it armed Mr Kelly with everything he needed to ensure that he would have received the full benefit of the Shark Quota for the 2006 year and thereafter, including on and from the snapshot date.
84 Despite this, Stringer Clark in their reply persisted with the flawed claim that the relevant permit was the non-existent Permit D and continued to assert Mr Kelly’s entitlement to the Boat SFR and “compensation”. Mr Casement and Mr Scarfo submitted that in this letter Stringer Clark were asserting that completion of the sale agreement required signed transfer forms for Permit D, failing which they proposed three settlement offers. Although I accept that the letter could be read this way, read as a whole, Mr Kelly was not offering to give up his claim to the Boat SFR. It is sufficiently clear from the 17 February letter itself, and confirmed in all subsequent correspondence, that Mr Kelly maintained his position on the Boat SFR right up to the point of settlement in February 2008.
85 Mr Spralja’s letter of 20 March 2006 again pointed out Mr Kelly’s error in respect of the Boat SFR; on this occasion disclosing that his legal advice confirmed that “nobody can see where the [Boat] SFRs included in the contract”. It also reminded Mr Kelly of his obligation under the sale agreement to pay the levy for 2006. Finally, while he asserted that the sale agreement was void, it nevertheless gave Mr Kelly a further 10 days to “take the quota and pay the money”. And it was completely in Mr Kelly’s power to do so – he still had all the necessary signed transfer forms from January and it wasn’t until July that Mr Spralja wrote to AFMA requesting that they not act on the forms.[39]
[39]See [37] above
86 There was no response to that letter and on 1 May 2006 Mr Spralja wrote again to Mr Kelly directly, Mr Kelly responded the next day and Mr Spralja wrote back a day later. The substance of those letters is summarised above.[40] In my view, despite apparently lacking any input from a lawyer, Mr Spralja’s letters of 1 and 3 May 2006 could hardly be any clearer in their acceptance of Mr Kelly’s alleged repudiation of the sale agreement. They may not use the language of “repudiation” and “rescission”, but they make clear that Mr Kelly’s “3 options” (which included repeated demands for the Boat SFR and unjustified compensation) were outside the terms of the sale agreement, confirm that the sale agreement has lapsed following 90 days of delay and state that Mr Spralja was still willing to sell his Shark Quota to Mr Kelly, but the price had increased to $700,000 (plus GST).
[40]At [32]
87 I do not agree with the defendants’ submissions that Mr Spralja’s failure to sell the Shark Quota to third parties, his failure to pay the deposit back and his ongoing dealings with Mr Kelly show that Mr Spralja did not accept the repudiation. He initially claimed the deposit in effect as damages for losses from Mr Kelly’s breach of the sale agreement, but later repaid it on legal advice. He did continue dealings with Mr Kelly, but on new terms as to price. And this also explains why he did not sell the Shark Quota to a third party. As I have stated, the 1 and 3 May 2006 letter could hardly have made Mr Spralja’s position clearer and were in my view more than sufficient to communicate Mr Spralja’s acceptance of any repudiation.
88 In circumstances where the inference of repudiation can more readily be drawn on the basis of part 2 of the summary in Sopov, I am satisfied that there are good grounds for concluding that (among other things):
· Mr Kelly’s unflinching and repeated adherence to the assertion that he was entitled to the Boat SFR, in the face of the clear terms of the sale agreement and the other difficulties in that claim discussed above; and
· the repeated and groundless demands that Mr Spralja pay large sums of “compensation” to Mr Kelly,
were sufficient to meet the test in part 1 of that summary. In particular, in my view, Mr Kelly’s stance as manifested by his letters and those from his lawyers, went beyond “a bona fide dispute as to the true construction of a contract expressed in terms which are by no means clear”.
If so, are any of the defendants entitled to claim advocate’s immunity in respect of any such breach of retainer or negligence?
