Williamson v Carneys Lawyers

Hugh Williamson, the plaintiff, seeks damages against the first and third defendants for alleged negligence and breach of retainer, as well as for breaches of the Trade Practices Act 1974 (Cth) (now repealed) (in respect of the first defendant, Carneys Lawyers (Carneys)) and the Fair Trading Act 1987 (NSW) (in respect of the third defendant, Mr Meakes). The plaintiff also sought relief against Rabobank Australia Limited (Rabobank), the second defendant, but this aspect of the proceedings has been resolved. Accordingly, a reference in these reasons to “the defendants” is a reference to Carneys and Mr Meakes.

The plaintiff’s claim is based on the allegation that Mr Meakes failed to advise him to make his own inquiries relating to activities on land in the vicinity of a rural property known as Reevesdale which he purchased in July 2007. The plaintiff contended that, had he known that a quarry development was proposed on the property next to Reevesdale, he would not have purchased it. He claims damages on the basis of the loss of value of Reevesdale (which was eventually sold in May 2013 for $805,000); the loss of value of his terrace in Paddington (which he alleges he would have sold in 2007 at a higher price but for the defendants’ negligence) and various consequential losses.

The defendants defended the proceedings on various bases, including: that Mr Meakes did in fact advise the plaintiff to make his own inquiries about the surrounding properties; that the vendor’s real estate agent, Les Hannan, had already told him about the residents’ protest against the proposed quarry development; and that, even if such inquiries had been made, the plaintiff would still have purchased Reevesdale. The defendants also contested the calculation of damages and relied on the principle in Potts v Miller (1940) 64 CLR 282.

The plaintiff was a solicitor who practised principally in commercial law and litigation, both in partnership and on his own account, since he commenced his articles in the United Kingdom in 1983. He continued to practise after migrating to Australia in 1990. In 1994 the plaintiff engaged Stephen Fitzsimons as his personal accountant. Mr Fitzsimons has acted in that role ever since.

In 2001, the plaintiff was instructed by Michael Thomson to bring proceedings for damages for unfair dismissal, against his former employer, Societe Generale (the Thomson matter). The matter continued for several years and occupied a substantial part of the plaintiff’s professional practice as a solicitor.

On 10 January 2005 CEAL Ltd (CEAL), trading as Multiquip Quarries, lodged a development application for the construction of a quarry (the quarry development) at Ardmore Park, Bungonia, near Goulburn. Ardmore Park was adjacent to Reevesdale. On 2 August 2005 the Minister for Infrastructure and Planning refused the development application in respect of the quarry development. On 29 March 2006 CEAL appealed against the refusal.

On 24 March 2006 judgment was delivered in the Thomson matter. The result was adverse to Mr Thomson, who instructed the plaintiff to file an appeal on his behalf to a full bench of the Industrial Relations Court. As the appeal resulted in a delay in the conclusion of the matter, the plaintiff and Mr Thomson negotiated a new basis for the plaintiff’s professional fees for acting on the matter.

To that end, in May 2006, the plaintiff drafted a deed (without obtaining legal advice himself), which he and Mr Thomson executed on 24 May 2006, which provided for the payment of professional fees. In the deed, Mr Thomson acknowledged that he owed the plaintiff $2.475m, including GST, for fees from August 2001 to March 2006; agreed to pay the plaintiff $40,000 on account of costs by 2 July 2006; and agreed to pay a percentage of the net balance (a sliding scale, commencing at 27.5% and increasing to 32.5% for amounts over $2m) of any judgment or settlement sum obtained by Mr Thomson as a result of the proceedings.

I understood the plaintiff to admit in his evidence in the present proceedings that he knew that the deed was unenforceable by reason of the prohibition in the Legal Profession Act 2004 (NSW) (now repealed) against lawyers charging fees by reference to a portion of the amount recovered. He said that he believed that he would be entitled to make a quantum meruit claim against Mr Thomson for the legal work he had performed for him and sought to justify his entry into the deed by saying that Mr Thomson insisted that he would only be paid on those terms. I do not accept the plaintiff’s explanation.

At some time prior to August 2006, Reevesdale was offered for sale by Elders Real Estate and was passed in at auction. Mr Hannan, who commenced employment at Elders Real Estate in Goulburn in August 2006, inspected the property and subsequently became the real estate agent for the vendor.

Mr Hannan’s opinion was that Reevesdale was proving difficult to sell at a price acceptable to the vendor because the price was too high; the buildings on the property were Georgian and required costly upkeep; local residents preferred newer improvements; and its area was only 250 acres which was substantially less than was required to conduct a commercially self-sustaining farming business. Mr Hannan considered that the property might appeal to wealthy person as a weekender, but would be unlikely to appeal to a farmer. These matters led Elders Real Estate to enter into a joint agreement to market Reevesdale with Cassim Real Estate in Woollahra, Sydney.

From time to time, in his role as the vendor’s agent, Mr Hannan travelled to Reevesdale along the Mountain Ash Road from Goulburn via Bungonia. He noticed that there were various placards tied to fences and trees near Bungonia on which was handwriting of a sufficient size to be legible from the road. The placards contained various messages, including “STOP THE QUARRY”; ‘NO QUARRY”; and “NO TRUCKS THROUGH BUNGONIA”.

In 2007 the plaintiff was having financial difficulties. His principal lender, the National Australia Bank Ltd (the NAB), refused to increase his indebtedness beyond $1m. His sole security property was a terrace in Cascade Street, Paddington, where he lived with his wife and family. The fees he believed he was owed from the Thomson matter were disputed and were not, in any event, payable until the conclusion of the matter. He had an urgent need for cash and no apparent way of remedying the situation unless he could obtain further cash by refinancing his debt.

In March 2007 the plaintiff saw an advertisement for Reevesdale in the Sydney Morning Herald. He contacted Michael Cassim, from Cassim Real Estate. Bill Bridges, another agent at Cassim Real Estate, rang Mr Hannan and asked him to call the plaintiff to arrange an inspection of Reevesdale.

The plaintiff ascertained that Reevesdale had been passed in at auction for $2.2m in 2006. He believed that if he could acquire Reevesdale for $1.8m, he would have immediate equity of some hundreds of thousands of dollars, against which he could increase his borrowings. Moreover, he believed that he could transfer all of the debt, with which his Paddington terrace was charged, to Reevesdale, and thereby convert all interest payments into tax deductible expenses.

