Ward v Loumbos

1. [1]

   MEAGHER JA: I agree, for the reasons given by Sackville AJA, that this appeal should be allowed and the orders proposed by his Honour made.

2. [2]

   SACKVILLE AJA: The question on this appeal is whether a Judge of the Equity Division (Lindsay J) erred in finding that a gift by the respondent (Mr Loumbos) to the appellant (Ms Ward) of $1.3 million, plus certain expenses, in connection with the purchase of a residential property, was conditional on a marriage taking place between the parties. Since the marriage did not take place, the primary Judge made an order (among others) setting aside a document styled “Deed Poll-Gift” (Deed Poll) executed by Mr Loumbos evidencing the gift. His Honour also declared that Ms Ward held the residential property, which had been transferred to her name, on trust for Mr Loumbos. [1]

3. [3]

   Ms Ward contends that the primary Judge’s fact finding process miscarried, primarily because his Honour misapprehended key evidence and overlooked other evidence that made the findings implausible. Ms Ward’s notice of appeal seeks an order that the appeal be allowed and the proceedings instituted by Mr Loumbos be dismissed. However, Mr Ashhurst SC, who appeared with Mr Corbett for Ms Ward, conceded that if the appeal succeeds it will be necessary for this Court to order a new trial.

Background facts

1. [4]

   The primary Judge described the relationship between Mr Loumbos and Ms Ward and its subsequent breakdown in rather colourful terms. The background facts can, however, be stated more circumspectly.

2. [5]

   In 2007, Ms Ward commenced living with her adult disabled daughter at a residential property in Lilyfield (Lilyfield Property). She occupied the Lilyfield Property as a tenant but, according to the primary Judge, “longed” to own the residence. [2]

3. [6]

   In February 2011, Mr Loumbos and Ms Ward commenced their relationship. At that time, Mr Loumbos was 65 years old and Ms Ward was aged 43.

4. [7]

   Within a few weeks of the relationship beginning, Mr Loumbos bought Ms Ward a necklace worth about $10,000 and other expensive gifts.

5. [8]

   In April 2011, Mr Loumbos offered to purchase the Lilyfield Property from the owner for $1.3 million. The offer was accepted and Mr Loumbos so informed his solicitor.

6. [9]

   On 21 April 2011, the Commonwealth Bank of Australia (CBA) sent letters to Mr Loumbos offering to provide finance totalling about $9 million. The various offers were made to Mr Loumbos personally, two of Mr Loumbos’ companies and to the trustees of the Loumbos Family Trust. The CBA loans were primarily intended to refinance existing loans from the National Australia Bank (NAB), but apparently included an advance of $1.12 million to facilitate the purchase of the Lilyfield Property. Each letter of offer required the grant of a mortgage over the Lilyfield Property as part of the CBA’s security for the advances.

7. [10]

   On 9 May 2011, Ms Ward sent an email to Mr Loumbos’ solicitor, Mr Beattie, stating that the name of the purchaser under the (as yet unexchanged) contract of sale of the Lilyfield Property was to be changed from Mr Loumbos to Ms Ward herself. On the same day, Mr Beattie advised the vendor’s solicitors of the change of purchaser.

8. [11]

   In early June 2011, Mr Loumbos paid $87,000 to purchase a BMW vehicle for Ms Ward. [3] According to the primary Judge, Mr Loumbos gave the vehicle to Ms Ward “as an act of generosity … with the intention that [she] own it absolutely”. [4] (In the proceedings, Mr Loumbos claimed an order that Ms Ward deliver up the vehicle. The primary Judge rejected the claim [5] and there is no appeal from his Honour’s decision in this respect.) In addition, Mr Loumbos paid off a debt of $52,500 that Ms Ward owed on her own Mercedes Benz vehicle.

9. [12]

   On about 27 June 2011, Ms Ward retained ClarkeKann Lawyers to act for her in connection with the purchase of the Lilyfield Property.

10. [13]

    On 30 June 2011, Ms Kerry of ClarkeKann wrote to Ms Ward advising that although the vendor of the Lilyfield Property was overseas, his solicitors held an executed contract of sale that would allow an exchange of contracts to take place. ClarkeKann’s letter included the following:

11. [14]

    In late June or early July 2011, Mr Loumbos and Ms Ward executed the documents relating to the CBA loans.