268 On 20 May 2008 Mr Kelly filed an amended statement of claim, supported by an affidavit of his solicitor, David Fitzpatrick sworn 19 May 2008. The amended statement of claim added paragraphs 19 to 25 which, in substance, pleaded the terms of settlement with Mr Spralja dated 19 February 2008, confirmed Mr Kelly’s compliance with the terms, alleged that Mr Spralja had failed or refused to implement the terms and sought specific performance of the terms and (or alternatively) damages. Importantly, the prayer for relief to the amended statement of claim deleted all reference to the sale agreement (including the alleged oral agreement) and instead sought relief exclusively under the terms of settlement.
269 The affidavit of Mr Fitzpatrick describes the circumstances of the execution of the terms of settlement and exhibits the terms. It confirms that Mr Fitzpatrick received into his firm’s trust account the sum of $709,500 (being the $645,000 plus GST) payable under the terms by Mr Kelly and had notified Bullards of this fact. It then describes Mr Fitzpatrick’s efforts to have the signed license transfer forms lodged with AFMA and AFMA’s response. In relation to that response, Mr Fitzpatrick deposes that:
“On 7 May 2008 I received a facsimile transmission from AFMA advising (among other things) that AFMA intended to postpone the fishing permit transfer until AFMA received further ‘instructions’ from Mr Spralja. Now produced and shown to me and marked with the letters “DJF-5” is a true copy of the facsimile transmission from AFMA to me dated 7 May 2008. I subsequently received the original of AFMA’s letter in the mail. At no time until the letter from AFMA on 7 May 2008 have I or the plaintiff been aware that Mr Spralja claims that he was medically unfit to make a decision on 19 February 2008.”
270 The letter from AFMA at exhibit “DJF-5” to the affidavit relevantly states:
“In relation to AFMA’s processing of your request, I advise that AFMA has recently received correspondence from Mr Spralja requesting that we delay processing any transaction between your client and himself. Mr Spralja advises that a dispute in relation to legal representation is currently being investigated by the Legal Services Commissioner, Victoria and that he was medically unfit to make a decision on the 19th February, 2008 when the agreement between the two parties was made. I have replied to Mr Spralja advising that I will postpone this permanent transfer until such time as I receive further instructions.”
271 On 20 May 2008, Judge Anderson adjourned the matter to 12 June 2008. On 2 June 2008, Mr Spralja filed an amended defence and counterclaim. This was in substantially the same form as Mr Spralja’s defence in the original proceeding, except that it contained an additional paragraph comprising a series of bland denials of paragraphs 18 to 25 of the amended statement of claim, comprising the pleading of the terms of settlement. Mr Spralja filed a further amended defence and amended counterclaim on 12 June 2008 (the day of the hearing of Mr Kelly’s application for judgment on the terms of settlement). This admitted the execution of the terms of settlement as alleged by Mr Kelly, but advanced an argument in substance that Mr Kelly was seeking the transfer of the Shark Quota for the 2008/2009 season, which was not included in the terms of settlement. The amended counterclaim advanced the same argument and sought a declaration in the prayer for relief that the terms of settlement did not permit or allow the transfer of the Shark Quota for the 2008/2009 season.
272 Notably, the amended defence did not advance any arguments relating to Mr Spralja’s fitness to enter into the terms of settlement or seek to have the terms of settlement declared unenforceable based on any of the claims advanced in this proceeding (or otherwise). Indeed, it admitted due execution of the terms. And although the claims in the original proceeding and defences to those claims were carried through into the amended pleadings, they were no longer the subject of any claim for relief or evidence. Mr Kelly had deleted all claims for relief in respect of the sale agreement. Mr Spralja’s amended counterclaim was entirely new and likewise no longer referenced or advanced any claims based on the sale agreement. It also sought relief only in respect of the terms of settlement.
