Studer v Boettcher [2000] NSWCA 263 (24 November 2000)

11/30/2017 Studer v Boettcher [2000] NSWCA 263 (24 November 2000)

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Supreme Court of New South Wales - Court of Appeal

Studer v Boettcher [2000] NSWCA 263 (24 November2000)

Last Updated: 13 July 2007

NEW SOUTH WALES COURT OF APPEAL

CITATION: STUDER v BOETTCHER [2000] NSWCA 263 revised - 26/04/2007

FILE NUMBER(S):

40907/98

HEARING DATE(S): 27 April 2000

28 April 2000

JUDGMENT DATE: 24/11/2000

PARTIES:

Australasian Legal Information Institute

http://www.austlii.edu.au/

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Christian J Studer v

Uwe Boettcher

JUDGMENT OF: Handley JA Sheller JA Fitzgerald JA

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): EQ 4900/92

LOWER COURT JUDICIAL OFFICER: Young J

COUNSEL:

Appellant - in person

Respondent - David L Williams

SOLICITORS:

Appellant - in person

Respondent - Minter Ellison



CATCHWORDS:

NEGLIGENCE - professional negligence - solicitor not negligent in preparation of case orconduct of mediation - solicitor appreciated weakness in client’s case and acted properly inputting pressure on the client to settle on best available terms

LEGISLATION CITED:

Crown Lands Act 1989 (NSW)

Real Property Act 1900 (NSW)

DECISION:

Appeal dismissed with costs

JUDGMENT:

THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

40907/98

EQ 4900/92

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HANDLEY JA

SHELLER JA

FITZGERALD JA

Friday 24 November 2000

Christian Johann STUDER v Uwe Daniel BOETTCHER

NEGLIGENCE - professional negligence - solicitor not negligent in preparation of caseor conduct of mediation - solicitor appreciated weakness in client’s case and actedproperly in putting pressure on the client to settle on best available terms

The appellant purchased a property at Mullumbimby in the Byron Shire that was subject tounregistered leases including that of K which were referred to in the contract of sale. K held alease over part of the land with an option of renewal and an option to purchase and had built ahouse on the land. The appellant through his solicitor asked K to withdraw her caveat to enableregistration of his transfer of the property. This was done on the express basis that the caveatwould be reinstated after registration to protect her interest in the land. After registration theappellant refused to recognise any interest held by K and took steps to evict her. Kcommenced proceedings to protect her possession and the action was finally settled at amediation. The appellant then sued his former solicitor for professional negligence, arguing thatthe solicitor had unduly pressured him into accepting the settlement and/or that the solicitor hadbeen negligent in preparing for, and at the mediation, because he failed to make a properassessment of the respective cases and caused the plaintiff to make a settlement onimprovident terms. The trial Judge dismissed the action, finding that the appellant’s will had notbeen overborne, that the solicitor had not unduly pressured the appellant, and that the solicitor’sadvice to settle was based upon a proper assessment of the appellant’s case. The appellantappealed.

HELD, (dismissing the appeal): The trial Judge correctly found that in the circumstances the



respondent acted with proper care and skill in preparing for and conducting the mediation andthat his firm advice to settle on the available terms was sound. It was not established that therespondent had overlooked any relevant fact, document or legal argument in his client’s favour.The respondent had appreciated the serious difficulties in the appellant’s case and actedprofessionally and properly in the best interests of the appellant in bringing pressure to bearupon him to settle on the best terms available to him.

ORDERS

Appeal dismissed with costs.

THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

40907/98

EQ 4900/92

HANDLEY JA

SHELLER JA

FITZGERALD JA

Friday 24 November 2000

Christian Johann STUDER v Uwe Daniel BOETTCHER



JUDGMENT

1 HANDLEY JA: This is an appeal by a former client from the dismissal by Young J on 21October 1998 of his action against his former solicitor for professional negligence. He had alsosued his former barrister in the same proceedings but that claim was compromised onundisclosed terms on the morning of the sixth day of the trial before Young J. The action arosefrom a mediation conducted before a retired judge on 16 May 1991 which concluded with asettlement of the litigation in which the respondent was acting as the appellant’s solicitor.

2 The original proceedings arose out of the appellant’s registered ownership of some 20hectares of land at Mullumbimby in the Byron Shire (“the property”). The appellant, a Swissnational then visiting Australia, entered into a contract to purchase the property from MrHoskings for $82,000 (5/1020). The contract, in the standard form of the day, was dated 1 July1984 but was entered into in January that year. Mr Graeme Smith, solicitor of Mullumbimby,acted for both parties.

3 The Second Schedule to the contract disclosed the existence of caveats by S L Granich andM D Koenig (sometimes Konig). The Third Schedule relevantly disclosed a lease of 11 acres toSarah Lorraine Granich for 5 years from 16 October 1980 at an annual rent of $1 and anotherlease of 11 acres to Mirjam Denise Koenig for 5 years from 13 March 1981 at the same rent.The contract stated that the property sold was subject to the tenancies or occupanciesparticularised in the Third Schedule and printed Clause 11 stated that no objection, requisitionor claim shall be made by the purchaser in respect of any matter disclosed in the Second orThird Schedules.