12. [15]

    On 12 July 2011, a crucial conference took place in the offices of ClarkeKann (Conference). The persons participating in the Conference were two solicitors from ClarkeKann (Mr Gray and Ms Kerry), Mr Loumbos and Ms Ward.

13. [16]

    There was sharply conflicting evidence as to what occurred at the Conference. However, it was not in dispute that in preparation for the Conference Ms Kerry, on Mr Gray’s instructions, prepared two documents. The first was the Deed Poll, which Mr Loumbos was to execute in favour of Ms Ward. The second was a Deed of Indemnity, to be executed by Ms Ward (described as the “Guarantor”) and various Loumbos entities (described collectively as the “Other Guarantors”).

14. [17]

    The upshot of the Conference was that both the Deed Poll and the Deed of Indemnity were executed by the relevant parties. Despite being executed on 12 July 2011, both Deeds were dated 14 July 2011.

15. [18]

    The Deed Poll was expressed to be executed between Mr Loumbos as “Donor” in favour of Ms Ward as “Donee”. It relevantly provided as follows:

16. [19]

    The document was executed “as a Deed Poll” by Mr Loumbos, whose signature was witnessed by Ms Kerry. Ms Ward “acknowledge[d] the gift the subject of th[e] Deed Poll” by signing the document.

17. [20]

    The Deed of Indemnity contained the following recitals under the heading “BACKGROUND”:

18. [21]

    Clause 3.1 of the Deed of Indemnity provided that each of the “Other Guarantors” jointly and severally indemnified the Guarantor for any liability she might incur under the “Transaction Documents”. This expression was defined to mean “each of the Facility Agreements annexed at Annexure A to this Deed and any other documents which give effect to the Loans”. The copy of the Deed of Indemnity in the Blue Appeal Book does not include Annexure A, but it can be inferred that the Facility Agreements were those entered into between the Loumbos entities and the CBA.

19. [22]

    On 13 July 2011, Ms Ward sent an email to Mr Beattie advising that she was using her own solicitor to handle the purchase of the Lilyfield Property. Mr Beattie replied immediately, noting that the CBA had advised him that day that the purchase was to settle the following day (14 July 2011). Mr Beattie stated in his reply that he had informed the CBA that he was unaware of any settlement. Mr Beattie also recorded that Mr Loumbos had advised his firm that “he signed some other documents including a loan agreement”. Mr Beattie asked Ms Ward to get her solicitor to forward him a copy.

20. [23]

    At 5.31 pm on 13 July 2011, Ms Ward emailed Ms Kerry of ClarkeKann asking for copies of the documents signed the previous day. Ms Kerry responded by forwarding to Ms Ward copies of the contract of sale of the Lilyfield Property, the Deed Poll and the Deed of Indemnity.

21. [24]

    At 5.45 pm on 13 July 2011, Ms Ward emailed Mr Beattie advising that she would forward a “copy”. This was presumably intended to be a reference to the documents requested by Mr Beattie. However, it appears that Ms Ward did not at any stage forward copies of the Deed Poll or the Deed of Indemnity to Mr Beattie.

22. [25]

    The purchase of the Lilyfield Property was completed on 14 July 2011. Completion took place simultaneously with exchange of the signed counterparts of the contract of sale which, as I have noted, were dated 14 July 2011. The cover sheet of the contract struck out Mr Beattie’s name as the solicitor acting for the purchaser and substituted ClarkeKann Lawyers as the solicitors for the purchaser, Ms Ward.

23. [26]

    In November 2011, Mr Loumbos and Ms Ward became engaged. Shortly thereafter Mr Loumbos gave Ms Ward several valuable rings. (Mr Loumbos sought the return of the rings as part of his claim in the proceedings but the primary Judge rejected the claim. [6] There has also been no appeal from this decision.)

24. [27]

    From about mid-2012, Mr Loumbos caused Ms Ward to be paid a fortnightly fee for “consultancy services”. The primary Judge characterised these payments as “more readily seen as an attempt to provide [Ms Ward] with a layer of financial security”. [7]

25. [28]

    In January and early February 2013, discussions took place between Mr Loumbos and Ms Ward concerning Mr Loumbos’ desire to refinance his business loans. These discussions led to the execution, on 8 February 2013, of a second Deed of Indemnity between Ms Ward and the various Loumbos entities.

