McFee v Reilly

1. [1]

   McCOLL JA: I have had the privilege of reading Leeming JA’s reasons in draft. I agree with his Honour’s reasons and the orders he proposes.

2. [2]

   LEEMING JA: The parties to this litigation fall into four camps: the mother, her four daughters, her son, and a solicitor. It will be convenient, without intending any disrespect, to refer to the members of the Reilly family by the given names by which each was known. For many years, the mother, known as Peg (although christened Margaret Lillian), participated with her husband, Frank, in a partnership known as the FB & ML Reilly Partnership. The partnership conducted grazing activities on two rural properties near Forbes in central New South Wales, “Malaya” and “Boronga”. Peg owned Malaya and Frank owned the parcels of land which comprised Boronga.

3. [3]

   The critical events occurred in 2003 and 2009. In 2003, a solicitor (Mr Buckley) drafted a will for Frank, which Frank executed in the presence of him and his clerk. The will gave all of his real and personal property, save for Boronga, to his four daughters, as joint tenants. A separate clause addressed the gift of Boronga, but failed to indicate to whom it was given.

4. [4]

   It was accepted that Frank was mentally incapable from at least 2009. In 2008 he suffered a serious accident and after a short stay in hospital, thereafter resided in a nursing home. It was said that the cost of that accommodation was in the order of $50,000 per year, and that while Frank owned Boronga, all of that cost had to be met without any government subsidy. Frank died in December 2012.

5. [5]

   In June 2000, Frank had given an enduring power of attorney exercisable jointly and severally by Peg and their son Joseph. The instrument deleted the clause which otherwise would have conferred authority “to execute an assurance or other document, or do any other act, whereby a benefit is conferred” on the donees. Purportedly acting pursuant to that power, on 6 July 2009, Peg caused Boronga to be transferred to her four daughters Margaret, Carmel, Genevieve and Patricia (known as Tish), as joint tenants. (In what follows references to “Margaret” are to the daughter, not the mother who was known as Peg.) The stated consideration was $1. A formal market valuation dated 18 May 2009 valued the property at $815,000 (although the primary judge observed at [40] that that may have understated its value). Peg took that course with the involvement of Mr Duncan Maccallum, the employed solicitor of the sixth defendant, Mr Dennis McGroder. There is no issue as to Mr Maccallum acting within the scope of his employment, such that Mr McGroder is liable for his conduct, and rather than referring to the party (Mr McGroder) and the participant in events (Mr Maccallum) I shall mostly simply refer to “the solicitor” to denote whichever man is appropriate to the context.

6. [6]

   In 2014, Joseph lodged caveats upon the various lots comprising Boronga, and later that year commenced proceedings against his mother, his four sisters and Mr McGroder. Relevantly for present purposes, he sought orders (a) rectifying Frank’s will such that he was the devisee of Boronga, (b) for damages in negligence against his mother and sisters; (c) for equitable compensation for breach of fiduciary duty against his mother in which his sisters and Mr McGroder’s employed solicitor had participated, and (d) for damages in negligence against Mr McGroder. Joseph had been in possession of Boronga, and by their cross-summons, his sisters sought possession of the property and the taking of accounts of a partnership. They also sought leave to apply out of time under the Succession Act 2007 (NSW) for provision for their maintenance, education and advancement in life.

7. [7]

   The primary judge heard a trial over four days and delivered a judgment of 409 paragraphs: Reilly v Reilly [2017] NSWSC 1419. Broadly speaking, his Honour upheld Joseph’s claims (although he found it unnecessary to determine whether Peg and her daughters were liable at law: see at [221]). He proposed some 25 orders, of which, relevantly:

   1. (1)

      orders 1-7 rectified Frank’s will as sought by Joseph, and dealt with other ancillary matters;

   2. (2)

      orders 8-11 upheld Joseph’s claim that Boronga was held on trust for the estate, and required his sisters to transfer title to him;

   3. (3)

      orders 12-16 upheld the claims of Margaret, Carmel, Genevieve and Tish for provision under the Succession Act, in amounts of $80,000, $275,000, $80,000 and $60,000 respectively, and charged those amounts upon Boronga and granted other ancillary relief;

   4. (4)

      orders 17-20 wound up a partnership conducted by Joseph and his sisters and ordered the taking of accounts;

   5. (5)

      orders 21 and 22 reserved for separate determination the questions of the amount of any equitable compensation to which Joseph (through Frank’s deceased estate) might be entitled against Peg, and the quantum of any damages at common law he might be entitled to against Mr McGroder.

8. [8]

   Following an opportunity for the parties to be heard as to their form, orders were made in substantially the terms proposed on 9 November 2017. His Honour delivered a separate judgment on costs. The two matters of quantification left unresolved (Joseph’s claim in equity against Peg and at common law against Mr McGroder) have not yet been determined in light of the appeals.

9. [9]

   All parties save Peg (who has filed a submitting appearance) have appealed or cross-appealed. It is best to deal with the procedural matters immediately. The sisters’ appeal is as of right, from final orders declaring them constructive trustees and requiring the transfer of Boronga. However, their appeal was filed slightly out of time. Contrary to what was asserted on its face, the two month extension of time to commence an appeal is not engaged by serving an unfiled notice of intention to appeal within 28 days after the material date. However, no point was taken, and that extension (of some 6 days) should be granted.

10. [10]

    The matters left outstanding by the primary judge mean that the other parties’ cross-appeals are interlocutory. The solicitor’s purports to be as of right, while Joseph’s asserted that leave was granted on 18 June 2018. On that date, the Registrar made orders by consent for the filing of Joseph’s cross-appeal (with which he failed to comply, although only by two days), but on no view was there a grant of leave. (The Registrar has no power to grant leave.) There should be grants of leave, given the sisters appeal as of right, and the fact that written and oral submissions proceeded on the basis that the appeals were properly before the Court. A further reason for mentioning this is that some of the unresolved issues affect the analysis of some of the issues (notably, relating to quantification) in this Court.

11. [11]

    The issues which arise in this Court are fewer than those which arose at trial, although they are nonetheless numerous. What follows is not exhaustive, but indicates the main issues sufficiently to explain the structure of this judgment.

    1. (1)

       By their appeal, the sisters challenge the finding that they must transfer Boronga to the estate; that involves challenges to primary findings that the solicitor acted for them such that his knowledge of Peg’s breach of fiduciary duty could be imputed to them. By amendment, they also challenge the finding that Peg breached her fiduciary duty as attorney.

    2. (2)

       The solicitor’s cross-appeal contends that there was no duty owed by him to Joseph as a disappointed beneficiary under the (rectified) will, no breach of duty, and no causal connection between any breach and any loss suffered by Joseph. He also challenges the contingent finding by the primary judge at [391] that he ought to be held liable for 100% of any damages suffered by Joseph pursuant to s 35 of the Civil Liability Act 2002 (NSW). By amendment, he challenges the rectification of the will.

    3. (3)

       Joseph has filed a cross-appeal which may fairly be described as defensive. He contends that if he is not entitled to Boronga (as a result of the rectified will and the success of his claims against his mother and sisters), then there was error in the determination of provision under the Succession Act in favour of the sisters and in the finding that the estate had suffered no loss in the improvident transfer of Boronga to them.

12. [12]

    The most efficient way of resolving the multiplicity of issues arising from the appeal and two cross-appeals is as follows.

    1. (1)

       First, to resolve the challenge to the rectification of Frank’s will; this, unlike all other issues, concerns events in 2003, rather than years later in 2009 and thereafter.

    2. (2)

       Secondly, to resolve the other challenge to the judge’s findings of primary fact, namely, whether there was an agreement between Peg and Frank that Frank would transfer Boronga to their daughters when he could no longer farm the land.

    3. (3)

       Thirdly, to resolve the remaining aspects of the sisters’ challenge to their liability in equity to the estate. This includes addressing the submissions as to the breach of fiduciary duty by Peg and the imputation of the solicitor’s knowledge to them, and also the effect of s 42 of the Real Property Act 1900 (NSW).

    4. (4)

       Fourthly, to resolve the common law liability of the solicitor in negligence to Joseph.

13. [13]

    Rather than attempting to summarise the whole of the relevant evidence, findings and reasons of the primary judge at the outset, I shall do so insofar as is relevant to the particular issue at the same time as addressing and resolving the parties’ submissions. But before doing so, it may be convenient to identify my conclusions resolving this multifaceted dispute.

    1. (1)

       First, I have rejected both challenges to the findings of primary fact. I would not interfere with the primary judge’s decision to rectify Frank’s will, nor with his conclusion that there was no agreement between Frank and Peg to transfer Boronga to the sisters.

    2. (2)

       Secondly, I agree with the primary judge that Peg’s decision as Frank’s attorney to give Boronga to their daughters breached the fiduciary duty she owed to Frank.

    3. (3)

       Thirdly, Peg’s solicitor should have advised her against doing so, as an incident of his common law duty owed to Frank.

    4. (4)

       Fourthly, Mr Maccallum was also acting for the daughters. He was described on the conveyance as their solicitor, and he wrote on their behalf to the Office of State Revenue to seek a stamp duty exemption (he was also acting for them at this time in establishing two partnerships). His knowledge of Peg’s breach of fiduciary duty is imputed to them for the purpose of their liability as recipients of property transferred in breach of fiduciary duty.

    5. (5)

       Fifthly, the sisters became registered proprietors of Boronga. By reason of the Real Property Act 1900 (NSW), that title may only be lost in cases of fraud within the meaning of s 42 of that Act, and, contrary to the reasons of the primary judge, that did not occur here. However, they are still required to account to the estate for the value of the property they were given in breach of fiduciary duty.

    6. (6)

       Sixthly, the solicitor owed a duty at common law to Joseph as a beneficiary under Frank’s (rectified) will. The solicitor was retained for the purpose of estate planning, and requested and obtained possession of Frank’s will. He knew that it was defective insofar as it dealt with Boronga. He also knew that Frank was incapable and would never make another valid will, and was assisting Peg to transfer Boronga to Joseph’s sisters. In those circumstances, the solicitor owed a duty at common law to Joseph to take reasonable care to protect Frank’s and Joseph’s interests (which were wholly aligned), which in this case amounted to reasonable care to seeing that Frank’s testamentary intentions were carried out and that his attorney did not breach her obligations to him.