4 Ms Koenig’s caveat (4/746) dated 2 April 1982 stated that she claimed an equitable interestunder a written agreement of 13 March 1981. Her lease for a term of 5 years, expiring on 13March 1986, had been granted by Mr Hoskings and was dated 5 December 1983 (5/1062). Itreplaced an earlier lease for the same term granted by Mr Peter Miller, the then registeredproprietor, on 13 March 1981 (4/732). Clause 16 of the Miller lease conferred on Ms Koenig anoption to purchase the leased property for $7,000 in consideration of an option fee of $4,000,but acknowledged that the $11,000 had already been paid. The option was subject to sub-division approval.

5 Clause 20 contained an acknowledgment by the landlord that any buildings erected on theleased land were the property of the lessee, and that he held such improvements as trustee forthe lessee who was entitled to sole occupation. Clause 14 contained an option of renewal “for afurther period”. In cl 16(d) the lessor promised that no agreement would be entered into during



the period of the option which would prevent the sale of the 11 acres to Ms Koenig and nothingwould be done which would prejudice her rights under the option.

6 The lease from Hoskings to Koenig contained (cl 16) an option in the same terms as theMiller lease but the right of renewal in cl 14 was to “a further period which shall terminate oncompletion of any contract for sale entered into between the parties hereto pursuant to clause16”. Clause 21 provided that if the lessor sold the freehold to a purchaser other than the lesseethe contract of sale would contain terms obliging the purchaser to observe and perform thecovenants of the lease as if the purchaser had been the original lessor. The purchaser couldalso be required to enter into a fresh lease with the lessee for the balance of the term, togetherwith any renewal thereof.

7 Mr Hoskings contracted to sell the property to the appellant before becoming the registeredowner. Although the lease from Mr Hoskings is dated 5 December 1983, it was not executedby Ms Koenig until some date between 26 January and 7 February 1984 (2/325, 327). Thelease was possibly dated when it was executed by Mr Hoskings. Mr Hoskings’ signature waswitnessed by Mr Graeme Smith and Ms Koenig’s by Mr Andrew Sochacki, her then solicitor,and the latter attended to the stamping. Ms Koenig, having obtained a lease from Mr Hoskings,agreed to remove her caveat intending to replace it after his registration (2/327).

8 At an early stage the appellant entered into negotiations to buy out Ms Granich. This isreferred to in a letter which Ms Koenig wrote to Mr James Black, a solicitor, on 25 January1984 (2/324). Mr McDonnell of Elliot & Sochacki was acting for Ms Granich and Ms Koeniggave him the appellant’s address in Switzerland (2/327).

9 On 18 April 1984 Mr Smith wrote to the appellant in Switzerland stating (2/329):

“I confirm this matter has now been settled. I am obtaining thesignatures on the fresh leases from the various tenants. The solicitorsacting on behalf of Granich have enquired as to the possibility of apurchase of Miss Granich’s share and I enclose a photocopy for yourinformation”. (emphasis supplied)

10 On 27 April Elliot & Sochacki wrote to Mr Smith enclosing stamped copies of the leasesfrom Hoskings to Granich and Koenig. The letter stated that they had been informed by MsKoenig that Hoskings had contracted to sell the property to “certain people from Switzerland”and that if this was correct they drew Mr Smith’s attention to cl 21 and requested draft leasesfrom him for execution by their clients (2/330).

11 On 16 May the appellant wrote to Mr Smith stating: “I’m going to deal with Miss Granichdirectly” (2/331). On 5 July Mr Smith wrote to the appellant stating “the lease documents arenow with the solicitors for Koenig and Granich for execution” and stated that settlement of thepurchase was not complicated “except for the fact that there were the lease arrangements inrespect of the property”. He asked if the negotiations with Miss Granich were completed “so



that I can forward the relevant Withdrawal of Caveat and Surrender of Lease to the solicitors forher” (2/332).

12 On 25 July Elliot & Sochacki again wrote to Mr Smith asking for draft leases and on 31 JulyMr Smith under cover of a letter headed “Studer - Lease to Granich and Koenig” forwardedlease documents to Elliot & Sochacki for their clients’ consideration (2/334). On 3 August 1984the appellant wrote to Mr Smith stating “also I’d like to know what a kind of complication werewith the lease arrangements. Actually there is only one lease arrangement with Koenig. WithGranich the negotiations is complete now ... please write the ‘banana-man’, you know whom Imean, the dismissal on right time. This dismissal is very important, because I’m not interestedin this lease” (2/336). This was a reference to the lease of 5 acres to Tony Pinna for 5 yearsfrom 1 October 1980 at a yearly rent of $100 which was also referred to in the Third Scheduleof the contract of sale.

13 The contract between the appellant and Granich dated 9 July 1985 provided for him topurchase her “11 acres” for $9,000 payable by instalments (2/352).

14 On 22 July 1985 the appellant wrote to Mr Smith asking for Ms Koenig’s lease which he hadin his file (2/351), and on 20 August Mr Smith replied saying he was enclosing a Withdrawal ofCaveat form to be signed by Ms Granich and a copy of the lease to Ms Koenig (2/353). MrSmith actually sent a copy of the lease to Ms Granich (2/354). On 21 October the appellant sentMr Smith the Withdrawal of Caveat signed by Ms Granich who by then had been paid in full(2/355).