The plaintiff accepted in cross-examination that Reevesdale was a “trophy property” in that it was aesthetically pleasing and had an historic Georgian house located on it, where the plaintiff intended to spend time with his family on weekends and on vacation.

The plaintiff’s plan was, accordingly, to safeguard his financial future by substantially increasing his borrowings on a property, the income from which would be significantly less than the interest cost of the debt. Although it might be thought that the plaintiff could have sold his Paddington terrace to increase the availability of cash, he was reluctant to take this course, at least in part because it was where he lived with his new wife and young children (at least one of whom attended a school within walking distance) and also because he believed that there was significant development potential associated with the terrace which he wanted to be in a position to realise in due course.

On 3 May 2007, the hearing of CEAL’s appeal against the Council’s refusal of the development application in respect of the quarry development began. Jagot J heard the appeal on 3, 4, 7, 8, 9, 14, 15 and 16 May 2007. At the conclusion of the hearing her Honour reserved her decision.

Also during May 2007 the plaintiff arranged to inspect Reevesdale with Mr Hannan. The plaintiff and his wife drove from her parents’ property in Hay to Goulburn and then took the Mountain Ash Road to Bungonia Village where they parked the Porsche in which they had made the journey and got into Mr Hannan’s car (which was more suitable for the unsealed road that lay ahead) in which they were driven to Reevesdale. En route, the plaintiff saw placards posted on the side of the road which referred to a quarry. He asked Mr Hannan about them. Mr Hannan told him that he did not know much about it but that he would find out and get back to him.

As soon as the plaintiff saw Reevesdale he “fell in love with it” and wanted to make it his own. The plaintiff asked Mr Hannan about the property, including its carrying capacity.

After the visit, Mr Hannan visited a residence on Mountain Ash Road from which one of the placards was displayed. He was told by the owner that the placards had been erected in protest against a proposed quarry on Oallen Ford Road which would bring about a substantial increase in traffic on local roads, cause structural damage to local heritage buildings and result in nuisance associated with dust and noise. He also told Mr Hannan that there were legal proceedings in the Land and Environment Court over the development application.

Mr Hannan rang the plaintiff and relayed the substance of the conversation. When Mr Hannan mentioned the Land and Environment Court, the plaintiff told him that he knew where it was and that he would make some enquiries.

For reasons given below where I address the credibility of witnesses and the Jones v Dunkel inference (named after the eponymous case, (1959) 101 CLR 298), I accept Mr Hannan’s evidence (and reject the plaintiff’s denials) that there were placards on the side of the road; that they had a conversation to this effect; and that Mr Hannan reported to him the results of his inquiry about the significance of the placards.

In late May 2007, after he had visited Reevesdale, the plaintiff applied to Rabobank for finance. Because the plaintiff’s plan was tax-driven, he was anxious to complete the sale before 30 June 2007. Chris Twyford, a rural manager at Rabobank, sent the plaintiff a letter dated 24 May 2007 to which indicative terms for a loan of $2.75m (being $1.8m for Reevesdale and $950,000 to refinance the Paddington facility) were attached.

The plaintiff responded to Mr Twyford by email dated of 28 May 2007 in which he said, in part:

On 31 May 2007 the plaintiff filled in a loan application with Rabobank in which he sought a total amount of $3.025m. In an email sent on the same day to Mr Twyford, he described Reevesdale as a “marvellous bargain” at $1.65m. In the email the plaintiff identified two sources of income which he expected to enhance his cash flow over the next two years: first, his claim against Mr Debney, a former partner; and second, the costs associated with the Thomson matter referred to above.

The plaintiff reported to Mr Twyford in his email of 31 May 2007 the following with respect to the Thomson matter:

In support of his assertion that he had a claim against Mr Thomson for a substantial sum for costs, the plaintiff forwarded, under cover of letter to Rabobank dated 1 June 2007, a copy of the deed dated 24 May 2006 (referred to above) pursuant to which the monies were said to be owing. The letter said:

In about early June 2007, at about the time the plaintiff had decided to purchase Reevesdale, he encountered Wally Meakes. Mr Meakes was also a solicitor. He had practised continuously since his admission on 12 February 1982. He and the plaintiff had become acquainted through their membership of the Tattersall’s Club in Sydney where their paths crossed from time to time on the club premises and environs.

Once the plaintiff had confirmed Mr Meakes to be experienced in rural conveyancing, he asked him to do the conveyancing for his purchase of Reevesdale. On 4 June 2007 Mr Meakes received the sales advice notice from Mr Cassim. The sales advice notice recorded that the price at which Reevesdale was to be transferred was $1.675m. Mr Cassim sent Mr Meakes a copy of the sale contract.

Later that day, 4 June 2007, the plaintiff sent an email to Mr Twyford and Mr Fitzsimons which was copied to Mr Meakes, in which he said in part:

On 7 June 2007 the plaintiff sent an email to the real estate agent which was copied to Rabobank, his accountant and Mr Meakes in which he said in part:

Mr Meakes opened a file on 12 June 2007. When he received a copy of the draft contract, he reviewed it, together with the planning certificate dated 7 October 2005, and the information memorandum relating to the property. As he was going through these documents he made a file note of the matters which he wished to raise with the plaintiff including the following:

He also noted in his file note:

I infer that this note was a reference to the following in Schedule E:

At about this time Mr Meakes delegated various matters relating to the Reevesdale transaction to Nina Spinelli, a paralegal who was working under his supervision.

On 12 June 2007 Mr Meakes met with the plaintiff and went through the contract with him. Although the plaintiff was principally a commercial litigator and not a conveyancer, he appreciated, in 2007, the significance of exchange and completion. He also knew, that, generally, although not invariably, exchange preceded completion by a number of weeks to permit searches and inquiries to be made. He was also aware that, typically, a contract for sale of land included a certificate under s 149 of the Environment Planning and Assessment Act 1979 (NSW) which set out information from government sources as to the zoning of the subject property and the particular uses to which it could be put.

I accept Mr Meakes’ version of what occurred in the course of that conference on 12 June 2007. The plaintiff told Mr Meakes that he needed to settle by the end of June and that he had spoken with his accountant about prepaying interest with a view to making the transaction “tax effective”. He boasted that he was buying Reevesdale at “an extremely good price”. He acknowledged that the income from the property would not be sufficient to service the loan but announced, “that’s the point”. Mr Meakes asked him whether he had made inquiries about the local area and whether he had spoken with the neighbours, the Council and those in the local area to find out what was happening. Mr Meakes advised the plaintiff that such inquiries ought be made because they could affect the plaintiff’s enjoyment of Reevesdale. The plaintiff assured him that he had done his “due diligence” already.