    7. (7)

       Seventhly, the solicitor breached the duty he owed to Joseph by not drawing to Peg’s attention the fact that the course she was proposing was contrary to Frank’s intentions and best interests, and involved a breach of fiduciary duty on her part, absent which the transaction would not have proceeded and Joseph would have been entitled to Boronga under the will when Frank predeceased him. However, it has not as yet been determined whether Joseph has suffered any loss, or if so, its quantum.

Rectification

1. [14]

   Frank’s will was professionally drafted, but on its face defective. The entirety of its substantive provisions was as follows:

2. [15]

   Clause 3 is obviously incomplete. The primary judge addressed, as a threshold issue in his reasons, Joseph’s claim that the will be rectified, on the basis that the omission of Joseph’s name as a beneficiary was a clerical error. The primary judge relied on a handwritten note dated 18 March 2003 prepared by the solicitor who acted for Frank, which included “Leave ‘Boronga’ to Joseph Thomas Reilly together with 2/3 of your interest in your farming P’ship FB & ML Reilly”: at [50]. The solicitor, Mr Buckley, was cross-examined and had no independent recollection of the conference at which he took instructions.

3. [16]

   The primary judge considered that rectification should be ordered under s 27 of the Succession Act 2007 (NSW). No challenge was made to his reasons to extend time, which may accordingly be passed over. For the substantive exercise of the power, his Honour gave reasons at [65]-[67]:

4. [17]

   Senior counsel for the solicitor declined to address rectification orally. He accepted that it was appropriate for the Court to rely merely upon what was said “in your rather short submissions on this point and not stray beyond it because you do not wish to elaborate it orally” (transcript, 27 September 2018, p 38). The solicitor addressed rectification at paragraphs 11-16 of his submissions. Aside from reiterating the need for the statutory power to rectify a will to be exercised with great care, the submission makes one point, which is based on the 8 days which passed between Mr Buckley’s filenote and the date the will was executed by Frank and witnessed by Mr Buckley and his clerk. The first of Mr Buckley’s cross-examiners elicited the following non-responsive speculation:

5. [18]

   The second cross-examiner then obtained these answers:

6. [19]

   The solicitor’s submissions then emphasised the unexplained absence from the witness box of Mr Buckley’s secretary, and asserted that the primary judge failed to deal with this evidence.

7. [20]

   I cannot accept the submission, for reasons which may be stated immediately.

   1. (1)

      First, the answers of Mr Buckley, although not objected to, were of no weight; they were the non-responsive and expressly speculative thoughts of a witness with no recollection of the events (that is not intended as a criticism of the witness).

   2. (2)

      Secondly, it is not the case that the primary judge did not deal with this evidence. His Honour expressly stated at [56] that Mr Buckley was “[i]nvited to speculate about how, and why, clause 3 of the deceased’s will takes the form it does ... he could not exclude the possibility that there was an undocumented change of the deceased’s instructions at or about the time the will was executed”.

   3. (3)

      Thirdly, the submission fails to grapple with the basic problem posed by the will as executed. On no view can it have reflected Frank’s instructions, or Mr Buckley’s professional expertise, to draft a will which did not identify any devisee of Boronga. It is plain that there was a clerical error; the question then arises what should have been written had the error not been made.

   4. (4)

      Fourthly, the scenario as to which Mr Buckley speculated (a change of instructions implemented by a secretary) seems inherently implausible; one does not expect legal secretaries to make material changes to documents as instructed by a client. Further, his speculation does not address the fact that Mr Buckley apparently witnessed Frank executing the will in final form. Equally importantly, even if that is what occurred, it is clear that there has been a further clerical error, because (on this hypothesis) the devisee of Boronga was omitted from cl 3 of the will as amended. Hence the scenario still begs the question: what should have been written had the clerical error not been made?

   5. (5)

      Fifthly, the testator plainly intended to devise Boronga to someone. The only plausible candidates on the facts of this appeal are his children. If his son were to be wholly excluded in favour of his daughters, then there was no occasion for separate clauses 3 and 4; instead, the will would have provided for the entirety of his estate to his daughters. This point was raised by the judge with Mr Buckley, who agreed, and the further cross-examination took the matter no further. Further, there was no record of any instructions taken, let alone a memorandum or other formal record, addressing why it was that the testator chose to disinherit his only son.

   6. (6)

      Sixthly, Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 is of no assistance. The speculative answers of Mr Buckley are not to be converted into a basis capable of sustaining an inference. No inference can be drawn unless evidence has been given of facts “requiring an answer”: see (for example) Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121; [2000] HCA 18 at [51] and Lim v Cho [2018] NSWCA 145 at [41]. Although Mr Buckley was permitted to make the statements reproduced above, they did not amount to a case which required the secretary to be called lest an inference be drawn as to her evidence.

8. [21]

   Grounds 1(e) and 4(d) of Mr McGroder’s amended notice of cross appeal are not made out.

Was there an agreement between Frank and Peg?

1. [22]

   The transfer of Boronga to Frank and Peg’s four daughters appears to have been related to a broader restructure of the assets held by her and Frank. On 1 July 2009, two partnership deeds were executed: the Shadrack Partnership and the Boronga Partnership. All five children executed the former, but only the daughters executed the latter. The former involved a business of investment; the latter involved the business of farming and grazing and made it plain that the right to graze and farm on Boronga was an asset of that partnership.

2. [23]

   Peg said that she felt justified in transferring Boronga to her daughters because of an understanding with her husband that he would leave Malaya to Joseph, and that that was a fair splitting of the farming assets of the family. This was known at trial and in this Court as the “Agreement”.

3. [24]

   The primary judge was not satisfied that there had been an oral agreement between Frank and Peg to the effect that if Peg transferred Malaya to Joseph, then he would leave Boronga to their daughters: at [87]-[88]. Nor was his Honour satisfied that that was why Peg exercised the power of attorney to transfer Boronga to her daughters: at [89]. His Honour rejected a criticism that Peg had not been sufficiently confronted with this in cross-examination: at [90]-[91], and then made positive findings as to the reason for the transfer at [93]-[95] as follows:

4. [25]

   The primary judge noted that the effect of s 163B of the Conveyancing Act 1919 (NSW) was that the power of attorney did not confer power to execute a document which would confer a benefit upon herself: at [110]. His Honour rejected the submission that insofar as the conveyance was executed for the purpose of possibly relieving Peg of the obligation to pay the costs of Frank’s nursing home care, that did not of itself involve an absence of authority or breach of obligation. He did so on the basis that if Peg incurred expense personally, she was entitled to reimbursement, and the absence of any allegation that there was some unlawfulness, for example, in fraud of the revenue: at [121].

5. [26]

   The primary judge considered that while Peg could, by the exercise of the power of attorney, make a gift of Frank’s property to a third party, the power was qualified by a fiduciary obligation and an obligation to exercise the power bona fide and not for an improper, foreign purpose, such as would amount to a fraud on the power. His Honour regarded the transaction as both a fraud on the power and a breach by Peg of her fiduciary obligations: at [126]-[127]:

6. [27]

   Accordingly, the primary judge concluded that Peg was liable to account to Frank’s estate for that property, although she herself was not a recipient of it: at [130]-[132].

7. [28]

   There were essentially two challenges made to the refusal by the primary judge to find that there had been an agreement between Frank and Peg. The first was that, in light of the way in which Peg had been cross-examined, it was not open to reject her testimonial evidence. The second was that appellable error had been made in declining to find an agreement. For sensible forensic reasons, the former was at the forefront of the submissions in this Court. I shall address each, in turn, below.

8. [29]

   It was submitted by the daughters that the primary judge was not entitled to make findings adverse to Peg, her daughters and Mr Maccallum in light of the way in which they had been cross-examined (amended notice of appeal, ground 7). The submission was supported by the solicitor, especially in relation to the findings against Peg as to the absence of an agreement, which, so it was put, “amounted to a finding that Peg was lying” and which was elaborated as follows:

9. [30]

   The primary judge rejected a similar submission made at trial, saying at [91] that:

10. [31]

    It was not put that his Honour’s statement of principle in that paragraph was incorrect. Nor was there, with respect, sufficient attempt to grapple with the subtleties of what his Honour was saying. The transcript records counsel for Joseph cross-examining Peg as follows (by reference to a solicitor’s letter dated 21 July 2014):

11. [32]

    It is very much to be borne in mind that Peg was born in February 1929 and was 87 when she was cross-examined in August 2016. The primary judge saw, far more vividly than could be conveyed by any transcript, how she responded to questioning. The transcript does make it plain that Peg could give firm evidence about things that were demonstrably incorrect (in light of the contemporaneous documents); her evidence that she doubted anyone went with her to see Mr Maccallum at page 84 is an example. It is also plain, by his interventions, that the primary judge was alert to the need to draw aspects of her evidence to the forefront with a view to achieving a fair trial. An example of this turning on the agreement is found towards the conclusion of her cross-examination by Joseph, where the primary judge took her to the discussion to which she deposed giving rise to an agreement between Peg and Frank as to Joseph receiving Malaya and the daughters receiving Boronga, and established, with non-leading questions, that she had other real and personal property that was not part of the conversation she said she had had with Frank about being “fair” to the children.

12. [33]

    The primary judge was thus demonstrably attuned to the need for Peg fairly to be confronted with the case, both during the hearing and in his reasons. And what is fair in cross-examination turns in part upon the personal characteristics of the witness. Not lightly would I accept that, despite what his Honour did during the hearing and said in his judgment, the findings which were made were unavailable. It seems to me that this is an area where an appellate court ought to be especially deferential to the primary judge, and even more so a primary judge who was highly familiar with dealing with elderly witnesses and who was evidently alert to ensure that curial processes were administered fairly. In cases such as this, the transcript is apt to provide a more than ordinarily imperfect record of what occurred in the court. The pauses, hesitations and intonations of any witness, but perhaps especially an elderly witness, bear upon the probative value of the testimony and what needs to be put in order to achieve a fair trial, but are seldom conveyed by the transcript.

13. [34]

    There was no contemporaneous documentation recording the “agreement” to which Peg deposed. Indeed, if anything the contemporaneous documents told against such an agreement.

14. [35]

    “Malaya” was transferred to Joseph in 2000. Peg’s solicitor at that time, Mr Burke, wrote to Joseph, copying in Peg, in April 2000 saying that the intergenerational stamp duty waiver would apply and that:

15. [36]

    Peg agreed in cross-examination that she did not correct her solicitor’s statement in that letter. Against this, it was said that the statement was directed to stamp duty, and there was no occasion for her to do so.