15 On 27 November and 6 December Mr Smith wrote to Ms Koenig asking her to call to sign aconsent to the registration of the transfer from Hoskings to the appellant (2/358, 360).

16 At some stage Ms Koenig attended at the office of Mr Smith and gave him or signed aninformal withdrawal of her caveat. This was dated 31 October 1985 (2/399), and stated that itwas “to enable the registration of a transfer from Raymond William Hoskings to ChristianJohann Studer. Kindly reinstate the caveat following registration of the transfer” (2/356). InJanuary 1986 Mr Smith sold his practice to Mr Forbes and retired. On 20 March 1986 Elliot &Sochacki wrote to Smith and Forbes seeking renewal of Ms Koenig’s 5 year lease which hadexpired on 13 March (2/365).

17 On 6 June Mr Forbes wrote to the appellant informing him that the matter was now ready forregistration and added (2/373):

“As to the leases which are proposed to the two ladies it does seemto us at this stage that they would not be strictly legal but we canfurther investigate this situation as soon as the deeds have beenreturned to us duly registered in your name”.

18 On the same day he wrote to his law stationers forwarding the Transfer for Registration,together with the Withdrawal of Caveat signed by Ms Granich and the Consent to Registrationby Ms Koenig. On 22 July Ms Koenig wrote to the appellant stating: “I have followed up the

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course of my lease and I have found out that it got stuck in Smith’ s drawers ... right now I onlyneed a new lease. The new lease will be sent to you to be signed eventually” (2/388).

19 The transfer was rejected by the Land Titles Office because the Certificate of Title and theMinister’s consent under the Crown Lands Act which had been produced earlier and rejectedhad not been relodged. It then became apparent that the Certificate of Title had been lost andMr Forbes had to obtain a new one. The necessary documents were forwarded by Mr Forbesto his law stationers on 20 October 1986. On 25 March 1987 Mr Forbes wrote to the appellant,who by this time was living on the property, informing him that the Certificate of Title in his namehad been received from the Land Titles Office (2/405).

20 On the same day Ms Koenig wrote to Mr Richard Maloney, solicitor at Byron Bay, stating:

“Tenancy in common Studer/Koenig it was decided that my name(and Erica’s) would be put on the title as soon as the title arrives fromthe Title Office. My share of block 4 is marked yellow on the enclosedmap. Would you please arrange tenancy in common as soon aspossible”. (2/406) (Erica was the appellant’s wife.)

21 On 26 March Mr Forbes wrote to Elliot & Sochacki advising them that the appellant hadbecome the registered proprietor of the property “but there are no caveats registered on thetitle” (2/410).

22 On 2 April 1987 the appellant wrote a letter (which was copied to Ms Koenig) to Mr Maloney,the solicitor to whom Ms Koenig had written on 25 March, stating:

“We would also like you to draw up our Joint Ownership Contract(Tenancy in Common, page 9 in the booklet ‘Legal Guide to Buyingand Selling a Home’ from the Law Society of NSW) with MirjamKoenig”. (2/411)

23 Mr Maloney wrote a letter dated 18 May to the appellant and his wife referring to theappellant’s letter of 2 April and conferences on 24 April and 16 May. He drew attention to thepossible illegality of the lease and option to purchase held by Ms Koenig and said that theymight not be enforceable but this raised a complex question of law (2/414). There is ahandwritten note on the letter which states that it was received in September 1987. On 30September the appellant gave Ms Koenig a notice to quit (2/428):

“You are illegal on my property. As I have got now my Title deed I donot accept your stay. Therefore I must give you notice that you have toleave my land by 31.10.87”.

24 The correspondence between the appellant and Ms Koenig, and other correspondence ofhers between January 1984 and September 1987, was also in evidence in the originalproceedings. See 2/324-7, 341, 344, 350, 361, 364, 366, 368, 371, 382, 388, 389, 3/599,4/757, 765, 767 and 771. This disclosed an apparently friendly relationship between Ms

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Koenig and the appellant and his wife, and an apparent acceptance of her status on the land.The appellant and his wife also availed themselves of her services while they were inSwitzerland. She wrote to the local Land Board about the possible purchase of Crown roads.She also acted, for a time without a Power of Attorney, and for a time with such a power, toprotect their property from the activities of Mr Costello, a developer, who had attempted tobulldoze a road through it outside the limits of a right-of-way. Ms Koenig succeeded inattracting the intervention of the Council and the police.

25 Ms Koenig did not accept the notice to quit and commenced proceedings to protect herpossession of the 11 acres. The appellant was the registered proprietor, but she relied in herstatement of claim (appellant’s blue book) on a personal equity based on his knowledge of herinterest, and his representations that he would recognise it and grant a new lease and option ofpurchase in her favour (71-2).

26 She alleged that in reliance on these representations she withdrew her caveat andconsented to the registration of the transfer in his favour (72). She also pleaded a case of fraudbased on these representations which were alleged to have been made dishonestly (73). Shealso claimed to have carried out improvements to the land.

