FEDERAL COURT OF AUSTRALIA

COSTS – successful respondent deprived of costs

EVIDENCE – expert evidence – whether expert evidence in matters of law is desirable – use to which such evidence may be put

NEGLIGENCE – solicitors - standard of care - solicitor having or professing to have expertise in particular area of law – standard of care commensurate with expertise - whether retaining counsel absolves solicitor from giving advice – whether solicitor entitled to follow counsel’s advice – barristers – whether junior counsel is required to give advice when senior counsel is retained – immunity from suit – failing to advise on item of compensation not within immunity

VALUATION – compulsory acquisition – method of determining compensation – meaning of market value – comparative method – land residual method - special value – value to the dispossessed owner – land available for immediate development – whether of economic value – whether part of special value

Arkaba Holdings Limited v Commissioner of Highways [1970] SASR 94 followed

Apro Developments Ltd v Province of British Columbia (1977) 15 LCR 97 referred to

Bailey v Isle of Thanet Light Railways Company [1900] 1 QB 722 considered

Baringa Enterprises Pty Ltd v Manly Municipal Council (1965) 15 LGRA 201 applied Chapman v The Minister [1966] 2 NSWR 65 referred to

Commissioner of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Ltd (1947) 74 CLR 358 referred to

Commonwealth v Arklay (1951-1952) 87 CLR 159 referred to

Davy-Chiesman v Davy-Chiesman [1984] 1 All ER 324 referred to

Devries v Australian National Railways Commission (1992-1993) 177 CLR 472 referred to

Duchess of Argyll v Beuselinck [1972] 2 Lloyd’s Rep 172 distinguished

Eagle v Charing Cross Railway Company (1867) 30 LJCP 297 considered

Ergopex Pty Ltd v Meerkin & Apel (1996) V.Con.R 54-550 referred to

Francis v Francis [1956] P 87 referred to

Gianarelli v Wraith (1988) 165 CLR 543 applied

Greenough v Minister of Lands and Forests) (1974) 10 NSR (2d) 598 referred to

Halifax v S Cunard & Co [1975] 1 SCR 458 referred to

Hawkins v Clayton (1987-1988) 164 CLR 539 followed

Housing Commission of NSW v Falconer (1981) 1 NSWLR 547 followed

Kennedy Street Pty Ltd v The Minister [1963] NSWR 1252 applied

Lake Erie & Northern Railway Co v Brantford Golf and Country Club (1917) 32 DLR 219 discussed

Liverpool City Council v Irwin [1977] AC 239 referred to

Macrae v Stephens, (unreported, Court of Appeal New South Wales, 18 October 1996) referred to

Melwood Units Pty Ltd v Commissioner of Main Roads (Qld) (1978) 19 ALR 453 considered

Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] 1 Ch 384 followed

Minister Administering the Heritage Act 1977 v Haddad (1988) 67 LGRA 438 referred to Municipality of Metropolitan Toronto v Loblaw Groceterias Ltd [1972] SCR 600 discussed

Orchard v South Eastern Electricity Board [1987] 1 QB 565 referred to

Pastoral Finance Association Limited v The Minister [1914] AC 1083 applied

Permanent Trustee Australia Ltd v Boulton (1994) 33 NSWLR 735 referred to

Pointe Gourde Quarrying & Transport Company Limited v Sub-Intendent of Crown Lands [1947] AC 565 referred to

Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer Vizagapatam [1939] AC 302 distinguished

Re LeBlanc and City of Halifax (1967) 66 DLR (2d) 15 referred to

Re Schooley and Lake Erie & Northern Railway Co (1915) 25 DLR 537 discussed

Rees v Sinclair [1974] 1 NZLR 180 applied

Rogers v Whitaker (1992) 175 CLR 479 followed

Rondel v Worsley  [1969] 1 AC 191 referred to

Russell v Minister for Lands 17 NZLR 241 referred to

Saif Ali v Sydney Mitchell & Co [1981] AC 198 discussed

Spencer v Commonwealth (1906-1907) 5 CLR 418 considered

Stebbing v The Metropolitan Board of Works (1870) 40 LJQB 1 considered

The Moreton Club v The Commonwealth (1948) 77 CLR 253 at 257 referred to

Turner v Minister of Public Instruction (1955-1956) 95 CLR 245 considered

Voli v Inglewood Shire Council (1962-1963) 110 CLR 74 mentioned

Wyong Shire Council v Shirt (1979-1980) 146 CLR 40 mentioned

Yarn Traders Pty Ltd v MMBW [1970] VR 427 referred to

Yates Property Corporation Pty Ltd v Darling Harbour Authority (unreported, Land and Environment Court, Cripps CJ, 1 April 1992) referred to

Yates Property Corporation Pty Ltd (in liquidation) v Darling Harbour Authority (1991) 24 NSWLR 156 discussed

YATES PROPERTY CORPORATION (in liquidation)

v JOHN BOLAND (as representative of Abbott Tout Russell Kennedy Solicitors), THEODORE SIMOS and JOHN WEBSTER

NG 495 of 1997

NG 716 of 1997

YATES PROPERTY CORPORATION (in liquidation) and IAN FRANCIS YATES

v JOHN BOLAND (as representative of Abbott Tout Russell Kennedy Solicitors), THEODORE SIMOS and JOHN WEBSTER

NG 717 of 1997

DRUMMOND, SUNDBERG & FINKELSTEIN JJ

5 AUGUST 1998

MELBOURNE

                                                                                                                          NG 717 of 1997

THE COURT ORDERS THAT:

1.                  The appeals be allowed.

2.         The orders made by Branson J on 5 June 1997 be set aside and in lieu thereof it be ordered that the proceeding be remitted to another Judge of the Court for the assessment of damages against the first and third respondents.

3.            The orders made by Branson J on 14 August 1997 be set aside.

4.         The first and third respondents pay the appellant’s costs of the appeals in NG 495 of  1997 and NG 716 of 1997.

5.         The respondents pay Ian Francis Yates’ costs of the appeal in NG 717 of 1997.          

Note: Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules

                                                                                                                          NG 717 of 1997

REASONS FOR JUDGMENT

THE COURT: The principal issue raised by this appeal is whether Abbott Tout Russell Kennedy (Abbott Tout), a firm of solicitors represented in the proceeding by the first respondent, and John Webster, a member of counsel, were negligent in their conduct of a compensation claim on behalf of Yates Property Corporation Pty Ltd (Yates) before the Land and Environment Court (NSW).  If they were negligent then the question arises whether Abbott Tout or Mr Webster is immune from liability in consequence of the principles laid down in Gianarelli v Wraith (1988) 165 CLR 543.

Yates had purchased three parcels of land in Darling Harbour in 1981.  The combined area of the land was 1.542 hectares.  The purchase price was $5.1 million.  In late 1981 or early 1982 Yates decided to investigate the possibility of developing the land as a market place.  A study was undertaken of the operation of Paddy’s Market which was operating nearby and which the government of New South Wales had announced would be relocated.  Other investigations were conducted as well.  The result of them was that Yates decided that it would be profitable to develop the land as a market.  It sought expressions of interest from prospective stallholders and obtained the written agreement from some forty of them to take a stall if the market was constructed.  The prospective stallholders each paid a deposit of two months rent.  In 1983 consultants were engaged to carry out the work that was necessary in order to obtain approval from the Sydney City Council to develop the land as a market.  That approval was given on 13 August 1984.  Yates also engaged architects to prepare plans for a proposed market building.  In 1984 the existing structures on the land were demolished and a builder was retained to carry out the construction of the building in accordance with the plans that had been prepared.  On 20 July 1984 Yates obtained the authority of the Sydney City Council to construct a market building that would house 896 market stalls.  Consequently Yates was in a position where it could commence its development of the market almost immediately.  The expenditure that had been incurred to reach that stage exceeded $2.7 million.

The project was interrupted when on about 4 June 1984 Yates was informed by the Director of Public Works (NSW) that the land was likely to be resumed by the soon to be established Darling Harbour Authority.  The Director advised Yates to hold its development proposals in abeyance until the Authority could consider the matter.

Yates retained Abbott Tout to advise what action it could take to prevent the land being resumed.  Abbott Tout suggested that experienced senior counsel (Mr Hemmings QC) be asked to give that advice.  Subsequently, proceedings were instituted by Yates for the purpose of preventing the Authority compulsorily acquiring its land but those proceedings proved to be unsuccessful. 

On 7 May 1985 the land was acquired by the Darling Harbour Authority pursuant to the Darling Harbour Authority Act 1984 (NSW).  Consequently the Authority became liable to pay compensation to Yates to be assessed according to the value of the land: see s 12C of the Darling Harbour Authority Act and s 124 of the Public Works Act 1912 (NSW).  The Land and Environment Court had exclusive jurisdiction to hear and determine the claim for compensation: see s 24 of the Land and Environment Court Act 1979 (NSW).

Abbott Tout was retained to act on the claim.  Senior counsel and junior counsel were also retained.  Mr Webster was the junior counsel.  He was a qualified and experienced valuer who for many years had worked in the New South Wales Valuer General’s Department.  In 1965 Mr Webster commenced to study law and after gaining his qualifications was called to the Bar in 1973.  By 1985 the greater part of his practice was conducted before the Land and Environment Court.

Yates filed its claim for compensation with the Land and Environment Court on 2 January 1986.  Two months later, on 10 March 1986, the Supreme Court of New South Wales ordered that Yates be wound up on account of its insolvency and Mr B R Silvia was appointed as its liquidator.  Mr Silvia remained the liquidator of the company until some time after the conclusion of the proceedings before the Land and Environment Court. 

The preparation of the case for trial took considerable time.  Little work was done in 1986 while the liquidator was making arrangements with the secured creditors of Yates to fund the litigation.  During 1987 and most of 1988 Abbott Tout collected a vast quantity of documents that were required to properly instruct the valuers who were to be called to give evidence about the value of the land.  Detailed preparation of the evidence did not begin until 1989.

The work performed by Abbott Tout was undertaken by Mr B Schwaiger.  He had been admitted to practice as a solicitor in August 1987 and joined Abbott Tout the following month.  In October 1987 Mr Schwaiger was instructed by his principals to handle the claim.  Mr Schwaiger knew nothing about the law relating to the compulsory acquisition of land and he knew nothing about the law relating to the valuation of land.  At no stage did he acquaint himself  with the basic principles involved. 

