Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Bartier Perry Pty Ltd v Paltos [2021] NSWCA 158 Hearing dates: 6–7 April 2021; last written submissions 5 July 2021 Date of orders: 3 August 2021 Decision date: 03 August 2021 Before: Payne JA at [1]; White JA at [261]; McCallum JA at [262] Decision: (1) Bartier Perry's motion dated 19 March 2021 seeking to lead fresh evidence is dismissed; (2) Appeal allowed; (3) Set aside orders 2 and 5 made by Rothman J on 1 December 2020 (including the undertaking offered as a condition of making order 2) and in lieu thereof order: (a) Bartier Perry to pay damages to Mr Paltos in the amount of $942,777; (b) Bartier Perry to pay Mr Paltos' costs of the proceedings on the ordinary basis; (4) No order as to costs of the appeal with the intention that the parties pay their own costs of the appeal; (5) Cross-appeal dismissed; (6) Cross-appellant to pay the costs of the cross-respondent of the cross-appeal. Catchwords: NEGLIGENCE – professional negligence – solicitors – where appellant law firm was retained to advise the respondent as to his rights in a family law partnership – whether appellant failed to give competent advice to the respondent about the manner and circumstances of the exercise of a put option granted by a put and call option agreement forming part of the partnership documents – breach of retainer and concurrent duty of care NEGLIGENCE – professional negligence – causation – factual causation – where respondent would have exercised put option had he been properly advised of his rights – where failure to give competent advice caused loss CONSUMER LAW – misleading or deceptive conduct – professional advice – where a dangerously incomplete statement of the respondent's rights was misleading and deceptive in that it was apt to mislead the respondent into believing that his legal rights were ineffective CONTRACTS – implied terms – terms implied in law – necessity CONTRACTS – implied terms – terms implied in fact – necessary to give business efficacy CONTRACTS – construction – interpretation – calculation of purchase price under formula prescribed in a put and call option agreement APPEALS – damages – where primary judge awarded damages and required an undertaking as to repayment pending the outcome of related proceedings – whether primary judge erred in not assessing damages on a lump sum basis once and for all – whether this Court should itself determine the damages payable on a lump sum basis – approach for correct assessment of damages Legislation Cited: Civil Liability Act 2002 (NSW), ss 5D, 5E Civil Procedure Act 2005 (NSW), ss 56, 98, Part 6 Competition and Consumer Act 2010 (Cth), s 82, Sch 2 ss 18, 236 Evidence Act 1995 (NSW), s 91 Income Tax Assessment Act 1997 (Cth), s 118-37 Partnership Act 1890 (UK), s 38 Supreme Court Act 1970 (NSW), ss 23, 63, 75A Taxation Administration Act 1953 (Cth), Part IVC Trade Practices Act 1974 (Cth), s 82 Uniform Civil Procedure Rules 2005 (NSW), rr 42.1, 51.53 Cases Cited: Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420; [2009] HCA 48 Arundell v Bell (1883) 52 L J Ch 537 Australian Executor Trustees (SA) Ltd v Kerr [2021] NSWCA 5 Blatch v Archer (1774) 1 Cowper 63; (1774) 98 ER 969 Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; [1977] UKPCHCA 1 Bridge v Deacons [1984] AC 705 Burchell v Wilde [1900] 1 Ch 551 Byrne v Australian Airlines Ltd (1995) 185 CLR 410; [1995] HCA 24 Carazi Pty Ltd v Blow Dry Bar Franchising Pty Ltd (in liq) (No 2) [2015] NSWSC 108 Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 Commissioner of Taxation (Cth) v Murry (1998) 193 CLR 605; [1998] HCA 42 Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32 Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54 Council of The City of Botany Bay v Michos [2013] NSWCA 244 Doherty v Liverpool District Hospital (1991) 22 NSWLR 284 Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 E K Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 Fitch v Dewes [1921] 2 AC 158 Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 Geraghty v Minter (1979) 142 CLR 177; [1979] HCA 42 Great Wall Resources v O'Sullivan [2009] NSWCA 119 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 Johnson v Perez (1988) 166 CLR 351; [1988] HCA 64 Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281; [1995] HCA 4 Liverpool City Council v Irwin [1977] AC 239 Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; [1991] HCA 12 McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187 Mellersh v Keen (No 2) (1860) 28 Beav 453 Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (1991) 33 FCR 1; [1991] FCA 758 Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; [2004] HCA 3 Old v McInnes and Hodgkinson [2011] NSWCA 410 Page v McKensey [1995] NSWCA 351 Page v McKensey (Supreme Court (NSW), Windeyer J, 17 December 1993, unrep) Paltos v Bartier Perry Pty Ltd [2020] NSWSC 705 Paltos v Bartier Perry Pty Ltd (No 2) [2020] NSWSC 1706 Pennant Hills Restaurants Pty Ltd v Barrell Insurances Pty Ltd (1981) 145 CLR 625; [1981] HCA 3 Polkinghorne v Holland (1934) 51 CLR 143; [1934] HCA 28 Potts v Miller (1940) 64 CLR 282; [1940] HCA 43 Rabelais Pty Ltd v Cameron (1995) 95 ATC 4552 Re David and Matthews [1899] 1 Ch 378 Ruthol Pty Ltd v Tricon (Australia) Pty Ltd [2005] NSWCA 443 Ryder v Frohlich [2004] NSWCA 472 Ryder v Frohlich [2006] NSWSC 833 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 Smith v Everett (1859) 27 Beav 446 Sobell v Boston [1975] 2 All ER 282 SRSC v Beaumont [2004] NSWSC 164 Thames Cruises Ltd v George Wheeler Launches Ltd [2003] EWHC 3093 Todorovic v Waller (1981) 150 CLR 402; [1981] HCA 72 Trego v Hunt [1895] 1 Ch 462 Turner v TR Nominees Pty Ltd (1995) 31 ATR 578 Tyco Australia Pty Ltd v Optus Networks Pty Ltd [2004] NSWCA 333 Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603; [1998] HCA 38 Walton v Illawarra [2011] NSWSC 1188; (2012) 28 BCL 202 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55 Wilson v Williams (1892) 29 L R Ir 176 Texts Cited: R I Banks, Lindley & Banks on Partnership (20th ed, 2020, Thomson Reuters) Category: Principal judgment Parties: Bartier Perry Pty Ltd (Appellant) Dennis Paltos (Respondent) Representation: Counsel: J Emmett SC with H Grace (Appellant) I R Coleman SC with C D Freeman (Respondent) Solicitors: YPOL Lawyers (Appellant) Polczynski Robinson (Respondent) File Number(s): 2020/361939 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Common Law Citation: [2020] NSWSC 705; [2020] NSWSC 1706 Date of Decision: 9 June 2020; 1 December 2020 Before: Rothman J File Number(s): 2017/301216 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] HEADNOTE [This headnote is not to be read as part of the judgment] In 2010, Mr Paltos established a family law practice in partnership with Mr Milevski (the Partnership) by the execution of a Heads of Agreement, a Deed of Agreement of Partnership Terms and a Put and Call Option Agreement. In December 2015, Mr Paltos suffered two strokes and was unable to work for an extended period. There arose a dispute about the Partnership. In February 2016, Mr Paltos formally retained Bartier Perry Pty Ltd (Bartier Perry) to advise him "with regard to [his] Partnership in Paltos Milevski and in relation to the demands being made by [his] partner". Sometime prior to 18 April 2016, Bartier Perry advised Mr Paltos that Mr Milevski could terminate the Partnership and suggested that Mr Paltos offer to sell 20% of the Partnership to Mr Milevski or dissolve the Partnership himself. Mr Milevski commenced proceedings and, on 21 April 2016, the Supreme Court made orders by consent for the dissolution of the Partnership and appointment of Receivers. An account was ordered but those proceedings have yet to be heard. Mr Paltos filed separate proceedings against Mr Milevski and the Receivers appointed to the Partnership (the Partnership Proceedings). The Partnership Proceedings have also not been heard. In the Partnership Proceedings, Mr Paltos is seeking payment of significant sums "on account of goodwill" of the Partnership and payment "on account of work in progress". On 5 October 2017, Mr Paltos commenced proceedings against Bartier Perry seeking damages for breach of contract, negligence, and for misleading and deceptive conduct for its alleged failure properly to advise Mr Paltos about his rights to exercise a put option granted by the Put and Call Option Agreement. Mr Paltos successfully opposed the motion by Bartier Perry for those proceedings to be heard at the same time and by the same judge as the Partnership Proceedings. The Partnership Proceedings have been adjourned repeatedly on Mr Paltos' application pending determination of his claim against Bartier Perry. The put option was relevantly exercisable by a partner who was suffering "total and permanent disablement" within the meaning of the Put and Call Option Agreement. The primary judge held that Bartier Perry was liable to pay Mr Paltos damages of $1,411,707. It was common ground at the trial, however, that a deduction would need to be made from that amount for any amounts comprising "any calculation on account of goodwill" of the Partnership and any payment "on account of work in progress" of the Partnership at the date of its dissolution achieved in the Partnership Proceedings. This was because, on the hypothesis that Mr Paltos had exercised the put option, neither goodwill of the Partnership nor work in progress of the Partnership would have been payable to Mr Paltos. The primary judge, however, did not make a deduction of the amount payable to Mr Paltos on account of goodwill of the Partnership and any payment on account of work in progress. Instead, the primary judge accepted an undertaking from Mr Paltos to "repay" to Bartier Perry amounts representing the goodwill of the Partnership and work in progress as at the date of dissolution, if those amounts were subsequently obtained by Mr Paltos in the Partnership Proceedings. The principal issues on appeal concerned whether the primary judge erred: 1. in finding that Bartier Perry breached its duty of care and retainer (ground 1); 2. in finding that Bartier Perry engaged in misleading or deceptive conduct in contravention of s 18 of Sch 2 to the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law) (ground 2); 3. in finding that the Put and Call Option Agreement contained an implied term to the effect that the obligations arising from an exercise of the put option could not be defeated by the dissolution of the Partnership (ground 3); 4. in holding that any breach of Bartier Perry's duty of care or retainer, or any misleading or deceptive conduct, was causative of the relevant loss (ground 4); 5. in calculating damages under the Put and Call Option Agreement (ground 5); and 6. in accepting the undertaking instead of assessing damages once and for all on a lump sum basis (ground 6). The Court (Payne JA, White and McCallum JJA agreeing) held, allowing the appeal in part: 1. The advice given by Bartier Perry to Mr Paltos that the Put and Call Option Agreement did not apply to him "yet" or "at this time" was not sufficient to discharge its obligation to provide competent legal advice. A reasonably competent solicitor in the position of Bartier Perry would have advised Mr Paltos that if he remained unable to work in the Partnership after six months he could exercise the put option to require Mr Milevski to purchase his 70% interest in the Partnership: [67], [76]-[77], [80], [83]-[86] (Payne JA); [261] (White JA); [262] (McCallum JA). 2. The advice given by Bartier Perry to Mr Paltos was misleading and deceptive, in that it was a dangerously incomplete statement of his legal rights and was apt to mislead him about the nature of those rights: [88], [90]-[92] (Payne JA); [261] (White JA); [262] (McCallum JA). 3. On the proper construction of the Put and Call Option Agreement, the put option survived the dissolution of the Partnership. It was unnecessary to imply a term to that effect in law or fact: [97]-[100] (Payne JA); [261] (White JA); [262] (McCallum JA). 4. The primary judge was correct to find that, had Bartier Perry advised Mr Paltos between 13 and 19 April that if he continued to be incapable of carrying out his usual duties as a partner until 23 June he could have exercised the put option, Mr Paltos would likely have exercised the put option: [113], [119] (Payne JA); [261] (White JA); [262] (McCallum JA). Civil Liability Act 2002 (NSW) s 5D; Australian Consumer Law s 18, applied. 5. The primary judge was correct to reject Bartier Perry's construction of the calculation of the "Purchase Price" for the purposes of the Put and Call Option Agreement: [137] (Payne JA); [261] (White JA); [262] (McCallum JA). 6. The primary judge erred in accepting the undertaking rather than making a final award of damages. The qualifications to the general principle that common law damages are to be assessed on a lump sum basis once and for all did not apply in this case. Given the length of time since the dissolution of the Partnership and the fact that Mr Paltos had successfully opposed hearing this matter together with the Partnership Proceedings, this Court should determine damages rather than order a re-trial: [147], [158], [165] (Payne JA); [261] (White JA); [262] (McCallum JA). 7. Bartier Perry bore the onus of proving the value of Mr Paltos' claim for an allowance for the net value of the Partnership assets on the taking of accounts. That was a benefit Mr Paltos would derive by reason of Bartier Perry's breach and one he would not have enjoyed if he had exercised the put option: [175]-[176], [202], [205] (Payne JA); [261] (White JA); [262] (McCallum JA). Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (1991) 33 FCR 1; [1991] FCA 758 at 17; Tyco Australia Pty Ltd v Optus Networks Pty Ltd [2004] NSWCA 333 at [255], [264]; Ruthol Pty Ltd v Tricon (Australia) Pty Ltd [2005] NSWCA 443 at [44], [53], applied. 8. Having regard the all of the evidence, the value of the Partnership's goodwill was $957,000. The correct methodology to determine Mr Paltos' damages insofar as they related to future hypothetical events was one based on the possibilities and probabilities of those events, namely, the outcome of Mr Paltos' claims for goodwill and work in progress in the undetermined Partnership Proceedings. The appropriate percentage was 70%: [154]-[155], [202], [233] (Payne JA); [261] (White JA); [262] (McCallum JA). Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20, applied. 9. The value of the Partnership's goodwill ($957,000) should be reduced by 70% (Mr Paltos' share) and 70% again (the appropriate Malec v Hutton percentage). Subtracting that amount ($468,930) from $1,411,707, Mr Paltos was entitled to damages of $942,777: [235] (Payne JA); [261] (White JA); [262] (McCallum JA). Judgment 1. PAYNE JA: Mr Paltos, the respondent, was admitted as a solicitor in 1979 and specialised in family law. In 2010, he commenced to practise in partnership with Peter Milevski in a practice styled "Paltos Milevski Family Lawyers" (the Partnership). When the Partnership was established three documents were executed, namely, a Heads of Agreement, a Deed of Agreement of Partnership Terms and a Put and Call Option Agreement. 2. On 23 December 2015, Mr Paltos suffered two strokes and was hospitalised. Mr Paltos was unable to return to work in any capacity for a period of time after he suffered the strokes. 3. On 15 February 2016, Mr Milevski wrote to Mr Paltos signalling a dispute about the Partnership. The next day, 16 February 2016, the appellant, Bartier Perry Pty Ltd (Bartier Perry), was retained to act for Mr Paltos. On 29 February 2016, a formal retainer was executed, which described the services to be provided by Bartier Perry as including "advising [Mr Paltos] with regard to [his] Partnership in Paltos Milevski and in relation to the demands being made by [his] partner". In discharge of that retainer, Mr Paltos dealt principally with Mr McCaffery from Bartier Perry and, less frequently, with a Mr Creais. 4. Sometime prior to 18 April 2016, Bartier Perry advised Mr Paltos that Mr Milevski could terminate the Partnership and suggested that Mr Paltos offer to sell 20% of the Partnership to Mr Milevski or dissolve the Partnership himself. 5. On 18 April 2016, Mr Milevski commenced proceedings in the Supreme Court against Mr Paltos, seeking dissolution of the Partnership. On about the same date, Bartier Perry ceased to act for Mr Paltos. 6. On 21 April 2016, the Supreme Court made orders by consent including orders that the Partnership be dissolved and Receivers appointed. The claim for an account sought in those proceedings was adjourned and has yet to be heard in the Equity Division (the Account Proceedings). In separate proceedings, which are to be determined before the claim for an account is resolved, Mr Milevski seeks payment of $461,476.30 said to be owing by Mr Paltos. Those proceedings will be heard together with Mr Paltos' cross-claim in which he is seeking from Mr Milevski, among other things, an amount representing 70% of the value of the Partnership assets as at 21 April 2016, by reason of Mr Milevski having allegedly taken over the Partnership from the Receivers without paying for the goodwill of the Partnership (the Partnership Proceedings). Damages from the Receivers by reason of their conduct of the receivership are also apparently to be sought.1 Multiple hearing dates have been vacated and the proceedings were last before the court in June 2021. Despite opposing the application by Bartier Perry to have the present matter heard at the same time as the Partnership Proceedings because at that time Mr Paltos asserted there were no overlapping issues, it appears that Mr Paltos has successfully had those proceedings adjourned on the basis that the outcome of his case against Bartier Perry is material to the outcome of those proceedings. On 30 June 2021, a judge in the Partnership Proceedings made the following orders: "1. I make the orders in the Short Minutes of Order initialled by me and dated today. SHORT MINUTES OF ORDER 1. The proceeding including the Receivers' Notice of Motion filed 9 August 2019 scheduled for mention at 9.30am on 2 July 2021 be vacated. 2. The proceeding including the Receivers' Notice of Motion filed 9 August 2019 be stood over for mention at 9.30am on 2 September 2021. 3. Costs be reserved. 4. Liberty to apply on 3 days' notice. THE COURT NOTES THAT: The solicitors for the Defendant will notify the Plaintiff and the Receivers if final orders in Supreme Court of New South Wales, Court of Appeal Proceeding No 2020/00361939 are pronounced and will seek to relist the matter for mention at an earlier date if practicable." 1. On 17 August 2016, Mr Paltos lodged a Notice of Intention to Engage in Legal Practice with the Law Society of New South Wales under the name "Paltos Family Lawyers Pty Ltd", although as it transpired Mr Paltos was unable to work as a solicitor until December 2016. In December 2016, Mr Paltos returned to practise as a solicitor, albeit at a much-reduced capacity than he had enjoyed before his strokes. 2. On 5 October 2017, Mr Paltos commenced proceedings against Bartier Perry seeking damages for breach of contract, negligence, and for misleading and deceptive conduct arising from essentially the same conduct; that is, its alleged failure properly to advise Mr Paltos about his rights to exercise a put option granted by the Put and Call Option Agreement. As I have said, an application by Bartier Perry for those proceedings to be heard and determined at the same time as the Partnership Proceedings was rejected. Accordingly, the present appeal comes before this Court before the Partnership Proceedings have even commenced to be heard. I will return in detail to the complexities created by this state of affairs, particularly as regards the damages appeal. 3. In Paltos v Bartier Perry Pty Ltd [2020] NSWSC 705 and Paltos v Bartier Perry Pty Ltd (No 2) [2020] NSWSC 1706, Rothman J held that Bartier Perry was liable to pay Mr Paltos damages of $1,411,707 for breach of its duty of care, retainer and s 18 of Sch 2 to the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law) because it had failed properly to advise Mr Paltos of his rights to exercise the put option under the Put and Call Option Agreement. The primary judge's award of damages was subject to an undertaking being given by Mr Paltos to pay to Bartier Perry certain components of any damages he received from the Account Proceedings and the Partnership Proceedings (together the Equity Proceedings). The undertaking was in the following terms: "The plaintiff, Dennis Paltos, undertakes to pay to the defendant, Bartier Perry Pty Ltd, any amount received or allowed to him in proceedings brought by Peter Milevski, being proceedings 2016/118930 and 2017/246841, confined to amounts received or allowed by or to the said Dennis Paltos in any calculation on account of goodwill, if any, of the Paltos/Milevski Partnership or on account of work in progress, if any, in the said partnership at the date of its dissolution." 1. As I have explained, Mr Paltos has sought from Mr Milevski in the Partnership Proceedings payment of an amount representing 70% of the value of the Partnership assets (including goodwill and work in progress) as at 21 April 2016. It is common ground in the present case that the quantum of damages payable by Bartier Perry to Mr Paltos must be reduced by the amount Mr Paltos is entitled to recover from Mr Milevski for the goodwill of the Partnership and work in progress as at the date of dissolution of the Partnership. This state of affairs raises obvious and significant issues about the assessment of and quantum of damages in the present case to which I will return. Decision of the primary judge The first judgment 1. The principal facts found by the primary judge may be summarised thus: 1. on 23 December 2015, Mr Paltos suffered two strokes and was hospitalised. He had not returned to work as at 21 April 2016; 2. on 15 February 2016, Mr Milevski wrote to Mr Paltos regarding the Partnership and, the next day, 16 February 2016, Bartier Perry commenced acting for Mr Paltos; 3. Bartier Perry was aware that Mr Paltos had suffered strokes when they were engaged on 16 February 2016. Bartier Perry was aware throughout the time they were retained that Mr Paltos continued to suffer many symptoms as a consequence of those strokes; 4. sometime prior to 18 April 2016, Bartier Perry advised Mr Paltos that Mr Milevski could terminate the Partnership and suggested that Mr Paltos try to sell 20% of the Partnership to Mr Milevski or dissolve the Partnership himself; 5. on 18 April 2016, Mr Milevski commenced proceedings in the Supreme Court against Mr Paltos, seeking dissolution of the Partnership. On about the same date Bartier Perry ceased to act for Mr Paltos. On 21 April 2016, the Court made orders, by consent, that the Partnership be dissolved and Receivers appointed. It is Mr Paltos' case in the Partnership Proceedings that shortly thereafter Mr Milevski took over the assets of the Partnership without paying the Receivers for the goodwill of the Partnership; 6. at all relevant times during Bartier Perry's retainer Mr Paltos was, in fact, unable to carry out any duties in the Partnership and if this remained the case in June 2016 he would be totally and permanently disabled within the meaning of the Put and Call Option Agreement; 7. Bartier Perry owed Mr Paltos a duty of care and were retained to advise him of his rights under the Put and Call Option Agreement; 8. Bartier Perry breached its retainer and duty of care and engaged in misleading and deceptive conduct by failing properly to advise Mr Paltos about his right to serve a put option notice on Mr Milevski and thereby enliven his rights under the Put and Call Option Agreement; and 9. on or about 21 April 2016, pursuant to orders of the Court the Partnership was dissolved. 1. The document at the heart of Mr Paltos' case was the Put and Call Option Agreement. The essence of that case was simple. Mr Paltos alleged that, acting competently, Bartier Perry should have advised him that if he remained unable to work in the Partnership for a period of six months he would at that time, but for a limited period only, be able to exercise the put option granted by the Put and Call Option Agreement. Competent advice would have been that exercise of the put option may be financially advantageous to Mr Paltos and that he should seek accounting advice about that question. Acting competently, Bartier Perry should have advised Mr Paltos that the put option arguably survived the dissolution of the Partnership. 2. Mr Paltos' case was that if he were given that advice he would have served a put option notice. He would in that event have been entitled to be paid in accordance with the formula in the Put and Call Option Agreement. As he was not given that advice, he failed to exercise the put option in time and that valuable right was lost. Mr Paltos claimed that Bartier Perry, in contract, tort and under s 18 of the Australian Consumer Law, was liable to compensate him for that loss. 3. As the terms of the Put and Call Option Agreement are at the heart of this case, I will set out its relevant terms at some length. Clause 2.4 of the Put and Call Option Agreement provided: "2.4 Condition Precedent to Grant of the Options The Call Options and Put Options are granted under this Deed subject to the occurrence of the Trigger Event in respect of the Owner and Incoming Partner". 1. "Trigger Event" was defined in cl 1.1 as follows: "'Trigger Event' means the death or total and permanent disablement of an Owner or Incoming Partner". 1. "TPD" was defined in cl 1.1 of the Put and Call Option Agreement as follows: "'TPD' means total and permanent disablement of an Owner or Incoming Partner and: a) If there is an Insurance Policy in place in respect of an Owner or Incoming Partner, TPD has the meaning given in that Insurance Policy; b) If there is no Insurance Policy in place in respect of an Owner or Incoming Partner, TPD means the existence of circumstances where, because of injury or illness, the Owner or Incoming Partner has not been able to carry out their usual working activities in their usual occupation for a period of six consecutive months". 1. The following relevant terms were defined in cl 1.1 of the Put and Call Option Agreement: "'Business Entity' means the legal partnership practice of Paltos & Co. however constituted 'Business Interests' means the form of a particular Owner or Incoming Partner's equity interest in the Business Entity including any associated entities 'Completion Date' means the later of: a) The date that is 30 days after the date on which the respective Call Option or Put Option is exercised; or b) Such other date as the parties unanimously agree to be the date on which the transfer of Business Interests as contemplated by this Deed is completed 'Exiting Owner' means the Owner or Incoming Partner who has exercised either a Put Option granted to him under the terms of this Deed or has been served with an Option Notice exercising a Call Option granted by him under this Deed 'Insurance Policy' means a policy of life insurance that is identified in columns 3 and 4 in Schedule D under which a sum insured is payable to an Owner or Incoming Partner subject to the occurrence of a Trigger Event in respect of the person nominated in column 1 of Schedule D. 'Market Value' means the amount calculated in accordance with Schedule C and where there is a dispute as to the application of this formula then the Market Value is the value of the Business Interests as determined by an accountant appointed by the President of the Institute of Chartered Accountants for New South Wales and: a) they are to be instructed to value the Business Interests using the formula set out in Schedule C; b) no discount or uplift is to be applied merely because: i) the number of Business Interests being transferred is a minority holding or is a majority holding or is neither a minority holding nor a majority holding; ii) the Business Interests being transferred are not being transferred with all of the other Business Interests; and c) their decision is that of an expert not an arbitrator and their valuation is binding on the parties 'Option Exercise Period' means the 30th day after the following days: a) in the event of the death of an Owner or Incoming Partner – the date of the death; b) in the event of the TPD of an Owner or Incoming Partner – the date that the TPD event (as defined in the Insurance Policy) occurred or, if there is no such Insurance Policy in place, the date on which the Principal has not been able to carry out their usual working activities for a period of six consecutive months 'Purchase Price' means in relation to Business Interests that are transferred in accordance with this Deed, the amount calculated in accordance with the following formula: [A% x B] – C Where A = the percentage that the Business Interests held by the Exiting Owner bears to the total of all business interests of that class; B = the Market Value of all Business Interests; C = the amount of the sum insured received by the Related Insurance Owner of the Insurance Policy (if any) in respect of the Owner or Incoming Partner who suffered the Trigger Event, provided that, if the application of this formula equals zero or a negative number then the Purchase Price is $1.00 'Put Option' means the option granted under clause 2.2 of this Deed by an Ongoing Owner to an Exiting Owner which may be exercised by an Exiting Owner". 1. The exercise of the put and call options was dealt with by cll 5.1 and 5.2 which provided: "TERMS OF TRANSFER OF BUSINESS INTERESTS 5.1 Sale Transaction Terms Upon the exercise of a Call Option or a Put Option in accordance with clause 3.1, the terms on which the Exiting Owner's Business Interests are to be transferred to the Ongoing Owner are as follows: a) the Ongoing Owner must pay to the Exiting Owner the Purchase Price in consideration for the transfer by the Exiting Owner of the Exiting Owner's Business Interests; b) if there is more than [one] Ongoing Owner that is the purchaser of the Business Interests, then those Ongoing Owners will purchase the Business Interests of the Exiting Owner and pay the Purchase Price in the same proportion among them as represents the Market Value of their respective Business Interests; c) completion of the sale and purchase of the Business Interests must take place on or before the Completion Date at such place as the Owner who first exercises the Call Option or Put Option specifies in the Option Notice; d) all documents that evidence ownership of the Business Interests must be delivered by the Exiting Owner to the Ongoing Owner upon the payment of the Purchase Price; e) an Owner or Incoming Partner who has suffered TPD is prohibited from holding any office or any other management role in any Business Entity and must resign from holding any such offices or roles within seven (7) days of the Trigger Event being determined as having occurred; f) for as long as any Internal Debt Amounts remain outstanding those debts will, from the Completion Date, carry an annual interest charge calculated at the prevailing bank overdraft interest rate for the bank with which the Business Entity that owes the debt holds the majority of its accounts and with that interest charge being calculated on a daily basis. 5.2 Release by Ongoing Owner Where the options granted under this Deed have been exercised and the transfer of Business Interests as contemplated by this Deed has been completed then the Ongoing Owner must: a) indemnify the Exiting Owner from and against all actions, claims, demands, notices, losses, damages, costs or expenses for which that person may become liable in respect of the Business Entity and which arise after the Completion Date (including any guarantees and the like that may have been provided by any such person, but only to the extent to which such guarantee has not been called upon or otherwise exercised prior to the exercise of the Call Option or Put Option under this Deed); b) as soon as reasonably practicable after the Completion Date do all things and sign all documents necessary: i) to procure the release of any assets of the Exiting Owner with respect to debts of the Business Entity; ii) to release any guarantees or personal covenants given by the Exiting Owner with respect to debts of the Business Structure". 1. At the trial a great deal of evidence was led about Mr Paltos' medical condition during the period of the Bartier Perry retainer. The primary judge spent some time analysing that evidence and identifying the circumstances in which the put option was exercisable. 2. As is clear from the passages quoted above, the condition precedent to the exercise of, relevantly, the put option, was the "occurrence of the Trigger Event in respect of the Owner". "Trigger Event" was defined to mean "the death or total and permanent disablement of an Owner or Incoming Partner". 3. "TPD" was a defined term the construction of which was controversial before the primary judge. The essential debate at the trial was whether the definition required proof of "total and permanent disablement of an Owner" in addition to proof of the matters in (a), which addressed the case where there was an "Insurance Policy", or (b), where there was no "Insurance Policy". The primary judge concluded that the definition did not require proof of "total and permanent disablement of an Owner" in addition to proof of the matters in (a) or (b) of the definition. 4. The primary judge's preferred construction was that the Trigger Event occurs at the end of six months of disablement, being in this case Mr Paltos' inability to perform his usual working activities in the Partnership for a period of six consecutive months: "[243] On my preferred construction, the Trigger Event occurs at the end of six months of disablement. On the only other reasonable construction, it occurs, relevantly, at the happening of the injury that causes disablement. If, as I hold, the Trigger Event occurs at the conclusion of the six-month period, and the grant of the option, as distinct from its exercise, requires the Trigger Event, then the Put and Call Option Agreement would have little use, unless there were an implied term to the effect of that pleaded. Further, if the subjection operated in any other more fundamental way, it would not be a 'subjection' but a negation of the grant of the option. [244] In my view, the subjection to clause 2.4 and the terms of clause 2.4, read with the other provisions, operates so that the Put and Call Option Agreement grants the options, but makes it clear that the exercise of the options is conditioned on the occurrence of a Trigger Event. …" 1. His Honour was apparently of the view that the existence of the implied term (explained below) was potentially important as otherwise the dissolution of the Partnership might destroy the right. Senior Counsel for Bartier Perry accepted that his Honour's alternative finding at [367], that on the proper construction of the Put and Call Option Agreement the right to serve a put option notice survived the dissolution of the Partnership, was correct. 2. On the contingent basis that the right to serve a put option notice did not survive the dissolution of the Partnership, however, the primary judge found that the Put and Call Option Agreement contained an implied term to the effect that: "[260] The proposition, claimed in [11A] of the Further Amended Statement of Claim is simply that: if the Put Option is exercised, and has not lapsed, requiring the Ongoing Owner to purchase the interest in the Partnership, that obligation is not capable of being defeated by the dissolution of the Partnership or any other step that would disentitle the Exiting Owner, who has the right to exercise the put option, from benefiting from the terms of the Put and Call Option Agreement. That is precisely the point, cited with approval in Peters (WA) v Petersville, from Shepherd v Felt & Textiles of Australia Ltd." 1. The primary judge concluded that Mr Paltos was suffering "total and permanent disablement" within the meaning of the Put and Call Option Agreement as at the date six months after he first suffered a stroke. He would have been entitled to serve a put option notice under the Put and Call Option Agreement at that time. 2. By that time, however, Bartier Perry's retainer had been terminated. The critical issue about liability was whether it had been shown that during the currency of its retainer a reasonably competent solicitor in the position of Bartier Perry would have given Mr Paltos advice that if he remained unable to work in the Partnership after six months he may be able to exercise the put option. 3. The primary judge found that a reasonably competent solicitor in the position of Bartier Perry should have, at least following the deterioration of Mr Paltos' medical prognosis on about 13 April 2016, given Mr Paltos advice that if in June 2016 he remained unable to carry out his usual working activities in the Partnership he may be able to issue a put option notice under the Put and Call Option Agreement requiring Mr Milevski to pay him for his 70% share of the Partnership by reference to the formula in Schedule C to the Put and Call Option Agreement. 4. The primary judge accepted that prior to 13 April 2016 Bartier Perry was not negligent in failing to give that advice because of Mr Paltos' strongly expressed desire to return to carrying out his usual working activities in the Partnership as soon as possible. The primary judge found, however, that by 13 April 2016 it was obvious to Bartier Perry that: 1. Mr Paltos was by that time prepared to give up the whole of his interest in the Partnership; 2. Mr Paltos had previously had no insight into the degree to which he was disabled; 3. Mr Paltos was suffering from a medical condition that prevented him from working in the Partnership and was getting worse; and 4. Barter Perry had not provided advice to Mr Paltos about the issues arising under the Put and Call Option Agreement. 1. There was a limited controversy on the appeal about the advice that the primary judge did find that Bartier Perry had given about the exercise of the put option. It was common ground that the advice given was brief. Mr McCaffery said words to Mr Paltos to the effect of "the put options do not help [you, Mr Paltos]". The principal controversy was whether Mr McCaffery went on to qualify that statement by saying words to the effect of "at present because there is a six-month requirement in relation to your disability", "yet" or "at this time". It is not precisely clear which, if any, version of those qualifying words the primary judge accepted had been said: "[308] The other two additional Partnership Documents, as earlier mentioned, were sent to Mr McCaffrey on 17 February 2016. While Mr McCaffrey attests to the fact that he recollects that he advised to the effect that the Put Options do not help the plaintiff 'at present because there is a six-month requirement in relation to your disability', that conversation or advice is not, in those terms, accepted. But little turns on it. That which was put to the plaintiff, at one stage of cross-examination, was that the words 'yet' or 'at this time' were used and that the plaintiff was aware that there was a six-month period to which the Put and Call Option Agreement referred." (Footnotes omitted.) 1. Despite the rejection of Mr McCaffery's evidence about the qualifying words in this passage, it appears from his Honour's discussion of breach that his Honour accepted, at least on a contingent basis, that the advice given to Mr Paltos by Mr McCaffery included qualifying words such that the Put and Call Option Agreement "did not apply yet or at this stage". 2. Even assuming that the qualifying words had been uttered, the primary judge found that a cursory reading of the Put and Call Option Agreement should have revealed to Bartier Perry that up to 30 days after Mr Paltos had been unable for six consecutive months to undertake his usual activities in the Partnership because he had suffered a stroke, there existed an opportunity for him to exercise the put option by serving an option notice. After 30 days, the option would lapse. 3. The primary judge accepted that Mr Paltos had made known to Bartier Perry his "continuing strident desire to return to his practice". Although Bartier Perry, through Mr McCaffery, was aware of the significant limitations in Mr Paltos' capacity to determine what was in his best interests, it was not negligent for Bartier Perry to follow those instructions for the majority of the time they were retained. 4. The primary judge found that the position changed dramatically on 13 April 2016, when Mr Paltos' medical condition had, according to the contemporaneous medical evidence, deteriorated significantly, and Mr Paltos had indicated to Bartier Perry that he was now prepared to give up all of his interest in the practice. His Honour found: "[336] As at 13 or 14 April 2016 at least, the defendant, through Mr McCaffrey, was under an obligation to advise the plaintiff of his rights under the Put and Call Option Agreement and the process that was required to institute that procedure. The procedure was not complicated. All that was required was for an Option Notice to be served on Mr Milevski, at the appropriate time. [337] As at 13 and 14 April 2016, the plaintiff's health was significantly worse; his instructions were to transfer his 70% interest in the Partnership to Mr Milevski; and he was facing the dissolution of the Partnership. The defendant was not retained in the litigation and did not appear in the litigation between the plaintiff and Mr Milevski. [338] While I would consider that a prudent solicitor would have advised the plaintiff fully on his rights under the Put and Call Option Agreement from the very outset of the relationship, I have found that, while ever the instructions were that the plaintiff was to return to his practice, it was not negligent or a breach of duty for the defendant not to advise on those issues at that point in time. However, once those instructions changed in the manner that they did, at least as early as 13 and 14 April 2016, that situation altered dramatically. [339] Further, given that it was necessary for the defendant to have construed the Put and Call Option Agreement from the very earliest time that the relationship between the plaintiff and the defendant arose, that information should have been readily available and acted upon immediately. Not to do so was to fail to provide information upon which the plaintiff could decide the course of action he could have taken. Further, put in other terms, the defendant's obligation was to assist the plaintiff in defining the most beneficial means of achieving the objective that, by 13 and 14 April 2016, the plaintiff had decided upon. [340] As at 13 and 14 April 2016, the defendant should have advised the plaintiff that he had available the serving of an Option Notice, either immediately or shortly, under the Put and Call Option Agreement, the effect of which would have been to require Mr Milevski to purchase his shares at the Completion Date, which, if the Option Notice were to have been served on 14 April 2016 (or 15 April 2016), would have been, in accordance with the earlier described construction of the Deed, on 16 May 2016 and, otherwise, by 22 July 2016." 1. For essentially the same reasons as in relation to the breach of contract and negligence findings, the primary judge found that Bartier Perry had engaged in misleading and deceptive conduct by adverting to the put option contained in the Put and Call Option Agreement, but failing to explain that if Mr Paltos' disability persisted for six months he would be entitled to serve a put option notice and may be financially much better off as a result. 2. The next question to which a significant amount of the trial and a large part of the appeal was directed was the causation issue; whether, had Bartier Perry given Mr Paltos the advice about the possible exercise of the put option described at [14]-[18] above, Mr Paltos would have served on Mr Milevski a put option notice under the Put and Call Option Agreement in June 2016. 3. The primary judge found that if he had been given the advice by Bartier Perry about the possible exercise of the put option at [14]-[18] above, Mr Paltos would have served a put option notice on Mr Milevski during the period the notice would have been effective: "[367] The question that then arises is what effect the non-service of the Option Notice had on the rights of the plaintiff. Plainly, the Put Option was granted on 29 June 2010 and provided for the service of the Option Notice, whereupon the rights of the plaintiff would have included the ability to insist on Mr Milevski purchasing his interests at the agreed calculation and, in my view, would have survived any dissolution of the Partnership. [368] However, the Option Notice was not served and, it would seem, that right has now been lost. Under the Put & Call Option Agreement, because the Option Notice was not served within the Option Exercise Period, the right has lapsed. [369] Given the predominant concern of the plaintiff as to money and the desire, as from 13 April 2016, to have Mr Milevski purchase the entirety of the plaintiff's interest in the Partnership, the Court accepts as accurate the evidence of the plaintiff that, if he had been advised of the ability to take advantage of the Put Option, he would have done so. … [377] I continue to accept that if the plaintiff were to have been aware of those matters, which he was not, he would have exercised the Put Option by serving, at the appropriate time, an Option Notice. The appropriate time, in this alternative preferred construction, was between 23 June 2016 and 22 July 2016 (or, perhaps as a result of the weekend 25 July 2016). … [387] An Option Notice was not served at all. I accept that if the plaintiff were to have known of his capacity to serve the Option Notice, he would have done so. As earlier stated, the Option lapsed on or about 22 July 2016. … [411] The defendant had available to it the Put and Call Option Agreement. On any reasonable and available understanding of the law on the survival of Options, expressed, as in this Agreement, to survive, inter alia, death, the Options would and could be utilised, regardless of the dissolution of the Partnership. Such a protection or right of the plaintiff in his Partnership was fundamental to the task of advising the plaintiff. The defendant did not so advise and misled or deceived the plaintiff that there were no rights of which he could avail himself, once the Partnership had been dissolved. He suffered loss as a result of the misleading or deceptive conduct." (Footnotes omitted.) 1. The primary judge concluded that Mr Paltos had demonstrated that he suffered a loss by reason of not issuing a put option notice to Mr Milevski. That was because his Honour accepted that on the correct construction of the Put and Call Option Agreement Mr Paltos was entitled to be paid an amount calculated in accordance with Schedule C to that agreement, despite Mr Milevski resisting making such a payment. Mr Duggan, an expert accounting witness called by Mr Paltos, calculated the value of the Partnership on the basis prescribed by the Put and Call Option Agreement as $2,016,724 and the purchase price of Mr Paltos' interests as 70% of that amount, $1,411,707. His Honour accepted that calculation and rejected a submission that the calculation of the amount payable under the put option by Mr Duggan involved double counting. That matter is the subject of ground 5 of the appeal and I will address the complexities raised by that issue when dealing with that ground. 