27 These allegations had a solid basis in the documentary evidence alone, but Ms Koenig hadalso sworn affidavits. Her case also had a sound legal basis. Under s 43 of the Real PropertyAct the registered proprietor of land held it subject only to incumbrances notified on thecertificate of title, but there is an exception in the case of fraud. The facts and documentsreferred to provided more than one basis for a case of fraud against the appellant.

28 The appellant had agreed in the contract of sale to take the property subject to the lease toMs Koenig, and subject to her caveat. The correspondence shows that the appellant and hiswife had been in contact with Ms Koenig before the contract was entered into, and she claimedthat she had introduced them to the property and to the vendor, and in the process hadinformed them of the basis of her interest in the 11 acres.

29 Mr Smith, in his affidavit, filed and served shortly before the mediation, claimed that he hadfully explained the legal position to the appellant and his wife, over about half an hour, beforethe contract was entered into. His explanations had been translated for their benefit by MrMoeller, like Ms Koenig, another Swiss German who was resident in the area.

30 The appellant and his wife claimed that they were not aware of Ms Koenig’s option ofpurchase and option of renewal which were not disclosed in the contract, and that Mr Smith’sexplanations were perfunctory and failed to draw to their attention the real nature of the interestsof Ms Koenig and Ms Granich.

31 The affidavit evidence of Mr Smith was confirmed by his letter of 18 April 1984 to theappellant in which he said that he was obtaining signatures on fresh leases from the varioustenants (2/329). This was followed by a further letter on 5 July in which Mr Smith told theappellant that the lease documents were now with the solicitors for Koenig and Granich for

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execution, and referred to “the lease arrangements in respect of the property” (2/332). Theseletters did not provoke any protest or question from the appellant.

32 On 3 August the appellant wrote to Mr Smith saying: “There is only one lease arrangementwith Koenig. With Granich the negotiations is complete now” (2/336). The appellant recognisedthe interest of Ms Granich which he purchased for $9,000 by a contract dated 9 July 1985,although her five year lease referred to in the contract of sale was to expire on 16 October.There was obviously no reason for the appellant to pay such a sum to Ms Granich if her onlyinterest in the land was about to lapse.

33 In Bahr v Nicolay [No 2] [1988] HCA 16; (1988) 164 CLR 604 the High Court held that anacknowledgment by a purchaser in the contract of sale that he would hold the property subjectto unregistered interests in favour of third parties created a trust in their favour enforceableagainst the purchaser after he became the registered proprietor.

34 Moreover Mason CJ and Dawson J held that a purchaser who obtains registration on thebasis of a representation to, or arrangement with, the holder of an unregistered interest whichinvolves the recognition of that interest, commits a fraud if, after obtaining registration, he seeksto repudiate that representation or arrangement. At p 615 they said:

“The section restricts, in the interests of indefeasibility of title, rightswhich would exist otherwise at law or in equity. And granted that anexception is to be made for fraud why should the exception notembrace fraudulent conduct arising from the dishonest repudiation ofa prior interest which the registered proprietor has acknowledged orhas agreed to recognise as a basis for obtaining title, as well asfraudulent conduct which enables him to obtain title or registration? ...there is no difference between [a] false undertaking which inducedthe execution of the transfer ... and an undertaking honestly givenwhich induces the execution of a transfer and is subsequentlyrepudiated for the purpose of defeating the prior interest. Therepudiation is fraudulent because it has as its object the destructionof the unregistered interest notwithstanding that the preservation ofthe unregistered interest was the foundation or assumption underlyingthe execution of the transfer”.

35 It therefore did not matter whether the appellant acted honestly and only changed his mindafter having been advised by Richard Maloney of a possible basis for challenging Ms Koenig’stitle (2/414), or whether he had decided before becoming registered to repudiate her interestlater and concealed this intention from her. A letter written by the appellant’s wife on 14November 1989 to his then solicitors would support a finding that he had intended for quitesome time beforehand to repudiate Ms Koenig’s interest after he became registered (2/453:“we were convinced we would need to become registered owner in order to do legal steps, sowe just played her game. Surprisingly she never mentioned her lease and we of courseavoided to talk about this affair as well”).

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36 The appellant’s recognition of Ms Koenig’s unregistered interest culminated in theagreement he made with her on or about 25 March 1987 that the property would be transferredinto the names of the appellant, his wife and Ms Koenig as tenants in common, and that MsKoenig would have an interest as tenant in common commensurate with her 11 acres (2/406,411).

37 There was other conduct by or on behalf of the appellant which involved representations toMs Koenig or an arrangement with her. She asked through her solicitors for a new lease fromthe appellant, which Mr Smith later sent to her solicitors for execution. In due course theexecuted lease was returned to Mr Smith. When her existing 5 year lease expired, her solicitorasked Mr Smith for a renewed lease.