16. [37]

    The fact remains that the claimed oral agreement depended upon an acceptance of the testimonial evidence of Peg. The gravamen of the solicitor’s submissions (which were the most elaborate on this issue) was that the finding should not have been made having regard to the way the trial was run; this has been addressed above.

17. [38]

    It was also put by the solicitor (once again in writing; senior counsel advised that he did not wish to elaborate this aspect orally: transcript, 27 September 2018, p 26.16) that:

    1. (1)

       Peg gave unchallenged evidence that the reason for her instructions to Mr Maccallum was the agreement;

    2. (2)

       Peg remained on civil terms with Joseph at all times, and there was no underlying antipathy with him;

    3. (3)

       Consistently with the “agreement”, Joseph in fact received Malaya, Peg received nothing and the transfer only occurred once Frank became incapable of farming the property.

18. [39]

    Those matters were all said to be consistent with the agreement. It was also submitted that the primary judge “failed to grapple with” them.

19. [40]

    I do not accept these submissions. First, in response to the first point, while Peg’s evidence supported the existence of an Agreement, it did in a real sense sit uneasily with the testimonial evidence of each of the sisters (considered in more detail below) to the effect that each was told by Peg that the transfer of Boronga to them was because of Peg’s view of what was “fair”. If ever there was an occasion for Peg to tell her daughters that the reason for the transfer of a share of the property to them was because of what she had agreed with their father many years before, that was the time to do so. Further on this point, in the case of Tish, weight should also be given to an email she wrote to Mr Maccallum on 24 April 2009 (addressed further below, in connection with Mr Maccallum obtaining Frank’s will). She said:

20. [41]

    Secondly, the second and third points lack force. It was not disputed that Peg remained on civil terms with Joseph, that Joseph received Malaya and the transfer of Boronga only occurred once Frank became incapable. But while those matters are consistent with an agreement between Peg and Frank, they are also consistent with Peg forming the view which she in fact told her daughters, namely, that she, Peg, thought that it was fair for the daughters to receive Boronga.

21. [42]

    Thirdly, I entirely reject the criticism that the primary judge failed to “grapple” with this evidence (as to which see the decisions collected in Bunnings Group Ltd v Borg [2014] NSWCA 240 at [36]). The reasons of the primary judge disclose a close attention to the objective facts, inherent probabilities and testimonial evidence. It suffices to reproduce [87]-[89] of his Honour’s reasons:

22. [43]

    Contrary to the solicitor’s written submissions, the primary judge self-evidently “grappled” with the testimonial evidence from Peg as to the agreement; the matters considered at length above call that evidence into question and support his conclusion. This is, with respect, far distant from the cases where the fact-finding process has been found to have miscarried. The decision which is perhaps most commonly cited in support of that proposition is Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 in which it was said at [66] that “[w]here it is apparent from a judgment that no analysis was made of evidence competing with evidence apparently accepted and no explanation is given in the judgment for rejecting it, it is apparent that the process of fact finding miscarried.” That is not this case.

23. [44]

    I do not consider that any proper basis has been made out to overturn the findings of primary fact made by the primary judge.

The sisters’ liability to Frank’s deceased estate

1. [45]

   The four sisters became registered proprietors of the parcels of land comprising Boronga. They were sued as knowing recipients of property pursuant to the “first limb” of Barnes v Addy (1874) LR 9 Ch App 244. It was necessary for Joseph to establish that there was a receipt of property in breach of a fiduciary obligation in circumstances where the recipient has sufficient knowledge (no submission was made that the principle was confined to trustees; cf Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [113]).

2. [46]

   There was no doubt that the sisters received property which, but for the conveyance by Frank’s attorney Peg, would have fallen into the estate. There was no doubt that Peg owed Frank a fiduciary obligation. The questions which arose were whether Peg breached her fiduciary duty, and whether the sisters had the requisite knowledge of any such breach, the latter question turning on the knowledge of the solicitor and whether that should be imputed to them.

3. [47]

   Peg as the donee of Frank’s enduring power of attorney owed a fiduciary obligation to Frank. Insofar as she purported to exercise her power to dispose of Frank’s assets in a way which she considered “fair”, she was in a position of conflict between herself and Frank. She was exercising the power in order to give effect to her own views, which was not for the purpose of advancing Frank’s interests.

4. [48]

   There was a substantial body of evidence to that effect. Margaret gave evidence in her affidavit that her mother had a “rare” conversation with her in which she said:

5. [49]

   Carmel gave evidence that she had a conversation with her mother:

6. [50]

   Genevieve likewise gave evidence that her mother has said:

7. [51]

   Tish’s evidence was to the same effect. She said she was present when her mother told Joseph that she was going to transfer Boronga to the girls, and when asked why, her mother had said:

8. [52]

   Contrary to a submission advanced by the sisters, no cross-examination was necessary in order for them to be found to have knowledge that would indicate to an honest and reasonable person that Peg, rather than trying to act in the best interests of Frank, was using the power of attorney in order to achieve what she considered to be a “fair” disposition of his property. To anticipate what follows in these reasons, it is trite that in order for a third party who receives trust property to be liable under the “first limb” of Barnes v Addy, it is sufficient for any of the first four, but not the fifth, categories of knowledge in Baden v Société Générale pour Favoriser le Dévelopment du Commerce et de l'Industrie en France SA [1993] 1 WLR 509 at 575-576, 582 to be made out. The fourth category is knowledge of circumstances which would indicate the facts to an honest and reasonable person. This was what the primary judge found at [215]:

9. [53]

   I agree with his Honour’s analysis. It was never in dispute that the sisters knew that they were receiving title to Boronga for nominal consideration, nor that their father was incapable, nor that their mother was exercising an enduring power of attorney, and all four gave evidence that they were told by her that she was doing so because of her own view of what was “fair”.

10. [54]

    But in any event, it seems that these submissions by the sisters preceded Joseph’s unequivocal concession that his case based on knowledge turned on the imputation to the sisters of the solicitor’s knowledge (see the next section below).

11. [55]

    As reproduced above, the primary judge concluded at [126]-[127] that Peg’s exercise of the power was a breach of fiduciary duty and a fraud on the power. In the circumstances of this case, and especially where Peg was acting with the assistance of a solicitor, there is no necessary reason for moral opprobrium attaching to her conduct, its characterisation in equity notwithstanding. All that matters for the purpose of the litigation in this Court is whether Peg’s conduct was (a) a breach of fiduciary duty sufficient to engage liability under the first limb of Barnes v Addy and (b) conduct which a competent solicitor in Mr Maccallum’s position should have advised against and declined to participate in.

12. [56]

    The solicitor submitted that there was no breach of duty by Peg for no fewer than five reasons:

13. [57]

    I have already rejected the solicitor’s challenge to the factual finding of no oral agreement between Peg and Frank, and to the rectification ordered by the primary judge; cf reasons (a) and (c) above.

14. [58]

    Reason (b) turned on other evidence that two of the sisters were told by Frank in 2007 and 2008 that Joseph would not be taking over Boronga: “That bloody Joe. He is a lazy little bastard. He is not going to get his hands on this place”, and “Joe is not taking this place over. I have worked pick and shovel to get this place.” It was said that the primary judge did not consider that evidence.

15. [59]

    Reason (d) was that the transfer benefited Frank because it would facilitate the receipt of a pension, and enable a reduction in the costs of Frank’s nursing home care, which ultimately was a liability for which the person who bore it would be entitled to an indemnity from Frank’s assets. Mr Sheldon SC, who appeared for the solicitor in this Court but not at trial, emphasised that it was sufficient for there to be some benefit to Frank.

16. [60]

    Reason (e) was aligned with reason (d). It was that the transfer reflected a “good faith assessment of what was in Frank’s interests”. It was said that Frank no longer had a need to use Boronga. It was also said, by reference to Taheri v Vitek (2014) 87 NSWLR 403; [2014] NSWCA 209 at [111] and [130] that an attorney might properly effect a transaction which did not directly benefit the principal, and that “[t]here is simply no doubt that the transfer was of some benefit to Frank so that, a fortiori, the transfer was within power and proper”.

17. [61]

    These reasons are unpersuasive. Giving away substantial property in order to obtain a pension and a rebate on nursing home fees is scarcely to the benefit of the principal; Frank would have been much better off in money terms if the property was sold for its fair value (which seems to have been at least $815,000). There was in truth no benefit to Frank in the transaction by which his attorney gave away one of his most substantial assets.

18. [62]

    It is also far from clear that there was no benefit to Peg. The evidence does not seem to establish how payments for Frank’s accommodation were made (I have found none, and the Court was told when this point was raised that there was none). In this Court, submissions proceeded on the basis that the two most likely candidates were funds in Frank’s and Peg’s joint bank account, or funds in Peg’s personal account. Insofar as Peg did not seek reimbursement from Frank’s estate (and there seems to be no evidence that she did), then the transaction was in a practical sense to the benefit of Peg, contrary to the restrictions upon the power of attorney. However, it is unnecessary to express a concluded view whether that sufficed to breach the condition to which the power was subject; it suffices to reject the factual premise of reason (d).

19. [63]

    The evidence of Frank’s animosity to his only son was evidence of statements made in 2008 or 2009, around the time of his mental decline. But in any event, it did not authorise Peg to give away Frank’s property to his other children. Fundamentally, it was and is clear on the findings of the primary judge, not challenged in this Court and reflecting the evidence of the sisters, that Peg was in her capacity as Frank’s attorney seeking to do what she thought was in the best interests of the family, rather than what was in Frank’s interest. That did not permit her to cause Frank to enter into an improvident transaction, giving away his most substantial asset.

20. [64]

    Reason (e) is simply wrong. It does not matter if an attorney receives no benefit if the power is exercised by the attorney in a position of conflict. Suppose Peg genuinely believed that the best thing to do with Boronga was to give it to a charity supporting research for dementia, or to a religious charity. Despite the absence of any benefit to herself, to act on her own views of how the property might best be deployed would not prevent such an exercise of power being in breach of her fiduciary duty as attorney.