When the plaintiff told Mr Meakes that he would be going to the United Kingdom in late June, Mr Meakes asked him if he had sorted out the power of attorney with his accountant. The plaintiff told Mr Meakes that he wanted to appoint him as his attorney. Mr Meakes expressed reservations about that course but told him that he could take a power of attorney for emergency situations.

Mr Meakes then sat beside the plaintiff and went through the draft contract with him. He raised the time period between exchange and completion with the plaintiff and suggested that the only practical way of ensuring completion by 30 June 2007 was to have exchange coincide with completion. The plaintiff agreed to this proposal.

Mr Meakes drew the plaintiff’s attention to the fact that Reevesdale was subject to a mortgage granted by the vendor to Elders Rural Bank Ltd which would need to be discharged on settlement.

Mr Meakes also took the plaintiff through the planning certificate and noted that Schedule E, cl 3 set out the legitimate uses of the land, which included extractive industries and mining. I am satisfied that he also drew the plaintiff’s attention to the note to intending purchasers of rural land in Schedule 3 which is set out above.

I am satisfied that the plaintiff was untroubled by what he had learned from Mr Hannan about the possibility of a quarry being developed in the area near Reevesdale and indifferent to the warnings Mr Meakes gave him about the possibility of the permitted uses on neighbouring land. His desire to buy Reevesdale was quixotic: he was enchanted with the idea of living in a Georgian house on a rural property and attracted to the advantage of being able to claim all his interest, and much of his expenditure, as a tax deduction.

Moreover the plaintiff enjoyed the sense that he had got the better of the vendor and had bought a property that he believed was worth $2.5m for only $1.675m. Indeed, when asked in cross-examination whether it was a “lifestyle property”, he responded that he would “categorise it as an undervalue acquisition”. Thus, he believed that he had, merely by purchasing a loss-making property that no one else seemed to want, made a profit of hundreds of thousands of dollars and thereby gained much needed equity which would permit him to increase his borrowings. His view was evident from the following exchange in cross-examination:

Whether the plaintiff’s infatuation with Reevesdale led him to refrain from reading the contract; whether he read it carefully or whether he merely skimmed it because it was largely in a standard form cannot be determined because the plaintiff’s evidence on the topic was not consistent (see below). I am satisfied that Mr Meakes sufficiently explained its salient features, and in particular the risks posed by the uses to which neighbouring properties could be put, and the need to make his own inquiries.

Mr Meakes arranged for David Gal, a solicitor employed by Carneys, to prepare a general power of attorney, which the plaintiff executed, appointing Mr Meakes as his attorney.

At some time after his conference on 12 June 2007, Mr Meakes received an updated planning certificate dated 17 January 2007 and reviewed it. It was not materially different from the one he had gone through with the plaintiff on 12 June 2007.

On 14 June 2007 Mr Meakes received a counterpart contract for sale of Reevesdale from the vendor’s solicitors under cover of letter dated 13 June 2007. As at 19 June 2007 Mr Meakes understood that the plaintiff wanted to complete the purchase on 28 June 2007. He wrote a letter to that effect to the NAB, as outgoing mortgagee of the Paddington terrace.

On 19 June 2007, Jagot J dismissed the developer’s appeal against the refusal of the development application in respect of the quarry development: CEAL Ltd v Minister for Planning [2007] NSWLEC 302. There is no evidence that either the plaintiff or Mr Meakes was aware at that time that the decision had been handed down or the result of the appeal.

On about 21 June 2007 the plaintiff travelled to the United Kingdom with his wife, Lucinda to introduce her to his family and friends. He did not return until 14 July 2007. At times he was out of email and telephone contact while he was away. His solicitor, accountant and banker attempted, unsuccessfully on occasions, to communicate with him. His whereabouts while away included the “wilds of Lincolnshire”. He was also a spectator at Wimbledon.

On 26 June 2007 Mr Fitzsimons rang Mr Meakes to suggest an alternative to a guarantee from the plaintiff’s company (which was required by Rabobank as a condition of the loan) and proposed that Mr Meakes could execute the guarantee on behalf of the company as the attorney for its sole director. Mr Meakes voiced his discomfort with the proposal and told Mr Fitzsimons that he would need to get instructions from the plaintiff. Mr Meakes attempted, without success, to contact the plaintiff by phone. He sent him an email at 8.43pm in which he expressed his concern that the matter could not settle by the end of the week (being Friday 29 June 2007) and listed the various reasons. There were difficulties with email reception to the plaintiff’s email address. On more than one occasion, Mr Meakes received a delivery status notification to say that there had been a delay in delivery.

On 27 June 2007, Mr Twyford emailed the plaintiff and noted that he had not received a response to his email of 26 June 2007. The plaintiff, who was attending Wimbledon as a spectator at that time, did not respond.

Eventually, the plaintiff sent an email on 28 June 2007 in which he instructed Mr Meakes to execute a guarantee on behalf of the plaintiff’s company to meet Rabobank’s requirements. He gave his father’s email address as an alternative means of communicating with him, as well as the phone number of a friend with whom he planned to stay. He also said:

On 28 June 2007 the plaintiff rang Ms Spinelli from the United Kingdom. They spoke about the execution of various finance documents. The plaintiff told Ms Spinelli that Mr Fitzsimons could sign the documents as a duly authorised officer. He instructed Ms Spinelli to speak with Mr Fitzsimons and return the letter of offer to Rabobank. At the end of the conversation he said:

After this conversation Ms Spinelli spoke to Mr Fitzsimons, Mr Twyford and the vendor’s solicitors. She then sent an email to the plaintiff in part in the following terms:

On 28 June 2007 the NAB confirmed the payout figure of $995,635.12 if settlement occurred on that day and $995,846.93 if it took place on the following day. Rabobank confirmed that it could not settle until the letter of offer could be signed by all parties to the transaction.