38 The appellant was able to become the registered proprietor only because Ms Koenigwithdrew her caveat. This was done on the clearly expressed basis that she would lodge afresh caveat after the appellant had become registered. She would only be entitled to do this ifshe retained an equitable interest in the land after registration. The lease sent by Mr Smith onbehalf of the appellant to Ms Koenig’s solicitors conferred such an interest. The appellant andhis solicitors were only entitled to use Ms Koenig’s withdrawal of caveat on the terms on whichit was offered which involved a recognition of her rights under the new lease from the appellantwhich she had executed and returned to his solicitor. In this respect the case brought by MsKoenig against the appellant bears an uncanny resemblance to some of the facts in WaltonsStores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387.

39 Ms Koenig had built a house on her 11 acres and carried out other improvements before theappellant purchased the property. She claimed to have continued to improve the propertythereafter, building a garage and workshop in 1984, a laundry and bathhouse in 1986, andsubstantial fencing in 1986-7 (4/705). I don’t understand this evidence to have been disputed inthe original proceedings, particularly as Ms Koenig annexed to her affidavit photographs ofthese improvements other than the fencing.

40 A court would have readily found that Ms Koenig had effected these improvements in thebelief that the appellant recognised her interest in the property. The appellant may have been inSwitzerland at the relevant times and not known exactly what was happening on the property.However this would not have assisted him because he certainly knew that Ms Koenig was inpossession and would be likely to carry out further improvements.

41 Equity acts to protect those who, under a verbal agreement or an expectation created orencouraged by a land owner, spend money on improving the land of the latter. See WaltonsStores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 at 416, 424.

42 Ms Koenig’s conduct in signing the withdrawal of caveat may also have constituted an act ofpart performance which may have made the new lease she had signed and returned to MrSmith, binding on the appellant in equity so as to be capable of specific performance.







43 The leases Ms Koenig held from Messrs Miller and Hoskings, and the draft lease from theappellant which she had executed and returned, could not have been registered at the LandTitles Office without sub-division approval from the local council which was not likely to beobtained. However any difficulties in this regard would not prevent a Court of Equity fromprotecting Ms Koenig.

44 The Court could have declared a lien on the land in favour of Ms Koenig for her expenditureand improvements since the appellant contracted to buy the property. See Chalmers v Pardoe[1963] 1 WLR 677 PC, 682. The Court could have declared that she had an enforceablelicence and protected her possession by appropriate injunctions as was done in Silovi PtyLimited v Barbaro (1988) 13 NSWLR 466. It could also have awarded her an interest in thewhole property, as a tenant in common, commensurate with her entitlement to the 11 acres. Asthe Privy Council said in Plimmer v Mayor of Wellington (1884) 9 App Cas 699 at 714:

“... the Court must look at the circumstances in each case to decide inwhat way the equity can be satisfied”.

45 It will be clear that the appellant had an extremely difficult case on his hands on the law andthe documentary evidence. Moreover the documentary evidence supported the affidavitevidence of Ms Koenig and Mr Smith. Mr Moeller (or Mohler) had translated Mr Smith’sexplanations for the appellant and his wife before he signed the contract of sale. Later, after theappellant and his wife returned to Switzerland, he helped the appellant at the property (4/705).He was not prepared to give evidence in the original proceedings for the appellant and told theappellant that he had been in Mr Smith’s office for about half an hour on the occasion inquestion (1/232). This was contrary to the affidavit evidence of the appellant and his wife.

46 At the trial of Ms Koenig’s action, the appellant would not have been able to call Mr Moeller,whom he had been friendly with in the past, to support his evidence against Mr Smith. He wouldthus have faced a submission that this witness had not been called because his evidencewould not support the appellant’s case. See Jones v Dunkel [1959] HCA 8; (1959) 101 CLR298.

47 The least expensive method of settling the original proceedings would have been torecognise Ms Koenig’s interest in the land as the appellant had done between January 1984and September 1987. This would have involved the “loss” of the 11 acres, but on the terms ofthe contract, and the evidence of Ms Koenig and Mr Smith, the appellant had not paid for those11 acres and had never had possession of them. However he and his wife were not interestedin any settlement on this basis and instructed the respondent accordingly (1/218, 2/480). Theappellant’s notice to quit had provoked the litigation and the attitude adopted by he and his wifemeant that any settlement would necessarily involve payment of a substantial sum to Ms Koenigto vacate the property.

48 The settlement negotiated at the mediation involved the appellant paying $130,000 to MsKoenig for “her” 11 acres but he received contributions from Mr Smith and another solicitorwhich totalled $30,000. Ms Koenig was paid the value, as assessed by the valuers for both

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parties, of her land assuming it could have been subdivided. Ms Koenig was not prepared tosettle for any less and, on the documentary and other evidence which has been summarisedabove, there was no reason to do so. In reality she could hardly lose the case. She could nothave sold “her” 11 acres for that sum, but they could have been worth that to the appellant whootherwise had a clean title. The only reason she had to be paid anything is that the appellantand his wife wanted her off the property, and were not prepared to accept her possession of the11 acres.

49 The respondent and Mr Walmsley had appreciated the difficulties in the appellant’s caseeven before the mediation and this was reflected in their advice to him. Before the mediationthey had been hopeful of being able to settle the case with Ms Koenig for much less than$130,000, but the situation changed immediately before and during the mediation.