21. [65]

    True it is that if the position is analysed, colloquially, from the perspective to “the family”, there was an overall benefit, insofar as Boronga was retained by family members while Frank (so it seems) became entitled after five years to certain social security benefits; that is slightly different from the philanthropic examples mentioned above. That there was no disadvantage to Frank, and an overall benefit to “the family” may very well be how all of the defendants saw the position at the time. There are however at least two problems with applying this approach to legal analysis. The first is that “[t]he members of the family are separate individuals”, as the High Court said in a not unrelated context in Farah Constructions Pty Ltd v Say-Dee Pty Ltd at [128]. The second is that Frank was incapable, and although his autonomy was impaired, his interest in his own assets was not to be disregarded. It is no answer to say that “Frank could no longer use Boronga”. To the contrary, especially given that Frank could no longer look after his own interests, care had to be taken when his attorney caused him to enter into an improvident transaction, such as that by which he gave his largest asset to his daughters.

22. [66]

    The primary judge did not express a concluded view as to whether Peg and her daughters saw Frank’s will and the power of attorney: at [205]. However, his Honour was not required to make a firm finding on those issues, because it was quite plain that Mr Maccallum saw and considered both. The evidence relating to this was as follows.

23. [67]

    At the first conference, at which Peg, Tish and Mr Maccallum attended, the latter’s file notes corroborated his evidence that Peg and/or Tish said the following:

24. [68]

    Mr Maccallum was also instructed that Frank’s other assets were to be transferred to all five children. A note the following week records his advice that there be created two separate partnerships, one with the four sisters, the other with all five siblings (“Perhaps two partnerships is my suggestion one for the land one for the other assets”).

25. [69]

    By email dated 23 April 2009, Mr Maccallum asked Tish for a list of assets, referred to the possibility that Peg might have to do a new will, and requested “copies of Peg’s and Frank’s will to be delivered so we can advise accordingly”. Tish responded later that morning:

26. [70]

    Mr Maccallum responded on 24 April 2009:

27. [71]

    Tish responded:

28. [72]

    The will was provided under cover of letter dated 6 May 2009 from Mr Buckley’s office. Mr Maccallum accepted that he “had noticed that there was an error in the will”. Mr Maccallum also received, under cover of the same letter, the power of attorney.

29. [73]

    On 20 May 2009, Mr Maccallum forwarded draft partnership deeds, for the creation of the Shadrack Partnership and the Boronga Partnership, to Tish for distribution by her. The four sisters were the partners of the Boronga Partnership; the five siblings were the partners of the Shadrack Partnership. The assets of the Boronga Partnership included “the right of grazing and farming on the property known as ‘Boronga’ or any other lands acquired by the partnership or any member thereof ...” In contrast, assets of the the Shadrack Partnership were to be investments.

30. [74]

    Mr Maccallum therefore knew:

    1. (1)

       Frank was mentally incapable;

    2. (2)

       his retainer extended to estate planning, for which reason he requested and gained possession of Frank’s will;

    3. (3)

       Frank’s will had a clause devoted to Boronga but did not identify to whom it was to be devised, and by a separate clause left the balance of his estate to his four daughters;

    4. (4)

       Frank’s attorney was instructing him to transfer Boronga to the four daughters, in circumstances where Frank was incapable and the attorney instructed that “the family” had agreed to that course;

    5. (5)

       simultaneously, the partnership of Frank and Peg which had conducted the farming business was to be replaced by two separate partnerships, involving four and five of the siblings respectively, with Joseph not being a member of the partnership which was to conduct the farming business.

31. [75]

    The case in this Court was argued on the basis that the requisite knowledge on the part of the sisters in order to found first limb Barnes v Addy liability turned on their being imputed with the knowledge of Mr Maccallum. This was made clear, with commendable candour, by senior counsel for Joseph (who had not appeared at trial):

32. [76]

    It was put that Mr Maccallum’s knowledge was insufficient to amount to Barnes v Addy liability:

33. [77]

    True it is that Mr Maccallum was not cross-examined in such a way as to suggest knowledge or belief of impropriety, or Nelsonian blindness to a breach of duty. But it is sufficient if (a) Mr Maccallum had knowledge of circumstances which would indicate a breach of fiduciary duty to an honest and reasonable person, and (b) that knowledge was to be imputed to the sisters.

34. [78]

    It was said by the sisters that:

35. [79]

    Reliance was placed on this Court’s decision in Bird v Bird [2013] NSWCA 262; 11 ASTLR 225, where there was some factual similarity. The two sons Warrick and Rodney were alleged to have received property obtained in breach of fiduciary duty by their mother who was the donee of a power of attorney (however, the sons had also been appointed attorneys, and had actual knowledge of the terms of the instrument). Macfarlan JA, with whom Beazley P and Ward JA agreed, said at [45]:

36. [80]

    However, that paragraph needs to be read with [43], which demonstrates that the trial was conducted on a particular basis:

37. [81]

    Bird v Bird is not applicable, given that in the present case, the state of mind is that of a solicitor, with reliance being placed on the fourth Baden category of knowledge. Rather, the matters set out above amount to knowledge of circumstances which would indicate to an honest and reasonable person a breach of fiduciary duty by Peg. Mr Maccallum must have known that Peg was a fiduciary, who was purporting to exercise a power of attorney giving away her principal’s asset. An honest and reasonable man would have known that, notwithstanding his instructions that “the family” all agreed to what was proposed, it was not in Frank’s best interests that that occur, and there was a conflict between Peg’s intentions and Frank’s best interests. It was not necessary to put any of this to Mr Maccallum in cross-examination. (The position would have been different if reliance had been placed upon, say, a studied refusal by Mr Maccallum to acknowledge the obvious.)

38. [82]

    Under the heading “The Role of the Sixth Defendant” the primary judge commenced a section dealing with the solicitor’s retainer with the sentence (at [167]):

39. [83]

    The reason it was important is that, as the primary judge recorded at [170], Joseph invited the Court to impute to Peg and his sisters the knowledge of the solicitor. The primary judge addressed this in some detail at [167]ff. His Honour addressed the following matters:

    1. (1)

       the fact that the employed solicitor Mr Maccallum had physical possession of the power of attorney and Frank’s will from around 6 May 2009;

    2. (2)

       the fact that Mr Maccallum had authority to perform work delegated to him by Mr McGroder (the latter personally played no substantial role in the transaction);

    3. (3)

       although Mr Maccallum said that he considered Peg to be his client, and that Tish was assisting her, the primary judge found at [173] that:

40. [84]

    There was no written form of costs agreement, although the primary judge observed at [181] that there was an exchange of correspondence in which a costs estimate was provided for “estate planning”. The primary judge said at [181] that:

41. [85]

    The primary judge was acutely concerned at the simplification involved in labelling a person as a “client”, explaining at [174]-[176] that:

42. [86]

    The primary judge found that although the solicitor purported to act for Frank, he did not in fact act either for Frank or for Joseph: at [177]. The primary judge placed some weight upon the documents in fact executed with the assistance of Mr Maccallum, saying at [182]:

43. [87]

    The primary judge then addressed at a level of detail the communications between Mr Maccallum and the various members of the Reilly family: at [183]-[203]. This included meetings between him with Peg and Tish, at one of which he made a note that “the other siblings are taking a back seat”; and letters, emails and telephone calls and (in the case of Tish and Genevieve) face to face meetings concerning the transaction.

44. [88]

    Significantly for present purposes, the letter to three of the sisters (Margaret, Carmel and Tish) enclosing the draft documents concluded:

45. [89]

    The fourth sister, Genevieve, met Mr Maccallum personally, and his file note of 11 June 2009 states “Documents explained and signed”. Mr Maccallum witnessed Genevieve’s signature on the transfer.

46. [90]

    Following the transfer, Mr Maccallum applied to the Office of State Revenue for an exemption based on “Transfer of farming property between family members”. Each of the transferee sisters had completed an application in the terms drafted by his office and sent by him to them. He was unquestionably acting on behalf of the sisters at that stage, who as transferees were primarily liable to pay stamp duty.

47. [91]

    Ground 1(a) of the sisters’ appeal challenged the finding that the solicitor acted for them in relation to the transfer of Boronga. Their written submissions relied on:

    1. (1)

       affidavit evidence that Mr Maccallum had been approached by Peg to act for her, and that he regarded Peg as his client;

    2. (2)

       Mr Maccallum never met any of the sisters aside from Tish, and that he never spoke with Carmel;

    3. (3)

       that Tish “thought she was simply acting as a conduit between Mr Maccallum and Peg, in circumstances where her mother did not use email”; and

    4. (4)

       that when Mr Maccallum wrote to the other sisters, he noted that he was acting on the “instructions from your mother and Patricia”, and added that “the reference to the latter should be taken to Patricia’s role as her mother’s assistant”.

48. [92]

    It was said that five matters pointed “decisively” to there being no retainer with the sisters:

49. [93]

    The submissions went on to say that, as in Cassegrain v Gerard Cassegrain & Co Pty Ltd (2015) 254 CLR 425; [2015] HCA 2, it was relevant to consider why Mr Maccallum’s knowledge should be imputed to the appellants.

50. [94]

    The issue in the present case is a narrow one. The question is whether, when the sisters became registered proprietors of Boronga as donees, they are to be taken to have had Mr Maccallum’s knowledge for the purpose of any liability they may have in equity as knowing recipients of property transferred to them in breach of fiduciary duty.

51. [95]

    In order to resolve that question, there is no need to resolve all aspects of the solicitor’s retainer. For example, it is unnecessary to express any view as to whether Peg, or Peg and Tish, or all five women, were jointly liable to pay the solicitor’s fees or any part of them. I consider that it is best to approach the only issue that matters — was Mr Maccallum’s knowledge to be imputed to the sisters — squarely.

52. [96]

    I would analyse the position as follows. First, Mr Maccallum acted for the sisters on the conveyance. For either (a) the sisters acted for themselves on the transaction or else (b) Mr Maccallum acted for them; there is no other alternative. It is plain that they did not act for themselves. McGroder’s Solicitors was the firm on the contract of sale, Mr Maccallum wrote on their behalf seeking a stamp duty exemption, and caused the memorandum of transfer to be registered.

53. [97]

    Secondly, I would disregard the probative value of the sisters’ own subjective views, and not merely because they were permitted to be given in litigation many years after the event, but principally because the terms of a retainer are to be determined objectively: see for example Hendriks v McGeoch [2008] NSWCA 53 at [10]-[11]. The subjective views of the solicitor fall into the same category. Senior counsel for the sisters in oral submissions accepted, in my view properly, that the question was to be determined objectively (transcript 27 September 2018, p 6.41).