Three valuers, Mr K J Parkinson, Mr C A Woodley and Mr F K Egan, were retained to give evidence on behalf of Yates.  Each was an experienced and highly regarded expert in his field.  During 1989 draft valuations were prepared by them.  Mr Webster was provided with copies of the drafts and he spent time in conference with the valuers going over them.  When the valuations were in final form they were considered by Mr Simos QC who in mid-1989 had been briefed to appear at the trial on behalf of Yates. 

In his valuation Mr Parkinson expressed the opinion that the market value of the resumed land was $51,825,000.  The method by which he arrived at this figure appears from the following extract from his valuation:

“Based on the sales information shown on the annexed sales schedules and available rental information, we are of the opinion that the market value of the subject lands at the date of vesting, excluding any items of special value, disturbance or abortive expenditure was: -

Present value of $8,062,404 pa being net rental of stalls

and car park (see Annexure 2) for 9 years deferred 1.5 years at

10 per cent                                                                                       $40,246,155

Present value of $5,793,110 pa for one year at 10 per cent

deferred 6 months                                                                               $5,235,602

                                                                                                          $45,481,757

Less 5 per cent risk/contingency factor                                              $2,274,087

                                                                                                          $43,207,670

Less building costs and holding charges                                            $6,185,713

Value of site plus interest with BA/DA for limited

period markets                                                                                 $37,021,957

Re-development value of main site based on comparable

sales 14,746 square metres less road widening of approximately

145 square metres = site area of 14,601 square metres at

$2,142 = $31,421,352

Less penalty costs of $1,385,000 = $30,036,352 - deferred

10.5 years at 5 per cent                                                                  $17,995,318

Add redevelopment value of James Street property:

670 square metres at $1,614                                                           $1,081,381

                                                                                                       $56,098,656

Less loss of interest on land (ex James Street site), 16.5

per cent pa for 6 months                                                                $4,275,417

                                                                                                      $51,823,239”

                                    Say$51,825,000

Thus, according to Mr Parkinson, the market value of the resumed land comprised the sum of the value of the site for use as a market for ten years and the value of the site for some other commercial development to be undertaken after ten years.

Mr Parkinson assessed the special value of the resumed land to be $75 million.  This amount was inclusive of the market value of the land.  He determined the special value of the land by reference to the value of the only other comparable market, Paddy’s Market, the leasehold interest of which had been purchased for $43 million in early 1988.  Mr Parkinson was of the view that the special value of the resumed land to Yates was properly to be assessed by what Yates or any other prudent purchaser would be required to pay to obtain an alternative market. 

Mr Woodley said that the special value of the resumed land was $51.27 million.  He determined the special value of the land on the assumption that the market development had been completed and was fully operational at the date of resumption.  The following extracts from his valuation explain the reasons:

“In respect of the markets site we have taken the view that the owners are entitled to be compensated on the basis of payment of a monetary consideration adequate to place them in a position no worse than they would have enjoyed if such steps towards resumption had not been taken on the assumption that at the date of resumption Yates Property Corporation could reasonably have expected to have completed the approved development of the Harbour Street site and have commenced operation as a four day market and night parking business.

This assumption in favour of the dispossessed owners is considered to be the proper and appropriate approach in assessing the special value for determination of compensation.

...

[W]e have taken the view that the special value of this land to the owners may be taken to be the price a hypothetical purchaser in the position of the owners would have been willing to pay to retain such land inclusive of the assumed benefit of being occupied by an operating market together with a perceived potential for future development of air space above the markets.”

In an annexure to his valuation Mr Woodley provided a calculation of the market value of the site component of the land.  He estimated that value to be $35 million for one part of the land (sometimes referred to as the Harbour Street site) and $870,000 for the remainder of the land (sometimes referred to as the James Street site).  Mr Woodley arrived at the site value of the Harbour Street site by deducting from the value of that land, determined on the basis that it contained an operational market, the costs of constructing a market building and certain other costs. 

The most conservative of the three valuers was Mr Egan.  In his view the market value of the land based on comparable sales was $28.08 million to which he thought there should be added $10.5 million for its special value to Yates.  He determined the special value of the land by having regard to what a prudent investor would pay to derive the income that was expected from an operational market on the land.  He explained the basis of his approach as follows:

“At the date of resumption the hypothetical purchaser could earn an estimated $4,500,000 on an expenditure of $35,737,000 which equates to 12.6% net return.  This attractive return would reflect the enterprise of the owners (Yates Property Corporation Pty Limited) in developing the concept and obtaining the development and building approvals and acquiring the uniquely suitable site for such an enterprise. 

It is considered because of their enterprise the site has a special value to them over and above the market value of the land at the date of resumption. 

...

Having regard to the predicted cost to a prudent purchaser in the position of Yates Corporation, and that Yates market would have been functioning at the time of resumption at a cost of $35,737,000 then the Yates Corporation would need to expend an additional $14,263,000 to replace its annual income.”

The capital cost of replacing the lost income from the market, namely $14,263,000, formed the basis of the assessment of special value.  Mr Egan discounted this amount to arrive at the figure of $10.5 million for the reason that Yates had not actually taken the step of constructing the market.

Thus, in one way or another each valuer arrived at one of his valuations of the resumed land on the assumption that an income producing market had been built on the site.  Mr Webster explained why the valuers had taken that approach.  It was for the reason that if Yates had not been told in June 1984 to suspend the development of the site it would have been completed at the date of resumption.  Mr Webster thought it was “just so unfair” if compensation could not be assessed on that basis.  There was another reason.  In Pointe Gourde Quarrying & Transport Co v Sub-Intendent of Crown Lands [1947] AC 565 the Privy Council held that compensation should not be assessed by reference to any increase in value of the resumed land brought about by the very scheme of which the resumption forms an integral part and in Melwood Units Pty Ltd v Commissioner of Main Roads (Qld) (1978) 19 ALR 453 the Privy Council held that the principle operates in reverse.  So it was arguable that Yates should not be prejudiced by the fact that it had stopped its proposed development of the land in June 1984 on receipt of the letter from Director of Public Works.

The trial in the Land and Environment Court commenced on 30 January 1990 before Cripps CJ.  It went for about eight weeks.  On 1 May 1990 Cripps CJ handed down his decision: see Yates Property Corporation Pty Ltd v Darling Harbour Authority (1990) 70 LGRA 187.  He fixed the compensation payable to Yates at $22,334,500.

Cripps CJ determined the quantum of the compensation in the following way.  Three valuers had been called by the Authority.  They gave evidence of the value of the resumed land based upon the sale of comparable land.  In their view the highest and best use of the land included use as a market but none of them was of the view that that use gave the land any special value.  His Honour did not accept that this was so.  Counsel for Yates had submitted that in order to assess compensation it was proper for Yates’ valuers to assume that the market buildings had been constructed and that the market was operational.  Cripps CJ rejected this submission.  His Honour said that it was not appropriate to value the land otherwise than in its physical condition at the date of resumption but that it was proper to have regard to “the potentiality of the subject site by reason of its size and location for use as a market”: 70 LGRA at 201.  Therefore his Honour said that the compensation payable to Yates should be assessed at a figure in excess of the market value of the land.  His Honour fixed the amount of compensation “by reference to the sales evidence [that is, evidence of the sale price of comparable land] and [taking] into account the special value of the land to Yates by reason of its potential for use as a market”: 70 LGRA at 205.

An appeal was taken to the Court of Appeal of New South Wales: the decision is reported as Yates Property Corporation Pty Ltd (in liquidation) v Darling Harbour Authority (1991) 24 NSWLR 156.  The Court of Appeal confirmed the rejection by Cripps CJ of the method of valuation employed by the three valuers.  The principal judgment of the Court of Appeal was delivered by Handley J.  In relation to Mr Parkinson’s assessment of market value his Honour said (at 175) that Mr Parkinson’s approach “is contrary to the fundamental principle that what must be valued is the property taken in the condition in which it existed at the date of resumption.”  Two cases were referred to that were said to support this view.  The first was a decision of the Privy Council in Raja Vyricherla Narayana Gajapatiraju v The Revenue Divisional Officer, Vizagapatam [1939] AC 302 and the second a decision of the High Court in Turner v Minister of Public Instruction (1955-1956) 95 CLR 245.  Based on these authorities his Honour described Mr Parkinson’s valuation as “contrary to legal principle”.  The other valuations, to the extent that it appeared that they also proceeded on the assumption that the market buildings had been erected and that markets were in operation, were also held to be “legally flawed”: as to Mr Woodley’s valuation see 24 NSWLR at 179 and as to Mr Egan’s valuation see 24 NSWLR at 181.  

It is not necessary to express any final opinion on whether the Court of Appeal was correct in its finding that the approach taken by the valuers was contrary to law.  There is no doubt that there was a significant risk that their approach would be rejected as unreliable because it was dependent on many assumptions about the income to be derived from and the profitability of the market development.  Mr Hemmings QC had advised on that risk although it appears that his advice was not passed on to Mr Schwaiger or to junior counsel.  However, each valuer did assign a value to the resumed land as a vacant site, although only Mr Egan arrived at that value having regard to the sale of comparable land.  It is difficult to understand how that part of the valuations could be described as “legally flawed”.  Indeed there are two decisions of the Supreme Court of Canada, Halifax v S Cunard & Co [1975] 1 SCR 458 and Municipality of Metropolitan Toronto v Loblaw Groceterias Ltd [1972] SCR 600 that support the approach taken by the valuers in arriving at their value of the resumed land as a vacant site. 

In Loblaw Groceterias the Supreme Court was required to consider what was a permissible approach to fixing the amount of compensation for the expropriation of vacant land that was uniquely suited for development as a shopping centre.  Spence J delivered the judgment of the Court.  He said, thatin the case of the expropriation of vacant land and especially vacant land that was uniquely adaptable for a particular purpose, there were two possible approaches to fixing the amount of the award.  Those methods were the comparative method and the land residual method.  He described the comparative method as the consideration of actual sales of like lands in a like area and a determination from such comparison of the going market value of the land in question at the date of the expropriation.  The second method he explained was a much more sophisticated process which:

“takes as its starting point, the purpose for which the lands were purchased which, to quote the words of (the trial judge) were for ‘developing a shopping centre of sorts’, determining by a series of very detailed and expert calculations just what sort of shopping centre would be the highest and best use of the land, the estimate of the income which would be obtained were such type of shopping centre permitted on the lands, taking the cost of erecting the shopping centre and taking the difference between the capitalised income from the lands and the cost of erection of the centre as being the residue assignable to the value of the lands.”