26. [29]

    The second Deed of Indemnity was drafted by Mr Anderson of ClarkeKann. Mr Anderson subsequently lodged caveats on Ms Ward’s behalf over properties owned by Mr Loumbos and one of his companies.

27. [30]

    On 19 March 2013, the relationship between Mr Loumbos and Ms Ward came to an end following an exchange of emails.

28. [31]

    On 11 April 2013, Mr Anderson of ClarkeKann emailed Mr Loumbos about a proposed refinancing transaction. In the email, Mr Anderson said this:

29. [32]

    Mr Loumbos responded as follows:

30. [33]

    On 1 May 2013 (well after the Parties’ relationship had broken down), Mr Loumbos sent Ms Ward a text, as follows:

31. [34]

    On 10 May 2013, Mr Loumbos’ new solicitors wrote to Ms Ward asserting that Mr Loumbos had been prepared to purchase the Lilyfield Property in 2011:

32. [35]

    Mr Loumbos’ solicitors lodged a caveat over the title to the Lilyfield Property on or about 17 October 2013. The caveat claimed that Mr Loumbos had an equitable interest by way of a “Constructive/Resulting Trust”. The facts justifying the claimed interest were said to be the following:

33. [36]

    Mr Loumbos commenced the Equity Division proceedings on 3 December 2013.

The Primary Judgment

1. [37]

   The primary Judge noted that it was not in dispute that Mr Loumbos funded the whole purchase price for the Lilyfield Property. [8] Nor was it in dispute that Ms Ward had become registered as the proprietor of the Lilyfield Property, subject to a mortgage to the CBA. [9]

2. [38]

   His Honour recorded Mr Loumbos’ contentions as follows: [10]

3. [39]

   Ms Ward’s counsel accepted that Mr Loumbos had pleaded a case of unconscionability founded on an allegation that Mr Loumbos had executed the contract under a mistake. [11] The mistake pleaded was that Mr Loumbos executed the Deed Poll in the belief that it was conditional and would not take effect until he and Ms Ward were married.

4. [40]

   Ms Ward’s counsel had objected to Mr Loumbos conducting an unconscionability case founded on an allegation that Ms Ward had unconscientiously taken advantage of Mr Loumbos at a time when he was under a special disadvantage. Despite the objection, the primary Judge noted that Mr Loumbos had advanced what his Honour described as “an allegation of unconscionability arising from a catching bargain”. [12] His Honour considered that it was unnecessary to deal with this allegation and that the best course was to uphold Ms Ward’s objection to Mr Loumbos’ attempt to widen his case. [13]

5. [41]

   The primary Judge made the following observations concerning the credit of the witnesses who gave evidence: [14]

6. [42]

   The primary Judge found that when the parties were introduced in 2011, Mr Loumbos presented as a successful businessman but was in truth a lonely, comparatively unsophisticated person. [15] His Honour also found that both parties had expensive tastes and a tendency to indulge them. [16]

7. [43]

   His Honour seems to have accepted that Mr Loumbos provided the resources necessary to fund the parties’ expensive lifestyle, since he found that Ms Ward “lacked the wherewithal to purchase the [Lilyfield Property] from her own resources”. [17]

8. [44]

   The primary Judge observed that a “fundamental flaw” in the Deed of Indemnity was that it identified Mr Loumbos’ financier as the NAB rather than the CBA. This error, in his Honour’s view, corroborated Mr Loumbos’ evidence that he did not read any of the documentation presented at the Conference and, more importantly, that he was offered only a minimal explanation of “it” (presumably the documentation). [18]

9. [45]

   The primary Judge noted that the resolution of what occurred at the Conference was not assisted by the absence of contemporary file notes prepared by the two solicitors in attendance. [19] Estimates of the length of the Conference varied, but his Honour considered that it could not have lasted more than 30 minutes, most of which was taken up with Ms Kerry explaining the terms of the contract of sale of the Lilyfield Property.