273 At the hearing before Judge Anderson on 12 June 2008, Mr Gronow appeared for Mr Kelly and Mr Settle for Mr Spralja. Mrs Spralja’s evidence was that, in the course of submissions, Judge Anderson said that Mr Kelly could have Mr Spralja’s Permit P. Mr Settle (on instructions from Mr Spralja) then pointed out that the permit was non-transferable and was just an administration number in AFMA. Judge Anderson stood the matter down briefly, apparently to check the legislation. When the application resumed His Honour “said that Kelly could not have the Permit, but could have everything else”. The judgment pronounced by Judge Anderson that day recited that the judgment was obtained “at a trial before a judge without a jury commencing 12 June 2008”, but there was no evidence adduced at trial apart from Mr Fitzpatrick’s affidavit and no reasons for judgment were given. Judge Anderson ordered as follows:
“There will be judgment for the plaintiff against the defendant for a declaration that the written terms of settlement between the plaintiff and the defendant, dated 19 February 2008, being exhibit DJF1 to the affidavit of David Fitzpatrick, sworn 19 May 2008 and together with the transfer documents, being forms with the identifiers GP, TC, SDW and SESS, comprising six pages and forming part of exhibit DJF5 to the said affidavit of David Fitzpatrick, are valid and enforceable.”
274 His Honour reserved liberty to apply in relation to a number of matters concerning the mechanics of securing confirmation by AFMA of the transfer of the Shark Quota to Mr Kelly. He also reserved “the question of the award and amount of any damages, including damages or compensation in respect of any loss or damage suffered by the plaintiff as a result of any breach, attempted breach, repudiation or attempted repudiation by the defendant of terms of settlement”. There was no evidence before me of any later application by Mr Kelly or Mr Spralja for further relief in relation to any of these matters. Mr Spralja was ordered to pay Mr Kelly’s costs of the proceeding from 19 February 2008 fixed at $6,000.
275 The principles as to the application of the advocate’s immunity are now well settled, particularly in relation to advice given that leads to a settlement of a proceeding. Most notably, the recent decisions of the High Court in Attwells v Jackson Lalic[86] (“Attwells”) and in Kendirjian v Lepore (“Kendirjian”)[87] have confirmed that the authoritative test for the application of the immunity is not satisfied where the work of the “advocate” leads to an agreement between the parties to litigation to settle their dispute.[88]
[86]Attwells v Jackson Lalic Lawyers Pty Ltd (2016) 259 CLR 1
[87]Kendirjian v Lepore (2017) 259 CLR 275
[88]Atwells, per French CJ, Kiefel, Bell, Gageler and Keane JJ at [5]
276 The test for the application of the immunity is as follows:
“…the central justification for the advocate’s immunity is the principle that controversies, once resolved, are not to be reopened except in a few narrowly defined circumstances. This is a fundamental and pervading tenet of the judicial system, reflecting the role played by the judicial process in the government of society… If those immunities remain, it follows that the re-litigation could not and would not examine the contribution of judge or witness to the events complained of, only the contribution of the advocate.”[89]
The protection is “grounded in the necessity of ensuring that the certainty and finality of judicial decisions, values at the heart of the rule of law, are not undermined by subsequent collateral attack”. [90]
[89]D'Orta‑Ekenaike v Victoria Legal Aid (2005) 223 CLR 1, per Gleeson CJ, Gummow, Hayne and Heydon JJ at [45]
[90]Attwells per French CJ, Kiefel, Bell, Gageler and Keane JJ at [52]
277 It is clear that the immunity can extend to work done out of court, providing it is work which “leads to a decision affecting the conduct of the case in court”. But even the High Court in the earliest of the recent leading cases on the immunity recognised that: “to take the immunity any further would entail a risk of taking the protection beyond the boundaries of the public policy considerations which sustain the immunity”.[91] The court in Attwells defined the limits of the immunity as follows:
“Once it is appreciated that the basis of the immunity is the protection of the finality and certainty of judicial determinations, it can be more clearly understood that the “intimate connection” between the advocate’s work and “the conduct of the case in court” must be such that the work affects the way the case is to be conducted so as to affect its outcome by judicial decision. The notion of an “intimate connection” between the work the subject of the claim by the disappointed client and the conduct of the case does not encompass any plausible historical connection between the advocate’s work and the client’s loss; rather, it is concerned only with work by the advocate that bears upon the judge’s determination of the case.”[92]
[91]Giannarelli v Wraith (1988) 165 CLR 543 per Mason CJ at [66]-[67]
[92]Attwells per French CJ, Kiefel, Bell, Gageler and Keane JJ at [46]