54. [98]

    Thirdly, this is a case where (if it matters) the retainer extended to acting for the sisters as transferees on the conveyance and in seeking a stamp duty exemption. McGroder’s Solicitors was the firm nominated as the solicitor acting for both vendor and purchasers on the contract for sale as executed, and as was sent in draft to each sister. And that firm acted for the sisters (and only the sisters) in applying for a stamp duty exemption. The fact that the sisters did not seek out the solicitor is neither here not there; what matters is the legal services provided by him in relation to the conveyance, not how it came to be that the solicitor acted for them.

55. [99]

    Fourthly, the solicitor communicated to Peg via Tish (who unlike her mother used email and who attended conferences with him).

56. [100]

    Fifthly, the retainer was not confined to the conveyance of Boronga, but extended to “estate planning”, which inevitably involved the children of Frank and Peg, not least because they were all called upon to execute a partnership deed, and the four sisters were called upon to execute a second and separate partnership deed. As part of that estate planning, the solicitor considered himself obliged to request and obtain possession of Frank’s will.

57. [101]

    There is no occasion in this appeal to deal with the numerous (not to mention inconsistent) decisions on the imputation of the knowledge of an agent to his or her principals, described in a series of editions of Bowstead and Reynolds on Agency as “a plethora of cases in different contexts, which are extremely difficult to reduce to any order” (see the opening words of the commentary to Article 95 in 18th ed 2006 and 21st ed 2018). The parties proceeded on the basis that the issue turned on whether the solicitor was acting for the sisters. I agree that that is dispositive. In all of those circumstances, I see no error in the finding by the primary judge that Mr Maccallum’s knowledge ought to be imputed to the sisters for the purposes of any equitable liability arising from their receipt of legal title to the property.

58. [102]

    The conveyance effected by Peg and Mr Maccallum of Frank’s land was registered, and the sisters obtained title by registration of Boronga. (Eventually, this seems to have occurred without the payment of ad valorem stamp duty.)

59. [103]

    The primary judge noted that on the first day of the trial, the sisters amended their defence to rely upon the indefeasible title conferred by s 42 of the Real Property Act 1900 (NSW). Joseph advanced a case which was confined to the first limb of Barnes v Addy and the primary judge noted that mere notice of another’s fraud was insufficient to overcome a recipient’s indefeasible title: at [146]. The primary judge concluded that the sisters held Boronga on trust for the deceased estate on the basis that their notice of the breach went beyond mere notice: “Theirs was not a passive form of notice, but notice borne of active involvement in the process of divesting the deceased of his land” (at [216]).

60. [104]

    The primary judge considered that this turned upon the sisters’ knowledge that they knew the consideration was $1, that they “knew or might easily have inferred from other known facts” that the reason was Peg’s own view of what was “fair”; and they knew that Peg was acting for a purpose beyond what was proper for an attorney: at [213]-[215]. This was preceded by an elaborate analysis of authority, which may be passed over, because Joseph conceded that the orders declaring that the daughters held Boronga on trust should be set aside, consistently with Farah Constructions Pty Ltd v Say-Dee Pty Ltd at [190]-[198]. (For completeness, Joseph’s written submissions made a formal submission to the contrary, which was maintained orally.) In Farah Constructions, a unanimous High Court confirmed that a volunteer who became the registered proprietor of land held pursuant to the Real Property Act had a defence of indefeasibility against a claim in equity under Barnes v Addy unless the plaintiff could make out “actual fraud, moral turpitude”. Joseph expressly disavowed any such finding. However, Joseph contended that he was entitled to equitable compensation against all of them in respect of the value of Boronga, and his cross-appeal sought judgment in the amount of $1.2 million in his favour in his capacity as Frank’s personal representative.

61. [105]

    A person who is liable under the first limb of Barnes v Addy is liable to account to the person to whom the fiduciary duty was owed for the property transferred in breach of duty. The liability to account is as a constructive trustee. In Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 it was emphasised “what has long been recognised as the essential characteristic of the Barnes v Addy liabilities: they expose the persons to whom they apply to personal, to in personam, liabilities”: at [253]. Finn, Stone and Perram JJ went on to say (at [253]):

62. [106]

    In concluding that the same test of knowledge should apply to both “limbs” of Barnes v Addy liability, the Full Court said at [267] that:

63. [107]

    Liability to account as a constructive trustee extends also to cases where a third party has assisted in a fraudulent and dishonest breach of trust, even though the third party has received no trust property: see Hasler v Singtel Optus Pty Ltd; Curtis v Singtel Optus Pty Ltd; Singtel Optus Pty Ltd v Almad Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 at [69]-[80].

64. [108]

    The personal liability to account to the person to whom a fiduciary obligation was owed exists even if the property has ceased to exist, or has been transferred to a third party, or (as in the present case) is incapable of being held on constructive trust by dint of statute. Thus, although statute prevents a court ordering that the sisters hold Boronga as constructive trustees, they are still liable to account to the estate for the value of the property. I did not understand their counsel to submit to the contrary.

65. [109]

    The value that was submitted to the Office of State Revenue was $815,000. The value which Joseph contended in his cross-appeal the sisters should account was $1.2 million. This issue did not arise on appeal, and the primary judge noted at [353] that the parties gave little attention to it at trial (despite the late amendment to rely on s 42). In this Court, no submissions were made save that it should be remitted for determination at first instance. That remitter should extend to any dispute as to the time or times at which the value ought to be determined, a matter as to which, once again, no submissions were made in this Court. The orders I propose will permit that to occur (assuming the parties cannot otherwise resolve their dispute).

The solicitor’s liability at common law

1. [110]

   Plainly enough, the solicitor owed a duty to Frank, whose property Peg was asking Mr Maccallum to give to their daughters. However, the case sought to be advanced by Joseph was that he was owed a duty not in his capacity as administrator of Frank’s deceased estate, but personally, as a disappointed beneficiary under Frank’s will.

2. [111]

   By way of overview, the primary judge considered Joseph’s common law claim against the solicitor at [348]-[406], holding that the solicitor owed Joseph the duty of care alleged. His Honour held that the solicitor had a duty to protect Frank’s interests, as his “ultimate client” (at [384]), leading his Honour to conclude that the solicitor was also required to protect the interests of Joseph “as an intended beneficiary of the deceased”: at [386]. The solicitor submitted that this was wrong. First, it was said to be inconsistent with the notion that a testator could change his or her will, and ask a solicitor for assistance to do so, in which circumstances the undoubted duty to the testator would be inevitably inconsistent with a duty owed to the beneficiary. Secondly, the solicitor relied on the consideration that until the will was rectified, it was not clear that Joseph was an intended beneficiary.

3. [112]

   This was the main question of law argued in this Court. I set out below a more detailed summary of the reasons of the primary judge, and the parties’ submissions in this Court.

4. [113]

   The primary judge, with respect correctly, observed at [366] that the starting point of considering whether the solicitor owed the alleged duty is the nature and scope of the retainer, citing Hawkins v Clayton (1988) 164 CLR 539 at 544; [1988] HCA 15; Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18 at [16], [19], [57]-[63], [78] and [81]. The primary judge noted at [181] that no written retainer between Peg and the solicitor was in evidence. The only written document in evidence which revealed anything substantial about the nature and scope of the retainer was a costs estimate dated 22 April 2009. Although the parties had agreed there was no contractual relationship between Frank and the solicitor (a proposition of which his Honour was understandably sceptical at [179]), no issue was taken as to his Honour’s statements at [368]-[369]:

5. [114]

   The dispositive reasoning on the existence of a duty of care appears at [384]-[386]:

6. [115]

   The solicitor recognised, in accordance with binding authority, that a solicitor could owe a duty of care to a disappointed beneficiary under a will. He contended that the present appeal stood outside such a duty of care, as recognised in Hill v Van Erp (1997) 188 CLR 159; [1997] HCA 9, for two main reasons:

   1. (1)

      First, the solicitor did not prepare the will. He merely possessed and read it.

   2. (2)

      Secondly, it was central to the Court’s reasoning in Hill v Van Erp that the interests of the testator and disappointed beneficiary were entirely aligned. The solicitor submitted that the position here was less straightforward, because the instructions the solicitor received were not to benefit Joseph, but to benefit his sisters. That that was not Frank’s true intention was only a conclusion reached following rectification resulting from contested litigation.

7. [116]

   The absence of a duty of care owed to Joseph as a disappointed beneficiary was the main proposition for which the solicitor contended in this Court, and it is best to quote the careful and nuanced submissions extensively. In his written submissions, it was put as follows:

8. [117]

   The solicitor continued:

9. [118]

   Orally, Mr Sheldon’s contention that the interests of Frank and Joseph were not relevantly coincident was put as follows:

10. [119]

    On the other hand, Joseph contended that the interests of Frank and Joseph were entirely consistent in the circumstances:

11. [120]

    In oral submissions on appeal, Joseph contended that the duty owed by the solicitor was that stated in Badenach at [45] (French CJ, Kiefel and Keane JJ): that is, the duty “recognised in Hill v Van Erp, to give effect to a testamentary intention.”

12. [121]

    To reiterate what was mentioned by the primary judge, the solicitor’s 22 April 2009 “costs estimate” described the work as “estate planning” and “attending to all aspects of intergenerational transfer of land”.

13. [122]

    No party contended that there was any binding authority squarely on point. As will be seen below, assistance may be derived from Badenach, the most recent High Court appeal on the circumstances in which a solicitor acting for a testator will owe a duty to a disappointed beneficiary. The solicitor in that case received instructions from the testator to prepare his will, on the basis that the entirety of the testator’s estate was to pass to the plaintiff, who was the son of the testator’s de facto partner. The testator’s principal assets were two properties that he owned as a tenant in common in equal shares with the plaintiff. The solicitor drew the will in accordance with his instructions, and the testator died shortly thereafter. The testator’s biological daughter obtained an order for family provision, substantially depleting the estate. The plaintiff sued the solicitor, alleging negligence in failing to advise the testator of the possibility of such a claim.

14. [123]

    The High Court held that the solicitor did not owe the claimant a duty of care: see [25]-[33], [56]-[66] and [78]-[91]. Central to that conclusion was the finding that the interests of the claimant were not coincident with the interests of the testator: see especially at [47], [74] and [85]. The basis for this conclusion was articulated by Gageler J at [62], in a passage demonstrating the centrality of the client’s instructions to the question of the existence of a duty of care:

15. [124]

    The centrality of the client’s instructions creates a difficulty in the present case, where the “ultimate client”, Frank, was incapable of giving instructions, and was represented by an attorney. The solicitor never received any instructions directly from Frank, although he was bound to protect his interests and he undoubtedly owed him a duty of care directly.