10. [46]

    His Honour found that ClarkeKann had been instructed by Ms Ward and not by Mr Loumbos and thus the two solicitors present at the Conference were not acting on his behalf. [20] His Honour also found that at the Conference little, if anything, was said to explain the contents of the two Deeds. [21]

11. [47]

    The primary Judge, in substance accepted Mr Loumbos’ account in his affidavit as to what happened at the Conference. The account was as follows: [22]

12. [48]

    His Honour acknowledged that this finding was contrary to the evidence of Ms Ward, whose denial was “ostensibly corroborated” by the two solicitors, Mr Gray and Ms Kerry. [23] His Honour gave a number of reasons for accepting Mr Loumbos’ version in preference to the other three witnesses: [24]

13. [49]

    The primary Judge further found that Ms Ward’s conduct appeared: [25]

14. [50]

    Ms Ward had not been saved from error, as she should have been, by legal advice that insisted that Mr Loumbos obtain independent advice before the Deeds were executed. Instead: [26]

15. [51]

    On these findings, the primary Judge concluded that the case fell “comfortably” within the jurisdiction of the Court to order that the Deed Poll be set aside and declare that Ms Ward held the Lilyfield Property on trust for Mr Loumbos. [27] It was also appropriate to order Ms Ward to transfer the Lilyfield Property to Mr Loumbos.

16. [52]

    Since Mr Loumbos told ClarkeKann at the Conference that the Deed Poll was not to take effect until he and Ms Ward were married and the lawyers ought to have heard and paid heed to what Mr Loumbos said, ClarkeKann had no authority to take the Deed Poll or to allow Ms Ward to treat it as operative before the marriage took place. [28] It followed that the Deed Poll was delivered by Mr Loumbos to ClarkeKann, as agents for Ms Ward, in escrow: [29]

17. [53]

    The fact that the document was a Deed Poll was no impediment to it being delivered in escrow. Nor was the Deed Poll an impediment to a declaration that Ms Ward held the Lilyfield Property on trust for Mr Loumbos. Even so, the Deed Poll remained a “transactional document” liable to be set aside. [30] Mr Loumbos had signed the Deed Poll in the mistaken belief that it could not and would not be given effect immediately. [31]

18. [54]

    Furthermore, because a reasonable time for the satisfaction of the escrow condition had passed, equitable relief was available, even in the absence of a mistake, to have the Deed Poll delivered up for cancellation. [32] An order setting aside the Deed Poll was not inconsistent with an order requiring the Deed Poll to be delivered up for cancellation.

19. [55]

    The orders made by the primary Judge included:

Submissions

1. [56]

   Ten of the 13 grounds in Ms Ward’s Notice of Appeal challenge the primary Judge’s findings of fact, principally the findings concerning what was said and understood by the participants at the Conference. Of the errors of law identified in the Notice of Appeal, the only one pressed was that his Honour erred in failing to require “clear and convincing” proof that Mr Loumbos executed the Deed Poll in the mistaken belief that it would not become operative unless and until he and Ms Ward married.

2. [57]

   Mr Ashhurst SC, who appeared with Mr Corbett for Ms Ward, submitted that the primary Judge made two critical errors. The first was that his Honour misinterpreted Mr Gray’s evidence as to his attitude towards Mr Loumbos during the Conference of 12 July 2011. The second was that his Honour failed to address critical evidence given by both solicitors (Mr Gray and Ms Kerry) present at the Conference. According to Mr Ashhurst, these errors vitiated the fact-finding process and necessitated a new trial.

3. [58]

   Mr Ashhurst contended that the primary Judge’s findings, although framed as credit-based, were not protected from appellate intervention by reason of the principles stated in Fox v Percy. [33] He submitted that where important evidence inconsistent with the other party’s case is misunderstood or not dealt with by the primary Judge, the Court is entitled to interfere with the findings of fact. The present case, so Mr Ashhurst argued, fell into that category.

4. [59]

   Mr Insall SC, who appeared with Mr Smith for Mr Loumbos, submitted that the primary Judge’s findings were credit-based and supported by the evidence. Having regard to the advantages enjoyed by the primary Judge in evaluating the evidence, particularly as to the events at the Conference, Ms Ward had not satisfied the requirements for appellant intervention.

5. [60]

   Mr Insall relied on the primary Judge’s acceptance of Mr Loumbos’ account of what transpired at the Conference and his Honour’s rejection of Ms Ward’s “protestations of innocence” about the withholding of a copy of the Deed Poll from Mr Loumbos and his solicitor during the period between 12 and 14 July 2011. Mr Insall also relied on the finding by the primary Judge that both Mr Gray and Ms Kerry had substantially reconstructed the events at the Conference. Mr Insall submitted that the primary Judge had given cogent reasons for finding that neither Mr Gray nor Ms Kerry confronted Mr Loumbos in relation to his statement at the Conference that the Deed Poll was to be conditional on his marriage with Ms Ward taking place.