The decision of the Supreme Court in Halifax is to the same effect.  The land residual method was the method employed by both Mr Parkinson and Mr Woodley in arriving at the value of the resumed land as a vacant site.  As presently advised we do not read Rajah Vyricherla or Turner to require a finding that this method of valuation is impermissible.  However, we do point out that Halifax and Loblaw Groceterias were not referred to in argument before Cripps CJ nor were they referred to in argument before the Court of Appeal. 

By majority, the Court of Appeal did find that Cripps CJ had erred when dealing with the claim for special value.  The Court of Appeal was of the view that Cripps CJ may not have assessed the special value of the land in accordance with proper principles and remitted the case to the Land and Environment Court to determine what additional compensation (if any) should be allowed for special value.  It will be necessary to return to the reasons given by the Court of Appeal for its conclusion that Cripps CJ may not have properly assessed the special value of the resumed land later in these reasons.

It is convenient at this point to say something about certain of the principles that govern the determination of compensation for land that has been compulsorily acquired.  In Yates, 24 NSWLR at 159, Kirby P said of these principles that many of them appear “to fresh minds to be ambiguous and contentious” while others of them “appear to be arbitrary categories of indeterminate reference, designed as much to obscure the judicial leaps to judgment that are required in these cases as to provide guidance about when, and how far, to leap.”  The resolution of this case will depend not so much on how these principles might appear to “fresh minds” but how they should have been understood and applied by solicitors who professed to have specialised knowledge of them and by junior counsel who for most of his working life, both as a valuer and as a member of the Bar, had practised in the field.

In cases of compulsory acquisition the dispossessed owner is entitled (in the absence of statutory qualification) to compensation for the loss suffered by the owner from the taking of his land (The Moreton Club v The Commonwealth (1948) 77 CLR 253 at 257) so as to place him in a position as near as possible to that he was in before the taking (Russell v Minister for Lands (1898) 17 NZLR 241).  Commonly the loss of the dispossessed owner will be the market price of the land taken.  The method for determining that market price was authoritatively stated in Spencer v The Commonwealth (1906-1907) 5 CLR 418.  What is required “is an estimate of the price which would have been agreed in a bargain between a vendor and purchaser each willing to trade but neither of whom was so anxious to do so that he would overlook any ordinary business consideration”: Commissioner of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Ltd (1947) 74 CLR 358 at 367.  The best evidence of this value is that of comparable sales of other land if such evidence is available: The Commonwealth v Arklay (1951-1952) 87 CLR 159 at 170. 

However it is not unusual for a dispossessed owner to incur a loss which is more than the market price of the resumed land.  It is well settled that the owner of land compulsorily taken is entitled to recover as compensation the value of the land to him, not to the expropriating party, and the market price is not necessarily the proper test.  In Stebbing v The Metropolitan Board of Works (1870) 40 LJQB 1 at 5 Cockburn CJ said:

“When Parliament gives these compulsory powers, and provides that compensation shall be paid to a person from whom property is taken, for the loss which he sustains by reason of his property being taken, the sense of the matter is that he shall be compensated to the extent of his loss, and that his loss shall be tested by what was the value of the thing to him, not by what will be the value when the Board acquires it.”

In Eagle v Charing Cross Railway Company (1867) 30 LJCP 297 at 303 Bovil CJ said:

“It cannot be said, to my mind, consistently with justice, that a man’s damage is to be ascertained with reference to what he could sell his property for.  He may say, ‘I do not desire to part with it.’”

In the case of Bailey v Isle of Thanet Light Railways Company [1900] 1 QB 722 at 724 Channel J said:

“I think our judgment must be for the claimants.  The intention of the parties to use the land for a particular purpose may properly be taken into account.  Compensation must always be assessed on the basis of a value of the premises to the particular claimant.  The matter may be tested in this way.  Suppose the land taken consisted of trade premises to which a goodwill was attached.  The question for the Tribunal which had to assess the compensation would be, not what was the market value of the premises, but what was their fair value to the trader, including the goodwill.”

Most usually in this connection reference is made to the opinion of the Privy Council in Pastoral Finance Association Limited v The Minister [1914] AC 1083.  There Lord Moulton, who delivered the opinion, said at 1087:

“The appellants were clearly entitled to receive compensation based on the value of the land to them.  This proposition could not be contested.  The land was their property and, on being dispossessed of it, the appellants were entitled to receive as compensation the value of the land to them whatever that might be.” 

Lord Moulton explained that the formula to be applied to determine the compensation payable to the dispossessed owner is that which a prudent purchaser in his position would be willing to give for the land rather than fail to obtain it. 

In other words, if the dispossessed owner is to receive compensation to place him in the position which he was in before his land was compulsorily acquired, the measure of compensation must take account of the peculiar value to the owner of the property compulsorily acquired.  The peculiar value to the owner of resumed land is commonly referred to by the shorthand expression “special value”.  It should be emphasised that compulsorily acquired land will have no special value based on motives or considerations that cannot be measured by any economic standard (Lake Erie & Northern Railway Co v Brantford Golf and Country Club (1917) 32 DLR 219 at 229) or arising from collateral circumstances (Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547 at 573-4).

In Canada it has been held that the special value can only arise where the owner is actually using the land for a special purpose (Re LeBlanc and City of Halifax (1967) 66 DLR (2d) 15 at 22) or when the use for a special purpose was in immediate contemplation (Greenough v Minister of Lands and Forests) (1974) 10 NSR (2d) 598 at 612).  But it is recognised that additional compensation, that is additional to the market value of the resumed land, may be allowed for the “special adaptability” of the resumed land for as yet unrealised possibilities or potentialities not reflected in market value: see Re Loblaw Groceterias Co Ltd and Minister of Highways for Ontario (1963) 42 DLR (2nd) 17.  The difference between the two concepts was explained by Hodgins JA in Re Schooley and Lake Erie & Northern Railway Co (1915) 25 DLR 537 at 541:

“For the sake of clearness it may be mentioned that ‘special value’ refers to the present use of land, and means its added worth to the owners for the actual and particular use to which it is being put, and for which it is specially fit: while ‘special or exceptional adaptability’ refers to an apparent but future use to which the property may be, but is not now, put, and for which it is particularly adapted”.

The principles are the same in Australia where “special adaptability” is seen as a component of the market value of the resumed land rather than as a separate and additional component of the compensation that is payable to the dispossessed owner.  For example, in Turner 95 CLR 245 the High Court considered the compensation that was payable to the dispossessed owner of unsubdivided land that was capable of being subdivided provided that certain works were undertaken.  The Court held that is was impermissible to determine that compensation as the present value of the gain to be derived from the subdivision and sale of the land.  But as Dixon CJ said (at 268), “the value of the land was necessarily affected by all the advantages which the land possessed and these might be a matter of future or even contingent enjoyment.  Future advantages or potentialities must not be excluded.”  That is to say, although the land must be valued in its condition at the time of resumption the potential use to which the land can be put must be taken into account if it is not otherwise reflected in the market value of the land.  In valuing that special adaptability it is the present value of the future potentiality that must be determined.

Land will have special value if it has some special suitability for a business or an activity carried on or to be carried on by the owner.  That special suitability need not arise from any physical or legal attribute of the land: Housing Commission of NSW v Falconer, supra, at 573.  While it may arise from some physical or legal attribute it can also arise from some use made or to be made of the land.  However, the special suitability must be peculiar to the dispossessed owner: Arkaba Holdings Limited v Commissioner of Highways  [1970] SASR 94 at 100.  The reason why the special suitability must be peculiar to the dispossessed owner is that if it is not peculiar to him then the advantage should be reflected in the market price of the land, it being a requirement that the market price be ascertained by reference to its highest and best use (that is the use that would bring about the highest economic value on the open market): Turner, supra, at 264; Minister Administering the Heritage Act 1977 v Haddad (1988) 67 LGRA 438 at 444; Apro Developments Ltd v Province of British Columbia (1977) 15 LCR 97 at 101. 

To summarise, the potentiality or adaptability of land should properly be considered when assessing the market value of the land if that potentiality or adaptability adds to the value of the land making its highest and best use different from its use at the date of resumption.  But if the potentiality or adaptability is peculiar to the dispossessed owner then it will not be taken into account in ascertaining the market value of the resumed land but falls to be compensated as special value.

There will be many cases where the dispossessed owner is well advanced in the planning of and preparation for the realisation of the potentiality of the resumed land to the point where that potential use is imminent.  Further, the dispossessed owner may have incurred considerable expenditure in reaching that point.  In principle there is no reason why the dispossessed owner should not be compensated for the planning and preparation that has resulted in the imminent realisation of the potentiality of the resumed land.  Prima facie it should be assumed that this planning and preparation is of economic value to the dispossessed owner and should be the subject of compensation as a consequence of the compulsory acquisition of his land. 

One difficulty that might arise in determining how the dispossessed owner should be compensated for this economic value is whether that value should be included as part of the market value of the land resumed or whether it should be treated as special value to the owner.  If the planning and preparation can be of advantage to a hypothetical purchaser of the land using it in the same general way then it should be included in the market value of the land.  On the other hand, if the planning and preparation is of peculiar advantage to the dispossessed owner then the economic advantage should be the subject of compensation as special value. 

In reality, some of the steps taken in the planning of and preparation for a development are likely to add to the market value of the resumed land because they will be of advantage to the hypothetical purchaser and some are likely to result in special value.  But so long as double recovery is avoided it will usually be of no practical consequence whether the dispossessed owner recovers his compensation as market value or as special value provided he does in fact receive compensation for the advantage resulting from bringing a proposal to a state of imminent development. 

It is now necessary to return to the decision of the Court of Appeal to explain why it remitted the compensation claim to Cripps CJ to properly assess the special value of the resumed land.  In his reasons Handley J referred to the fact that Yates had carried out work etc. that put it in the position where it could construct a market on the land more quickly than any hypothetical purchaser.  This work etc. gave Yates an advantage that was of economic value.  However, Handley J was of the view that Cripps CJ had failed to take this economic value into account in determining the special value of the land and that failure was an error of law.