50 Mr Smith’s affidavit, which was adverse, was served a few days before the mediation. Untilthen the respondent and Mr Walmsley had been proceeding on the basis that if the appellantlost against Ms Koenig he would recover damages from Mr Smith equivalent to the value of herinterest in 1984. Once they had had an opportunity to consider Mr Smith’s affidavit theyrealised that the appellant could well lose against Ms Koenig and recover little or nothing fromMr Smith.

51 At the start of the mediation Mr Lever of counsel, who appeared for Ms Koenig, opened hercase and this brought home to the respondent and Mr Walmsley just how strong Ms Koenig’sdocumentary case was, and how important the withdrawal of caveat was that Mr Forbes hadused to procure the appellant’s registration.

52 If Mr Smith properly explained the contract to the appellant, and if he already understood thenature of the rights possessed by Ms Koenig and Ms Granich, he had no worthwhile prospectsof recovering substantial damages from Mr Smith.

53 In these circumstances I am satisfied that the respondent acted with proper care and skillduring the mediation, and that his advice to the appellant to settle on the best terms thenavailable was good advice. Moreover he acted professionally and properly in the interests ofthe appellant in bringing considerable pressure to bear on him to settle on the best terms thenavailable and I am satisfied that this was in the appellant’s best interests.

54 The appellant’s case against the respondent required him to establish that the respondenthad given bad or incorrect advice, and then to establish that he had been negligent in doing so.My assessment of the documents and the relevant law has satisfied me that the respondent’sadvice to the appellant at the mediation was sound. I am also satisfied that he and MrWalmsley had properly prepared the appellant’s case prior to the mediation. The appellant hasfailed to establish that they overlooked any relevant fact, document or legal argument in hisfavour.

55 It is most unfortunate for the appellant and his wife that their unwillingness to continue aneighbourly relationship with Ms Koenig that had existed between 1984 and 1987, and to



recognise her interest in the 11 acres, has resulted in the loss of their land and their investment.However this was not the result of any negligence by the respondent at the mediation, nor was itthe result of any inadequate preparation of the appellant’s case beforehand.

56 In my judgment the appeal entirely fails and should be dismissed with costs.

57 SHELLER JA: I have had the benefit of reading in draft the reasons for judgment preparedby Handley JA and Fitzgerald JA. For the reasons given by Handley JA I agree that the appealshould be dismissed with costs.

58 I agree with Fitzgerald JA that it is never the function of the legal adviser to coerce the clientinto settlement; see Harvey v Phillips [1956] HCA 27; (1956) 95 CLR 235 at 242. The degreeto which the legal adviser may seek to persuade the client to compromise the claim and theway in which that may be done can, I believe, only be resolved having regard to thecircumstances of the case in question. A great deal will turn upon the capacity of the client.Moreover, the client’s refusal to accept sound advice from the legal adviser may compromisetheir relationship. The legal adviser may feel that the client has lost faith in the legal adviser’scompetence and may be concerned by ethical restraints in pursuing what the legal adviserregards as a hopeless cause. I mention these matters only to explain the importance of thecircumstances of the case.

59 In regard to the role of the mediator, current practice suggests different views about whetherthe mediator should do no more than facilitate negotiation and the extent to which any greaterintervention is acceptable. There would, I think, be no doubt that it is generally agreed not to bepart of the mediator’s function to attempt to impose a settlement upon a party: see generallyYarn, Dictionary of Conflict Resolution 1999 at 274 and following. Again, any attempt by theCourt to define the mediator’s role must await the case where the manner of performance ofthe function has been challenged.

60 FITZGERALD JA: The circumstances giving rise to this appeal are set out in the reasonsfor judgment of Handley JA. I agree with his Honour that the appeal should be dismissed withcosts.

61 The appellant compromised litigation (the “original action”) on the advice of the respondent,who was then his solicitor. Subsequently, he sued the respondent, claiming common lawdamages. The appellant’s essential allegations in this Court were that:

(a) he was induced to make the compromise by:

(i) the respondent’s negligent advice; and/or

(ii) the respondent’s improper pressure; and,





(b) if the original action had proceeded to judgment:

(i) he would (or at least might) not have been required to pay the plaintiff in theoriginal action, one Konig, the sum of $130,000 by instalments secured by amortgage on his property as the compromise required; or

(ii) he would (or at least might) have recovered more than the sum of $30,000provided for in the compromise from the cross-defendant, a solicitor named Smithwho had previously acted for the appellant; and

(c) he had also sustained consequential loss. For example, his property was soldwhen he was unable to make payments to Konig in accordance with the mortgage.

62 Advice to compromise is not negligent merely because a court subsequently considers thata more favourable outcome would or might have been obtained if the original dispute had beenlitigated to judgment (or a more favourable compromise would or might have become availablelater). As Anderson J said in the Ontario High Court in Karpenko v Parvian, Courey, Cohen andHouston: [1]

“.. an industrious and competent practitioner should not be undulyinhibited in making a decision to settle a case by the apprehensionthat some Judge, viewing the matter subsequently, with all the acuityof vision given by hindsight, and from the calm security of the Bench,may tell him he should have done otherwise.”