Early on Monday morning, 2 July 2007, the plaintiff telephoned Mr Meakes who was on his way to work. Mr Meakes expressed his concern about the difficulties in communicating with the plaintiff, who assured him that he had found another way to obtain the tax break he was seeking but that he still wanted to purchase Reevesdale. Mr Meakes explained to the plaintiff the difficulties associated with his executing the guarantee on behalf of the company, as he did not have a power of attorney from the company. The plaintiff told Mr Meakes that he would try to be more available in future.

By letter dated 11 July 2007, the solicitors for Rabobank wrote to Mr Meakes confirming the loan amount of $3.025m for the following purposes:

The plaintiff returned to Australia from the United Kingdom on Saturday 14 July 2007. On Monday 16 July 2007 he attended the offices of Carneys. Mr Meakes took him through the transaction documents. Mr Meakes also raised with the plaintiff the circumstance that Reevesdale was subject to an exploration licence by a gold company. The plaintiff responded:

The plaintiff told Mr Meakes that he knew that Reevesdale had been on the market for a long time at a higher price; that he was worried about the delay; and that he did not want to miss out on getting the property. At the conclusion of the conference, the plaintiff, in the presence of Ms Spinelli, executed the transaction documents.

On 19 July 2007 the vendor’s solicitors faxed a letter to Mr Meakes and said:

On 20 July 2007 the plaintiff rang Ms Spinelli and told her that Mr Bridges had called him and told him that there were other purchasers who were interested in Reevesdale and who had offered $100,000 more. At that stage it was the plaintiff’s expectation that settlement would occur on 23 July 2007. Later that day the plaintiff rang Ms Spinelli again and told her that he would not increase his offer and that Mr Hannan was looking to see if something else was available. He told her, among other things:

Notwithstanding these communications, Mr Meakes telephoned the vendor’s solicitors to inform them that the transaction could be settled on Monday 23 July 2007. Contracts for the transfer of Reevesdale to the plaintiff were eventually exchanged and settled on Tuesday 24 July 2007. The purchase price was $1.675m. The Rabobank loan was secured by mortgages over the plaintiff’s terrace in Paddington and over Reevesdale. Cheques drawn on settlement included the sum of $20,137.50 to Elders Real Estate (the vendor’s co-agent) and $1,624,637.66 to Elders Rural Bank Ltd (the vendor’s mortgagee).

In October 2007 the plaintiff came to know some of the local residents in Bungonia who told him what he had already learned from Mr Hannan in May 2007: that there had been litigation concerning the application approval for the quarry development. The plaintiff was informed by local residents that the proponents of the development still wanted to pursue the development.

On 24 January 2008 the plaintiff wrote to Mr Twyford and purported to summarise his financial position in support of his application for a deferral of the date for repayment of $725,000 from 30 April 2008 to 30 June 2008 and an increase in borrowings from $3.025 to $3.5m. He informed Mr Twyford that the appeal in the Thomson matter would be heard on 10 March 2008 and that he would expect judgment by May 2008. He also foreshadowed an application for a 15 - 20 bedroom boutique hotel and conference centre in the coach house at Reevesdale. He summarised his position in the following sentence:

He sought to explain his relatively low work-in-progress (in his practice as a solicitor) as follows:

He also referred to an oral agreement whereby his neighbour in Paddington had agreed to buy his terrace for three times its market value, on the basis that it would be included in a larger development to be undertaken by his neighbour. The plaintiff’s evidence was that he understood the effect of the Statute of Frauds but considered that he could rely on the equitable doctrine of part performance as he had “done things on the property on the basis of what he [the neighbor] said”.

The plaintiff reiterated to Mr Twyford the significance of the deed with Mr Thomson as follows:

By email to Mr Twyford dated 29 February 2008, the plaintiff again sought to persuade Rabobank of his creditworthiness. He referred to the following projects:

The plaintiff admitted in cross-examination that he had never received a cent from Payplan although its principal took him out for dinner “several times”. He also admitted that Ability Australia had not made any money, although he volunteered:

Nor had the plaintiff made any money from the proposed insurance brokerage and claims agency.

In his tax return for the year ended 30 June 2008, the plaintiff recorded that he had suffered a taxable loss on Reevesdale of $109,000. The plaintiff accepted that he expended substantial amounts on Reevesdale between the time of its purchase and 30 June 2008, since interest costs alone did not account for the size of the figure.

At some stage in 2008 or 2009 the plaintiff brought proceedings in this Court for specific performance of the alleged agreement with his neighbour to sell the Paddington terrace for three times its market value (referred to above). He did not obtain the relief sought.

On 15 January 2009 Deacons, solicitors, wrote, on behalf of Mr Thomson, to Stephen Titus of Carneys informing him that any costs agreement that infringed either s 325 of the Legal Profession Act 2004 or the corresponding provision in the Legal Profession Act 1987 was not maintainable and that the deed between the plaintiff and Mr Thomson executed in May 2006 was “invalid and of no effect”.

On 16 January 2009 the plaintiff wrote to Mr Meakes in part in the following terms:

On 21 January 2009 the plaintiff reported on his financial situation to Mr Twyford. He informed him that he and his wife had moved out of the Paddington terrace to put it on the market and were living in rented accommodation nearby. He said of Reevesdale:

The plaintiff attached a copy of his letter to Mr Meakes to his letter to Mr Twyford as well as the facsimile from Deacons regarding the invalidity of the deed. The plaintiff also reported that his proposed business, Payplan Australia Pty Ltd, was going very well. I note that, although the plaintiff was prepared to inform Mr Twyford of the possibility that Mr Meakes had been negligent, he was not prepared to disclose that possibility to Mr Meakes himself and, indeed, did not do so prior to the commencement of these proceedings.

On 18 July 2009 the plaintiff sold his Paddington terrace for $1.4m.

On 25 August 2009 the plaintiff wrote to Richard Hincks, of Rabobank, seeking further accommodation. He purported to retain his belief, notwithstanding his knowledge of the proposed quarry development, that Reevesdale was worth significantly more than he paid for it and said:

The plaintiff accepted in cross-examination that the following extract from a Rabobank internal memorandum dated 29 October 2009 accurately described his preference both then and in October 2010:

The plaintiff suffered a brain abscess (as a result of undiagnosed diabetes) which manifested itself during the Oxfam trail walk in August 2010 and led to his collapse at the end of October 2010. He has not practised as a solicitor since.