When the case returned to Cripps CJ for his reconsideration counsel for Yates sought leave to reopen the case to lead evidence to quantify the economic value to Yates of being in a position to develop a market on the land immediately.  The evidence that was sought to be led concerned the holding costs that would be saved and the additional building costs that would be avoided by an immediate development of the land.  However, Cripps CJ refused leave to reopen the case.  His Honour also refused to increase his award.  He said that in arriving at the quantum of his award he had in fact taken into account not only the size and location of the land in connection with its suitability as a market but had also taken into account the work done and expenditure incurred by Yates in bringing the proposed development to a position where it could occur immediately.  Cripps CJ said that he had estimated the economic value of these factors to be worth $500,000 approximately and that amount had been added to the market value of the land which he had determined by reference to the sales of comparable land: see Yates Property Corporation Pty Ltd v Darling Harbour Authority (unreported, Land and Environment Court, Cripps CJ, 1 April 1992).

When the reasons for decision are read in conjunction with the reasons for the original decision it is apparent that Cripps CJ had determined the special value of the land to Yates by taking into account both the fact that the land was suitable for development as a market (a matter that strictly should have been taken into account in determining its market value) and the advantage to Yates of being in a position to develop the land more quickly than would a hypothetical purchaser as a result of the work done and the expenditure incurred.

Yates again appealed to the Court of Appeal.  This time the appeal was compromised when the Authority agreed to pay to Yates an additional sum of $1.25 million.  In the result Yates has received $500,000 for special value that is comprised in part as compensation for the potential use of the land as a market and in part as compensation for the advantage to Yates of the work and expenditure incurred in bringing the proposed market to a state where it was capable of immediate implementation.  It is not possible to ascertain how Cripps CJ would have apportioned the sum of $500,000 between those two components.  The settlement sum of $1.25 million is wholly attributable to the second component but fairness requires that sum to be apportioned between compensation and interest on that compensation to ascertain what additional sum Yates received for special value.  Based on a constant rate of interest of 12 per cent per annum over the relevant period of approximately seven years, the amount received for special value is approximately $ 565, 436 and the balance represents interest.

Yates claims that it should have received a substantially greater sum by way of compensation for the work performed in bringing the project to a state of imminent development.  It says that but for the negligence of Abbott Tout and counsel it would have been awarded an additional $4 million to $6 million by way of compensation.  It brought an action against Abbott Tout, Mr Webster and Mr Simos where the principal allegation made was that each of them had negligently failed to investigate, prepare and present Yates’ claim for compensation in a way that enabled the Land and Environment Court to award Yates the compensation to which it was entitled.  The contention was that if the claim had been properly investigated etc. evidence would have been led along the lines sought to be adduced at the second hearing before Cripps CJ and on the basis of that evidence his Honour would have awarded a higher sum by way of compensation.  Thus the result of the negligence, so the argument goes, was that Yates was denied the chance of obtaining a higher award and Yates sought to recover damages for the loss of that chance.

The action was heard by Branson J.  Her Honour dismissed the claim against each respondent.  She found that Abbott Tout had not been negligent in the conduct of the retainer on behalf of Yates for the reason that Abbott Tout had retained competent and experienced counsel and were entitled to rely on the advice of counsel as to the appropriate manner in which the claim should be investigated, prepared and presented before the Land and Environment Court.  Branson J also found that neither counsel was negligent in the manner in which he had prepared and presented the claim on behalf of Yates and, even if he had been negligent, he was immune from liability.  Her Honour ordered Yates and one of its directors (Mr Ian Yates) to pay the respondents’ costs, in part on an indemnity basis.

There are three appeals.  The first is by Yates against the order dismissing the claims against Abbott Tout and Mr Webster.  The second is by Yates from the orders that it pay the respondents’ costs.  The third is by Mr Yates against the order that he be liable with Yates to meet those costs.

It is necessary to make some observations about the manner in which the parties conducted the case before Branson J because it seems to us that the parties lost sight of the real issue that required determination.

Yates put its case as follows.  It was in an advantageous position at the date of the resumption of its land relative to any other prospective purchaser of the land wishing to build a market on the land.  That advantage was of economic value.  That economic value should have been taken into account as part of the special value to Yates of the resumed land.  The state of the authorities that existed at the time, all of which the respondents ought to have been aware of, in particular Kennedy Street Pty Ltd v The Minister [1963] NSWR 1252 and Baringa Enterprises Pty Ltd v Manly Municipal Council (1965) 15 LGRA 201, made it clear that the advantage was compensable as part of the special value of the land.  The respondents failed to lead evidence and conduct the case in a way that would see Yates obtain an appropriate award for that special value if the manner in which its valuers had assessed special value was rejected by the Land and Environment Court. 

The respondents sought to meet this case by disputing that the advantage to Yates of being in a position to develop the market was to be taken into account in determining the special value of the land.  Their case was that Spencer’s Case required it to be hypothesised that the hypothetical purchaser should be deemed to have available to him all of the knowledge and information about the proposed market that was in the possession of Yates and that it was to be assumed that Yates would make available to this hypothetical purchaser everything it could to assist the hypothetical purchaser to be in a position to develop the land immediately in accordance with the existing development approval and building approval.  Thus, so it was said, no occasion arose to consider whether Yates might have any advantage with respect to the development of the resumed land as compared with the hypothetical purchaser.  It was for this reason that evidence identifying or quantifying the value of that advantage was not adduced.

It will be apparent that both sides proceeded on the assumption that if Yates was in a position to develop the market immediately by reason of the work undertaken before its land had been resumed, that resulted in an advantage that was of economic value and for which it was entitled to receive compensation.  Indeed Mr Simos said in evidence that it was “obvious” that an ordinary hypothetical purchaser who intended to develop the resumed land immediately after purchase in accordance with the existing development approval and building approval would pay a higher price for the land.  We agree with this observation.

The difference between the parties was that Yates submitted that the economic value of this advantageous position formed part of the special value of the land and the respondents asserted that it should form part of the market value of the land.  Here each party proceeded on an unfounded assumption.  The unfounded assumption made by Yates was that if its advantageous position was not compensable as special value it was not otherwise compensable.  The unfounded assumption made by the respondents was that the Land and Environment Court was in a position to assess that advantageous position as part of the market value of the land.  The latter assumption was unfounded for the reason that no evidence had been led to properly identify or quantify the economic value of being in a position to immediately commence the development of a market.

Later it will be necessary to consider how these matters will affect the outcome of this appeal.  But before doing so it is convenient to address the issues in the manner in which they were raised by the parties both before this Court and before the trial judge.

In Spencer’s Case, Isaacs J said (at 441) that in order to arrive at the market value of resumed land it is to be supposed that the hypothetical purchaser is:

“perfectly acquainted with the land, and cognisant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reasons soever in the amount which one would otherwise be willing to fix as the value of the property”.

Prima facie, therefore, work done and knowledge acquired that would affect the value of the land should be taken into account when assessing its market value.  But what of work done and knowledge acquired that is of value to the dispossessed owner but is not connected with the character or quality of the land?  Take as an example a set of circumstances not dissimilar to the facts of this case.  A dispossesed owner of commercial land has prepared plans for a commercial building designed for a particular tenant who he knows will take a lease of the building and has engaged a builder to construct that building (or it might be that the owner is the builder) and is in a position to commence building works as at the date of resumption.  The dispossessed owner would no doubt regard the land as more valuable to him than the market price of that land determined by comparable sales of other commercial land.  Assume that the owner is willing to provide to the hypothetical purchaser his knowledge of the intentions of the prospective tenant and the plans for the proposed building and that the hypothetical purchaser is willing to undertake the same development as the dispossessed owner employing the same builder to carry out the works.  Of course, it will also be necessary to assume that the builder is willing to carry out the work for this hypothetical purchaser.  It is obvious that the hypothetical purchaser will pay more for the resumed land than its value as a commercial site determined by comparable sales.  Is the additional amount that the hypothetical purchaser is willing to pay part of the market value of the land?

The answer is to be found in the following proposition.  The work undertaken or the knowledge acquired by the dispossessed owner will be taken into account in determining the market value of the land if that work or knowledge can be of advantage to any hypothetical purchaser of the land because it would have the practical effect of adding to the character or quality of the land.  On the other hand, if the work done or the knowledge acquired is of a type that does not affect the character or quality of the land then it will not be taken into account in assessing the market value of the land.  This is not to say that the hypothetical purchaser may not be interested in acquiring the plans for the building or engaging the builder retained by the dispossessed owner.  But if the hypothetical purchaser is willing to pay a higher price for the land in order to obtain the plans and the services of the builder he would be paying a price for the plans etc. in addition to paying for the land.

Another example of what is no doubt an everyday occurrence will serve to make the point clear.  An owner of a furnished house is willing to sell his house in an unfurnished condition but if the purchaser is willing to pay a higher price than its market value then the owner will sell it as a furnished home.  Does the fact that the owner is willing to pass over his furniture add to the market value of the house?  Plainly it will not although the purchaser is willing to pay more for the house to obtain the furniture.  If the purchaser does pay more to obtain a furnished house the purchase price does not only represent the value of the home, a component of the purchase price represents the value of the furniture.

The authorities to which we will now refer support the views we have expressed.  First there is Kennedy Street a decision of Hardie J.  There the dispossessed owner had purchased unsubdivided land for the purpose of subdividing it and selling it in subdivided lots.  In furtherance of its intention the owner had a survey plan prepared and had made application for the approval of that plan to the relevant local authority.  The plan was approved in principle.  The owner had given careful consideration to the proposed subdivision, had finance for the development in place and had spent considerable amounts in relation to the subdivision application.  On the question whether those facts gave rise to a claim for special value Hardie J said (at 1256):

“the authorities lead me to the conclusion that the subject land had some special value to the plaintiff company over and above its market value.  The matters and considerations that have caused me to reach that conclusion arise from the relationship of the plaintiff company to the subject land.  The plaintiff company was incorporated to acquire, develop and sell the land.  The finance for the project was to be provided equally by the two owners of the shares of the company ... Between the date of the contract to purchase the land and the date of its resumption the company had given close and careful consideration to the problems associated with the proposed subdivision.  It had paid stamp duty and legal fees to acquire it; it had also paid survey fees and engineering fees, and the Council fee in relation to the subdivision application.  The knowledge and experience acquired by [the director of the plaintiff] and the time spent by him in examining the land and taking steps appropriate to ensure an expeditious approval of the subdivision were, in the event that happened, of no value to the company.”