6. [61]

   Mr Insall submitted that the primary Judge’s findings were supported by objective circumstances. These included the failure of the solicitors to make file notes of the Conference, their failure to perceive the obvious conflict between Mr Loumbos’ interests and those of Ms Ward and the “fundamental flaw” in the description of the finances in the Deed of Indemnity.

7. [62]

   In his oral submissions to this Court, Mr Insall advanced an alternative contention that, if accepted, would support the primary Judge’s orders even if the findings as to the events at the Conference were set aside. Mr Insall relied on the primary Judge’s finding that Ms Ward procured Mr Loumbos’ execution of the Deed Poll and his payment of the purchase price knowing that he held the mistaken belief that the Deed Poll would be effective only if the marriage took place. [34] This finding, so Mr Insall submitted, was not dependent on anything that was said at the Conference, and justified the relief granted to Mr Loumbos.

Reasoning

1. [63]

   Mr Insall correctly submitted that the High Court has repeatedly stressed that appellate courts must show respect for the advantages enjoyed by trial judges:

2. [64]

   Nevertheless, this Court is under an obligation to perform the appellate function conferred on it by Parliament. If, after making allowances for the advantages enjoyed by the trial judge, the Court concludes that error has been demonstrated, it is obliged to intervene. [38] As the High Court recognised in Fox v Percy, mistakes can occur at trial in the comprehension, recollection and evaluation of evidence. [39] It is for this reason that if a trial judge has failed to deal in a satisfactory way with a substantial body of evidence that must be addressed before a critical finding can be made, an appellate court on a rehearing is entitled to order a retrial. [40]

3. [65]

   In the present case, the primary Judge identified the critical factual question to be whether Mr Loumbos said anything at the Conference to the effect that the Deed Poll was not to take effect until the parties were married and that he would sign the document only if it was not to “see the light of day” until he and Ms Ward were married. [41] In answering this question in the affirmative, his Honour did not accept Mr Loumbos as an entirely reliable witness. He considered that although all witnesses endeavoured to tell the truth as they saw it, there was a “substantial amount of reconstruction in the evidence of most witnesses”. [42] Mr Loumbos, like Ms Ward, “remain[ed] blinkered by … emotional trauma … and an unconscious bias”. His evidence was neither entirely consistent nor entirely reliable. [43]

4. [66]

   There was a stark contrast between the evidence of Mr Loumbos and that of Mr Gray and Ms Kerry concerning the events at the Conference. In his cross-examination, Mr Loumbos maintained that neither Mr Gray nor Ms Kerry gave him a word of explanation about the Deed Poll and that he signed the Deed Poll without reading it. He said that he was not concerned about executing the Deed Poll because of the “instructions” he gave during the Conference. Mr Loumbos’ recollection was that Ms Kerry’s only involvement in the Conference was that she entered the room late in order to witness his signature.

5. [67]

   Mr Gray accepted that during the Conference he had not given advice to Mr Loumbos, since the firm had been retained only by Ms Ward. But Mr Gray denied that Mr Loumbos had said anything in the Conference about the Deed Poll being conditional on the marriage between Ms Ward and Mr Loumbos taking place. According to Mr Gray, if Mr Loumbos had said anything to that effect he (Mr Gray) would not have accepted Mr Loumbos’ assertion or instruction.

6. [68]

   Mr Gray’s cross-examination included the following passage:

7. [69]

   In his re-examination, Mr Gray gave the following evidence:

8. [70]

   Ms Kerry’s evidence was notable for its specificity. She estimated that the Conference lasted for about 30 minutes. She said that apart from a few minutes at the beginning, when Mr Gray spoke to Ms Ward and Mr Loumbos, the time was taken up by her explanation of the documentation. She recalled that she took about 10 to 15 minutes to explain to Ms Ward the material provisions of the contract of sale of the Lilyfield Property. In the remaining time, which she estimated to be “at least 15 minutes”, she explained the terms of the Deed Poll and the Deed of Indemnity. She explicitly stated that she gave the explanation to both Ms Ward and Mr Loumbos, even though she appreciated that Mr Loumbos was not a client of the firm.