At some time prior to June 2011 the Minister for Infrastructure and Planning approved the development of a quarry on the land next to Reevesdale. No development has yet commenced. Notwithstanding this approval, the plaintiff’s desire to keep Reevesdale continued at least up to and including 2012 when he was obliged to sell it for financial reasons. Eventually, in May 2013, Reevesdale was sold for $805,000. The net sale proceeds were $708,451.

On 27 May 2015 the plaintiff sent an email to Mr Couston, the solicitor for the defendants in these proceedings. After setting out why he thought he would win the case, the plaintiff wrote:

The plaintiff relied on the evidence of Ronald Heinrich who has been in practice as a solicitor, principally involved in conveyancing, since 9 December 1971. The defendants relied on the evidence of Edward Boyce, also an expert conveyancing solicitor, who was admitted to practice in New South Wales in February 1974. Their evidence was broadly to the same effect. They agreed that, as at 2007:

Mr Heinrich explained that the purpose of recommending that a proposed purchaser make enquiries of the local Council was that Councils keep records of current or determined development applications in their planning departments and may also have a note or record of decisions of the Land and Environment Court that are germane to those applications. Accordingly a prospective purchaser could ascertain potential uses and development of surrounding land.

The expert opinions were consistent with the following extract from a pro forma letter issued by the Law Society as at 15 November 2006 entitled ‘LETTER TO PURCHASER EXPLAINING CONTRACT FOR PURCHASE OF NON-STRATA RESIDENTIAL PROPERTY” which contained the following paragraph:

Mr Heinrich also gave evidence of his own practice not only to advise a city buyer of a rural property to speak to the Council (as set out above) but also to speak to the neighbours.

Mr Heinrich said that he was not aware of any accepted practice amongst rural conveyancers in New South Wales in 2007 of checking that their clients had in fact undertaken the inquiries that had been advised. He was not, however, asked as to his own practice in this regard. Mr Boyce said that if inquiries had been recommended and a solicitor was subsequently given instructions to exchange contracts, the solicitor would be entitled to proceed on the basis that the client had either satisfied himself or herself as to such inquiries, or elected not to make them. A solicitor would not be obliged to check that a client purchaser had made the enquiries the solicitor had recommended.

Peter Reardon, a valuer, was engaged by Rabobank, on behalf of the plaintiff, to value Reevesdale as at 25 February 2008. He valued the property at $2m (comprising $900,000 for the land and $1.1m for the improvements). He also valued the property as instructed by Rabobank, for the plaintiff, as at 25 August 2009 at $1.8m (comprising $753,900 for the land and $1.05m for the improvements). He valued the property again as at 7 February 2012 and considered its market value to be $1.75m and its value on a forced sale to be $1.55m. Mr Reardon also said, in his report dated 7 February 2012:

Mr Reardon was not required for cross-examination. His evidence was not challenged.

The plaintiff relied on the report of Mr Fitzsimons. The defendants relied on the expert evidence of Tamara Lindsay. Mr Sullivan QC, who appeared on behalf of the defendants, obtained, in his cross-examination of Mr Fitzsimons, the witness’ concessions to all of the matters raised by Ms Lindsay in her report. Accordingly, the evidence is (subject to legal submissions as to the recoverability of the damages) that the plaintiff has suffered losses, as calculated by Ms Lindsay, as follows:

I formed a very adverse view of the plaintiff’s credit, who was an unimpressive witness. I do not accept his evidence except where corroborated, against interest or consistent with uncontroverted or admitted facts. My reasons for this view are set out below.

The plaintiff appeared to be at pains to divine the forensic significance of each question asked of him before he formulated his response, which at times was not responsive to the question. The transcript is redolent with examples, of which the following exchange is one:

In making this assessment of the plaintiff, I have taken into account that his capacity to answer questions is likely to have been compromised in some way by the brain abscess and its consequences. However, although the plaintiff’s fluency may well have been marred, his capacity to find an answer that suited his interests at the time demonstrated that, whatever his disability, his mental processes were intact at least to that extent. Furthermore I note that the plaintiff did not rely on any medical evidence to the effect that his evidence was affected by his injury or that any of the matters referred to in this part of the reasons (dealing with the plaintiff’s credibility) ought not be regarded as adversely affecting his credit.

The plaintiff did not particularly recall the conference with Mr Meakes on 12 June 2007 although he accepted that it occurred. Nor did he have a good recollection of executing the documents. Although he denied being told that he ought make his own inquiries, he accepted, or did not deny, many of the propositions put to him in cross-examination by Mr Sullivan about what had occurred in the conference. He gave the strong impression that he had other things on his mind when he met with Mr Meakes and that he regarded the legal documents associated with the purchase of Reevesdale to be a necessary, but inconvenient, formality.

The plaintiff was loath to admit that he had read the contract for the purchase of Reevesdale. Mr Sullivan put to him, in various ways, that he had done so. He responded variously, including as follows:

As referred to above, I am satisfied that the plaintiff, either through reading the contract himself, or being taken through it by Mr Meakes, was aware of all material conditions. The versions he gave, which are set out above, are largely irreconcilable. That he was prepared to offer such a range of versions reflected adversely on his credit.

The defendants also challenged the plaintiff’s credibility on the basis of the deed entered into to provide for his remuneration with respect to the Thomson litigation. The plaintiff’s preparedness, as an officer of this Court, to enter into an agreement that he appreciated was prohibited by the Legal Profession Act, did him no credit. The apparent egregiousness of his conduct was compounded by his disclosure of the deed, on a confidential basis, to Rabobank with a view to his persuading it to rely on the deed for the purposes of advancing money to him, in circumstances where he appreciated that the deed was unenforceable. His conduct in this respect was not only unscrupulous but also dishonest.

I regard the plaintiff’s evidence that, although the deed was unenforceable, he had a claim in quantum meruit for the same, or a similar, figure as the product of forensic opportunism.

The defendants also sought to impugn the plaintiff’s credit on the basis of his insistence that, had he not purchased Reevesdale, he would have had to sell his terrace in Paddington. The plaintiff was adamant that the added “fat” associated with the Reevesdale purchase was what gave him additional borrowing capacity, which he needed, since he was at the limit of the facilities advanced by the NAB and did not have the income to service any increased borrowings. Although this version has some superficial plausibility, there are at least two obstacles to its acceptance.