16. [125]

    French CJ, Kiefel and Keane JJ in Badenach summarised the effect of the decision in Hill v Van Erp in the following way (at [18]):

17. [126]

    The recognition by ultimate appellate courts in Australia and the United Kingdom that a solicitor may owe a duty of care to a disappointed beneficiary is relatively recent: Hill v Van Erp and White v Jones [1995] 2 AC 207; [1995] UKHL 5 were decided in the last quarter century. It is not therefore altogether surprising that other appellate authority is scant. However, mention should be made of two decisions, although they were not the subject of submissions.

18. [127]

    The first is Clarke v Bruce Lance & Co [1988] 1 All ER 364; [1988] 1 WLR 881. The defendant solicitors drafted the testator’s will in 1973. Under the will, the plaintiff was the devisee of a service station owed by the testator. In 1978, the defendants were engaged by the testator to draft a variation to the lease agreement to the service station, which variation gave the lessee an option to purchase the service station upon the testator’s death. Following the testator’s death, the plaintiff claimed in negligence against the defendants, alleging that they breached their duty to the plaintiff as beneficiary and the testator to advise the latter that the lease variation was an uncommercial transaction. The Court of Appeal held that the defendant owed the plaintiff no duty of care.

19. [128]

    At 369-370, the Court of Appeal (May and Balcombe LJJ) listed four reasons militating against recognition of a duty of care in the circumstances. First, there was no close proximity between the defendants and the plaintiff at the time of the 1978 lease variation. Secondly, the 1978 transaction did not have as an object the benefit of the plaintiff (indeed, the plaintiff’s interests were in direct conflict with the intended recipient of the benefit from the lease variation). The third was the spectre of indeterminate liability. Finally, it was said that recognition of a cause of action in negligence in favour of the plaintiff against the defendants was not necessary for achieving an effective remedy.

20. [129]

    Clarke was decided before White v Jones and Hill v Van Erp, and so its modern applicability is to be approached with caution. However, at least two factors suggest the decision’s continuing modern relevance in Anglo-Australian law. First, it was expressly decided on the assumption — favourably to the plaintiff, and anticipating what was established in the United Kingdom by White v Jones — that a solicitor instructed to prepare a will owes a duty of care to a beneficiary under the proposed will: at 367j. Secondly, the decision has subsequently been cited with approval — indeed, as a prime example of the limitations of the duty recognised in White v Jones and Hill v Van Erp. See White v Jones at 256E (Lord Goff, with whom Lords Browne-Wilkinson and Nolan expressed agreement), where it was cited as an example amongst instances where a solicitor will not owe a duty of care to third parties. In Hill v Van Erp, Dawson J (with whom Toohey J agreed) cited Clarke with apparent approval at 187:

21. [130]

    The second is Vagg v McPhee (2013) 85 NSWLR 154; [2013] NSWCA 29. There, Tobias AJA said at [47]-[49]:

22. [131]

    The general rule is that a solicitor owes a duty of care in negligence solely to his or her client: Badenach v Calvert at [49] and [83].

23. [132]

    To that rule, there is an exception. In Hill v Van Erp and White v Jones, a duty of care was held to be owed by a solicitor to a disappointed beneficiary in respect of the drawing or execution of a will, where the will failed to confer a benefit which the testator intended to bestow. In Vagg v McPhee at [47], Tobias AJA, with whom Ward JA agreed, described the exception as “well established”, while Basten JA summarised its development at [8]-[13].

24. [133]

    It is best to consider separately the two matters to which Mr Sheldon pointed: the fact that the solicitor did not prepare the will, and the fact that Frank’s will left his devise of Boronga blank.

25. [134]

    Dealing with the first matter first, let it be assumed that the will which the solicitor received on around 6 May 2009 was in a form as rectified, and left Boronga to Joseph. In circumstances where the solicitor was retained for estate planning, was receiving instructions from the donee of an enduring power of attorney to enter into an inter vivos transaction which would subvert the transmission of assets in the will, and where the testator was incapable to the solicitor’s knowledge, I consider that the solicitor owed a duty of care to the beneficiary under the will.

26. [135]

    The issue resolves to how the rule and its exception apply when the testator has become incapable. That is to say, bearing in mind the importance attributed to consistency or coincidence of interest between testator and intended beneficiary, how do those principles apply when the testator is no longer capable of forming a testamentary intention, and can no longer effect an inter vivos disposition, save through a statutory mechanism (such as a statutory will or an enduring power of attorney)?

27. [136]

    None of the authorities involving a subsequent inter vivos transaction was one in which the testator was incapable, while the principle explaining the duty owed to a disappointed beneficiary by a solicitor retained to draft a will rests on consistency. It is in this respect that Badenach is of some importance. The general proposition that a duty is owed is clear from Hill v Van Erp, but the divergent strands of reasoning in that case present a difficulty in determining whether the extension identified by the primary judge is warranted. Much of the reasoning reflects the now disfavoured metaphor of proximity. Dawson and Toohey JJ relied in part on assumption of liability (see at 186 and 190), which was rejected by Gummow J at 231. McHugh J dissented.

28. [137]

    Badenach confirms the significance of the consistency and coincidence of interest to which reference is made in Hill v Van Erp, making it plain that consistency between the duty to the client/testator and duty to the client’s intended beneficiary is central to the duty owed by the solicitor to that intended beneficiary. It has been said that the “notion of coincidence of interest contrasts with the High Court’s refusal [in Hill v Van Erp] to embrace the notion of ‘assumption of responsibility’ as the touchstone of liability, which was a feature of the House of Lords’ decision in White v Jones”: S Walmsley et al, Professional Liability in Australia (3rd ed, Lawbook Co, 2016), p 446.

29. [138]

    There is inevitably consistency of interest between a testator who is drafting his or her will, and the identified beneficiaries under that will.

30. [139]

    Conversely, there is inevitably inconsistency in the two other most likely situations which arise in connection with cases of this general class: cases where a testator retains a solicitor to alter his or her will, and cases where the testator retains a solicitor for the purpose of entering into an inter vivos transaction which will alter the transmission of assets under the will.

    1. (1)

       In the former case, where a solicitor is retained to alter a (mentally capable) testator’s will, there is an inevitable inconsistency, precluding any duty owed to the beneficiary whose hope to take an asset under the will is affected by the alteration.

    2. (2)

       The latter case is also necessarily inconsistent. The position is clearest when the inter vivos transaction is one whereby a specific devise or bequest is sold or given to another. Irrespective of the operation of the doctrine of ademption, there is a necessary inconsistency between the beneficiary’s contingent interest under the will and the testator’s instructions in the inter vivos transaction. There is inconsistency even where the inter vivos transaction reflects the will: it is one thing to receive an asset immediately, it is another to receive it at a time dependent upon the testator’s death, and subject to the administration of the will including payment of estate creditors, and to the testator predeceasing the beneficiary.

31. [140]

    Hence, these cases of subsequent alterations to the will, or inter vivos transactions, are ordinarily outside the scope of any duty of care owed by the solicitor retained by the testator. That is because the current intention and instructions of the testator are necessarily inconsistent with the interest of the beneficiary, which depended upon the testator’s former intention.

32. [141]

    The position is different when the testator has become incapable. First, in such a case there is no conflict between the former and current intentions and instructions of the testator; the testator in such a case has validly made a will but has no current legally effective intention (whether consistent or inconsistent). This point was made by Berger JA in Graham v Bonnycastle (2004) 243 DLR (4th) 617 at [57], albeit dealing with a subsequent will, rather than a subsequent inter vivos transaction:

33. [142]

    Graham v Bonnycastle concerned whether a subsequent will had been executed when the testator was incapable, in circumstances when the solicitor negligently permitted that to occur. The majority of the Alberta Court of Appeal considered that there was an adequate remedy in not having the later will admitted to probate, at the solicitor’s cost. That example tends to emphasise the narrowness of the point in the present appeal, which arises out of a subsequent inter vivos transaction.

34. [143]

    Secondly, in such a case there will inevitably be another natural person with authority to effect the transaction (typically, pursuant to an enduring power of attorney) who is a vital participant in the transaction and who will invariably owe fiduciary (or fiduciary-like) duties to the incapable person.

35. [144]

    Contrary to the solicitor’s submissions in this appeal, I do not regard the coincidence of interests in a case where the testator has become incapable as merely coincidental. There are two reasons for this.

    1. (1)

       First, the coincidence of interests is a necessary and inevitable consequence of the loss of capacity by the testator.

    2. (2)

       Secondly, the incapacity of the testator has strengthened the interest of the beneficiary under the will. In the ordinary class of case represented by Hill v Van Erp and White v Jones, the disappointed beneficiary can sue the negligent solicitor who was retained by the testator, even though the beneficiary’s interest was at all times subject to the testator’s power to alter the will or dispose of the asset inter vivos. But where the testator has become incapable, the interest of the beneficiary, whilst still contingent (because, amongst other ordinary contingencies, the beneficiary may predecease the testator) is no longer liable to being extinguished by those mechanisms.

36. [145]

    Those considerations point to a conclusion that, given that the law recognises a duty owed to a beneficiary by a solicitor retained to draft a will, the position of a solicitor retained for the purpose of estate planning who acts for an incapable person entering an inter vivos transaction which will affect the interest of the beneficiary under the will should be subject to the same duty.

37. [146]

    The primary judge appears implicitly to have regarded the duty of care upheld by him as an incremental extension of the principles stated in Hill v Van Erp. I incline to the view that that is the right approach. This is not a wholly new category of tortious liability; far from it. A solicitor’s liability to a disappointed beneficiary arising from the coincidence of interests when the solicitor acted for a competent testator drafting his or her will is very closely related to a solicitor’s liability to a disappointed beneficiary arising from the coincidence of interests when the solicitor acted for an incompetent testator on a transaction which would alter the expectancies created by an earlier will. In the present litigation, Joseph asks not so much for an extension of the law of negligence, but the application to the particular circumstances of an incapable testator of the principles stated in Hill v Van Erp (cf Robinson v Chief Constable of West Yorkshire Police [2018] AC 736; [2018] UKSC 4 at [29]).

38. [147]

    No submissions were made as to the methodological approach in a case such as this (which is to say, whether the incremental approach I am inclined to favour is correct, or whether instead a fuller analysis is required). But I do not consider that anything turns on this, because further considerations point in the same direction.