278 Turning specifically to advice leading to settlement, the High Court in Attwells held:
“To accept that the immunity extends to advice which leads to a settlement of litigation is to decouple the immunity from the protection of the exercise of judicial power against collateral attack, such an extension undermines the notion of equality before the law by enlarging the circumstances in which lawyers may be unaccountable to their clients.” [93]
[93]Attwells v Jackson Lalic Lawyers Pty Ltd [2016] HCA 16 at [41]
And further that:
“The public policy which sustains the immunity is not offended by recognising the indisputable fact that the terms of the settlement agreement, by reason of which the appellants claim to have been damaged, were not, in any way, the result of the exercise of judicial power.”[94]
[94]Attwells per French CJ, Kiefel, Bell, Gageler and Keane JJ at [59]
279 In Kendirjian v Lepore the High Court likewise noted that “advice leading to a compromise of a dispute cannot lead to the possibility of collateral attack upon a non-existent exercise of judicial power to quell disputes.”[95]
[95]Kendirjian v Lepore per Edelman J at [31]
280 The defendants’ have submitted that the issues in dispute were not quelled by the terms of settlement. Rather, Judge Anderson finalised the original proceeding by declaring the terms of settlement valid and enforceable and entering judgment against Mr Spralja, in favour of the defendants (as opposed to orders being made by consent, as was the case in Attwells). As such, there is a functional connection between the defendants’ conduct and the judgment. Therefore, the defendants’ are protected by the immunity.
281 Counsel for Bullards developed this submission in oral argument. He submitted:
“We say there were no consent orders made in the Kelly proceeding, indeed the Kelly proceeding continued ultimately in front of Judge Anderson with an amended pleading but the same proceeding and it was upon the determination of the fact that the terms of settlement were enforceable and valid.”
After referring to Mrs Spralja’s evidence concerning the transfer of Permit P, counsel continued:
“What's significant about that is that in effect the terms of settlement were not implemented in their entirety according to their terms but rather, involved some judicial intervention and amendment and so it was the judicial determination which in effect concluded the party's rights, not the terms of settlement alone.”
282 I reject these submissions. As explained above, while the amended pleadings in the proceeding before Judge Anderson on 12 June 2008 had legacy paragraphs from the original proceeding, there was no sense in which any of the issues raised in those pleadings were “before” His Honour. In particular, all of the relief relating to those legacy pleadings had been deleted and replaced by relief relating exclusively to the terms of settlement. I am satisfied that the brief exchange concerning the transferability of Permit P was also concerned exclusively with the effect and operation of the terms of settlement, not with any issue raised in the original proceeding.
283 Further, although Mr Spralja apparently raised his capacity to enter into the terms of settlement with AFMA and this was referred to in Mr Fitzpatrick’s affidavit, this was not later referred to or relied on in Mr Spralja’s amended pleadings. Thus, none of the issues raised in this proceeding were before His Honour. On that basis, I accept Mr Spralja’s submission that
“Judge Anderson did not make any order or finding in respect of:
a.the original controversy between the parties the subject of the Original Proceeding (in particular no finding as to construction of the terms of the Sale Agreement dated 29 November 2005); nor
b.the circumstances in which the Terms of Settlement were entered into, in particular no finding or determination of any allegation the subject of the current proceeding.”
284 In my view, there is therefore no sense in which it can be said that was there a functional connection between the defendants’ conduct and the judgment of Judge Anderson on 12 June 2008. I accept that His Honour exercised his judicial power, but in doing so he made no findings of fact or law relevant to the issues in the original proceeding, nor did he quell any of the controversies between the parties in the original proceeding. That was achieved entirely by the terms of settlement. To the extent there was any controversy before Judge Anderson, this concerned a discrete an minor aspect of the implementation of the terms of settlement, that was not and could not have arisen in the original proceeding. Further, His Honour’s decision enforcing the terms of settlement did not traverse any of the issues raised before me. Put another way, there was clear air between the original proceeding and His Honour’s decision enforcing the terms of settlement. And (as submitted by Mr Spralja) the substantive content of the rights and obligations embodied in the terms of settlement, arose between the parties without any intervention or determination by the court.