First, any “solution” provided by the additional borrowings from Rabobank was, at best, short-term. The loan agreement with Rabobank required the plaintiff to repay $600,000 by 30 April 2008. The loan monies were insufficient to allow for that repayment (since deductions had to be made from $3.025m of $1m (to repay the NAB) and $1.725m (for the cost of the purchase of Reevesdale including incidentals), leaving $300,000. The plaintiff admitted that, without the Rabobank funds, he was unable to meet his debts as and when they fell due. It is therefore difficult to see how the loan improved his financial position. At best, it provided no more than an ephemeral amelioration of his cash flow.

Secondly, the Thomson deed was unenforceable and, in any event, Mr Thomson was not obliged to pay the plaintiff for his legal services until the litigation had concluded. Accordingly, there was no real prospect of any income from that quarter in the foreseeable future.

Thirdly, the plaintiff insisted, in a different context, that he was most reluctant to sell Paddington for personal and financial reasons. He maintained that he did not want to disrupt the education of one of his children, who attended the local school. Further, he also asserted that he had an enforceable agreement to sell his terrace to his neighbour for three times its market value. He accepted, on the one hand, that he was bound by that agreement not to sell the terrace to a third party; while on the other, he maintained that he would have acted, in breach of the agreement, to sell the terrace had he not bought Reevesdale.

The plaintiff was cross-examined about telling Ms Spinelli that he was looking at other properties when the vendor of Reevesdale informed Mr Meakes that settlement would not proceed. He said in evidence that he had no intention of buying another property if he could not have Reevesdale but that he was “suspending the truth” for two days because he believed that Mr Bridges was not telling him the truth about the vendor’s not wanting to sell to him. He sought to justify what he admitted amounted to a lie (that he was looking at other properties) on the basis that he thought that Mr Meakes might say something to the vendor’s solicitor or to the agents. He agreed that he was prepared to lie to his own solicitor.

He was also cross-examined about the email to Mr Couston sent on 27 May 2015 referred to above in which he said that he was getting “quite keen on the Lake Bathurst property”. He was unable to give any satisfactory explanation as to how he could reconcile his recent statement with his case that, had he not purchased Reevesdale, he would not have purchased another rural property and he would have had to sell his Paddington terrace. I reject his evidence that the words “lo and behold” in the email imported such an ironic tone into the whole of the paragraph that no part of it could possibly be taken either literally or seriously.

The plaintiff gave evidence that he found out about the prospect that there would be a quarry near Reevesdale when he became acquainted with local residents in October 2007, who told him that there had been litigation. He agreed that he was “annoyed” when he found out but said that he complained to no one but his wife (who was not called to give evidence) because he “didn’t think there was anything done wrongly”. I regard this evidence as irreconcilable with the plaintiff’s case.

The plaintiff presented as acutely conscious of his legal rights and ready to blame others for bad outcomes. Had he really believed, in October 2007, that Mr Meakes had in any way failed to fulfill his duties to him as a solicitor, I have no doubt that he would not only have written to Mr Meakes but also used the putative claim for damages in correspondence with Mr Twyford, who was the recipient of forecasts of numerous money-making schemes or pots of gold to which the plaintiff asserted he would be able to resort to solve his impecuniosity. Although the plaintiff insinuated to Mr Twyford in January 2009 that there was a possibility that Mr Meakes had been negligent, he did not pursue the allegation, or even disclose it to Mr Meakes, until he filed the statement of claim in these proceedings.

When the plaintiff was cross-examined about the proposed development of the coach house at Reevesdale to which he referred in his letter to Mr Twyford dated 24 January 2008 set out above, the following exchange occurred:

The plaintiff’s answer manifested, in my view, not only his cavalier approach to the truth but also his forensic flexibility. He realised that plans made in 2008 to develop Reevesdale as a tourist facility were inconsistent with his case that he found out in October 2007 that a quarry development was proposed on the adjacent land and that, if he had found out earlier, he would not have purchased Reevesdale at all. Accordingly, he sought to use the development to advance a case that he was trying to make the best of a bad lot by resisting the quarry development by creating a tourist destination. Moreover the disparity between the letter and the objective facts revealed his grandiloquence. He was, at the time of the letter, on the brink of a substantial default to Rabobank and had no funds to comply with the facility, much less develop Reevesdale.

He also gave evidence that it did not occur to him until 2012 that it was Mr Meakes’ responsibility to advise him to make enquiries of the Council. Mr Sullivan reminded the plaintiff of his letter to Mr Twyford dated 21 January 2009 (in which he made an allegation of negligence against Mr Meakes). He responded by saying that he did not even know if Mr Meakes had a duty to give that advice in 2009. The following exchange ensued:

The plaintiff submitted that I should reject Mr Hannan’s evidence because Elders Real Estate (for whom Mr Hannan worked) was associated with Elders Rural Bank Limited (the mortgagee of the vendors of Reevesdale) and therefore had a motive to conceal from Mr Meakes the development application for the quarry. The plaintiff admitted, when challenged, that there was no evidence to suggest that there was any connection between the real estate agent and the vendor’s mortgagee. I regard the plaintiff’s submission of a conspiracy theory based on a connection between Elders Real Estate and Elders Rural Bank Limited as one borne of desperation and designed to impugn Mr Hannan’s evidence, which the plaintiff appreciated destroyed his case.

The plaintiff’s wife was with the plaintiff when he had the discussion with Mr Hannan referred to above about the placards on Mountain Ash Road on the way to Reevesdale. She and the plaintiff remain on good terms despite their separation. He continues to contribute to her financial support and that of their children. The plaintiff did not call her as a witness in his case. I infer that her evidence would not have assisted his case and more readily draw the inference that Mr Hannan’s evidence is to be accepted in preference to the plaintiff’s where they are in conflict. I do not accept the plaintiff’s evidence that he complained to his wife about Mr Meakes’ conduct in October 2007 when he spoke to local residents who told him of the quarry development.

In March 2015 Mr Hannan was diagnosed with bowel cancer. He consulted an oncologist on 25 March 2015. In early April 2015 he informed Mr Couston, the solicitor for the defendants with carriage of the proceedings. On 21 April 2015 he affirmed an affidavit setting out his recollection, including of conversations he had had with the plaintiff and the local resident about the quarry protest signs and the occasion on which he had inspected Reevesdale with the plaintiff.