9. [71]

   Mr Loumbos’ counsel asked Ms Kerry how she was able to recall in such detail what happened at the Conference, bearing in mind that four years had passed and Ms Kerry had no contemporaneous notes. Ms Kerry gave the following answers:

10. [72]

    The cross-examination returned to the topic a few questions later and the following exchange took place:

11. [73]

    Ms Kerry rejected a suggestion in cross-examination that she was focussed on explaining the documents to Ms Ward. She insisted that “rightly or wrongly” she had taken it on herself to explain the contents of both the Deeds of Indemnity and the Deed Poll to Mr Loumbos, as well as to Ms Ward.

12. [74]

    The primary Judge gave a number of reasons for preferring Mr Loumbos’ account of what was said at the Conference over the version given by the other three participants. His Honour rejected Ms Ward’s account insofar as it corroborated the evidenced given by Mr Gray and Ms Kerry. For present purposes, Mr Ward’s evidence can be put to one side, since the primary Judge considered that she had not acted innocently in withholding a copy of the Deed Poll from Mr Loumbos and his solicitor and concluded that her evidence was unreliable.

13. [75]

    The evidence of Mr Gray and Ms Kerry, however, cannot be treated in the same way. In order to find that Mr Loumbos expressly stated at the Conference that the Deed Poll was not to take effect until the marriage took place, the primary Judge had to reject the evidence of Mr Gray and Ms Kerry that Mr Loumbos made no such statement at the Conference. There was no suggestion that the solicitors were party to some kind of arrangement with Ms Ward to mislead Mr Loumbos or to ignore anything he said. Moreover the primary Judge accepted that both Mr Gray and Ms Kerry were endeavouring to tell the truth as they saw it.

14. [76]

    As I have noted, the primary Judge found that the evidence of both solicitors involved “substantial reconstruction of events”. However, his Honour clearly appreciated that a general finding of this kind could not, of itself, justify rejecting the evidence of the solicitors. This is particularly so in relation to Ms Kerry’s detailed and apparently plausible account of why she had a good recollection of the Conference despite the absence of contemporaneous notes.

15. [77]

    One key plank in the primary Judge’s evaluation of the evidence was his statement that “[o]n their own evidence the Clarke Kann [sic] solicitors did not really engage with [Mr Loumbos], or listen to him meaningfully”. [44] A second key plank was his Honour’s view that Mr Gray believed that “he would have disregarded any statements made by [Mr Loumbos]”, and that Ms Kerry’s “attention was narrowly focussed on explaining the terms of the purchase contract, and on the mechanical exercise of obtaining signatures on the documentation”. [45]

16. [78]

    This analysis does not reflect the evidence given either by Mr Gray or by Ms Kerry. Both solicitors, but particularly Mr Gray as the more senior, can legitimately be criticised for failing to advise Mr Loumbos to obtain independent legal advice before he executed the Deed Poll and the Deed of Indemnity. But the failure to appreciate the conflict of interest between Ms Ward and Mr Loumbos does not provide a sound basis for attributing to the solicitors evidence that they did not give.

17. [79]

    The primary Judge appears to have interpreted the passage in Mr Gray’s cross-examination to which I have referred [46] as demonstrating that he would have ignored anything Mr Loumbos said at the Conference, including any statements or instructions to the effect that the Deed Poll should not take effect unless and until Mr Loumbos and Ms Ward were married. Mr Gray’s evidence, fairly interpreted, simply amounted to an acknowledgement that if the engagement or impending marriage of Ms Ward and Mr Loumbos had been “mentioned” in the course of the Conference he would have thought it irrelevant.

18. [80]

    The trial was conducted on the basis that neither party would take a Browne v Dunn [47] point against the other, since the affidavits indicated sufficiently where the witnesses were in disagreement. Nonetheless, it was not put to Mr Gray that he would have regarded as irrelevant an instruction or statement by Mr Loumbos prior to the signing of the Deed Poll that it was not to take effect unless and until the marriage took place. Nor was it put to Mr Gray that he appreciated that Mr Loumbos understood that the Deed Poll would not be operative unless the marriage took place. Each of these propositions would have been directly contrary to Mr Gray’s affidavit evidence. Moreover, it would have been remarkable if an experienced solicitor, even if he was insensitive to an apparent conflict of interest, would have dismissed as irrelevant a statement or instruction by Mr Loumbos suggesting that he understood the Deed Poll would not take effect until he and Ms Ward were married. It is true that Mr Gray saw himself as acting for Ms Ward and not Mr Loumbos. But a statement by Mr Loumbos that the Deed Poll was not to take effect until the marriage occurred would not merely have been inconsistent with the clear terms of the Deed Poll itself, but directly inconsistent with the instructions given by Mr Gray’s client (Ms Ward), who was present in the room and signed both Deeds.