63 A lawyer’s advice to a client to make or reject an available compromise is commonly notconcerned only with the client’s rights, obligations and hopes. Usually, other matters must alsobe considered. For example, it is often impossible to predict the outcome of litigation with ahigh degree of confidence. Disagreements on the law occur even in the High Court. Anapparently strong case can be lost if evidence is not accepted, and it is often difficult toforecast how a witness will act in the witness-box. Many steps in the curial process involvevalue judgments, discretionary decisions and other subjective determinations which areinherently unpredictable. Even well-organized, efficient courts cannot routinely produce quickdecisions, and appeals further delay finality. Factors personal to a client and any inequalitybetween the client and other parties to the dispute are also potentially material. Litigation ishighly stressful for most people and notoriously expensive. An obligation on a litigant to pay thecosts of another party in addition to his or her own costs can be financially ruinous. Further, timespent by parties and witnesses in connection with litigation cannot be devoted to other,productive activities. Consideration of a range of competing factors such as these canreasonably lead rational people to different conclusions concerning the best course to follow.Advice to compromise based on a variety of considerations is not negligent if a personexercising and professing to have a legal practitioner’s special skills could reasonably havegiven that advice. [2]



64 Handley JA has carefully considered the issues in the original action and concluded that theadvice which the respondent gave the appellant was not “bad or incorrect” but “good” and“sound”. In the circumstances, a conclusion that the respondent was not negligent is inevitable.

65 Having regard to the test of negligence which is applicable, a conclusion that advice tocompromise was not negligent does not necessarily mean that a client who acted on thatadvice did not sustain loss as a result of doing so. The appellant also based his claim againstthe respondent on pressure which he alleges the respondent improperly applied to force him tocompromise. The appellant submitted that that pressure was a breach of the duty which therespondent owed to him and that, in consequence, he sustained the alleged loss which hasearlier been outlined.

66 The trial judge preferred the respondent’s evidence to the evidence given by the appellantand his wife (who was not present at the mediation) where there was conflict. His Honour said:

“I was not at all impressed with [the appellant] as a witness. He gaveevery impression of a man that had a fixed idea in his mind and hewas not going to let it go, no matter what. I formed the impression thatit was more likely than not that he was now thoroughly convinced thatthe act of agreeing to the settlement was not an act of his free will andhis whole evidence was clouded by the fact that he had now takenthat as his primary paradigm.

...

The only other witness to give oral evidence was the [respondent]. Hepresented well, but I must remember that as a solicitor and used topublic speaking he would not have the same nervousness as perhapsthe [appellant and his wife] did. Yet despite a day of cross-examination he was untroubled. He gave every indicia of anexperienced, knowledgable and capable solicitor and was able togive a very credible account of what happened during the mediation.

...

I have no trouble at all in saying that where there was any dispute asbetween the version of facts given by the [appellant and his wife], onthe one hand, and [the respondent], on the other hand, I prefer [therespondent’s] evidence.”

67 The mediation at which the original action was compromised extended over a period of 8 to10 hours on 17 May 1991. There were discussions between the parties and lengthy privatediscussions between the appellant, his barrister and the respondent. The mediator circulated,making suggestions. The advice which the respondent and the appellant’s barrister gave him inthe course of those discussions was considerably more pessimistic than advice which they had



previously given. That is not unusual. Additional information frequently leads to changedperceptions.

68 The respondent acknowledged that, in the words of the trial judge, “.. for quite a while theappellant was not interested in moving beyond some $30,000 - $50,000.” However, “... at sometime the [mediator] said that it was quite plain that the case was not going to settle unless [theappellant] made an offer of at least $100,000.” The respondent and his barrister persuaded theappellant not to withdraw from the mediation, as he said he wished to do, but to make thecompromise which he did.

69 The trial judge referred to, and apparently accepted, a number of passages in therespondent’s evidence which were to the effect that:

(a) an affidavit by Smith which was received a few days before the mediation hadcaused the respondent and the appellant’s barrister to change their earlier viewthat if the appellant was unsuccessful against Konig in the original action he wouldsucceed (or had a strong case) against Smith;

(b) the outline of Ms Konig’s case at the commencement of the mediationemphasised the strength of her case;

(c) the respondent was careful to explain the various legal concepts involved to theappellant in plain and untechnical language: “.. as best he could in plain language.”The appellant and the respondent conversed in German, which is the appellant’sprimary language;

(d) the respondent assessed the credibility of the appellant, Konig and Smith,taking into account the affidavit evidence, Smith’s profession and Ms Konig’sbehaviour and demeanour on the day of the mediation; and

(e) the respondent explained the likely costs of a trial of the original action, whichwas expected to take at least two weeks.



70 The financial discussions between the appellant and the respondent appear to have beenprimarily directed to the appellant’s dispute with Ms Konig, who was legally aided andappeared not to own any property. It was explained to the appellant how much it would cost himto defend Ms Konig’s claim. Reference was made to the amount of the costs for which theappellant would be liable if he failed in the original action.