In May 2015 it was proposed that, in light of Mr Hannan’s declining health, his evidence be taken in Goulburn as it would be difficult for him to attend court. Directions were made on 9 June 2015 to permit Mr Hannan to give evidence by audio-visual link from a remote location. Laura Acton, a solicitor assisting Mr Couston, visited Mr Hannan at St Vincent’s Hospital in Sydney on 18 June 2015 at which time he signed a further statement in which he made a few corrections to the contents of his affidavit.

On 25 June 2015 Ms Acton visited Mr Hannan in hospital and arranged for him to affirm a second affidavit which incorporated the statement he had signed on 18 June 2015. During this period it became increasingly clear that Mr Hannan would not be able to give evidence. On 3 July 2015 he died.

By reason of these circumstances, Mr Hannan’s evidence could not be tested in cross-examination. This must be taken into account in assessing its weight.

However, I accept Mr Sullivan’s submission that the circumstances in which Mr Hannan’s affidavits were executed tell in favour of his reliability. Mr Hannan had no interest, whether financial or otherwise, in the proceedings or their outcome. That he was prepared to spend any of his residual precious time or energy on the evidence in this case when his prognosis was so dire suggests that his version is true.

Moreover, Mr Hannan’s evidence has a certain verisimilitude in light of what has emerged about the plaintiff. It is entirely consistent with the view I have formed of the plaintiff that he would say, when Mr Hannan mentioned the Land and Environment Court, that he knew where it was. The plaintiff’s fondness for Reevesdale was not affected when, on his admission, he learned of the application in October 2007. It is difficult to see, in those circumstances, why he would have been deterred by what Mr Hannan passed on by way of local knowledge when he followed up the plaintiff’s enquiry about the significance of the protest signs.

Mr Meakes has an obvious interest in the outcome of the proceedings. The relevant events, as far as he was concerned, took place in June and July 2007. The first time he had any indication that his conduct was to be called into question by the plaintiff was in 2012, when the statement of claim was served. Mr Meakes did not make a file note of his meeting with the plaintiff on 12 June 2007, although he did make a file note of the matters that concerned him when he went through the draft contract and the out-of-date s 149 certificate in preparation for that meeting.

Each of these matters tends to reduce the weight that can be attached to Mr Meakes’ evidence. However, when the plaintiff put to Mr Meakes in cross-examination that he could not really remember the detail of the matter, Mr Meakes’ response was such as to persuade me that he had a good recollection of the transaction notwithstanding the passage of time. The transcript does not capture the tenor of Mr Meakes’ evidence. However I set it out because it shows that the plaintiff and this transaction made a significant impression on Mr Meakes.

I accept Mr Meakes’ evidence. He came across as a diligent solicitor who was concerned to protect his client but also concerned neither to allow the apparent urgency of the transaction; nor his prior acquaintance with the plaintiff; nor their common club membership (which the plaintiff described as a “brotherhood”); nor the plaintiff’s qualifications and experience as a solicitor to compromise proper and prudent practice. Mr Meakes’ unwillingness to use the power of attorney in what he considered to be an inappropriate way (when the plaintiff asked him to execute the guarantee on behalf of the plaintiff’s company) is further evidence of this.

The plaintiff alleged the following causes of action against the defendants:

The contract of retainer was not relevantly express. Accordingly, the plaintiff must establish that there was an implied term to the effect alleged. Before any such term can be implied it is necessary that it pass the three-fold test adopted in Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347 that it be necessary to give business efficacy to the contract; that it be so obvious as to go without saying; and that it not be inconsistent with any express term of the contract.

Mr Sullivan accepted that there was an implied term of the contract of retainer that required the defendants to advise the plaintiff to make inquiries of the local council to ascertain whether there were any proposed developments in the area surrounding Reevesdale that might affect the plaintiff’s enjoyment of the property. The defendants also accepted that the co-extensive duty of care they owed to the plaintiff required them to give him such advice. I note that it was not suggested by the plaintiff that the defendants’ retainer imposed any higher duty in contract than in tort.

There is a contest of credit between the plaintiff, who denied that Mr Meakes advised him to conduct inquiries of the Council and the neighbours as to developments or proposed developments on surrounding properties, and Mr Meakes, whose evidence was that he had given that advice.

The plaintiff has failed to discharge the onus of proving that Mr Meakes did not give him such advice. Indeed, I accept Mr Meakes’ evidence that he did in fact give him such advice. The file note created by Mr Meakes when he received the draft contract and the out-of-date s 149 certificate prior to meeting with the plaintiff on 12 June 2007 indicated that he turned his mind to the very question of developments on surrounding properties in a rural setting. Moreover, I accept Mr Meakes’ recollection of his meetings with the plaintiff, as set out above, during which he raised such matters.

I am satisfied that Mr Meakes, having advised the plaintiff to carry out those inquires, did not represent either that he would carry them out himself or that the plaintiff did not need to carry them out.

I accept the defendants’ submissions that the duty of care they owed to the plaintiff neither required Mr Meakes to carry out such enquiries himself, nor to check with the plaintiff that he had conducted such enquires himself. Nor can a term imposing such an obligation be implied in the contract of retainer. The evidence of Mr Heinrich and Mr Boyce did not support the imposition of either of these obligations. For a solicitor to be required to undertake inquiries as to developments on properties surrounding the subject property without specific instructions from the client to do so would amount, in my view, to an unjustified extension of a solicitor’s retainer. Questions of commercial and lifestyle risk are not generally within such a retainer, which is principally concerned with ensuring that good title passes from vendor to purchaser and that the purchaser is aware of any matter that may affect that title.

Moreover, the suggestion that a solicitor should check with a client to make sure that he or she has followed the solicitor’s advice (to conduct inquiries of the Council) presupposes a level of paternalism which is inconsistent with the usual relationship between a solicitor and a client, at least in circumstances where a client is not under a relevant disability.

Accordingly, although it is accepted that Mr Meakes neither conducted the relevant inquiries himself, nor checked with the plaintiff that he had conducted the relevant inquiries, he was neither in breach of his contract of retainer nor his duty of care by omitting to do those things.

By reason of the foregoing, the plaintiff has not established that Mr Meakes breached his contract of retainer with the plaintiff or that he was in breach of the duty of care he owed to the plaintiff. Nor has he established that any of the representations alleged against Carneys or Mr Meakes arising from the Trade Practices Act or the Fair Trading Act were made, either expressly or by silence. I note for completeness that the defendants accepted, for the purposes of these proceedings, that any such representations as were made were made in trade and commerce, as required by the legislation. I understood the basis for the concession that it did not expose the defendants to any greater liability than that to which they would be exposed in contract or tort.