285 In Attwells, the terms of settlement (as agreed between the parties) were embodied in consent orders made by the court. The High Court held that:
“…the consent order and associated notation by the Court reflected an agreement of the parties for the payment of money in circumstances where no exercise of judicial power determined the terms of the agreement or gave it effect as resolving the dispute. The consent order may have facilitated the enforcement of the compromise, but it was the agreement of the parties that settled its terms.”[96]
In my view, contrary to the defendants’ submissions,[97] the fact that His Honour’s judgment was not by consent is not a valid point of distinction in this case.
[96]Attwells at [62]
[97]First defendant’s submissions in reply at [14]
286 The terms of settlement (which Mr Spralja had admitted) comprehensively and finally determined the controversy between the parties that had been enlivened on the pleadings in the original proceeding. As in Attwells, Judge Anderson’s determination did no more than facilitate the enforcement of the terms, albeit including by dealing with aspects of the implementation of the terms. The terms of settlement, by reason of which Mr Spralja claims to have been damaged, were not the result of the exercise of judicial power.[98] Further, in my view, the work of the defendants in relation to the settlement was not in any sense “functional” in His Honour’s decision.
[98]Attwells per French CJ, Kiefel, Bell, Gageler and Keane JJ at [59]
If not, how should responsibility for the breach be apportioned among the defendants?
287 Bullards submit (and it does not appear to be in dispute) that:
Part IVAA of the Wrongs Act compels the Court to apportion damages between defendants if [citing Dual Homes at [215], [384]]:
(a)the plaintiff’s claim against each defendant is an apportionable claim;
(b)that in relation to that claim each defendant is a concurrent wrongdoer; and
(c)the court can identify the material facts by reference to which it is to assess the extent of each defendant’s responsibility for the plaintiff’s damage, which can include regard to the comparative responsibility of the other defendant for the plaintiff’s damage.
Mr Spralja’s claim is an apportionable claim in that it is “a claim for economic loss or damage in an action for damages arising from a failure to take reasonable care”. [See ss 24AE and 24AF(1)(a), Wrongs Act]
If the Court concludes that each of the defendants is liable in damages to Mr Spralja they are concurrent wrongdoers for the purposes of the Wrongs Act. [See s 24AH, Wrongs Act ]
A finding that a defendant is a concurrent wrongdoer must necessarily involve analysis of responsibility for causing the plaintiff’s damage in respect of each apportionable claim.
While Bullards recognise that, if they and the other defendants are found to have a liability to pay damages to Mr Spralja, Bullards’ responsibility for Mr Spralja’s damages will be limited to their aliquot responsibility for Mr Spralja’s damages, Bullards make no submissions as to the appropriate apportionment between the defendants.”
288 Neither Mr Spralja’s submissions, nor those of Mr Casement and Mr Scarfo, add anything of substance to those by Bullards, and (like Bullards’) state that they make no submissions as to the appropriate apportionment. I am satisfied for the reasons submitted by Bullards that Mr Spralja’s claim is an apportionable claim and that the defendants are concurrent wrongdoers for the purposes of the Wrongs Act 1958 (Vic).
289 The principles applicable in this court for the assessment of comparative responsibility under s24AI(1) of the Wrongs Act 1958 (Vic) are conveniently summarised in the decision of John Dixon J in Dual Homes. It requires a broad discretionary evaluation of the conduct of the wrongdoers in terms of both causation and culpability:
“What is required of the court is a broad consideration of both the culpability of the departure from the standard of reasonable care and the relative importance of the acts of the parties which caused the damage. The concept of culpability which is applied is not ‘moral blameworthiness but [the] degree of departure from the standard of care of the reasonable man’, while the relative importance of the conduct of the wrongdoers invokes an assessment of causal potency. These considerations may overlap.