71 Other practical considerations were also explained to the appellant. The appellant wasinformed that the respondent would be on long service leave and unable to conduct the originalaction on behalf of the appellant between August and November 1991. A possible joinder ofanother solicitor, one Forbes, who had bought Smith’s practice and thereafter acted for theappellant for a period, might delay and extend the hearing of the original action. Further, apersonal association between Forbes and the appellant’s barrister might cause him to ceaserepresenting the appellant if Forbes was joined. The trial judge accepted the respondent’sevidence that he and the appellant’s barrister did not use those circumstances to threaten theappellant that they would withdraw their representation if he did not compromise the originalaction.

72 His Honour rejected the appellant’s evidence that undue pressure applied by the respondentand his barrister, including threats to withdraw from the original action, forced him to capitulateand to compromise against his will. Likewise, his Honour rejected allegations that therespondent must have realised that the appellant “had lost his will and was just doing whateverhis lawyers said to him.” He was satisfied that the appellant “... did understand the perilousposition he was in, and although he did have a great reluctance to settle, eventually heunderstood that the decision had to be made in the way it was made, whether he liked it or not.”Further, the appellant”... came to a rational decision at the end of the day, albeit one that he didnot particularly like. Like many litigants who believe fervently in their own position, it is a matterof disappointment when they realise their best interest is served in solving the matter, even ifthey are not particularly enamoured by the terms.”

73 The factual findings made by the trial judge led to the dismissal of the appellant’s case. HisHonour said:

“Because I have come to the view that I have on the facts, it isunnecessary to go into the question as to how far a solicitor even hasa duty to press on reluctant clients the advantages of a settlementwhich the solicitor knows is going to be emotionally very hard for theclient to accept. Certainly thirty or forty years ago, in an era whenlegal advisers were expected to take a paternalistic role, it is clearthat it was the duty of counsel and solicitors to put pressure on clientsto do what the lawyers believed was sensible and in the clients’interest; see eg Harvey v Phillips [1956] HCA 27; (1956) 95 CLR235.

Whilst things may be a little different in this less paternalistic age, Ibelieve it still is the rule that it is proper and appropriate for solicitors





to put pressure on clients to do what is, in the lawyer’s view, in theclients’ own interest. Of course, there must come a point where theclient is just behaving as an automation and if the matter gets to thatpoint then the solicitor should know that he or she should not proceedat least without an independent person speaking to the client to makesure that the client understands. However, on the facts that is not thiscase.”

74 Although it is in the public interest for disputes to be compromised whenever practical, [3] alawyer is not entitled to coerce a client into a compromise which is objectively in the client’sbest interests, at least when the client alone must bear the consequences of the decision. [4]The client, not the lawyer, is entitled to decide whether to compromise or to litigate.

75 Broadly, and not exhaustively, a legal practitioner should assist a client to make an informedand free choice between compromise and litigation, and, for that purpose, to assess what is inhis or her own best interests. The respective advantages and disadvantages of the courseswhich are open should be explained. The lawyer is entitled, and if requested by the clientobliged, to give his or her opinion and to explain the basis of that opinion in terms which theclient can understand. The lawyer is also entitled to seek to persuade, but not to coerce, theclient to accept and act on that opinion in the client’s interests. The advice given and anyattempted persuasion undertaken by the lawyer must be devoid of self-interest. Further, whenthe client alone must bear the consequences, he or she is entitled to make the final decision.

76 People repent at bargains for many reasons. In the present matter, the appellant’s wife, whowas not present at the mediation, was dissatisfied with the compromise which he hadreluctantly made. Whatever the reason for a subsequent change of mind, a client who wasreluctant to make a compromise and was persuaded to do so by his or her lawyer can easilybecome convinced that the now unwanted bargain was coerced. Since there is no clearboundary between permissible persuasion and impermissible coercion, the distinction can bedifficult to apply to the circumstances of a particular case.

77 In the present matter, the factual findings made by the trial judge were open to his Honourand should not be disturbed. On those findings, his Honour correctly rejected the appellant’sclaim that the compromise which he made resulted from improper pressure from therespondent.

78 In the circumstances, it is unnecessary to discuss other difficulties which confront theappellant such as his failure to establish that the compromise deprived him of even thepossibility of a better financial outcome if the original action had proceeded. Handley JA’sconclusions are inconsistent with any suggestion that the compromise caused the appellant anyloss.

79 In summary, the appellant failed to establish any breach of duty by the respondent, and hisaction was correctly dismissed.

******



END NOTES

1. (1981) 117 DLR (3d) 383, 397. See also Chancellor etc of Oxford University v JohnSteadman Design Group (1991) 7 Cons. LJ 102, 107; Finmore v Slater & Gordon (1994) 11WAR 250.

2. cf Rogers v Whittaker [1992] HCA 58; (1992) 175 CLR 479, 483.

3. cf Unity Insurance Broker Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; (1998) 192 CLR603, 651; Tresize v National Australia Bank (1994) 122 ALR 185, 189; Studer v Konig(unreported, McLelland CJ in Eq., 4 June 1993).

4. See Harvey v Phillips [1956] HCA 27; (1956) 95 CLR 235, 242. See also Tresize 122 ALR185, 199.

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Studer v Boettcher [2000] NSWCA 263 (24 November 2000)

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