His Honour also pointed out that the resumption had deprived the plaintiff of a profitable venture and that it would take some months for it to re-establish itself in the business of selling vacant land in the subdivision.  His Honour then continued:

“I am satisfied that the plaintiff company would, rather than lose the opportunity of acquiring the land, have paid a price substantially in excess of the market value of £19,500.  I am of the opinion that the plaintiff company, having expended £840 in the project over and above the deposit paid and being in a position to proceed at once and expeditiously with the completion of the purchase and with the subdivision and the sale of the land, would have been prepared to pay an additional £2,500 over and above the market value of the land.”

Kennedy Street was approved by a majority of the Full Court in New South Wales in Chapman v The Minister [1966] 2 NSWR 65 and both cases were cited with approval by Starke J in Yarn Traders Pty Ltd v MMBW [1970] VR 427 at 430.

It was submitted that Kennedy Street is only authority for the proposition that special value is to be determined by how long it would take a dispossessed owner to be in the same position on an alternative site as he was at the date of resumption in respect of the resumed site.  It is quite clear that is not the ratio of Kennedy Street.  Kennedy Street stands for the proposition that special value is recoverable when the dispossessed owner has been deprived of land that he is in a position to develop at once and expeditiously.  That advantage gives to the dispossessed owner a benefit over and above the market value of the land.  It is true that in Kennedy Street Hardie J did refer to the fact that it would take the plaintiff some time (around two to three months) to re-establish itself in the business of selling vacant land.  As the reasons make clear the plaintiff was deprived of a number of advantages by reason of the resumption “one of the most important being the length of time reasonably required by the plaintiff to re-equip itself for [its] business” (emphasis added): see [1965] NSWR at 1256.  The plain reading of the case shows that special value was assessed not only by reference to the time the plaintiff might have taken to re-establish itself but also by reference to the other factors identified by Hardie J as representing the opportunity foregone by the resumption.

The second decision to which reference should be made is Baringa Enterprises.  In that case the dispossessed owner had acquired land for the purposes of development as a joint shopping and residential site.  It spent money in bringing the land to a point where it was “in a condition ripe for development”: [1965] LGRA at 204.  Hardie J found that the owner would have been able to undertake the development with less waiting and preparatory time than a new owner (that is a hypothetical purchaser) and “thus the plaintiff company would have had an advantage over other purchasers, in that it would not have had to bear so much by way of carrying costs; also it would have had some benefit from the substantial expenditure by way of fees paid to architects and others for and in relation to the plans and specifications”: [1965] LGRA at 205.  His Honour also found that the dispossessed owner could have obtained building approval for a type of development better than and more extensive and more profitable than could have been obtained by a new owner.  The reasons do not disclose why this was so.  Accordingly, Hardie J concluded that:  “Looking at the matter from all aspects and bearing in mind the plaintiff’s substantial expenditure on the project over and above the cost of the land, some of which gave the land an added value in its hands and some of which was not reflected in added value the land had a special value over and above its market value to the dispossessed owner.”: [1965] LGRA at 205.

It is apparent that Hardie J considered that the land had special value to the owner not only because the dispossessed owner could undertake a development that was more profitable than a development undertaken by a hypothetical purchaser but also because the dispossessed owner was in an advantageous position for the reason that it could undertake its development more expeditiously than could a hypothetical purchaser.

Baringa cannot be explained on the basis that it is concerned with compensation for the time taken to acquire an alternative site.  Baringa is an application of the principle found in Kennedy Street, namely that land will have a special value to its owner if that owner is in fact in a position where he can develop that site more expeditiously than could the hypothetical purchaser.

There are three further observations we wish to make about Kennedy Street and Baringa.  First, the effect of these cases is that the advantage of being in a position to quickly realise the potentiality of resumed land is, as a general rule, to be treated as part of the special value of the land and not as a factor to be taken into account in assessing its market value.  This accords with our view of how market value is to be determined. 

The second observation is that in deciding whether land has special value to the dispossessed owner (or even in deciding whether certain advantages should be taken into account in assessing the market value of land) the decision is to be made in the context of what a dispossessed owner in the position of a prudent purchaser would pay for the land.  True it is that the cases give guidance on how that sum is to be determined.  But common sense has some part to play in this exercise.  And we think that the principles set out in Kennedy Street and Baringa are neither more nor less than an application of common sense to the question: How should the compensation payable to a dispossessed owner be determined?

The final observation we wish to make is that in assessing Yates’ claim for compensation Cripps CJ himself had formed the view, without the benefit of any argument, that Yates was entitled to be compensated for the fact that it had progressed its proposal to the point where that proposal was about to be implemented.  Cripps CJ recognised that Yates would bid more for the land in that circumstance than would a hypothetical purchaser.  The fact that Cripps CJ was able to reach that view without argument demonstrates how obvious it was that Yates was entitled to compensation for the work etc. undertaken by it to be in that position.

The learned trial judge did not determine whether Spencer’s Case required the economic value to Yates of being in a position to develop the land to form part of the market value of the land or whether it was to be brought to account as special value.  Her Honour held that it was not necessary for that issue to be decided.  She described the relevant issue to be, at least so far as the case against counsel was concerned, whether they were negligent in forming the views which they did as to the proper understanding of Spencer’s Case.  Her Honour found that the views held by counsel “were views which it was reasonably open to barristers of their respective seniorities experienced in valuation law to hold”.  She also found that having regard to the manner in which evidence of special value was to be given by the valuers to be called by Yates, counsel were not under a duty to require those valuers to consider and give evidence concerning every alternative method of assessing special value which could be advanced consistent with legal principle.

With regard to the claim against Abbott Tout the learned trial judge found that there was no negligence by that firm in the conduct of its retainer.  This was for the reason that it was reasonable for Abbott Tout to accept the appropriateness of the approach taken by counsel and that the firm’s failure to advise Yates that there was some other basis upon which special value could be propounded did not mean that they failed to conform to the standard of reasonable care demanded by law.  Moreover, her Honour said that even if Abbott Tout had given advice that there was some other basis to claim special value, counsel would have advised to the contrary and counsel’s advice would have prevailed with the liquidator.  Accordingly, her Honour concluded that even if Abbott Tout had been negligent that negligence was not causative of any loss.

We propose to consider the claim against Abbott Tout before dealing with the position of Mr Webster although many of the issues that will be discussed are common to both claims.

It was not in dispute before the trial judge or before this Court that Abbott Tout owed Yates a duty to exercise due skill and care in the performance of its retainer.  The parties proceeded on the assumption that the source of that duty was both the contract of retainer (arising from an implied term perhaps of the Liverpool City Council v Irwin [1977] AC 239 variety) and the common law of negligence.  They also proceeded on the assumption that the content of the duty arising under the contract was necessarily co-extensive with that imposed by the common law.  Neither assumption appears to be correct.  In Hawkins v Clayton (1987-1988) 164 CLR 539 the High Court confirmed the trend of authority in England and elsewhere that a solicitor owed to his client a duty of care arising under the common law of negligence.  According to Deane J, the consequence of this was that there was no need for the implication of a contractual term which imposed a contractual duty that was co-extensive in content and concurrent in operation with the duty that exists under the common law: see Hawkins at 585.  Mason CJ and Wilson J, who were in the minority in the result of the case, agreed with Deane J on this aspect of the case.  However, as Deane J made clear, the fact that a term would not be implied imposing a duty that was co-extensive with that imposed by the common law did not mean that a particular duty of care could not be implied in a particular case. 

To resolve whether Abbott Tout failed to exercise due skill and care in the performance of its retainer first it is necessary to consider two preliminary issues: viz (a) what work Abbott Tout required to perform under its retainer; and (b) with what standard of care Abbott Tout was required to carry out that work.

According to the pleadings it was accepted that in late 1985 Abbott Tout was retained to “conduct the Land and Environment Court proceeding on behalf of” Yates.  When a solicitor is retained to conduct a proceeding on behalf of a dispossessed owner before the tribunal charged with the task of assessing the compensation that is to be paid to that owner the principal duties of the solicitor are to take full instructions to enable the solicitor to consider and advise his client how the compensation to which his client is entitled is to be determined, to give that advice and then to assemble the evidence that must be led to enable the tribunal to properly assess the compensation that is to be paid.  We have assumed that counsel will be retained to appear before the tribunal.

In its submissions Abbott Tout put forward two bases for contending that its retainer did not require it to consider and advise Yates how the compensation payable to it should be assessed.  The first was that, as a matter of law, when a client retains a solicitor to conduct litigation and to brief counsel to advise and appear in that litigation the solicitor is under no obligation to provide any advice on any substantive aspects of the litigation except as may be specifically requested by the client.

This extraordinary submission should be rejected.  First, it is inconsistent with authority.  In Hawkins v Clayton, supra, Deane J, with whom Mason CJ and Wilson J agreed, said that the relationship of solicitor and client is a relationship of proximity which ordinarily gives rise to a duty of care requiring the solicitor to take steps to avoid the client suffering foreseeable economic loss.  That duty cannot come to an end merely because counsel has been retained. Secondly, the submission completely loses sight of the fact that a solicitor is retained by a client because the solicitor is a professional person who by his training and qualifications is able to provide advice to his client on matters of law.  When a solicitor is retained to conduct litigation his function is to further his client’s interests in that litigation.  That is what he is qualified to do and that is why he is paid a fee.  The solicitor does not cease to be obliged to carry out that function because counsel has been retained.  In that circumstance the client is entitled to receive the professional advice and assistance of both the solicitor and counsel.  To suggest that a solicitor has no role to play in the substantive aspects of a case once counsel has been retained is to misunderstand the role of a solicitor and to ignore the fact that the client places reliance upon the solicitor to take care to ensure that the client does not suffer any avoidable loss.

The second basis that was put forward to support the contention that Abbott Tout had no responsibility for providing substantive advice to Yates arises from correspondence in late 1986 and early 1987 between Abbott Tout and the liquidator of Yates.  It was said that this correspondence establishes an agreement or understanding that Abbott Tout was to have no role to play in the litigation other than “co-ordinating” the proceeding, whatever that may mean. 