19. [81]

    Contrary to the primary Judge’s reasoning, Ms Kerry at no stage accepted that she did not “engage with” Mr Loumbos. It was certainly not Ms Kerry’s evidence that she was “narrowly focussed” on explaining the contract of sale. The primary Judge asked Ms Kerry whether it was “possible” that she was focussed on the contract of sale because she was nervous. Ms Kerry disagreed with the suggestion and maintained that she had been “less nervous” because she had practised what she was going to say at the Conference. The following exchange also took place between the primary Judge and Ms Kerry:

20. [82]

    In my opinion this is a case in which the primary Judge’s findings of fact, although credibility based, were seriously affected by a misapprehension as to the evidence given by Mr Gray and Ms Kerry. That evidence had to be addressed before his Honour could properly conclude that Mr Loumbos had stated at the Conference that the Deed Poll was not to take effect until he and Ms Ward were married. This required the primary Judge to give an adequate explanation as to why he rejected the accounts given by Mr Gray and Ms Kerry. With respect, the explanation given by his Honour was flawed because it misapprehended the solicitors’ evidence and attributed to them concessions that they did not make. The error clearly played an important part in his Honour’s reasoning process, leading to the finding that Mr Loumbos’ evidence was to be preferred over that of Mr Gray and Ms Kerry.

21. [83]

    The primary Judge’s misapprehension of the evidence given by Mr Gray and Ms Kerry might not warrant this Court ordering a new trial if other evidence provides sufficient independent support for the findings made by his Honour. Mr Insall relied on a number of matters as providing such support, but in my view they do not detract from the significance of the error.

22. [84]

    One matter relied on by Mr Insall was the primary Judge’s finding that Mr Loumbos could not afford to give away $1.3 million. [48] However, the evidentiary basis for this finding is unclear. It is true, as the primary Judge found, that Mr Loumbos borrowed the funds to finance the purchase of the Lilyfield Property. But Mr Loumbos himself gave evidence that in April 2011 the CBA offered advances to him and his companies totalling $9 million on the security of various properties (including the Lilyfield Property). Presumably at that stage the assets of Mr Loumbos and his companies were of sufficient value to support very large loans from a major institutional lender on apparently conventional commercial terms. Moreover, not only did Mr Loumbos make substantial gifts to Ms Ward earlier in 2011, but (as Mr Insall accepted) he did not give any evidence as to his overall financial position at the time he executed the Deed Poll.

23. [85]

    The primary Judge gave some weight to the incorrect identification of the lender in the Deed of Indemnity. His Honour said that if the document had been read to Mr Loumbos, the error would have been exposed. [49] However, Ms Kerry, who drafted the Deed of Indemnity did not say that she had read out its terms at the Conference. There is no necessary inconsistency between Ms Kerry’s evidence and the failure of all parties at the Conference to identify the error.

24. [86]

    The fact that neither Mr Gray nor Ms Kerry considered that they were acting for Mr Loumbos is clearly a matter to be taken into account in assessing their evidence (as is their failure to recognise the conflict between the interests of Mr Loumbos and Ms Ward). However, their understanding that only Ms Ward was their client does not make it probable that both solicitors would have simply ignored a statement by Mr Loumbos that plainly contradicted the terms of the Deed Poll and was directly inconsistent with the instructions given by their client.

25. [87]

    Mr Insall also relied on the primary Judge’s acceptance of the evidence of Mr Smith, Mr Loumbos’ mortgage broker. Mr Smith said that in a conversation with Ms Ward in April 2011, in Mr Loumbos’ presence, she said this:

26. [88]

    The primary Judge thought that Ms Ward’s comments in the April 2011 conversation supported Mr Loumbos’ account of the Conference held three months later. [50] Ms Ward’s comments clearly assume that a marriage would take place, but they do not appear to be directed to whether Mr Loumbos’ gift to her was intended to be conditional on the marriage taking place. Mr Smith’s response to Ms Ward’s comments, as recorded in his affidavit, does not suggest that he interpreted Ms Ward as indicating that the gift was to be conditional on marriage.