39. [148]

    In a case such as this, as I have said, there will at least typically be a third person exercising a power of attorney. The incapable testator is vulnerable, as is the beneficiary under the will. The loss to the beneficiary is foreseeable. As the primary judge noted at [385], there is no indeterminate liability by the posited duty of care. There is no real imposition on the autonomy or freedom of the solicitor, who should be acutely aware of the potentially divergent interests of the incapable person and his or her attorney. In short, the so-called “salient features” identified in Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649; [2009] NSWCA 258 at [103], to the extent that they are applicable, favour the imposition of a duty of care or are inapplicable.

40. [149]

    Accordingly, I would conclude that the solicitor owed a duty of care to Joseph. I do not regard this as inconsistent with anything said in Badenach, nor in Clarke v Bruce Lance & Co or Vagg v McPhee. The general statements in those cases are not to be understood as applying to a case where the testator has become incapable, because those general statements are premised upon an inconsistency between the posited duty and the current instructions of the testator. The fact that neither the parties nor my own researches have identified any decision squarely on point — in which a disappointed legatee sued a solicitor whose retainer extended to estate planning and who was sued following an inter vivos transaction by an incapable testator effected pursuant to an enduring power of attorney — tends to confirm that the position is exceptional.

41. [150]

    Turning to Mr Sheldon’s second point of distinction, I consider this makes no difference. There is a factual complexity in the present case, arising from the obvious defect of Frank’s will, which was liable to be rectified. That factual complexity should not unduly interfere with the analysis of whether a duty of care is owed to the disappointed beneficiary who may (albeit in subsequent court proceedings) discharge the burden of establishing that rectification by inserting the words “to Joseph” should be ordered.

42. [151]

    I discount the rhetorical flourish to the effect that it took “several days” of trial and a “long, reserved judgment” to determine that the will was to be rectified. The length of the trial and the judgment was principally attributable to other issues. Conscious as I am of the advantages of hindsight, it is nonetheless plain on the face of the will that there is a clerical error. Mr Maccallum accepted that he recognised as much shortly after receiving it.

43. [152]

    It was plain that whatever Frank’s intentions were, they were being subverted by the instructions from Peg. The answer to the question of common law as to whether a duty of care is owed should not be distracted by the need for intervention (by a statutory expansion of equitable doctrine) to rectify the will so as to identify the devisee of Boronga. That said, I readily acknowledge that there may be other cases where the failure of the will to identify the devisee might tend against the imposition of a duty, or (perhaps more likely) make it harder or impossible to establish breach; I return to this issue below.

44. [153]

    In the facts of this case, where Mr Maccallum knew that Joseph was one of five children of Frank and Peg, and the only child not mentioned in the will, and the only son, and the man who was in fact working Boronga, I do not see the fact that the will needed rectification in order to identify Joseph as the devisee of Boronga as standing in the way of the solicitor owing him a duty of care. Other cases may not be so straightforward (cf Gibbons v Nelsons (a firm) [2000] PNLR 734, a decision of Blackburne J noted in M Davies, Solicitors’ Negligence and Liability (Oxford University Press, 2008), pp 363-4, but not mentioned by the parties).

Breach

1. [154]

   The primary judge found that Mr Maccallum breached his duty of care owed to the deceased, and incidentally to Joseph, by acting on the transfer without “a critical examination of [Peg’s] authority to effect the transfer, in circumstances in which [Peg] acted for a purpose foreign to her power and the effect of her so doing was to divest the deceased (and ostensibly, indirectly, [Peg]) of substantial property”: at [387].

2. [155]

   The solicitor’s written submissions addressed breach very concisely. They made two points in three paragraphs. The first was that it was no breach to accept Peg’s instructions, relying on cases holding that a solicitor is entitled to believe his or her client, even if the instructions appear improbable.

3. [156]

   The second was that it was “unrealistic to think that a solicitor would have adverted to the status of the will as likely to involve rectification so as to make Joe the legatee [sic] with respect to Boronga.” It was submitted that had Mr Buckley been consulted, “Buckley would have told him that Joe was the intended beneficiary according to his initial instructions but that, evidently, that testamentary intention had changed by the time Frank came to execute the will”. It was put that Mr Maccallum would have been justified in thinking that Frank’s intention was not to leave Boronga to Joseph.

4. [157]

   Orally, it was put thus:

5. [158]

   Then, by reference to a paragraph in Jackson & Powell on Professional Liability stating that the solicitor “must follow up these facts to ensure that he appreciates the real problem with which he’s being asked to deal”, the submission continued:

6. [159]

   The short answer to these submissions is that they miss the point that Mr Maccallum was acting for Frank, and therefore had an additional obligation to test that Peg was properly authorised to give instructions on his behalf.

7. [160]

   In the facts of this case, the fact that Joseph’s expectant interest under the will required rectification made no difference; the solicitor was required to take reasonable steps to ensure that Peg’s exercise of her power of attorney was proper.

8. [161]

   No submissions were made in this Court (nor apparently at trial) to s 5B of the Civil Liability Act 2002 (NSW) nor the risk of harm on which that section is premised. The risk of harm in a case where a testator is incapable is that the attorney may (whether innocently or consciously) misuse the power conferred on him or her, to the detriment of beneficiaries under the will. That risk, in a case such as this where the donee was elderly, and not legally qualified, was plainly foreseeable and not insignificant. Reasonable precautions by the solicitor called on to act for Frank and Peg went beyond obtaining a copy of the will. They extended to testing what Frank’s testamentary intentions in relation to Boronga had been, which would have disclosed that Peg’s instructions did not accord with them.

Causation

1. [162]

   Grounds 3(a) and 4(c) of the solicitor’s cross-appeal challenged the findings that the solicitor’s breach of duty caused loss. Those grounds were not the subject of oral submissions. The solicitor’s written submissions were brief, occupying less than a page. They made one point, namely, that Peg’s account of her instructions to Mr Maccallum about the 2000 agreement between her and Frank was not challenged in cross-examination and would have remained firm had the solicitor sought confirmation as to her instructions. It was put thus:

2. [163]

   It was also put that the only other practical step would have been to speak to Mr Buckley, which would, so it was contended, have led to a conclusion that Frank did not want to leave the property to Joseph.

3. [164]

   The causation case was based on the proposition that, but for the breach of duty, there would have been no inter vivos gift of Boronga to the sisters. That gave rise to a difficulty at first instance, because his Honour had held that Boronga was held by the sisters on constructive trust, and ordered that it be reconveyed to form part of the estate.

4. [165]

   The primary judge addressed causation in two places. First, at [388], his Honour made a contingent finding:

5. [166]

   The immediately following paragraph identified that “[i]n light of the way these proceedings have been conducted, the true measure of that damage is the market value of “Boronga” at or about the time of the death of the deceased”. I conclude that the primary judge is to be taken as finding that the breach of duty caused the gift of Boronga to the sisters, which would not have occurred but for the breach.

6. [167]

   Secondly, under the heading “Available, alternative course of action”, the primary judge made further findings which bore on causation at [404]-[405], preceded by an introductory paragraph [393]:

7. [168]

   The unelaborated, contingent finding of causation at [388] is to be read with the further paragraphs I have reproduced above. No contrary submission was put. Further, the issue arose in oral submissions as follows:

8. [169]

   I regard the resolution of this aspect of the appeal as very much subject to the way in which the trial has been run and the points which were taken and which were not taken in this Court.

9. [170]

   First, it is plain that the issue of causation falls to be determined by reference to s 5D of the Civil Liability Act. Once again, no submissions were made in this Court on that statute, nor was complaint made as to the failure by the primary judge to mention them.

10. [171]

    Secondly, the no transaction case summarised above is sufficient to satisfy s 5D(1)(a), and I see no reason why (nor were any submissions made) it would not be appropriate for the scope of the solicitor’s liability to extend to the transfer of Boronga to Joseph’s sisters.

11. [172]

    Thirdly, I agree with the solicitor’s submission that had Peg been asked to confirm her instructions that there was an agreement between her and Frank in 2000, she would have done so. But I do not agree that that is a basis for setting aside the finding of causation.

12. [173]

    The solicitor’s submissions do not, with respect, attend to the basic problem which confronted Mr Maccallum. His client was Frank. The retainer was not just to effect the conveyance; rather the retainer extended to estate planning. The solicitor was receiving instructions from Peg. Peg’s instructions were to cause Frank to give away Boronga to his daughters, pursuant to an agreement reached between him and her in 2000. Mr Maccallum was required to, and did, obtain Frank’s will. The will was prepared in 2003, three years after the agreement. The will dealt with Boronga in terms, and in a way which was patently defective.

13. [174]

    The client’s will was not only inconsistent with the instructions. The client’s will was inconsistent with the basis given by Peg for those instructions, namely, an informal agreement said to have been made with Frank three years prior to him executing his will.

14. [175]

    As was said in Badenach at [19], the scope of the solicitor’s duty will be set by the terms of the retainer. But Badenach was not dealing with the issues which arise where the client is incapable and the instructions from the client’s agent are inconsistent with what appears on the face of the most recent legal document executed by the client when he was capable.

15. [176]

    Faced with an irreconcilable clash between the source of the agent’s instructions and his client’s actual expression of testamentary intention, a competent solicitor would have advised against proceeding, and ceased to act. However firm Peg’s instructions were, a competent solicitor could not act for Frank when Frank’s agent’s instructions were an improvident transaction based on an agreement which both predated and was inconsistent with Frank’s later will. That answers the solicitor’s principal submission on causation, reproduced in [162] above.

16. [177]

    Fourthly, I do not accept the solicitor’s final point. Had Mr Buckley been consulted, he would have said he had no recollection of the events of 2003, and no documentary evidence explaining the patently defective will. If Mr Buckley had speculated that Frank must have changed his mind at the time he executed the will in the same way as he was permitted to give evidence at trial (which has been reproduced above), then that would not have been sufficient to entitle a solicitor acting with reasonable competence to execute Peg’s instructions.

17. [178]

    The onus at all times lay upon Joseph to establish that, but for the solicitor’s breach of duty, the gift of Boronga to his sisters would not have occurred. A solicitor acting for an incapable client in a matter of estate planning would have declined to act on the instructions from the client’s agent which were inconsistent with a will which post-dated the agreement which was the reason given by the agent for those instructions.