It will be recalled that in 1986 little progress was made in the prosecution of the claim because the liquidator did not have the agreement of the secured creditors of Yates to provide the necessary funds.  This led to the following exchange.  On 19 November 1986 the liquidator wrote to Abbott Tout advising that the secured creditors (there were three secured creditors each of whom held a debenture over the assets of Yates) were prepared to release $40,000 to enable valuations to be prepared and exchanged with the Authority conditional upon receiving from Abbott Tout an undertaking that it would be prepared to instruct counsel to complete the valuations and that Abbott Tout would co-ordinate the legal side until the valuations were exchanged.  On 20 November 1986 Abbott Tout wrote to the liquidator advising him that it would be prepared to proceed to the exchange of valuations provided it received a certain sum, not $40,000 that had been offered, on account of costs and disbursements.  Then on 13 January 1987 the liquidator wrote to Abbott Tout as follows:

“I advise that I require you to complete the co-ordination of the legal side of the valuation of the property at Darling Harbour which was resumed by the Darling Harbour authority.”

In the letter the liquidator requested that a deed be prepared to formalise the matter and that the deed should incorporate the following provision:

“Abbott Tout Greer Wilkinson - your agreement to provide the required legal services to complete that valuation to exchange stage, including responsibility for the fees of (counsel), for an amount of $45,000 of which $30,000 is payable now and $15,000 is payable from any additional realisations in the administration shares fifty per cent with any outstanding fees of the liquidators.”

The following observations can be made about this correspondence.  First, whatever was to be the nature of the arrangement that was contemplated by the liquidator no such arrangement was ever concluded.  The evidence does not disclose why the liquidator and Abbott Tout did not enter into the deed proposed by the liquidator but one obvious reason is that it would have been apparent shortly after this exchange of correspondence that the valuations could not be finalised speedily and certainly not at a cost of $45,000.  As things turned out it took Yates another three years and many hundreds of thousands of dollars in fees to be in a position to exchange valuations with the Authority.  Second, and more importantly, the correspondence does not suggest that Abbott Tout was to confine itself to the role of a “co-ordinator”.  The letter of 13 January  1987 spoke of Abbott Tout providing “the required legal services” to complete the valuations.  That does not mean that Abbott Tout was entitled to treat its retainer or its duties under that retainer as one that permitted it to provide a reduced level of “legal services” such that the obligation to provide legal advice was eliminated.

What then is the standard of care in accordance with which Abbott Tout was required to carry out its retainer?  Generally the standard is expressed to be that of a reasonably competent and diligent solicitor: see Charlesworth & Percy on Negligence (7th ed) para 9-87; Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] 1 Ch 384 at 403.  In Voli v Inglewood Shire Council (1962-1963) 110 CLR 74 at 84 Windeyer J described the obligation of an architect in the performance of his professional work as “the ordinary liabilities of any man who follows a skilled calling”.  His Honour explained those liabilities:

“He is bound to exercise due care, skill and diligence.  He is not required to have an extraordinary degree of skill or the highest professional attainments.  But he must bring to the task he undertakes the competence and skill that is usual among architects practising their profession.   And he must use due care.  If he fails in these matters and the person who employed him thereby suffers damage, he is liable to that person.  This liability can be said to arise either from a breach of his contract or in tort.”

The question that arises in this case is whether it is appropriate to impose a standard of care on Abbott Tout which is to be measured by reference to what a reasonably competent solicitor would be required to do or whether it is proper to impose some higher standard.

In the last fifteen years or so there have been two significant changes in the nature of the practice of solicitors.  The first is that there has been a sharp increase in the size of firms.  Large firms are becoming larger and small firms are merging to become larger.  Secondly, there has been a change in the nature of work that solicitors especially in these large firms do.  Their work has become more specialised.  Few solicitors in large firms carry on a general practice.  This is also increasingly true of smaller firms many of whom specialise in one or two narrow branches of the law.  It has become fashionable to refer to these small firms as “boutiques”.

When a firm, whether large or small, has developed a particular expertise in some area of the law it is difficult to see why as a matter of principle the standard of care in accordance with which that a firm should carry out its professional work should be judged by reference to the standard of care of an ordinary practitioner.  Indeed there is every reason to think that this should not be the case.  Not too long ago a client would utilise the services of one particular firm of solicitors for whatever legal work that client required from time to time.  Nowadays that client will look for advice from a firm that is expert in that area of the law that is of concern to the client.  He may even use two or three firms in one matter where that matter involves discrete areas of the law and one firm is not expert in all of those areas. 

When a client retains a firm that is or professes to be specially experienced in a discrete branch of the law that client is entitled to expect that the standard of care with which his retainer will be performed is consistent with the expertise that the firm has or professes to have.  Such a client would no doubt be justifiably dismayed if he was told that the firm that he has retained because of its experience is only required to act in accordance with the standards laid down for a solicitor who has only a general or even only a little knowledge of the law that is to be applied to the facts of the client’s case.

Thus, the content of the standard of care that is to be owed by a solicitor to his client under the general law should not be confined to the standard of care and skill that is possessed by a person of ordinary competence exercising the same calling.  The standard should reflect the fact that within any one calling practitioners have or profess to have varying degrees of expertise.  The standard of care and skill required of such a person must bear some relationship to that expertise.  In the case of a solicitor who is an expert in a particular branch of the law the requirement should be that the solicitor must carry out his retainer as would a reasonably competent solicitor who is an expert in that particular area of the law.  That is the manner in which the content of the duty of care that is owed by a specialist medical practitioner has been described.  See Rogers v Whitaker (1992) 175 CLR 479 at 483 where the High Court described the standard as “that of the ordinary skilled person exercising and professing to have that special skill, in this case the skill of an ophthalmic surgeon specialising in corneal and anterior segment surgery.”  There is no reason in principle why the standard of care of a solicitor having special skill should not be regarded in the same way.  In   Duchess of Argyll v Beuselinck [1972] 2 Lloyd’s Rep 172 Megarry J considered this issue in relation to a solicitor who had been retained to give advice in respect of a defamation but as part of the retainer was required to deal with certain tax matters as well.  On the question of the appropriate standard of care that was required of the solicitor Megarry J said that there should be an implied term of the contract of retainer that the client was entitled to expect from his solicitor “a standard of care and skill commensurate with the skill and experience which that solicitor or firm has” rather than a uniform standard of care postulated for the world at large.  Although his Lordship approached the issue by considering what term, if any, should be implied in the contract of retainer we are of the opinion that it is the common law and not the contract of retainer that imposes the requisite standard of care on a specialist solicitor.  However, if we are wrong in that regard and the approach by Megarry J is to be preferred then in our view there would be implied into the contract of retainer an obligation to conform with the standard of skill and care commensurate with the expertise the solicitor has or professes to have. 

Next it is necessary to consider whether a reasonably competent solicitor expert in the law relating to the resumption of land should have advised Yates to advance a case that Yates was entitled to compensation for the work it had done to bring the proposed market to a point where it was capable of immediate development.

Subject to one potential qualification there can be no doubt that this is the advice that should have been given and how the case should have been put.  Yates was entitled to be compensated for the economic value of being in a position to commence the market project. To the extent that it added to the market value of the land, some of that work, (for example obtaining a development approval and a building approval), would be the subject of compensation in the ascertainment of market value.  The remainder of the work, for example preparing plans for the market development, engaging the services of a builder and gathering together prospective stallholders, would give the land a special value to Yates.  However, for present purposes it makes no difference whether the balance of the work ought to be taken into account as part of the market value of the land as the respondents allege or as part of its special value as we have held.  Once it is accepted that the work had economic value that value should have been put forward as part of the compensation to which Yates was entitled whether for the purpose of assessing the market value of the land or in the assessment of the special value of the land to Yates.  That is to say, a competent solicitor experienced in the law relating to the resumption of land would have appreciated that Yates was entitled to compensation as a result of being in a position to immediately develop the land and he would have advised Yates to put forward that claim whether the solicitor was of the view that the proper characterisation of the claim was as an element of the market value of the land or as an element of its special value.  If there was any doubt about the proper characterization of the claim, the advice to give was that the claim should be put as falling under one or other head of compensation.

We would go one step further and hold that a solicitor with experience in the law relating to the resumption of land should have appreciated that the claim represented special value as a consequence of decisions such as Kennedy Street and Baringa which a competent solicitor expert in the area would be familiar with.  But, as we say, that is really of no consequence once it is appreciated that the claim could be put on the basis that compensation must be awarded under one head or another.

Implicit in this conclusion is the rejection of the view accepted by the trial judge that there was no negligence involved in failing to advance alternative methods of valuation provided they were consistent with legal principle.  There are a number of reasons why that view should be rejected.  First, it is not suggested that every possible alternative method of assessing value should be put forward.  Of course allowance should be made for the exercise of judgment in that regard.  Second, the respondents accepted, or at least they did before the trial judge, that it was obvious that Yates was entitled to be compensated for the advantageous position that it was in at the date of resumption.  So the issue here is whether this obvious claim should have been put forward.  Third, in the early days of the case Abbott Tout had been advised by senior counsel (Mr Hemmings QC) that if a claim for compensation was advanced that was reliant on hypothetical calculations of income, expense, profit and the like there was a real risk that to the extent the claim was dependent on such calculations it would be rejected.  The claim which we are of the opinion should have been put forward is one that does not suffer these disadvantages although it does still require the giving of evidence of anticipated costs etc.

We mentioned earlier that there was a potential qualification to our conclusion that Yates’ claim should have included a claim for compensation based on its advantageous position at the time of resumption.  The qualification is this.  It might be said that having regard to the way in which Mr Woodley put forward his method of determining the market value of the resumed land and Messrs Parkinson and Egan put forward their method of determining its special value, it would be inconsistent with or might adversely affect those claims if an alternative method of assessing compensation was to be argued.

However, we are of the view that this qualification cannot affect the conclusion that we have reached.  The fact is that no consideration was ever given to the question whether there might be some adverse impact on the nature of the claims as formulated if an alternative method of assessing value was pursued.  If that had been the subject of consideration then the issue in this case would have been whether the decision not to propound an alternative claim was a competent decision.  That would give rise to very different considerations. 

Is Abbott Tout able to avoid liability because it followed the advice of counsel in relation to the manner in which the case was to be run?  It will be recalled that this was the basis upon which the trial judge dismissed the claim against Abbott Tout.