It follows from these findings that the plaintiff has not made out any claim to relief and that there should be judgment for the defendants. However, as I am obliged, as trial judge, to make all relevant factual findings, I propose to address the question of causation.

Although there are some cases where the question of causation might be resolved differently whether the claim is brought in contract, tort, or under the Trade Practices Act or the Fair Trading Act, the present is not such a case (subject to the principles of remoteness, which are addressed below). In this case, Mr Meakes was obliged by the contract of retainer and the duty of care he owed to the plaintiff to advise him to make his own inquiries, at least of the Council if not the neighbours. The representations alleged are either that the inquiries did not need to be made or that Mr Meakes would make the inquiries himself, on behalf of the plaintiff.

For the reasons given above, I accept Mr Hannan’s evidence that the plaintiff noticed the placards and was told that they related to a protest against the quarry development and that Mr Meakes advised him to make his own inquiries. That the plaintiff was prepared to go ahead and buy Reevesdale in the knowledge that there was a quarry proposed in the vicinity is a powerful indication that he was unconcerned about what would have been revealed had he inquired of the Council or the neighbours, as recommended by Mr Meakes.

Moreover, although I do not necessarily believe that the plaintiff was too busy to read the contract between the time he received it (on or about 12 June 2007) and the time he executed it (on 24 July 2007), his priorities seemed to revolve around Lucinda and his trip to the United Kingdom, rather than looking after his own financial interests or acting on advice of persons such as Mr Meakes.

Furthermore, the matter the plaintiff relied on for the purposes of these proceedings as being what would have changed his mind about buying Reevesdale, is the very matter of which he was made aware by Mr Hannan, following his inquiry regarding the significance of the placards.

I am satisfied that the plaintiff did not make any inquiries of the Council or the neighbours, notwithstanding that he was aware of the quarry development from speaking with Mr Hannan and notwithstanding that he had been advised to do so by Mr Meakes. In these circumstances, whether or not Mr Meakes had advised him to make those inquiries, the plaintiff would still have purchased Reevesdale.

The narrative set out above indicates the plaintiff’s reluctance to sell Paddington on both personal and financial grounds. I do not accept that, had the plaintiff not purchased Reevesdale, he would have sold his Paddington terrace in mid-July 2007 (which he contended was a better market). Even if the NAB was not prepared to extend its facilities any further, it is likely that the plaintiff would have been able to use the Paddington terrace to increase his borrowings with another lender. I regard the plaintiff’s argument that he had to buy Reevesdale to keep Paddington as captious, for the reasons given above.

Accordingly, the plaintiff has failed to establish factual causation in negligence (as required by s 5D(1)(a) of the Civil Liability Act 2005 (NSW); see also Wallace v Kam [2013] HCA 19; 250 CLR 375 at [14] – [16]), contract or under the Trade Practices Act or Fair Trading Act.

The measure of damages in contract is the amount of money required to put the plaintiff in the position he would have been in had the contract been performed; in tort, the measure is the money to put the plaintiff in the position he would have been in had the tort not been committed: Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; 160 CLR 1. A similar test is used to assess damages under the Trade Practices Act or the Fair Trading Act: Kizbeau v WG and B Pty Ltd (1995) 184 CLR 281 at 290, including footnote (11); Henville v Walker [2001] HCA 52; 206 CLR 459 at [30] – [31] per Gleeson CJ.

In order to assess damages, I am obliged to assume (contrary to my findings above) that Mr Meakes did not advise the plaintiff to make inquiries of the Council and that, had he done so, the plaintiff would have gone to the Council. Had this occurred, the plaintiff would have found out that the quarry development had not been approved and that an appeal against its refusal had been dismissed: CEAL Ltd v Minister for Planning. In my view it is inconceivable that, in these circumstances, knowing that the developer’s appeal had been dismissed, the plaintiff would not have purchased Reevesdale.

However, accepting the counterfactual for the purposes of these reasons, and accepting that the plaintiff would not have purchased Reevesdale had he made inquiries of the Council, he has suffered no loss. The reason for this is that the unchallenged evidence of Mr Reardon was that Reevesdale was worth $2m as at 25 February 2008 (being seven months after the plaintiff purchased it for $1.675m). Furthermore Mr Reardon considered that Reevesdale had been “very good buying” and “below current market value” when the plaintiff purchased it for $1.675m.

Mr Reardon’s evidence comprises the only evidence of the value of Reevesdale at the time the plaintiff purchased it. The plaintiff has, accordingly, failed to establish that Reevesdale was worth less than he paid for it. The reduction in the value of Reevesdale from the time of its purchase by the plaintiff to the time of its eventual sale in 2013 was due, according to the unchallenged view of Mr Reardon, to the general reduction in the area, rather than to anything specifically related to the proposed quarry development, which has not, in any event, commenced.

In these circumstances, the starting point is the rule of practice derived from Potts v Miller that the measure of damages (for deceit, and by analogy, tort and contract) is usually the difference between the real value of the property at the time of purchase and what the plaintiff paid for it. The “real” value is the appropriate integer, rather than the market value, because hindsight can also be taken into account: Kizbeau v WG and B Pty Ltd at 291. Consequential losses (such as the expenses associated with the acquisition) may also be recoverable.

The plaintiff did not provide any basis for displacing the rule in Potts v Miller. He did not suggest that he could not have sold Reevesdale earlier than he in fact sold it. To the contrary, the evidence showed that he was very reluctant to part with Reevesdale and would have retained it had he been able to. That he sold Paddington years before he sold Reevesdale is further evidence of this. In these circumstances, the plaintiff has failed to prove that he has suffered any loss as a result of the defendants’ conduct.

The loss from the sale of the Paddington terrace is not recoverable in light of my finding on causation. However, even had factual causation been established, the loss would have been too remote to be recoverable in contract (Hadley v Baxendale (1854) Exch 341 at 354; 156 ER 145 at 151); tort (s 5D of the Civil Liability Act); or under the Trade Practices Act or the Fair Trading Act (Henville v Walker, at [136]).

It also follows from these findings that none of the consequential losses claimed is recoverable.

In these circumstances, it is not necessary to address Mr Meakes’ partial defence by reason of the Law Society of NSW Scheme under the Professional Standards Act 1994 (NSW).

I make the following orders: