FEDERAL COURT OF AUSTRALIA

Gore v Montague Mining Pty Ltd [2000] FCA 1214

NEGLIGENCE – CAUSATION – documentation of arrangements between mining tenement holders and mining entrepreneur – mining entrepreneur retained solicitor – solicitor failed to recommend insertion of assignment clause – other subsequent negligent advice – client did not give evidence whether such advice, if given, would have been accepted – other evidence that advice might not have been accepted – whether primary judge erred in finding that the solicitor’s negligence caused any loss.

Trade Practices Act 1974 (Cth), s 52

Hall v Foong (1995) 65 SASR 281 followed

Sellars v Adelaide Petroleum NL (1994) 179 CLR 297 followed

Chappel v Hart (1998) 195 CLR 232 followed

Bennett v Minister of Community Welfare (1992) 176 CLR 408 referred to

WCW Pty Ltd v Bolster & Co (unreported, 6 January 1993) cited

Sykes v Midland Bank Executor and Trustee Co Ltd [1971] 1 QB 113 followed

Lillicrap v Nalder & Son [1993] 1 All ER 724 referred to

Hanflex Pty Ltd v N S Hope & Associates [1990] 2 Qd R 218 (Full Court) followed

PETER L GORE & ORS v MONTAGUE MINING PTY LTD

N 1494 OF 1999

HILL, CARR & SUNDBERG JJ

30 AUGUST 2000

PERTH (Heard in Sydney)

On appeal from a Judge of the Federal Court of Australia

THE COURT ORDERS THAT:

1.         The appeal be allowed.

2.         The cross-appeal be dismissed.

3.         The judgment given on 22 December 1999 be set aside and in lieu thereof judgment be entered in favour of the respondent against the appellants in the sum of twenty dollars ($20.00) being nominal damages. 

4.         The appellants pay the respondent’s costs at first instance of the negligence issue incurred up to and including 20 August 1998 and the respondent pay the appellants’ costs of that issue thereafter.

5.         The respondent pay the appellants’ costs at first instance in respect of the issue of damages.

6.         The respondent pay the appellants’ costs of the appeal and the cross-appeal.

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

REASONS FOR JUDGMENT

THE COURT:

Introduction

1                     In this matter the appellants appeal from a judgment of a judge of this Court, given on 22 December 1999, awarding damages of $616,200 in favour of the respondent against them for professional negligence.  The respondent cross-appeals on the basis that his Honour should have awarded it a higher sum.  A somewhat unusual feature of the matter is that, although the essence of the respondent’s case was that the appellants were negligent in failing to give the respondent appropriate legal advice, no witness was called by the respondent to give evidence about what it would have done had it received such advice.

2                     There were three hearings before the learned primary judge.  The first hearing was concerned with whether the appellants were liable to the respondent for negligence and breach of contract.  On 23 October 1998 his Honour published reasons for his conclusion that the appellants were liable to the respondent in negligence.  On 18 October 1999, the parties not having been able to reach agreement on quantum, a hearing took place to assess damages.  On 5 November 1999 the primary judge published reasons for his decision that judgment should be entered in favour of the respondent against the appellants in the sum of $561,460.  It became apparent that there had been an incorrect assumption by his Honour in respect of one factor in that calculation, which resulted in the appellants filing a notice of motion seeking variation of the orders made on 5 November 1999.  On 22 December 1999, his Honour published reasons for his conclusion that there should be the adjustment sought by the appellants to the damages awarded.  His Honour also had to resolve a dispute about costs.  That dispute arose out of the fact that the appellants had, shortly before the hearing on liability, offered to settle the application for the sum of $600,000 plus costs.  As his Honour found, that offer was worth more than the judgment awarded some two years later.  In the reasons published on 22 December 1999 his Honour explained why he had decided to order the appellants to pay the respondent’s costs until 20 August 1998 (being a date a few days after the appellants made the offer) and declined the appellants’ motion that the respondent should pay its costs as from the date of that offer.  In their appeal the appellants seek an order that the respondent pay their costs after 20 August 1998, to be taxed on an indemnity basis.

Factual Background

3                     The appellants practise in partnership as solicitors under the name “Clayton Utz”. 

4                     The respondent’s sole director and shareholder was a Mr Paul Montague Williams.  Its paid-up capital was one dollar.  Mr Williams used the respondent as his corporate vehicle for pursuing a gold mining prospect in the Philippines.  The prospect was owned by a Mr Diotrepis Bautista, his wife and their company who have been referred to, collectively, as “the Filipino parties”. 

5                     In September 1996, Mr Williams, on behalf of the respondent, engaged the appellants to act as its solicitors.  He dealt with Mr Peter Gore, a partner in the Brisbane office of Clayton Utz.  Mr Williams engaged the appellants to advise the respondent in relation to negotiations towards establishing a joint venture between the respondent and the Filipino parties.  The retainer was later extended to transactions associated with that joint venture.  On 20 November 1996, a memorandum of agreement (“the MOA”) between the Filipino parties and the respondent was signed.  The appellants and a Philippines law firm retained by them on behalf of the respondent advised it almost from the outset of the negotiations of the MOA and, in particular, in relation to the drafting of that document.

6                     The following description of the terms of the MOA is taken from the primary judge’s reasons.  The MOA contained several recitals.  Recital A read:

“Montague is experienced and has the capability (financial and technical) in carrying out gold mining operations and the treatment of gold bearing ores so as to produce gold metal.”

7                     Recital B referred to the mining tenement held by Mr Bautista (described in the MOA as “DMB”) and recital C to that of Mrs Bautista (“EFB”). Recital D referred to a pending mining tenement application by their company Dopester Minerals Inc (“DMI”) which, if approved, was to form part of the agreement.  Under Philippines law, the respondent, being a foreigner, could not obtain a greater than forty per cent interest in those tenements unless it entered into a Financial or Technical Assistance Agreement (an “FTAA”) with the Filipino parties and that agreement was approved by the Philippines Government.   Recitals E and F read:

“E.      Montague, DMB, EFB and DMI wish to enter into a Joint Venture Agreement (‘JVA’) and a Financial or Technical Assistance Agreement (‘FTAA’) in respect of the areas referred to in Recitals B, C and D on the basis that Montague will hold a 70% interest in each and all of those areas through a project vehicle or structure to be agreed between the parties.  The remaining 30% interest in the project will be held by DMB, EFB and DMI in such manner and in such respective interests as they may agree and such interest shall be considered a fully paid interest in the project.  Until an application for an FTAA is filed, the Filipino Parties will hold a 60% interest in the project and Montague will hold a 40% interest in the project.  When the application/conversion for the FTAA is filed, the Filipino Parties will assign to Montague an additional 30% interest in the project so that Montague will hold a 70% interest in the project.

F.        Montague shall undertake and shoulder the costs and expenses for the exploration with detailed geological studies and/or report with a view to bringing the above-mentioned contract areas into Bankable Project within 2 years PROVIDED THAT if Montague does not bring the above-mentioned contract areas into Bankable Project within 2 years it shall not affect the equity interest in the project which Montague shall otherwise be entitled to under this Memorandum of Agreement.  The contract areas shall be brought into Bankable Project upon Montague’s satisfaction that the project is feasible from an economical, geological, metallurgical and environmental perspective as audited and confirmed by independent sources.”

It is not necessary to set out all twelve clauses of the agreement.  Those considered by the parties to be relevant to this case read:

“1.       The parties shall as soon as possible after execution of this Memorandum of Agreement negotiate the terms of a JVA and FTAA, execute the JVA and FTAA so agreed and apply for all necessary approvals of the relevant Departments of the Philippines Government for the JVA and FTAA or for conversion with respect to the areas referred to in Recitals B and C.  Upon notorisation of each of the contract areas referred to in Recital D, an application shall be made for all necessary approvals of the relevant Departments of the Philippines Government for inclusion in the FTAA.

  2.       . . .

  3.       Within 30 days after the execution of this Memorandum of Agreement, Montague shall pay to the Filipino Parties by way of a loan in such manner and in such proportions as the Filipino Parties may direct in writing the sum of 1,000,000 pesos.  If the payment of 1,000,000 pesos is not made within the said period of 30 days, Montague shall be in breach of this Memorandum of Agreement and Montague will remain liable to pay the 1,000,000 pesos to the Filipino Parties.  Montague shall pay to the Filipino Parties by way of loan in such manner and in such proportions as they may direct a further sum of 1,000,000 pesos on the first to occur of:

            (a)        the approval of the conversion/application for the FTAA by the relevant Departments of the Philippines Government; and

            (b)        six months after the application/conversion for the FTAA is filed.

            When first commercial production of gold is achieved pursuant to the FTAA, the aggregate amount so advanced by Montague to the Filipino Parties shall be repaid to Montague together with interest at such rate and on such terms of payment as are agreed in the FTAA.  The amount so owing together with interest shall be a first charge on the Filipino Parties’ share of production of gold from the project assets.

  4.       Montague shall be the manager and operator for the projects to be undertaken under the FTAA and shall provide all technical assistance to the project.  In consideration of Montague agreeing at no charge to act as manager and operator for the project and to provide all technical assistance to the project, the Filipino Parties have, subject to the filing of an application for a FTAA, agreed to Montague holding a 70% interest in the project instead of a 40% interest.  All costs and expenses incurred by Montague as operator and manager and by way of technical assistance shall be a charge on the joint venture and recoverable as provided in the FTAA.  If the application for the FTAA is not approved within 12 months from the date of application therefor, Montague shall be entitled to a 40% interest in the project and the Filipino Parties shall be liable to pay to Montague the amounts calculated in accordance with clauses 3, 4, 5 and 6 on the basis that they hold an aggregate 60% interest in the project.

  5.       Montague shall be responsible for providing all finance for the initial development of such of the project assets as Montague determines with a view to achieving commercial production of ore at a rate of not less than 500,000 tonnes per annum.  The costs to be financed:

            (a)        include exploration, geological, metallurgical, construction and operating costs incurred prior to a project achieving commercial production of ore at a rate of not less than 500,000 tonnes per annum; but

            (b)        do not include the value of the Filipino Parties’ 30% interest in the project.

            At the request of Montague, the parties shall make available the project assets by way of security to support any borrowings arranged by Montague for the purposes of development of the project assets.  The Filipino Parties shall be deemed to have been lent by Montague an amount or amounts equal to 30% (or 60% if the last sentence in clause 4 applies) of the construction and operating costs of a project as and when those costs are incurred by Montague unless those costs are financed by borrowings secured on the project assets.  The exploration, geological, metallurgical and other costs necessary to produce a Bankable Project shall be met by Montague.  The amount so owing by the Filipino Parties to Montague shall when first commercial production of gold is achieved be repaid together with interest at such rate and on such terms of payments as are set out in the JVA.  The amount so owing together with interest shall be a first charge on the Filipino Parties’ share of production of gold from the project assets.  When commercial production of ore at a rate greater than 500,000 tonnes per annum is achieved, Montague and the Filipino Parties shall thereafter be responsible for funding the project capital and operating costs in accordance with their respective project percentages.

  6.       . . .

  7.       . . .

  8.       . . .

  9.       Pending negotiation of the FTAA, the Filipino Parties shall permit Montague to have access to the project assets to carry out such investigations, geological surveys, drilling operations and feasibility studies as Montague may require.  All such operations shall be at Montague’s own expense but such expense shall be included as project capital costs for the purposes of the FTAA.

10.       Montague and each of the Filipino Parties shall keep all information relating to the project confidential and shall not disclose that information to any third party without the approval of the other parties unless required to do so by law.  If Montague wishes to raise funds for the project privately or on the Australian Associated Stock Exchanges, it may disclose such information relating to the Project as it requires for that purpose.

11.       . . .

12.       If notwithstanding their best endeavours to negotiate in good faith a mutually agreeable FTAA the parties have not agreed and executed an FTAA within 6 months from the date of this Memorandum of Agreement, then either party may notify the other or others in writing that it no longer wishes to be bound by this Memorandum of Agreement.  If any such notice served, the parties shall no longer be bound to each other by this Memorandum of Agreement or on any other basis.”

8                     The sum of one million pesos which, pursuant to clause 3 of the MOA, the respondent had agreed to pay to the Filipino parties was equivalent to approximately $50,000.

9                     By 12 December 1996, Mr Williams had reached agreement with an investment group known as “the Ellis syndicate”, whereby the Ellis syndicate would purchase 1% of the shares in the issued capital of the respondent for $25,000.  Mr Williams retained Mr Gore in relation to that transaction.  Mr Gore recommended that there be substituted an arrangement for a 1% net profit royalty.  Shortly after that date the respondent executed an agreement with the Ellis syndicate under which the syndicate was required to make an immediate payment to the respondent of $25,000.  At much the same time, Mr Williams entered into negotiations with a company called Spinifex Gold NL (“Spinifex”) with a view to the latter taking an interest in the joint venture with the Filipino parties.  On 16 December 1996, Mr Williams showed Mr Gore an agreement which had been signed by two directors on behalf of Spinifex (but not, at that stage, by anyone on behalf of the respondent).  Pursuant to the terms of that agreement Spinifex was to pay $25,000 to the Filipino parties on 16 December 1996 and to pay $100,000 by way of an option fee (for an option to acquire a 51% interest in the joint venture) to the respondent by 31 December 1996.  Mr Williams told Mr Gore that the $25,000 payable by Spinifex, together with the $25,000 paid by the Ellis syndicate would provide the funds necessary for the respondent to pay the first amount which it was obliged to pay to the Filipino parties.  The agreement (as it became) between the respondent and Spinifex contained the following clause:

“3.   Montague represents and warrants to Spinifex that it can assign in the form of a Joint Venture to Spinifex any portion of its interest.”

10                  In fact, the MOA did not contain a clause giving the respondent such right of assignment.  Mr Gore, during his meeting with Mr Williams on 16 December 1996, commented that clause 3 of the proposed agreement with Spinifex provided a warranty of the assignability of the respondent’s interest in the project.  He told Mr Williams “that will require the consent of [the Filipino parties].  You can’t assign any interest without their consent.”  Mr Williams replied “that won’t be a problem.  I can arrange that with the [Filipino parties].  I’m sure that they will consent”.  Mr Gore responded by saying “Well if you can’t obtain their consent that will be a breach of your contract with Spinifex”.  After discussion about other matters, Mr Williams signed the agreement (“the Spinifex Agreement”) on behalf of the respondent. 

11                  At Mr Williams’ request, Mr Gore prepared a draft of a joint venture agreement between the respondent and Spinifex.  Shortly thereafter, two directors of Spinifex (Mr Ron Gajewski and Mr Klaus Eckhof) had meetings with Mr Gore and Mr Williams in Manila.  At that stage Mr Gore had been retained to act also on behalf of Spinifex.  The Australian parties also met the Filipino parties.  The Filipino parties had just found out, from an Australian newspaper report, that Spinifex had paid the respondent $100,000 in relation to the joint venture.  The Filipino parties resented this and informed Mr Williams that they did not wish to work with the respondent any more, but that they were prepared to talk further with Spinifex. 

12                  At a meeting on the following day, 9 January 1997, Mr Gajewski, on behalf of Spinifex made an offer to Mr Williams that if the Filipino parties agreed to Spinifex being involved in the joint venture, it (Spinifex) would allow the respondent to keep the money already received by it and would also issue shares to the respondent by way of a finder’s fee.  Mr Williams agreed to this.  There were further conversations between Mr Williams and the Filipino parties, but they maintained their refusal to deal with the respondent.  Shortly afterwards the Filipino parties entered into an agreement with Spinifex.

The Case at First Instance

13                  The respondent’s case was that the appellants had been negligent and had breached their contract of retainer by failing to cause or attempt to cause a clause to be included in the MOA entitling the respondent to assign the whole or any part of its right title and interest under that document and, further, by failing to give proper advice in relation to the Spinifex agreement. 

14                 Counsel for the appellants submitted at first instance (and on appeal) that the MOA was not, and was not intended to be, a legally binding agreement.  It was, so it was put, only an agreement to agree which imposed, from the point of view of the Filipino parties, some obligation to negotiate in good faith.  The purpose of the MOA was to get the respondent “a seat at the negotiating table”. 

15                 His Honour scrutinised the relevant terms of the MOA and, while acknowledging that they revealed an intention to enter into a later agreement, held that it was “abundantly clear” that it was intended to have immediate legal effect to the extent of its agreed terms.  It was, so he held, a joint venture agreement, notwithstanding the intention of the parties to execute a later, more detailed document regulating the conduct of the venture.  In short, his Honour held that the MOA fell within the first category mentioned in Masters v Cameron (1954) 91 CLR 353 at 360 and created a joint venture relationship within the description of the term “joint venture” given by Mason, Brennan and Deane JJ in United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 10.

16                 In relation to the extent of the appellants’ duty of care to the respondent, his Honour reviewed the authorities, including Hawkins v Clayton (1988) 164 CLR 539, Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642, Citicorp Australia Ltd v O’Brien (1996) 40 NSWLR 398 and Yates Property Corporation v Boland (1998) 157 ALR 30.  He distilled from those authorities the following three propositions:

·          the scope of the matters in relation to which a solicitor has a duty of care to his or her client depends on the terms of the solicitor’s retainer and the ambit of any additional assumed responsibility;

·          in relation to matters within the solicitor’s duty of care, fulfilment of the duty is not necessarily confined to carrying out the client’s specific instructions; in order properly to discharge the duty and protect the client from a real and foreseeable risk of economic loss, it may be necessary for the solicitor to initiate action; and

·          where a client engages a solicitor who professes special expertise in a particular field of law to do work within that field, the relevant standard of care is that of the ordinary skilled solicitor exercising and professing special expertise in that field.

17                  His Honour described Mr Gore’s retainer as a wide one.  As Mr Gore professed special expertise in resources law, including the making of agreements regarding mining projects, it was his duty to take an active, innovative role in devising a form of agreement appropriate to the respondent’s foreseeable needs, in particular needs for finance.  Those foreseeable needs, so his Honour held, clearly included the ability to assign to potential financiers part of its interests in the contract with the Filipino parties (i.e. the MOA).  His Honour found that:

“It was an elementary aspect of the task of documentation for Mr Gore to ensure the proposed MOA was compatible with Mr Williams’ ideas about finance.

. . .

It was incumbent on Mr Gore to take an active role, thinking about the legal problems that confronted, or were likely to confront, Montague and advising Mr Williams how to deal with them.”

18                  His Honour found that Mr Gore had been negligent in both of the respects asserted by the respondent.  We set out below some of the relevant paragraphs from his Honour’s reasons:

“Notwithstanding the obvious need to do so, Mr Gore failed to structure the MOA in such a way as to enable Montague to assign its interest, or part of its interest, without needing to reopen negotiations with the Filipino parties.  Of course, it is conceivable the Filipino parties would have refused to sign an MOA containing an assignment clause, but Mr Gore did not even try them out.  Had he done so, and they had refused to accept such a clause, Mr Williams would at least have had early warning of the problem that confronted him in Manila in January.  He probably would have been able to structure his arrangement with Spinifex in such a manner as to circumvent it.  [This was a reference to the possibility that Spinifex might take shares in the respondent instead of a direct interest in the project.]

. . .

My sympathy with Mr Gore over the meeting of 16 December [the meeting mentioned above at which Mr Gore raised the problem of the Spinifex Agreement containing a warranty relating to assignment] arises out of the time pressures placed upon him.  He was confronted with a client who was anxious to sign the agreement and confident all would work out well.  However, Mr Gore should have recommended against signing the agreement.  By signing the agreement, Mr Williams was putting his company in a dangerous position; it was exposing itself to possible legal action.  As Mr Gore told Mr Williams “… if you can’t obtain their consent that will be a breach of your contract with Spinifex”.  Worse, the statement in cl 3 was clearly a misrepresentation exposing Mr Williams to personal liability under s 75B of the Trade Practices Act 1974.  The effect of the agreement was to deliver both Montague and Mr Williams into the power of other parties: the Filipino parties as to the terms of any consent or, if consent was refused, Spinifex.

Although time was short, there were still three days before the due date for payment of the first one million pesos.  This provided some opportunity to renegotiate the Spinifex deal.  As Montague had no other business activity, one possibility was that mentioned by Mr Gore himself in his evidence, for Mr Williams to issue to Spinifex an appropriate parcel of shares in Montague.  In that way, Spinifex could have achieved the desired interest in the project without renegotiation of the MOA.  According to Mr Wassaf’s [a solicitor called by the respondent as an expert witness] unchallenged evidence, the issue of shares is a common way for parties to avoid pre-emptive rights in a joint venture agreement.  Mr Gore must have known that in December 1996.  It was a course he should have explored rather than allow Mr Williams to put Montague’s head in a noose.” 

19                  His Honour rejected an argument, advanced on behalf of the appellants, that even if Mr Gore had breached his duty to the respondent, no damage flowed from that breach because the “deal” with the Filipino parties “would have come unstuck” in January 1997 in any event.  His Honour expressed the opinion that the MOA legally obliged the Filipino parties to negotiate the terms of, and execute, a JVA and FTAA and apply to the Philippines Government for approval.  However, the respondent had not been entitled to insist that the Filipino parties accept Spinifex.  His Honour said that if the respondent had pressed its rights against the Filipino parties and, in consequence, Spinifex had “been sent packing”, both Mr Williams and the respondent would have been exposed to legal action by Spinifex, Mr Gajewski having made clear that Spinifex would take action to recover its loss.  Moreover, Mr Williams’ negotiations with the Filipino parties would, in his Honour’s view, have been much more difficult.  Not only had he annoyed Mr Bautista by obtaining a $100,000 profit for the respondent without doing any work on the mining tenements, he had diminished the respondent’s image by arguing the desirability of harnessing Spinifex’s expertise and he would have had to recommence the search for a financier.  His Honour found that under those circumstances, it was not surprising that Mr Williams felt he had no option but to accept Mr Gajewski’s offer.  It was simply the best Mr Williams could do under the circumstances created by Mr Gore’s dual breach of duty towards it.

20                  His Honour then turned to the question of damage, and said this:

“Although the extent of Montague’s damage does not fall for consideration at this time, it is necessary for it to demonstrate some damage; damage is one of the elements of the tort of negligence.  This presents no problem to Montague; because of Mr Gore’s negligence it suffered a loss of commercial opportunity, at least.  Loss of an opportunity to obtain a commercial advantage is compensable damage – see, for example, Chaplin v Hicks [1911] 2 KB 786 and Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 – however difficult the task of assessment may be.  Liability is made out. 

Montague is entitled to proceed to assessment of its damages.”

21                  It is not necessary, for reasons which will emerge below, to examine the method adopted by his Honour to assess damages.  Instead, we propose to turn straight to those of the grounds of appeal which we consider to be relevant. 

The Relevant Grounds of Appeal

22                  There were some 42 grounds listed in the appellants’ notice of appeal.  We think that it is fair to say that they challenged every aspect of his Honour’s findings on the question of liability (including reliance or causation), his Honour’s method of assessing damages, his Honour’s decision to allow the respondent to re-open its case on the quantum of damages, and the costs order made against the appellants.

23                  As we consider that the respondent did not discharge its onus of proving that any damage which it sustained was suffered by reason of the appellants’ breach of duty, we shall deal very briefly with some of the appellants’ other arguments and then proceed to the matter of causation.

24                  In oral submissions to us senior counsel for the appellants conceded that the MOA was intended to be “immediately binding”, but submitted that it was not a “final binding joint venture”.  However, his Honour did not describe the MOA as a “final binding joint venture”.  As we have mentioned earlier in these reasons, he found that the MOA was intended to have immediate legal effect to the extent of its agreed terms, and that it was in law a joint venture agreement notwithstanding the intention of the parties to execute a later, more detailed document regulating the conduct of the venture.  We agree, respectfully, with the learned primary judge’s reasoning and conclusion that the MOA was a binding joint venture agreement. 

25                  We agree also with his Honour’s reasoning and conclusions about the duty of care owed by the appellants to the respondent and in relation to two of what he held to be breaches of those duties. 

26                  There was no challenge to his Honour’s conclusions concerning the extent of the duty of care owed by the appellants to the respondent. 

27                  His Honour’s findings about the breach of those duties were, however, challenged on the appeal.  In summary, the breaches were found to be in:

·          failing to structure the MOA in such a way as to enable the respondent to assign all or part of its interest without the need to re-open negotiations with the Filipino parties;

·          failing to advise the respondent that the MOA should be structured in that way; and

·          failing to recommend that the respondent not sign the Spinifex Agreement in the form tabled at the meeting on 16 December 1996. 

28                  His Honour had the unchallenged evidence of Mr Wassaf, a solicitor with extensive expertise in preparing, reviewing and negotiating joint venture agreements, farm-in agreements, farm-out agreements and sale and purchase agreements relating to mining tenements in Australia and other countries.  Part of Mr Wassaf’s evidence was that he would expect that a tenement sale agreement between an original tenement holder and an entrepreneur hoping to bring in a mining company with sufficient funds to explore the tenements, pay the purchase price under the sale agreement with the tenement holder and prepare a bankable feasibility study, would contain a provision enabling the entrepreneur to enter into farm-in arrangements with the mining company.  The provision would be one that was not conditioned by the consent of the tenement holder or (if the tenement holder insisted otherwise) on the basis that such consent would be required, but would not be withheld unreasonably.

29                  On the evidence before his Honour, it was clearly open to him to find that the first two of the failures referred to above amounted to, in all the circumstances, negligence.  We respectfully agree with his Honour’s conclusions in that regard.

30                  However we do not consider that Mr Gore failed in his professional duty to the respondent in the advice which he gave in relation to the Spinifex Agreement.  His Honour found that Mr Williams produced the Spinifex Agreement to Mr Gore three days before the respondent was obliged to pay $25,000 to the Filipino parties under clause 4 of the MOA.  His Honour also found that the respondent urgently needed that money and that Mr Williams was anxious to sign the agreement.  It had already been executed by Spinifex.  Mr Gore, quite properly, drew Mr Williams’ attention to the warranty, contained in the Spinifex Agreement, to the effect that the respondent could assign any portion of its interest to Spinifex in the form of a joint venture.  He told Mr Williams that such an assignment would require the consent of the Bautistas and that the respondent could not assign any interest without such consent.  Mr Williams’ response was to assure Mr Gore that he could arrange such consent with the Bautistas.  In those circumstances, having alerted the client to the difficulty and the client having expressed his confidence in no uncertain terms (see the extracts from the evidence set out below) of being able to resolve that difficulty, we do not think that it was negligence on the part of the solicitor to advise the respondent against executing the Spinifex Agreement in the form in which it then was, and to try and re-negotiate what was otherwise, from Mr Williams’ viewpoint, a most favourable deal.

Causation

31                  Even if we are wrong in our conclusion that the third category of negligence was not established on the evidence (i.e. assuming that all his Honour’s findings on breaches of duty were correct), we do not think that the respondent was entitled to succeed in its negligence claims.  We do not think that the respondent established that the appellants’ negligence caused it to sustain substantial damages.  (By substantial damages we mean other than negligible damages.) In those circumstances it would be entitled to nominal damages for breach of contract.

32                  It is apparent from the primary judge’s reasons that, in accordance with pre-trial directions, the respondent filed a statement (among other witness statements) of the proposed evidence-in-chief of Mr Williams.  However, at the trial, counsel for the respondent elected not to call Mr Williams. No explanation was offered for this.  Mr Williams was present in court for most of the hearing.  His Honour, with respect, quite correctly observed as follows:

“In that situation it should be inferred that Mr Williams’ evidence would not have assisted Montague’s case; in particular, his failure to contradict versions of conversations given by Mr Gore means I should accept those versions, they not being inherently improbable: see Jones v Dunkel (1959) 101 CLR 298.  I do so.”

33                  In relation to the absence of an assignment clause, we think that it is appropriate to approach the matter on the basis that Mr Gore’s failure to structure the MOA in such a way as to enable the respondent to assign (the first of the two breaches) is subsumed into the second breach of failing to advise the respondent that the MOA should be structured in that way.  In other words, Mr Gore’s negligence was in failing to advise the respondent that the MOA should contain a clause enabling the respondent to assign all or part of its interest without the need to re-open negotiations with the Filipino parties or, (as an alternative) one which provided that the consent of those parties would not be unreasonably withheld.  We do not think that it is sensible to isolate and treat the first breach (structuring the MOA) separately from the second breach.  It may have been Mr Gore’s duty to insert the assignment clause in a draft of the MOA even without instructions.  But at some point it would have been incumbent upon him to draw Mr Williams’ attention to the clause (because it might have had significance in his negotiations with the Filipino parties, there being another contender in the offing), give the advice referred to above and obtain instructions.  Thus the structuring, if it had occurred, would have flowed from the advice and the seeking of instructions in that regard.

34                  On the present state of the authorities (some of which we mention below), the respondent had the burden of proving that the appellants’ negligence caused it loss.  The traditional approach of a step-by-step consideration, first of causation, and then, secondly, assessment of damages, makes what can be quite a difficult task a little simpler where problems of causation arise.  As Debelle J stressed in Hall v Foong (1995) 65 SASR 281 at 301, causation must be established before the Court is required to assess damages.  However, the two steps are necessarily related and are often dealt with together – see Sellars v Adelaide Petroleum NL (1994) 179 CLR 297 at 340 and 364. 

35                  Causation is a question of fact to be answered by applying a commonsense test to the facts of the particular case – see Chappel v Hart (1998) 195 CLR 232 at 238 (per Gaudron J), 243-244 (per McHugh J), 255 (per Gummow J), 268-269 (per Kirby J) and 281-282 (per Hayne J) and the authorities there cited.

36                  In the present case, the Court had to decide whether Mr Gore’s negligence caused the respondent the loss of a commercial opportunity which was of more than negligible value.  The question is a matter of proof of a past hypothetical situation – what would have happened if Mr Gore had given the respondent (through Mr Williams) the advice which he should have given?  Would Mr Williams have accepted that advice?  If so, would the Filipino parties have agreed to a clause giving the respondent a right to assign without consent or on the basis that such consent would not be unreasonably withheld? 

37                  It seems to be established that the standard of proof of such a hypothetical question is ordinarily the general civil standard of proof i.e. on the balance of probabilities.  As Mason CJ and Dawson, Toohey and Gaudron JJ observed in Sellars at 353:

“When the issue of causation turns on what the plaintiff would have done, there is no particular reason for departing from proof on the balance of probabilities notwithstanding that the question is hypothetical.”

38                  In our view, under Australian law, the test for causation in a case such as the present case is a subjective one, that is, what would the respondent have done if proper advice had been given? (See for example McHugh J at 246 and Kirby J at 272 in Chappel v Hart.)  But we think that the authorities show that it is quite proper, when applying this test, to have regard to objective pieces of evidence.  Otherwise, on occasion, justice would not be done.  A person who suffered loss might be dead or have lost his or her memory, but there might be an abundance of other evidence of what that person would have done if properly warned or advised.

39                  On the aspect of Mr Williams’ failure to give evidence, senior counsel for the appellant relied upon the following passage from Gaudron J’s reasons for judgment in Chappel v Hart at 239:

“Where there is a duty to inform it is, of course, necessary for a plaintiff to give evidence as to what would or would not have happened if the information in question had been provided.”

40                  We would not read this part of her Honour’s reasons as expressing the opinion that in every “duty to inform” case where causation is in issue, it is necessary for a plaintiff or applicant to be called as a witness.  A plaintiff or applicant can give evidence in all sorts of ways short of that.  In Bennett v Minister of Community Welfare (1992) 176 CLR 408 (one of the authorities cited by her Honour in the footnote to the above passage) her Honour spoke in terms of it being “… sometimes necessary for a plaintiff to lead evidence as to what would or would not have happened if a particular common law duty had not been performed …”.  There is nothing in the other two authorities cited by her Honour to suggest that in the present case the respondent was doomed to failure because Mr Williams was not called to the witness stand. 

41                  Thus the question in the appeal is, as we see it:  Was there sufficient evidence before the primary judge to establish, on the balance of probabilities, that if Mr Gore had given the respondent the abovementioned advice about an assignment clause:

(a)        the respondent would have accepted that advice; and

(b)        the Filipino authorities would have been agreeable to a clause giving the respondent either an absolute right to assign, or a qualified right based on their consent not being unreasonably withheld; and

(c)        the absence of such a clause was a material cause of putting the respondent in the situation (in Manila in early January 1997) where it had to accept a less valuable bargain?

42                  We have set out above (at paragraphs 18-20) how the primary judge dealt with the issue of causation.  However, it is convenient to set out again the following passage:

“Orders

Although the extent of Montague’s damage does not fall for consideration at this time, it is necessary for it to demonstrate some damage; damage is one of the elements of the tort of negligence.  This presents no problem to Montague; because of Mr Gore’s negligence it suffered a loss of commercial opportunity, at least.  Loss of an opportunity to obtain a commercial advantage is compensable damage – see, for example, Chaplin v Hicks [1911] 2 KB 786 and Cellars v Adelaide Petroleum NL (1994) 179 CLR 332 – however difficult the task of assessment may be.  Liability is made out.”

43                  With all due respect to the learned primary judge, and conscious of his record of extensive experience at trial and appellate levels, we have reached the conclusion that in this matter he erred in his approach to the question of causation.  We turn first to the two cases cited by his Honour.

44                  Chaplin v Hicks was a relevantly different type of case to the present case.  In that case the breach of contract itself (ie without more) gave rise to the loss of a chance of winning the competition.  It fell into the category of what, in the context of tort, Gaudron J described, in Bennett v Minister of Community Welfare (at 419-420), as a situation where a failure to do something has a direct (physical) consequence such that the failure and the consequence may together be viewed as a positive act.  In Sellars the primary judge made a factual finding that the applicants (at first instance) believed in the truth of the representations made to them and that those beliefs were a substantial factor in their decision to enter into what was known as the Poseidon agreement and to decline to proceed further with the draft Pagini agreement.  It was that finding of fact which enabled the Court (having accepted the evidence that the re-negotiated Pagini agreement was less valuable than the terms of the draft Pagini agreement) to find that the respondent’s contravention of s 52 of the Trade Practices Act (1974) (Cth) had caused the applicants substantive loss.  The next stage was to assess the damages by a method which was based on an acceptance that the appellants would have entered into the Pagini agreement on the original terms, but which recognised that although, on the probabilities, the contract would not have been completed, there was a significant chance that it would have been completed.  With great respect, it would seem that the primary judge has conflated the fact-finding process by moving too quickly from breach of duty to assessment of loss, in the circumstances of the sort of case where, on the present state of the authorities, that may not be done.  As a Full Court of this Court observed in another case involving allegations of professional negligence on the part of a solicitor, WCW Pty Ltd v Bolster & Co (unreported, 6 January 1993) at par 15:

“Before this particular case against the solicitor could have been established, the appellant would have had to prove first, that as a result of the solicitor’s failure to give the advice, it lost an opportunity to seek warranties that would have provided it with protection in the events which have happened; secondly, that it would have accepted that advice; thirdly, that it would have required such warranties from the vendors; and fourthly, that either the vendors would have agreed to warranties in a form that would have given the appellant a right of action against them in the events which have now happened or, if they had refused to do so, that the appellant would not have signed the contract:  see Norwest Refrigeration Services Pty Ltd v Bain Dawes (W.A.) Pty Ltd (1984) 157 CLR 149 at 172-3.  Even if a negligent failure to advise can be established, a failure to prove these matters does not merely deprive the appellant of an entitlement to limited damages for the loss of the chance of obtaining protective warranties; it means failure to establish the cause of action:  ibid, at 173.”

45                  As we have mentioned, his Honour had noted the fact that Mr Williams was available to give evidence but did not do so, and the consequences, in terms of credibility, which flowed from such circumstances.  But in our view, he fell into error in not dealing with the question whether, in the absence of that evidence, there was sufficient evidence to establish, on a balance of probabilities, what Mr Williams would have done had he been properly advised.

46                  There are some other cases which provide a degree of assistance in this particular area of negligent legal advice.  The first was the (English) Court of Appeal decision in Sykes v Midland Bank Executor and Trustee Co Ltd [1971] 1 QB 113.  That case concerned what was found to be the negligent failure of a solicitor to draw his client's attention to an onerous clause in a sub-lease (the client was a firm of surveyors represented by one of its partners, a Mr Sykes).  Despite considerable pressure from the judge at first instance, Mr Sykes candidly told the Court that he did not know whether, had he been given the proper advice, he would have acted otherwise.  At 125 Harman LJ said this:

“I have searched for a contemporary indication of the way in which the plaintiffs’ minds worked and I have found almost nothing and am of opinion that on a balance of probability it is more likely than not that the warning which Mr Rignall was bound to give would have made no impact on the plaintiffs’ minds and that they would have disregarded it.  If that be so it is, in my judgment, an end of the case and I would allow the appeal.”

47                  Salmon LJ, at 127-128, observed:

“In these circumstances, it seems to me impossible for a court (which cannot hope to know the plaintiffs’ business as well as Mr Sykes knew it) to hold that the plaintiffs would probably not have taken the risk of entering into these under-leases.  Mr Sykes would not say so.  It might be different if there were any facts or contemporaneous documents pointing in the plaintiffs’ favour – but there are none.  On the contrary, all the known facts and documents strongly suggest that the plaintiffs would have taken the risk of entering into these under-leases even if they had been properly advised by Mr Rignall. … I can see no evidence on which a Court could properly hold that on a balance of probabilities the plaintiffs would not have taken the risk of entering into the under leases at the rents reserved, had they been advised of the true effect of the clauses in question.”

48                  Karminski LJ agreed.  After looking at various possibilities as to how the plaintiffs might have conducted themselves, his Lordship (at 132) said:

“On the facts of the present case I am quite unable to find that the plaintiffs have discharged the burden of proof upon them of establishing on the balance of probabilities that any damage at all flowed from the negligence of Mr Rignall.”

49                 Sykes was cited with apparent approval by Mason CJ and Dawson, Toohey and Gaudron JJ in Sellars at 351, although their Honours referred to some academic criticism of it.  It has also either been followed or cited with approval in Lillicrap v Nalder & Son [1993] 1 All ER 724 at 729-730 (Court of Appeal), Hanflex Pty Ltd v N S Hope & Associates [1990] 2 Qd R 218 (Full Court) and Hall v Foong.

50                 In Hanflex, Demack J (with whom Kelly SPJ and Kneipp J agreed) saw the case as being very similar to Sykes.  Hanflex had received advice from its solicitors that an agreement was binding when, as a matter of law, that was not the case.  It sued the solicitors.  The primary judge dismissed the action on the basis that he was not satisfied that there had been any breach of contract or negligence on the solicitor’s part and that even if there had been any breach, that such breach had caused any loss.  This was because his Honour did not believe the evidence given by the directors of the plaintiff that, had they been advised that they could avoid the agreement, they would have taken advantage of that opportunity.  The Full Court set aside the primary judge’s finding that there had been no negligence, substituted a judgment for nominal damages in the sum of $10 for breach of contract, but otherwise dismissed the appeal.  This was because it was clear, on the primary judge’s findings, that even if the appellant had received advice that the agreement was not binding, it would not have extricated itself immediately from the business venture concerned.

51                  With respect to the Full Court in Hanflex, we do not see that case as being, for present purposes, “very similar” to the situation in Sykes.  Hanflex was a stronger case from the viewpoint of the defendants/respondents.  They had a credibility finding in their favour to the effect that the plaintiff would not have acted any differently.  In Sykes the scale was more evenly poised because Mr Sykes (the honest witness) could not say whether it would have made any difference had he received the advice to which he was entitled. 

52                  Hall v Foong was another case in which it was found that the defendant solicitors had been negligent.  Their negligence was in failing to qualify their advice about the enforceability of a contract.  The trial judge found that the plaintiff’s failure to settle the dispute over the contract was caused by the erroneous advice given to her by her solicitor.  The plaintiff had not been asked either in evidence-in-chief or in cross-examination how she would have acted if her solicitor had correctly informed her of certain preliminary advice from counsel to the effect that the contract was not void (as the solicitor had advised Mrs Foong).  Hall v Foong is somewhat complicated by the fact that (see pp 304‑305) the majority were not able to conclude on the facts that there was only one appropriate form of advice which the solicitor could properly have given.  That, so their Honours observed, made the absence of a causal link even more pronounced than in Sykes.  On the question whether there was sufficient evidence to establish that Mrs Foong would have acted in a manner to her financial benefit if correctly advised, their Honours explored the various alternative courses which she might have adopted.  That was one basis upon which the majority held that causation had not been established.  Another distinction between that case and the present case is (see p 305) that Mrs Foong did not claim her loss on the basis that her solicitors’ negligence had caused her to lose the opportunity of re-considering her position.  Their Honours noted that the trial judge had not assessed the loss on that basis and, had he done so, damages would have been assessed for a sum considerably less than those which he awarded.  Olsson J dissented on the basis that his Honour considered that there was sufficient in the whole of the evidence for a relevant inference that Mrs Foong would have acted differently had she received proper advice (see p 292).

53                  In the present case, in the absence of any oral evidence from the respondent on the point, was there any other evidence (including, of course, documentary evidence) which might assist, one way or the other, in determining how the respondent might have acted?  In our view there is some, but not much, and most of it points against the respondent.

54                  First, we turn to the question whether or not Mr Williams would, if advised to do so, have instructed Mr Gore to seek to include an assignment clause in the MOA.  We agree with the appellants’ submission that this may well have depended, to some extent, upon the content of his negotiations with the Filipino parties.

55                  The evidence shows that Mr Williams represented the respondent to the Filipino parties as a company having experience and capability, both financial and technical, to carry out gold mining operations.  Recital A of the MOA was in those terms.  Clause 4 of the MOA provided that the respondent would be the manager and operator for the projects to be undertaken under the FTAA and would provide all technical assistance to the project.  In consideration of carrying out those functions at no charge, the Filipino parties agreed to the respondent holding a seventy per cent interest in the project.

56                  On 11 October 1996, Mr Williams told Mr Gore:

“Originally Bautista was only prepared to give me 60 % but when I said I would be responsible for the technical and management aspects of the project without any fee, Bautista agreed to me holding an additional 10%, giving Montague Mining 70% in all.  Montague Mining will put up the capital until the project is commercial.”

57                  Some, perhaps slight, indication of what might have happened at the negotiation stage if Mr Williams had asked the Filipino parties for a right to assign all or part of the respondent’s interest under the proposed MOA may be seen in the events of early January 1997.  When the Filipino parties found out that the respondent had contracted to assign part of what it considered to be its interest in the project without having done any work on the tenements, they ejected the respondent from the transaction. 

58                  It must be acknowledged that this was in the context that the Filipino parties were satisfied that Spinifex had the necessary financial and technical capability.  The point is that for Mr Williams to have raised, at the negotiation stage, the matter of the respondent wanting to bring in another party, even before the later joint venture agreement and the FTAA were executed, might have seemed somewhat inconsistent with the image which the respondent was projecting.  Mr Williams might well have been acutely conscious of that, and might well have chosen not to complicate or jeopardise the negotiations by raising the question of assignability at that stage.

59                  It should be remembered that at the stage when he was negotiating with the Filipino parties, Mr Williams was competing with other mining companies to get an interest in the project.  On 22 October 1996 Mr Williams told Mr Gore:

“There is a high degree of urgency because of the fact that other mining companies are approaching that will test us, so can you have a draft agreement prepared in the next few days?  I am keen to get the Bautista’s signed up as soon as possible.”

60                  In our view, in those circumstances there must have been at least the possibility that had Mr Williams sought to include an assignment clause in the MOA, this would have been an obstacle in the successful conclusion of the negotiations with the Bautistas.  It is even more of a possibility, in our opinion, that Mr Williams would have perceived that this could present such an obstacle and that he would have been concerned about that possibility.

61                  Then there is the following evidence of Mr Williams’ receptiveness to legal advice.

62                  On 16 December 1996 Mr Williams handed the Spinifex Agreement to Mr Gore and the following exchange took place:

“MR WILLIAMS:  “Spinifex are going to pay $25,000 and a further $100,000.  I want to execute this agreement straight away but I’d like you to have a look at it first.

MR GORE:  “Clause 3 provides a warranty that you can assign an interest in the project directly to Spinifex once it has earned its interest.”

MR WILLIAMS:  “Yes”.

MR GORE: “That would require the consent of the Bautistas.  You can’t assign any interest without their consent.”

MR WILLIAMS:  “That won’t be a problem.  I can arrange that with the Bautistas.  I am sure that they will consent.”

MR GORE:  “Well, if you can’t obtain their consent, that will be a breach of your contract with Spinifex.”

MR GORE:  “Clause 2 of this agreement provides that Montague is representing and warranting to Spinifex that it has good and valid title to the areas the subject of the memorandum of agreement.  You know that Montague does not in fact have title – it only has an agreement which gives you an opportunity to acquire title.  The Recital is therefore not correct.”

MR WILLIAMS:  “Yes, you are correct.  But that’s a technical point and in view of the urgency I don’t want to raise that point with Spinifex now.” ”

63                  At one stage of the negotiations, the Philippines lawyers retained by the appellants to advise the respondent suggested the clause which would make it clear (presumably to the Philippines authorities) that, until approval of the FTAA, Montague would not participate in the exploration, development and utilisation of the project areas.  There is a diary note recording the fact that when that advice was relayed to Mr Williams, his response was that he did not want the clause to go in because the respondent was going to expend $500,000.00 to $1,000,000.00 before the agreement. 

64                  Another problem with the state of the evidence is that no evidence was called from the Filipino parties as to what their reaction would have been if Mr Williams had included an assignment clause in the draft MOA or had asked them to agree to the inclusion of such a clause.

65                  There are three aspects to this evidence.  The first is whether the Filipino parties would have agreed to the inclusion of the clause, either one with an unrestricted right to assign, or subject to their consent with such consent not being unreasonably withheld.  The second is whether the mere disclosure of the fact that the respondent wished to be able to assign its interests even before the negotiation of the JVA and the FTAA would have caused the Filipino parties to end the negotiations.  The third is the likelihood that Mr Williams might well have had a keen perception of the problems which might have arisen if he were to raise the matter at the negotiation stage.

66                  We think that it is also worth noting that recital E of the MOA referred to the manner in which the respondent’s seventy per cent interest in the project was to be held.  It was to be held “… through a project vehicle or structure to be agreed between the parties.” (i.e. the respondent and the Filipino parties, emphasis added).  The remaining thirty per cent interest was to be held in such manner as the Filipino parties might agree.  We consider that this is another, again slight, indication that the Filipino parties would not have been very receptive, at the pre-MOA negotiation stage, to a proposal that the respondent should have the right to assign some or all of its interests under the MOA before the Joint Venture Agreement and FTAA had been executed.

67                  His Honour took the view that if the Filipino parties had refused the respondent’s request for an assignment clause, then it “probably would have been able to structure [its] arrangement with Spinifex in such a manner to circumvent” the problem.  As the appellants point out in their written submissions, this assumes that the Filipino parties would still have been prepared to conclude and sign the MOA even after the respondent had shown its hand.

68                  On the other hand, as senior counsel for the respondent pointed out in argument before us, there was some evidence that the Filipino parties were not totally opposed to a co-venturer having the right to assign its interest.  This can be seen in clause 17 of the joint venture agreement executed between Spinifex and the Filipino parties on 30 April 1997.  However, there was no assignment clause in the memorandum of agreement executed by Spinifex and the Filipino parties on 10 January 1997.  As senior counsel for the respondent acknowledged, it was not until the Filipino parties knew that “the money was there” and Spinifex was going to be able to develop the project, that they accepted an assignment clause.  Furthermore, the agreement of 30 April 1997 was in fact the FTAA – the more formal type of document which had been contemplated as following the MOA.  It is worth noting that the assignment clause in the agreement of 30 April 1997 contained fairly elaborate conditions to the right of assignment, including the provision of detailed information about any proposed assignee and pre-emptive rights in favour of the Filipino parties. 

69                  Senior counsel for the respondent submitted that it was quite clear as a matter of common sense that the “applicants’ negligence” was the cause of the respondent’s loss and that there was sufficient evidence of reliance for the primary judge to reach the conclusion that liability had been established.

70                  We disagree.  In our opinion, the state of the evidence was such that the respondent did not discharge the onus upon it of proving that, on the balance of probabilities:

·          If Mr Gore had given the appropriate advice about an assignment clause, Mr Williams would have accepted that advice;

·          the Filipino parties would have agreed to an assignment clause; or

·          if they were not prepared to agree to such an assignment clause; the Filipino parties would still have executed the MOA, despite the respondents’ request for assignability at such an early stage of the project.

“The Spinifex Advice”

71                  If, contrary to the view which we have expressed earlier in these reasons, Mr Gore was negligent in failing to give the respondent appropriate legal advice in relation to the Spinifex Agreement, there is still, in our opinion, insufficient evidence that that negligence has caused the respondent any substantial damages. The speculation about whether Mr Williams would have followed such advice is even greater in relation to the Spinifex Agreement than in relation to the MOA. The passages which we have set out above strongly suggest that he would not have taken the further advice which the primary judge found Mr Gore should have given. In the absence of any evidence from Mr Williams, the Court is simply left in the dark.

72                  Furthermore, Mr Eckhof said that Spinifex would not have taken an indirect interest through the respondent, either by way of shares or by way of a contractual right to receive from the respondent a share of the product of the venture. Mr Eckhof was not cross-examined about the first of those alternatives, which was the one upon which the primary judge focussed. There was no finding by his Honour, contrary to Mr Eckhof’s evidence, that Spinifex would have agreed to take shares in the respondent as part of a renegotiation of what became the Spinifex Agreement. In our view, there was insufficient proof on the balance of probabilities that this aspect of Mr Gore’s negligence (if it was negligence) caused the respondent any damage.

Conclusion

73                  For the foregoing reasons, in our view, the appeal should be allowed and the judgment set aside.  There should be judgment for the respondent against the appellants for nominal damages.  In Hanflex the sum was fixed at $10 as being comparable to the forty shillings awarded in 1971 in Sykes.  As ten years have passed since the Full Court’s decision in Hanflex, there should be judgment for $20.

74                  There remains the question of costs.  In Hanflex Demack J considered much the same question (at 229).  The Full Court ordered that the plaintiff should have its costs of the trial at first instance in respect of the issue of negligence and the defendant should have his costs at first instance in respect of the issue of damages.  The respondent was ordered to pay the costs of the appeal.

75                  The situation in the present case is further complicated by the fact that on 21 May 1999 the appellants sent a Calderbank letter to the respondent.  That letter contained an offer to settle which was, so his Honour found, worth more than the judgment obtained.  At first instance, by a notice of motion (filed on 11 November 1999) the appellants sought orders that they be required to pay the respondent’s costs on a party-and-party basis only up until 14 August 1998 and that the respondent pay their costs on a party-and-party basis after that date.

76                  On appeal, the appellants contended that if the judgment were not to be set aside, at least the costs order should be varied.  This was because, so it was put, his Honour’s discretion had miscarried in that he had had regard to irrelevant and incorrect considerations.  The appellants sought an order (if the appeal were otherwise dismissed) that the respondent pay the costs of the proceedings at first instance after 20 August 1998 and further, that those costs should be taxed on an indemnity basis.

77                  In our opinion, the facts do not disclose sufficiently unreasonable behaviour on the respondent’s part so as to justify any costs which it is to pay being taxed on an indemnity basis.

78                  However, we think that the appellants’ offer is a relevant consideration on the question of costs generally.

79                  In our opinion, taking an overall view of the litigation and its outcome, justice would be done if costs orders were made in the following terms:

1.         The appellants pay the respondent’s costs at first instance of the negligence issue incurred up to and including 20 August 1998, and the respondent pay the appellants’ costs of that issue thereafter.

2.         Respondent to pay the appellants’ costs at first instance in respect of the issue of damages.

3.         Respondent to pay the appellants’ costs of the appeal.

Associate:

Dated:              30 August 2000