We see real difficulty with the conclusion reached by the trial judge.  In this case the defence of reliance on counsel is a curious one.  It seems to be based on the evidence given by Mr Schwaiger.  He was asked whether he considered that there might be an advantage to Yates in the development it planned by comparison with any other developer who wished to undertake a similar development on the land.  His answer was, “I gave no independent consideration to that.  I was guided by and obtained and followed the advice of counsel.”  It might be thought from this answer that Abbott Tout had requested either Mr Simos or Mr Webster to advise on the issue and, having received that advice, rejected the possibility of a claim along the lines suggested.  But that was not the case.  Neither Mr Simos nor Mr Webster was asked to give any advice on what were the possible heads of compensation.  Indeed Mr Webster made it perfectly clear in his evidence that he regarded himself as not having been briefed to give any advice at all and Mr Simos was not asked to give any advice on the substantive aspects of the claim and only saw the valuers’ reports when they were in final form. 

The picture that emerges from the evidence is that it was the valuers and not the lawyers who decided what was to be the proper formulation of the claim for compensation; that is to say how the claim for market value and how the claim for special value should be formulated and quantified.  The only advice that Mr Webster or Mr Simos provided to Abbott Tout with regard to the appropriateness of the approach taken by the valuers was their lack of critical comment on the valuations that had been prepared.  The reason why Mr Schwaiger gave no independent consideration to the matter put to him was his assumption that if either Mr Webster or Mr Simos was of the opinion that there might be a problem with the approach of any of the three valuers he would say so.  Is that a sufficient discharge of the duties owed by Abbott Tout?

It has often been said that a solicitor will be absolved from a finding of negligence where he has obtained and acted upon the opinion of counsel: see e.g. Francis v Francis [1956] P 87 at 96.  But this statement should not be taken too far.  In the first place a solicitor will not be exonerated from exercising due skill and care merely because he has taken the advice of counsel.  If a solicitor does take the advice of counsel on a particular point, the solicitor is still under an obligation to turn his own mind to the subject.  He cannot blindly follow the advice of counsel: see Davy-Chiesman v Davy-Chiesman  [1984] 1 All ER 321 at 333-334  and Orchard v South Eastern Electricity Board [1987] 1 QB 565 at 579 each being a case concerned with whether a “wasted costs order” should be made against a solicitor but is nevertheless instructive on the point under consideration.

Secondly, it may be accepted that a solicitor who does not have specialist experience in a particular field is entitled to rely heavily on counsel.  It is proper for a solicitor who conducts a general practice to rely on the Bar to obtain specialist advice.  It may be that for many solicitors who have no particular experience in an area of law counsel is the source of specialist advice.  In such a case the solicitor will only be guilty of negligence if counsel’s advice is obviously wrong - that is so wrong that the error should be obvious to a reasonably competent solicitor.  But a solicitor with expertise in an area of the law cannot rely on counsel to the same degree.  Of course a solicitor expert in a field will also seek the advice of counsel.  Sometimes he will do so to obtain a second opinion.  Sometimes the solicitor will be asked by his client to obtain counsel’s advice.  Sometimes the solicitor may be too busy to deal with a problem himself and for that reason will obtain the services of counsel.  But for whatever reason counsel’s advice is sought, when the specialist solicitor receives that advice he is well placed to consider it and form his own view about its correctness.  In our view there is no justification for the conclusion that he is absolved from that task merely because he has taken the advice of experienced counsel.

What then is the position of Abbott Tout?  It had expertise in the law relating to the resumption of land.  According to the evidence Abbott Tout had partners who specialised in land and environment matters.  One of those partners was initially deputised to handle the claim on behalf of Yates.  But when Mr Schwaiger, who had no knowledge of the area, took over the conduct of the case that partner had little further involvement in the claim.  Nor did any other member of Abbott Tout who had specialised knowledge of the law relating to the resumption of land.  The reality is that the manner in which Abbott Tout carried out the retainer made it impossible for it to provide any substantive advice to Yates, advice that Yates was entitled to expect.

Thus, we have no difficulty in reaching the conclusion that Abbott Tout was negligent in failing to advise Yates how its claim should properly be presented in the Land and Environment Court and what evidence should be led to substantiate its claim.  That counsel who had been retained to appear on the claim did not alert Abbott Tout to any deficiency in the experts reports does not absolve Abbott Tout from its obligations.

The final issue that must be considered in connection with the claim against Abbott Tout is whether Branson J was correct in holding that if Abbott Tout had given proper advice that advice would have been rejected by the liquidator in favour of counsel’s advice and thus its negligence was not causative of any loss.

This was a finding of fact by the trial judge which was not based on her Honour’s observation of the demeanour of any witness.  It was a finding based on inferences drawn from evidence that was not in dispute.  Accordingly, this Court is free to review the evidence to decide whether the finding was wrong: see generally Devries v Australian National Railways Commission (1992-1993) 177 CLR 472.

There are a number of reasons why we are of the opinion that the finding was in error.  The first and most important reason is that the trial judge assumed that the decision to reject the advice of Abbott Tout (if given) in favour of counsel’s advice rested with the liquidator alone.  In this regard her Honour overlooked the fact that the decision to pursue the claim and decisions concerning the prosecution of the claim were primarily decisions taken by the secured creditors or by the secured creditors in conjunction with the liquidator.  If there had been a conflict of opinion between Abbott Tout on the one hand and counsel on the other, the conflicting views would have been passed onto the secured creditors in accordance with the practice which the liquidator had adopted of keeping all creditors, in particular the secured creditors, informed of all aspects of the case.  Whether the liquidator would have rejected the advice of Abbott Tout in favour of the advice of counsel would have depended in no small measure on the views of the secured creditors who were to a significant extent funding the claim.  There was no evidence before the court which would enable it to form any opinion whatsoever about the attitude of the secured creditors if presented with conflicting legal opinions.

Second, the finding ignores the evidence given by the liquidator that if confronted with conflicting legal opinions he would have taken the advice of the court.  It is not unusual for a liquidator to ask the court for directions if there is doubt how he should proceed in relation to a particular aspect of a liquidation. 

Third, the finding also ignores the evidence of the liquidator that he may have obtained independent advice from other counsel to resolve any conflicting views of the lawyers that may have been presented to him.  Indeed it would not be surprising if the secured creditors would have pressed the liquidator to take that step and, if the liquidator refused to do so, for the secured creditors to take that step themselves.

Fourth, the trial judge assumed, without any justification, that there would have been a clear conflict between the advice of Abbott Tout, if properly given, and the views of counsel.  We say that this assumption was without justification because as Mr Simos himself said in his evidence, it was obvious that Yates was entitled to be compensated for the work etc. in bringing the proposed development to a stage where it could proceed immediately.  His view was that this compensation should form part of the calculation of the market value of the land and not its special value to Yates.  If counsel had given that advice the liquidator may well have said:  “Good, make sure that there is evidence before the Land and Environment Court to enable Yates to recover the compensation to which it is entitled.  I do not care whether you present it as part of the market value of the land or as part of its special value to Yates.  That is of no concern to Yates as long as it recovers the compensation to which it is entitled.”

We can now turn to consider the claim against Mr Webster.  It will be convenient to defer dealing with the issue of immunity from liability based on Gianarelli until we have dealt with the merits of the allegation that Mr Webster was guilty of negligence.

Here again there is preliminary observation we wish to make about the conduct of the case before the learned trial judge.  Each side called expert evidence on the question of the negligence of counsel.  On behalf of Yates senior counsel was called to express an opinion on what advice a barrister should have given to Yates in relation to its claim for compensation for special value.  Senior counsel was also called to give evidence on behalf of Mr Simos.  He expressed the opinion that the views that led Mr Simos and Mr Webster to prepare and present the case in the manner they did could reasonably be held by competent counsel.

In dealing with the claim against both counsel the learned trial judge said that she “considered it appropriate to place reliance principally on the expert evidence in considering the issue of whether the conduct of the respondents in failing to advise of the existence of, or to propound or cause to be propounded on behalf of [Yates] conformed to the standards of reasonable care demanded by the law, of competent legal representatives in their respective positions”.  Her Honour merely “attach[ed] weight to [her] own reading of the [relevant] authorities”.

Although no point was taken in this Court that the expert witnesses should not have been called we wish to express our own view on the undesirability of leading this type of evidence in a claim for negligence against a legal practitioner.  In Midland Bank, supra, at 402 Oliver J said:

“I must say that I doubt the value, or even the admissibility, of this sort of evidence, which seems to becoming customary in cases of this type.  The extent of the legal duty in any given situation must, I think, be a question of law for the Court.  Clearly, if there is some practice in a particular profession, some accepted standard of conduct which is laid down by a professional institute or sanctioned by common usage, evidence of that can and ought to be received.  But evidence which really amounts to no more than an expression of opinion by a particular practitioner of what he thinks that he would have done had he been placed, hypothetically and without the benefit of hindsight, in the position of the defendants, is of little assistance to the Court; whilst evidence of the witnesses’ view of what, as a matter of law, the solicitor’s duty was in the particular circumstances of the case is, I should have thought, inadmissible, for that is the very question which it is the Court’s function to decide.”

See also Permanent Trustee Australia Ltd v Boulton (1994) 33 NSWLR 735; Ergopex Pty Ltd v Meerkin & Apel (1996) V.Con.R 54-550 at 66,555-66,556. 

It may be, as was suggested during the course of argument, that evidence of the type that was led in this case is now admissible under s 80 of the Evidence Act 1955 (Cth) by which opinion evidence is not inadmissible only because it is about a fact in issue or an ultimate issue.  We do not express any opinion on whether the evidence would be admissible under that section.  But what we wish to point out is that we regard such evidence of little assistance for the reasons expressed by Oliver J.  We think that a court is well placed to determine the liability in negligence of a legal practitioner without the aid of such evidence where questions of particular practices do not arise.  Moreover, a court runs a real risk of falling into error when it places principal reliance on the expert testimony of witnesses instead of forming its own view of the applicable principles of law, the duties owed by barristers and solicitors and the appropriate standards in accordance with which those duties must be performed.  As we have said, no point about the evidence was taken in this case.  Indeed, no party was in a position to make any complaint for the reason that each side tendered and relied upon the expert testimony of senior counsel.  But we would wish to discourage the leading of such evidence in future cases.  It has a tendency to distract the court from a proper adjudication of the issues that fall for determination in a negligence action.  If by reason of s 80 of the Evidence Act such evidence is tendered then the only appropriate use to which the evidence should be put is to confirm the views of the court on a particular issue rather than to inform those views.

The position of Mr Webster was as follows.  He was junior counsel in the case from its commencement.  He was involved in every aspect of its preparation for trial.  He appeared in many interlocutory hearings, he took part in the collation of a voluminous quantity of documents and he spent much time with the witnesses especially the valuers going over their evidence.  However, Mr Webster did not believe that he was under any obligation to instruct the valuers what should be included in their reports.  He was of the view that that was a matter for the valuers alone.  Moreover, Mr Webster made it clear that he gave no advice to Yates, whether directly or through Abbott Tout, about the formulation of Yates’ claim for compensation.  The position that Mr Webster took in that regard was that he was under no duty to give such advice.  He said that was the responsibility of senior counsel.

If we might say so, this is a remarkable assertion and one that shows a complete misunderstanding of the role of junior counsel.  In our courts most cases are conducted by junior counsel.  But when a case is a difficult or complex one or when it involves a substantial sum of money, the client or the solicitor will form the view that it requires the attention of two counsel and then leading counsel is retained.  That does not mean that the role of junior counsel is diminished.  On the contrary, as anyone who has practised as leading counsel will know, senior counsel places great reliance on junior counsel for all aspects of the preparation of a case for trial.  Further, Mr Webster had been retained to act as junior counsel because of his experience in valuation cases.  Thus, Yates was entitled to expect that Mr Webster would give due consideration to every aspect of its claim.  Yates’ claim was a difficult one.  It was for a substantial sum.  It required proper attention from all the practitioners who had been retained to act on Yates’ behalf.  Indeed, in this particular case it would have been obvious to Mr Webster that his instructing solicitor, Mr Schwaiger, had no experience whatever in valuation or resumption cases.  It would have been equally obvious to Mr Webster that Mr Schwaiger was completely reliant on counsel for direction as to the proper conduct of the claim.  It was quite wrong of junior counsel in those circumstances to act on the assumption that he had no responsibility for any aspect of the advice and decision-making involved in bringing such a large case to trial.

The matter gets worse.  Mr Ian Yates, the former chairman and managing director of Yates and its majority shareholder, was intimately involved in providing instructions to Abbott Tout and counsel on all aspects of the case.  At one stage Mr Yates enquired of Mr Webster whether any special value might be attributed to the resumed land on the basis that Yates had an advantage over a hypothetical purchaser of it because of the advanced state of the proposed development.  Mr Webster did not give this matter any consideration.  The reason that Mr Webster gave for not taking the matter further was that it was firmly in his mind that there was no advantage that Yates had over any other hypothetical purchaser of the land because Mr Webster understood the law to assume that the hypothetical purchaser had exactly the same knowledge as Yates had. 

But Mr Webster did not think to look at the cases to decide whether Mr Yates had a point.  If he had he would have realised that Mr Yates’ suggestion, far from being fanciful, was supported by the cases.  In any event if after having looked at the cases Mr Webster was still of the view that Yates had no advantage over any other hypothetical purchaser of the land for the purposes of a claim for special value Mr Webster could only have reached that conclusion on the basis that the advanced state of the development should be reflected in the market value of the land but the case was not being prepared on that basis.

It is not possible to escape from the conclusion that Mr Webster was negligent in the performance of his retainer.  He was negligent in thinking that he was under no obligation to advise Yates about the formulation of its claim.  He was negligent in his appreciation of how market value and special value were to be determined.  He was negligent in not suggesting either to Yates, Abbott Tout or senior counsel that Yates was entitled to receive compensation for the work it had performed either as part of the market value of the land or in the assessment of its special value.  The reason why Mr Webster was bound to consider how Yates’ claim should be formulated and give advice on that issue is that it was plainly foreseeable that if such advice was not given Yates might suffer loss and, accordingly, it was the function of counsel, both junior and senior, to take care to avoid that loss: Wyong Shire Council v Shirt (1979-1980) 146 CLR 40 at 47-48; Hawkins v Clayton, supra, at 579.

Notwithstanding his negligence Mr Webster claims immunity from liability.  Is he entitled to that immunity?  It is now clearly established for reasons of public policy that at common law a barrister is immune from liability for negligence in his conduct of litigation: Rondel v Worsley  [1969] 1 AC 191; Saif Ali v Sydney Mitchell & Co [1981] AC 198; Gianiarelli v Wraith, supra.  The considerations of policy that support the immunity are: (a) a barrister has an overriding duty to the court which requires the exercise of an independent judgment in the conduct and management of a case; (b) the barrister is concerned not only to achieve the most favourable possible outcome for his client but also with the proper and efficient administration of justice; and (c) the due administration of justice requires that collateral challenge to decisions of a court be avoided: Macrae v Stephens, (unreported, Court of Appeal New South Wales, 18 October 1996) per Beazley JA at 18.

The immunity is not confined to in-court negligence.  In Gianiarelli at 559-560 Mason CJ explained that:

“It would be artificial in the extreme to draw the line at the courtroom door.  Preparation of a case out of court cannot be divorced from presentation in court.  The two are inextricably interwoven so that the immunity must extend to work done out of court which leads to a decision affecting the conduct of the case in court.  But to take the immunity any further would entail a risk of taking the protection beyond the boundaries of the public policy considerations which sustain the immunity.”

Once it is accepted that the immunity does not cover all work which a barrister does outside court the question that arises is what is the test to be applied to determine what out of court work is and what out of court work is not covered by the immunity.  Where is the line to be drawn?  In Saif Ali it was accepted by a majority of the House of Lords that the position was best expressed by McCarthy P in Rees v Sinclair [1974] 1 NZLR 180 at 187:

“Each piece of before-trial work should, however, be tested against the one rule; that the protection exists only where the particular work is so intimately connected with the conduct of the cause in Court that it can fairly be said to be a preliminary decision affecting the way that cause is to be conducted when it comes to a hearing.  The protection should not be given any wider application than is absolutely necessary in the interests of the administration of justice ...”.

This formulation was also accepted by Mason CJ in Gianiarelli (see 165 CLR at 579) and by implication by Wilson and Dawson JJ each of whom regarded the common law position to be correctly stated by the majority in Saif Ali. 

The formulation of the relevant principle by Brennan J in Gianiarelli is to a similar effect.  He said (at 579):

 “neither a barrister nor a solicitor may be sued by a client in respect of any act done or omission made in the conduct of the client’s case in court or in the making of preliminary decisions affecting the way in which the case is to be conducted when it comes to a hearing.”

In this case the issue that requires consideration is whether the failure to advise of the existence of an item of compensation and the failure to take the steps that should have been taken to have that item of compensation properly assessed so that it could be reflected in the award of compensation, albeit as an alternative method of assessing compensation, falls within the immunity.

A convenient starting point to consider this question is to return to the decision of Saif Ali where the House of Lords held that on the facts of the particular case the immunity from suit did not attach.  There a barrister had been briefed to draw proceedings for a claim to be made by a passenger who was injured in a motor car accident.  He drew a claim against the owner of one of the two vehicles involved in the collision on the basis that the driver of the other vehicle was the owner’s wife and she had been driving as his agent.  The barrister did not advise that there was a cause of action against the wife or against the driver of the car in which the plaintiff was a passenger.  The claim against the owner was discontinued but by that time the claim against the two drivers had become statute barred.  The barrister was sued for negligence.  It was held that the claim fell outside the area of immunity.  The case stands as authority for the proposition that a barrister will not take the benefit of the immunity if he negligently fails to advise on the existence of cause of action and against whom that action lies.

Here the complaint is of a different character.  It is that the barrister failed to advise on an item of loss in respect of which compensation was recoverable.  In the case of a common law claim for negligence arising out of a motor car accident comparable negligence would be the failure to advise that a head of damage, such as loss of earnings or loss of earning capacity, is recoverable if the defendant is found to be negligent.

Such a complaint is concerned with conduct that is not in any relevant sense inextricably linked with the presentation of a case in court in that it affects the way in which the case is to be conducted in court.  True it is that the conduct may dictate the way in which a case is run in the sense that a particular head of damage will not be claimed.  But it is not intimately connected with any particular conduct that takes place in court so that it might be described as a preliminary decision, that is preliminary to decision-making that takes place in court. 

In Macrae, supra, it was suggested that counsel’s negligent advice whether there is a cause of action may fall within the immunity: see Macrae, supra, at 24-25 per Beazley JA.  We do not think that this is correct.  It is inconsistent with Saif Ali where the substance of what the barrister did was to fail to advise on the existence of a cause of action against a prospective defendant.  It is also inconsistent with the need to ensure that the immunity does not extend beyond the policy considerations that give rise to it.  Advice concerning the existence or otherwise of a cause of action has no relevant connection with the in-court conduct of counsel in the sense that no act of counsel in court depends upon that advice or the failure to give it.  The in-court conduct is not dependent upon the failure to plead a case against a particular defendant nor is it dependent upon the failure to plead a cause of action against an existing defendant.  The same is true when the complaint is that an item of damage should have been but was not included in the claim. 

Accordingly, we are of the opinion that Mr Webster is not immune from suit in respect of his negligence.  We should also mention that Abbott Tout did rely on the immunity as well but its conduct does not fall within it for the same reason the immunity will not avail Mr Webster and for the additional reason that Abbott Tout did not engage in any conduct as counsel: of course the immunity would extend to a solicitor acting as counsel.

The appeals should be allowed.  The orders made by the trial judge on 5 June 1997 dismissing the application against Abbott Tout and Mr Webster should be set aside and in lieu thereof it should be ordered that the proceeding be remitted to a judge of the Court for the assessment of damages.  In the absence of agreement it will not be possible for that judge to be the trial judge because of facts disclosed to her Honour during the argument on costs.  The order as to costs made on 14 August 1997 should be set aside.  If, after taking into account the damages for special value Yates has already received, Yates recovers further damages then it should have its costs of the trial.  In that event although Yates’ substantive appeal against Mr Simos did not proceed, we do not consider that he is entitled to his costs of the trial: compare Ritter v Godfrey [1920] 2 KB 47 at 60-61.

Associate:

Dated:              5 August 1998

Counsel for the Second                     JLB Allsop SC

Respondent:                                      PR Whitford

Solicitor for the Second                     Corrs Chambers Westgarth

Respondent:                                                 

Counsel for the Third                         R Conti QC

Respondent:                                      S White

Solicitor for the third                          Moray & Agnew

Respondent:

Date of Hearing:                                16-20 March 1998

Date of Judgment:                              5 August 1998