18. [179]

    That is sufficient to conclude that grounds 3(a) and 4(c) of the solicitor’s cross-appeal, which were far from the forefront of the issues debated in this Court, are not made out.

The share of the solicitor’s responsibility

1. [180]

   The solicitor challenged (in ground 3(b) of his cross-appeal) the contingent finding that the solicitor was 100% liable for damages. The finding was at [391]-[392]:

2. [181]

   I did not understand any submission to have been made orally or in writing in support of the ground. Appeals lie from orders, not findings, and no order has been made based on this finding. I do not disagree with what the primary judge said, as to the solicitor being the person whom all members of the Reilly family might be expected to rely for advice as to whether their “intergenerational transfer” could be effected in the way they proposed (although I respectfully doubt the appropriateness of expressing any quantified percentage value of its responsibility in the absence of clearly identified comparators). But in the absence of submissions, not to mention any other apportionable claim to compare the liability of the solicitor against, nothing more need be said of this ground.

Conclusion and orders

1. [182]

   There are at least potentially some problems presently unresolved having regard to the way the litigation has been conducted to date. Damage is the gist of Joseph’s claim in negligence. It is true that, by reason of indefeasibility of title, Boronga has not itself fallen into Frank’s deceased estate. It is not as yet clear whether the obligation to account on the part of the sisters will result in any deficiency of assets in the estate. This in turn affects Joseph’s claim against the solicitor (which is why the orders from which the solicitor has appealed are interlocutory). These matters should be regarded as being within the issues remaining for determination by a judge in the Equity Division. As presently advised, no separate order is required remitting those undetermined issues.

2. [183]

   There also remains Joseph’s claim for remedies for breach of fiduciary duty by his mother (who filed a submitting appearance in this Court, and which has not been determined as yet) and Joseph’s (defensive) cross-appeal against his sisters seeking to set aside the awards made pursuant to the Succession Act for family provision. This latter cross-appeal was not the subject of any submissions at the hearing. It is perhaps not pellucidly clear what should occur in relation to it. On the view I presently favour, it should be dismissed, because the sisters’ obligation to account to the estate for the value of Boronga leaves all of Frank’s and Peg’s children in the same position they enjoyed when the primary judge exercised his Honour’s discretion, which proceeded on the basis that it was valued at at least $1 million: see at [262]. However, the orders I propose will permit the parties to be heard as to the resolution of Joseph’s cross-appeal if there is a basis for some different outcome.

3. [184]

   The Court was told that, notwithstanding the absence of a stay, the parcels of land comprising Boronga had not been transferred to Joseph in his capacity as administrator of Frank’s deceased estate. This is to be deprecated. They were ordered to transfer the land “no later than 19 December 2017”. It is not for the parties to agree amongst themselves not to comply with an order binding them, even if it is subject to appeal. However, it has the consequence that no orders to restore title to Boronga to the sisters are required.

4. [185]

   A further consequence of the indefeasible title now enjoyed by the appellants is that Boronga will not form part of Frank’s deceased estate. Instead, there is presently an entitlement to equitable compensation from his daughters for the value of Boronga, which may in due course be converted into an amount of money. Notwithstanding Joseph’s concession as to indefeasibility, no submissions were made as to the operation of Frank’s will (as rectified) upon the estate’s entitlement to compensation for the value of Boronga. That may well be because it is accepted that Joseph in his capacity as specific devisee is entitled to that compensation, and that there is no room for the doctrine of ademption. I express no view on a point which was not argued, in an appeal and cross-appeals where so many points were taken.

5. [186]

   Joseph has failed in relation to indefeasibility, a point which took next to no time at the hearing. He has otherwise succeeded in this Court (irrespective of the outcome of his (defensive) cross-appeal), and the sisters and Mr McGroder have failed. I favour exercising the costs discretion such that the sisters and Mr McGroder are all liable to pay Joseph’s costs of the appeal and both cross-appeals, on the basis that as between themselves, the sisters are liable to pay half of those costs and Mr McGroder is liable to pay the other half. However, given the number of issues and the fact that Joseph’s success has not been entirely unqualified, I would hear from the parties, if they so wish, as to the exercise of the costs discretion in this Court. There seems to be no reason to interfere with the costs discretion exercised by the primary judge, although once again, I would hear from the parties if they seek to propound a basis for its re-exercise.

6. [187]

   Finally, one of the members of the Court which heard this appeal will, because of retirement, be unable to participate in the making of any further orders after late January 2019. It is with this in mind that I propose the slightly unusual course of remitting not merely any outstanding question of costs, but also as to other orders, to a single Judge of Appeal. However, I would permit the parties to be heard as to that proposal, and of course there are other possibilities notwithstanding that in 2019 the Court as presently constituted will be unable to make further orders in these appeals.

7. [188]

   I propose the following orders:

8. [189]

   PAYNE JA: I have read the decision of Leeming JA in draft. Like his Honour, I will refer to the relevant parties by their given names, without intending any disrespect.

9. [190]

   I agree with Leeming JA for the reasons his Honour gives that the finding by the primary judge that the will should be rectified was plainly correct. I agree with Leeming JA that the appeal must succeed to the extent that the constructive trust finding cannot stand on the basis of s 42 of the Real Property Act 1900 (NSW) as explained in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22. I agree with Leeming JA that the finding by the primary judge that he was not satisfied about proof of an oral agreement between Peg and Frank should not be disturbed. In joining in that conclusion I am particularly influenced by three things. First, the absence of contemporaneous documents supporting the existence of such an agreement. Secondly, the findings of the trial judge who saw the witnesses give evidence. Thirdly, the incompatibility of the oral agreement (allegedly made in 2000) and the instructions for Frank’s will (given in 2003) which on any view do not provide for the transfer of “Boronga” to the daughters. I also agree with Leeming JA that the knowledge of the solicitor, Mr McGroder (and his employed solicitor Mr Maccallum), was relevant and should be attributed to Margaret, Carmel, Genevieve and Patricia (Tish). For the reasons given by Leeming JA, Peg’s daughters are liable in equity to account to Frank’s estate for the value of “Boronga”.

10. [191]

    I have found the question of a duty of care owed by the solicitor to Joseph to be difficult. In particular, I have had difficulty reconciling the judgments in Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18 with the facts here established. As far as I am aware, there is no authority directly raising the issue addressed in this case. Certainly, the parties did not refer to any such authority.

11. [192]

    Such assistance as can be obtained from decided cases, including Graham v Bonnycastle (2004) 243 DLR (4th) 617 which Leeming JA refers to, supports the imposition of a limited duty of care here. This is because, as Leeming JA explains, the imposition of a duty of care is a coherent application of the law in that a duty, correctly framed, is consistent with Frank’s testamentary wishes. The vulnerability of Frank and Joseph to the exercise of due care and skill by the solicitor acting on instructions from the holder of Frank’s enduring power of attorney is a critical feature in favour of the imposition of a duty of care.

12. [193]

    On the other hand, this case does not fit comfortably within the principles applicable to the imposition of a duty of care explained by the plurality (French CJ, Kiefel and Keane JJ) in Badenach:

13. [194]

    The judgment of Gageler J in Badenach also poses a challenge to the imposition of a duty of care here:

14. [195]

    The solicitor here was not the solicitor who drew Frank’s will, although he was aware of its terms. As Leeming JA explains, however, the solicitor must have understood that Frank’s will left “Boronga” to somebody other than Peg’s daughters. So much is clear by the bequest of the residue to the daughters in the succeeding paragraph of the will. Not without hesitation, I have ultimately come to the conclusion, for the reasons given by Leeming JA, that the remarks of the High Court in Badenach are not to be understood as applying to a case where the grantor of an enduring power of attorney has become incapable.

15. [196]

    In reaching this conclusion I am influenced by the close analogy between the duty owed to Mrs Van Erp and the duty owed to the incapable grantor of the power of attorney, Frank. I am also influenced by the fact that the imposition of a duty of care of the kind found here will be rare indeed. The duty is confined to a solicitor engaged to advise the holder of an enduring power of attorney about estate planning issues where the grantor of the power has become incapable. In advising the grantee of the power as part of the estate planning retainer about an inter vivos transfer of property, the solicitor is obliged to exercise care and skill in giving that advice, taking into account any separate testamentary intentions of his or her client, the incapable grantor. In this limited way, the duties owed to Frank and to the beneficiaries under Frank’s will coincide completely.

16. [197]

    Accordingly, I agree that Badenach is able to be distinguished in the way suggested by Leeming JA and that a correct application of the “salient features” test to the facts of this case leads to the conclusion that the solicitor owed Joseph a duty of care.

17. [198]

    The content of that duty of care, as found by the primary judge, was not expressed with clarity. It may be that by examining the primary judge’s findings about breach, at [387], the content of the duty owed to Frank, and indirectly to Joseph, may have been to conduct “a critical examination of [Peg’s] authority to effect the transfer”. It may be, by reference to a later description of breach, at [406], that his Honour found that the solicitor owed Frank a duty to warn Peg not to act for a purpose foreign to her power.

18. [199]

    Accepting either formulation of the duty of care owed by the solicitor for present purposes, I agree with Leeming JA that Joseph established causation under s 5D of the Civil Liability Act 2002 (NSW).

19. [200]

    I was initially troubled by the evidence Peg gave, in answer to a question by counsel for the solicitor at T78.17 as follows:

20. [201]

    I agree, for the purposes of the claim in equity against Peg and her daughters, there was sufficient detail in the cross-examination to put Peg on notice that her evidence about the oral agreement was being challenged. I do not agree, however, that it was ever suggested to Peg that the content of her instructions to Mr Maccallum were other than she described in this passage.

21. [202]

    If Mr Maccallum had conducted “a critical examination of [Peg’s] authority to effect the transfer” or warned Peg not to act for a purpose foreign to her power, the evidence is tolerably clear that Peg would have told Mr Maccallum that she and Frank had orally agreed in 2000 that “Boronga” would be “given to the girls”.

22. [203]

    The problem, from Mr Maccallum’s perspective, is that he knew that in 2003, three years after the oral agreement Peg claimed to have made with Frank, that Frank gave instructions that “Boronga” was to pass under his will to somebody other than his daughters. I agree with Leeming JA that in those circumstances the no transaction case Joseph was conducting succeeded on the balance of probabilities. Acting with due care and skill, Mr Maccallum could not give effect to Peg’s instructions.

23. [204]

    I agree with the orders proposed by Leeming JA.