27. [89]

    Finally, Mr Insall submitted that the primary Judge was entitled to take into account that the affidavits made by Mr Gray and Ms Kerry were brief and did not address Mr Loumbos’ claims in detail. One difficulty with this submission is that his Honour did not place any reliance on the form of the affidavits. In any event, as Mr Ashhurst explained, the form of the affidavits reflected, at least to some extent, the circumstances in which they came to be prepared.

28. [90]

    Mr Loumbos was permitted to file an amended statement of claim shortly before the hearing. In order to address the fresh issues raised by the amended pleading, Ms Ward’s representatives asked Mr Gray and Ms Kerry to prepare affidavits dealing with events leading up to and at the Conference. Initially both refused. They ultimately complied with the request after being served with subpoenas and their affidavits were filed in Court on the second and third days of the hearing.

29. [91]

    It is also necessary to bear in mind that any assessment of the competing versions of events at the Conference must take into account objective circumstances that appear to give support to the evidence of Mr Gray and Ms Kerry. Not all of these matters were referred to by the primary Judge. They include the following:

30. [92]

    The Uniform Civil Procedure Rules 2005 (NSW) r 51.53(1) provides that the Court must not order a new trial “unless it appears to the Court that some substantial wrong or miscarriage has been … occasioned” by the ground relied upon. For the reasons I have given, the trial in this case miscarried and a substantial wrong has been occasioned. It is always regrettable if an appellate court has to order a new trial. However, as shown by the orders in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq), [51] it is sometimes necessary to do so. In my opinion, subject to addressing an alternative argument advanced by Mr Insall, the present is such a case.

31. [93]

    Mr Insall correctly submitted that the primary Judge justified the orders he made on the basis that Mr Loumbos, to Ms Ward’s knowledge, executed the Deed Poll in the mistaken belief that the gift would not be effective unless and until he and Ms Ward were married. However, when the Primary Judgment is read as a whole, it is clear enough that this conclusion rested on his Honour’s findings as to what was said at the Conference. Once these findings are set aside, the conclusion that Mr Loumbos was mistaken as to the import of the Deed Poll also cannot stand.

32. [94]

    As has been noted, the primary Judge identified the critical factual question to be whether Mr Loumbos stated at the Conference that the Deed Poll was not meant to take effect until the parties were married. The finding that Mr Loumbos did make that statement provided the factual foundation for the conclusion that he executed the Deed Poll under a mistake as to its operation. The finding also provided the basis for his Honour’s conclusion that Ms Ward was aware that Mr Loumbos was proceeding under a mistake. His Honour appears to have found that although Mr Gray and Ms Kerry did not pay attention to what Mr Loumbos said at the Conference, Ms Ward did.

33. [95]

    The primary Judge did not make any finding that Ms Ward and Mr Loumbos reached an arrangement or understanding prior to the Conference that the Deed Poll would be conditional on the marriage taking place. When asked to identify evidence of any such arrangement or understanding, independent of the events of the Conference, Mr Insall pointed to Mr Loumbos’ account of a conversation with Ms Ward in May 2011 (well before Ms Kerry’s email of 30 June 2011 suggesting that the gift be documented). However, the passage in the affidavit relied on does not indicate that the parties, at that stage, were contemplating anything other than an immediate gift to Ms Ward, enabling her to become the registered proprietor of the Lilyfield Property.

34. [96]

    In any event, unless Mr Loumbos’ account of the Conference was accepted, the primary Judge could not have concluded that he executed the Deed Poll under a mistake as to its effect. On the evidence of Mr Gray and Ms Ward, the contents of the Deed Poll were explained to Mr Loumbos and he said nothing to suggest that his understanding of its terms was any different.

35. [97]

    For these reasons, the alternative contention advanced on behalf of Mr Loumbos must be rejected.

Orders

1. [98]

   The following orders should be made:

2. [99]

   It will be a matter for the Judge hearing the retrial to determine whether Mr Loumbos will be permitted to make any further amendments to the Amended Statement of Claim.

3. [100]

   BARRETT AJA: I agree with Sackville AJA.