2. The primary judge accepted that Mr Paltos was seeking the payment of amounts by Mr Milevski in the Partnership Proceedings which, if recovered, would reduce the amount of the damages payable by Bartier Perry. The amount Mr Paltos was seeking, as I will explain in greater detail when dealing with ground 6 of the appeal, was an amount representing 70% of the value of the Partnership assets (including goodwill and work in progress) as at 21 April 2016. As I have said, the Partnership Proceedings in which those payments are sought have not yet been heard. 3. Bartier Perry submitted that as Mr Paltos had chosen to conduct this case against his legal advisors separately from and prior to resolution of the underlying disputes about the Partnership, the primary judge was obliged to assess Mr Paltos' damages now. Bartier Perry submitted that it was common ground between the parties at the trial that 70% of a figure between $879,434 and $1,026,007 calculated by Ms Rebecca Conoulty, the expert accountant Mr Paltos relies upon in the Partnership Proceedings, was the correct calculation of 70% of the value of the Partnership assets (including goodwill and work in progress) as at 21 April 2016. Bartier Perry submitted that this amount should be deducted from $1,411,707. 4. The primary judge recognised that some allowance needed to be made for the fact that Mr Paltos was claiming in these proceedings to have suffered loss of $1,411,707 in circumstances where, simultaneously, he was claiming in the Partnership Proceedings to have suffered a loss of over $600,000 which he accepted, if awarded, would reduce the damages recoverable from Bartier Perry. In the principal judgment, the primary judge considered the issue this way: "[431] It was submitted, by [Mr Paltos], that the difficulty associated with double counting the damage could be overcome by an undertaking that the plaintiff repay the defendant any amount received as a consequence of the proceedings in Equity. The difficulty with that course, left to its own devices, is that it deprives the plaintiff of any incentive to proceed with the litigation, or defend the litigation, in the Equity Division. Further, the repayment should not be confined to any award, but to any amount calculated to be the value of the plaintiff's interest in the Partnership, less any amount allowed for the value of the guarantee. [432] This was one of the reasons that I had hoped that the Equity Division proceedings would have concluded by the time it was necessary to publish these reasons. Such an event was not to be. [433] In the circumstances, an undertaking of the kind submitted must be provided before any damages will be ordered. The foregoing undertaking must be to the effect that any amount received by or payable to Mr Paltos, as a result of the Equity proceedings involving him and Mr Milevski, must be paid to the defendant in these proceedings. [434] Further, the Court requires an undertaking that the defendant in these proceedings will have all rights of subrogation to the rights and remedies belonging to the plaintiff in relation to the proceedings against Mr Milevski. An undertaking that the plaintiff will consent to such subrogation, if the defendant so requests it, will be required before any order for damages issues." 1. The primary judge did not make orders but gave the parties an opportunity to make further submissions about the orders to be made. The second judgment 1. On 1 December 2020, the primary judge delivered judgment in Paltos v Bartier Perry Pty Ltd (No 2) [2020] NSWSC 1706 (the second judgment). 2. As to the undertaking issue, the primary judge said: "[44] The issues of subrogation and the repayment undertaking, suggested by the Court in the First Judgment, relate to, in the latter case, any amount received by way of goodwill in the Partnership Proceedings. In relation to the subrogation, it relates to what otherwise might be payable under the provisions of clause 5.2 of the Put and Call Option Agreement. [45] A difficulty in terms of the minute, foreshadowed in the First Judgment and adumbrated by the Court in the course of the hearing on the minute of the order, is that the amount allowed for goodwill in the Partnership Proceedings, together with the repayment of any guarantees or amounts underpinning a guarantee paid by the plaintiff, will be offset by the debts owed on account of overdrawing and other matters. In those circumstances, if the overdrawing and other debts are a greater amount than the Court in the Partnership Proceedings values the goodwill of the Partnership, no amount would be awarded to the plaintiff as a result of the Partnership Proceedings. [46] On the other hand, if the amount of overdrawing is deducted from that which is payable pursuant to any damages assessed on the basis of the realisation of the Put and Call Option Agreement and its exercise, then the plaintiff will be paid that amount twice. [47] None of the foregoing relates to the value of the option once exercised in so far as it deals with the value of the Partnership for the purpose of the exercise of that option. Last, the Court's attempt to overcome the plaintiff receiving the goodwill or credit for the goodwill as well as the value calculated under clause 5.1 of the Put and Call Option Agreement, and the attempt to ensure that the defendant is not prejudiced by being required to offset the amount of damages payable by the plaintiff for the amount of overdrawing, led the Court to suggest the undertaking and the subrogation that is identified in the First Judgment. [48] Nor does the foregoing affect the reasonableness of the offer of $1.4 million and whether that results in a true compromise. That amount excludes any recompense for the return of the guarantee, which on the above analysis was appropriate. But the comparison between the offer and the judgment needs to include both costs and interest. Once interest, even up to the date of offer, is included, the offer is significantly better for the defendant. [49] Ultimately, the Court could have, more easily, awarded the judgment of $1.4 million, which had been shown to be owed and required an undertaking to repay any amount attributed to the goodwill of the Partnership in the Partnership Proceedings. The difficulty, contemplated by the Court, with that approach would have been that it may have been open to the plaintiff to settle the Partnership Proceedings (or arrange with Mr Milevski for them to be run) on the basis that the Court would determine goodwill at a very low figure and a consequential lower figure for the debt from overdrawing and otherwise. ,,, [52] The difficulty then arises that, if the Court, in these proceedings, ordered subrogation of the rights of the plaintiff in the Partnership Proceedings, or required an undertaking in or to that effect, the defendant in these proceedings could conduct the Partnership Proceedings in a manner that sought unreasonably to agitate matters that were consistent with its interests, but not those of the plaintiff. [53] If the defendant, on subrogation, was indemnified of its cost by the plaintiff in these proceedings, they could run issues and points that were, at best, only arguable. Further, the converse applies. The defendant could settle or run the Partnership Proceedings on an arrangement that the 'value' of the partnership would be optimised and the debts to the partnership increased accordingly. … [95] Lastly, the undertaking as to the repayment will not refer to amounts received by Mr Paltos from the Partnership Proceedings. It will refer to the payment to Bartier Perry of the amount, if any, assessed as the proportionate goodwill of the Partnership, and, if there be none assessed, the proportionate value, if any, of work in progress utilised to the advantage or benefit of Mr Paltos in assessing what, if any, amounts he is, as a consequence of the Partnership Proceedings, to pay or to receive." 1. It will be necessary to address, in detail, his Honour's reasons on the topic of the undertaking when addressing ground 6 of the appeal. I will return to that topic then. 2. His Honour also gave consideration to claims for additional relief made by Mr Paltos which are the subject of the notice of cross-appeal. As those claims are detailed and somewhat convoluted, I will address them when dealing with the notice of cross-appeal. 