The High Court in Podrebersek referred to Smith v McIntyre. In that case, Burbury CJ, Gibson and Crisp JJ identified considerations that might influence a finding of apportionment, including who created the hazard which ultimately caused the injury, the age, role and position of the person causing the damage and failing to take an obvious and available last opportunity to avoid the damage. The court emphasised the need for a broad discretionary assessment of all the circumstances. [99]
[99]Dual Homes, per John Dixon J at [390]-[392] (citations omitted)
290 Mr Bullard’s culpability in relation to the departures from the requisite standard at least in relation to the advice given to Mr Spralja, is tempered by the fact that he had come into the proceeding very late. He had therefore had only a limited opportunity to review documents and consider and form views about the issues in the proceeding. The evidence was that he deferred to Mr Casement and Mr Scarfo on the more technical aspect of the case, and it was clear (and unsurprising) that he was influenced by their views. On the other hand, despite his concession that he did not then have a full and detailed understanding of the issues in dispute, he was willing to advise Mr Spralja that there was serious risk in relation to his case and that Mr Spralja’s offer to accept $850,000 was like “winning Tattlotto”.
291 Mr Scarfo had also come into the case at a relatively late stage, but (perhaps apart from some of the more detailed aspect of the fishing licence regime) there is no reason to conclude that his capacity to advise on the issues in the proceeding was thereby compromised. Mr Casement was clearly in the best position to have been across all of the issues, having been involved in the proceeding since it commenced and been the author of Mr Spralja’s counterclaim. However, he gave evidence (and I accept) that Mr Scarfo was brought in as the senior counsel to lead Mr Casement, and his was the most authoritative voice in the discussions with Mr Spralja.
292 On the issue of the instructions to settle, I have found that Mr Bullard was in the “front line” in the dealings with Mr Spralja at court in the afternoon that were probably the genesis of the settlement reached later that day. He was also in the best position to secure clear confirmation of any instructions he thought he had from Mr Spralja, including by obtaining a document similar to the signed settlement instruction. He might therefore be said to have been more influential in terms of causation. But, in my view, Mr Bullard’s more direct role in this regard did not absolve Mr Scarfo and Mr Casement from taking steps to check the reliability of the instructions, including (for example) by asking to see written confirmation of the instructions, telephoning Mr Spralja or insisting on his return to chambers. Mr Casement bore particular responsibility in this regard, given his much longer experience of Mr Spralja and his recognition that he was “not an easy client”.
293 Doing my best to weigh these diversely weighted considerations in respect of both aspects of breach identified between all three defendants, I would assess their respective proportionate liability to be roughly equivalent. I will therefore order that any damages recovered by Mr Spralja following assessment, be paid as to one third by each of the defendants.
Disposition and orders
294 I will hear the parties further on the appropriate form of final orders to give effect to these reasons. In the meantime, my tentative view is that:
(a) I should order simply that there be judgment on liability for the plaintiff against the defendants and that the defendants are each liable to pay one third of any damages the plaintiff is assessed to have suffered by reason of the defendants’ negligence, and interest pursuant to statute.
(b) Any order for costs should await the assessment of damages, given the theoretical possibility that the amount of damages assessed is relevant to the question of costs.
(c) Subject to (b) above and any other matter that any of the parties wish to bring to the attention of the court, the defendants would be ordered to pay the plaintiff’s costs (including reserved costs) on the standard basis in default of agreement, apportioned in the same manner as damages.
295 Finally, I would hope the parties can co-operate in relation to the assessment of damages, so that the proceeding as a whole can be brought to a swift conclusion. This should include considering whether it is in the parties’ interests to retain a single joint expert pursuant to s65L of the Civil Procedure Act 2010 (Vic), to opine on on relevant matters (notably, the value of Mr Spralja’s Shark Quota in around May 2008) and the possibility of an early mediation or judicial resolution conference to resolve all outstanding issues. The court stands ready to make any orders as seem appropriate to facilitate these matters.
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Certificate
I certify that these 121 pages are a true copy of the judgment of His Honour Judge Woodward delivered on 3 September 2018.
Dated: 3 September 2018
Simone Karmis
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