3. Finally, the primary judge made an award of indemnity costs on the basis of an offer of compromise in the amount of $1.4 million. If Bartier Perry enjoy success in this appeal in reducing the amount of the damages award below $1.4 million it follows that the award of indemnity costs from the date of that offer must also be set aside. 4. His Honour made the following orders: "UPON THE PLAINTIFF PROVIDING AN UNDERTAKING IN THE FOLLOWING TERMS: The plaintiff, Dennis Paltos, undertakes to pay to the defendant, Bartier Perry Pty Ltd, any amount received or allowed to him in proceedings brought by Peter Milevski, being proceedings 2016/118930 and 2017/246841, confined to amounts received or allowed by or to the said Dennis Paltos in any calculation on account of goodwill, if any, of the Paltos/Milevski Partnership or on account of work in progress, if any, in the said partnership at the date of its dissolution. THE COURT ORDERS: (1) Judgment in the proceedings for the plaintiff; (2) The defendant shall pay the plaintiff the sum of $1,411,707; (3) Pursuant to the terms of s 100 of the Civil Procedure Act 2005 (NSW) the defendant shall pay interest on the aforesaid judgment sum from 22 July 2016 until the date of judgment at the rate prescribed in Supreme Court Practice Note SC Gen 16; (4) Pursuant to the terms of s 101 of the Civil Procedure Act 2005 (NSW), the defendant shall pay post-judgment interest at the prescribed rate; (5) The defendant shall pay the plaintiff's costs of the proceedings up to and including 28 February 2018 on the ordinary basis and on and from 1 March 2018 on an indemnity basis." Grounds of appeal 1. Bartier Perry advanced six grounds of appeal. It contended that the primary judge erred: 1. in finding that Bartier Perry breached its duty of care and retainer (ground 1); 2. in finding that Bartier Perry engaged in misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law (ground 2); 3. in finding that the Put and Call Option Agreement contained an implied term to the effect that "if the Put Option is exercised, and has not lapsed, requiring the Ongoing Owner to purchase the interest in the Partnership, that obligation is not capable of being defeated by the dissolution of the Partnership or any other step that would disentitle the Exiting Owner, who has the right to exercise the put option, from benefiting from the terms of the Put and Call Option Agreement" (ground 3); 4. in holding that any breach of Bartier Perry's duty of care or retainer, or any misleading or deceptive conduct, was causative of the loss for which Mr Paltos sought damages (ground 4); 5. in finding that Mr Paltos suffered loss and damage and in the quantification of the damages found (ground 5); and 6. in proposing that the Court accept the undertaking referred to in the second judgment at [96] instead of assessing damages once and for all as a lump sum on the basis of the evidence before the Court (ground 6). Application to lead fresh evidence 1. Bartier Perry sought to adduce evidence on the appeal which was submitted to be fresh evidence arising after the hearings by the primary judge. The evidence was contained in the affidavit of Timothy Randolph Price sworn on 19 March 2021 and its exhibit marked "TRP-1" comprising: 1. Law Society of New South Wales "find a lawyer" details for Mr Paltos dated 11 March 2021; 2. a copy of a historical company extract for "Paltos Family Lawyers Pty Limited" dated 11 March 2021; 3. Paltos Family Lawyers LinkedIn homepage screenshots dated 10 March 2021 which state the following: "… We are a boutique firm specialising in divorce, family law and de facto marriage cases. … Dennis … has worked in the legal profession for almost 40 years as a litigation lawyer. … To get in contact with Dennis so that we can assist you please email us … or call us …"; 1. Paltos Family Lawyers Facebook page screenshots of posts dated 10 February (apparently in 2021) to a similar effect; 2. Waleys & Waleys [2020] FCCA 841 (delivered on 27 April 2020), which records the following at [59]: "Also a part of exhibit A7 is a print of an email from the Father addressed his then-solicitor, Mr N, who appeared for him at Court on [25 September 2017]. That email includes the following: • I just called Paltos …"; and 1. Jamison & Jamison [2018] FCCA 2528 (delivered on 16 August 2018), which records that Paltos Family Lawyers were the solicitors for the applicant in those proceedings. 1. Bartier Perry submitted that the Facebook and Linkedin posts confirm that Mr Paltos has returned to practise as the principal solicitor at Paltos Family Lawyers and, at the very least, establish that Mr Paltos considers himself cognitively capable of working as a solicitor and has retained his commitment to returning to practice. It was submitted that the judgments in Waleys and Jamison also establish that Mr Paltos returned to practice and did some legal work in the business named "Paltos Family Lawyers". It was submitted that the judgments, when viewed in light of the more recent social media posts, underscore Mr Paltos' ongoing and unwavering commitment to return to practice. 2. Where the evidence relates to matters occurring after the trial, there is no requirement to show special grounds to justify its reception: Supreme Court Act 1970 (NSW), s 75A(9) ("subsection (8) [which requires special grounds] does not apply to evidence concerning matters occurring after the trial or hearing"). Nevertheless, in exercising the statutory power to admit fresh evidence regard must be had to the nature of the proceedings and the general public interest in the finality of litigation: Doherty v Liverpool District Hospital (1991) 22 NSWLR 284 at 296; Great Wall Resources Pty Ltd v O'Sullivan [2009] NSWCA 119 at [28]-[30]; Council of The City of Botany Bay v Michos [2013] NSWCA 244 at [33]. 3. Bartier Perry are correct that the material sought to be tendered on the appeal is fresh in that it was not available in 2020 at the time of the hearings before the primary judge. At its highest, however, this fresh evidence shows what was already apparent from the primary judgment itself, namely that after the relevant period in which Mr Paltos could have exercised the put option, he returned to practise as a solicitor, albeit on a much more limited basis than before he suffered the strokes. As I will explain, there is no longer an issue in this case about whether, in order to exercise the put option, Mr Paltos needed to demonstrate that he was totally and permanently disabled, in the sense that he was no longer able to work as a solicitor in the future. The primary judge rejected that construction of the Put and Call Option Agreement and Bartier Perry did not appeal from that finding. 4. Bartier Perry submitted that the evidence is relevant to establishing that Mr Paltos continued to practise law after the expiration of the notional Option Exercise Period and, by extension, believed that he was mentally capable of so acting. The evidence was said to undermine the primary judge's conclusion (at [314]) that Mr Paltos "was suffering from a condition that prevented him from working and was getting worse" as it indicates that his condition did in fact improve to the point at which he was able to return to practice. This, however, was understood by the primary judge who made a finding (at [12]) that in August 2016, Mr Paltos lodged a Notice of Intention to Engage in Legal Practice with the Law Society of New South Wales under the name Paltos Family Lawyers Pty Ltd and in December 2016, he returned to practise as a solicitor. The fresh evidence confirms those findings but takes the matter no further. 5. Bartier Perry also submitted that the evidence confirms the primary judge's finding that Mr Paltos was committed to returning to practice. It was submitted that this bears upon the question of whether Mr Paltos would have sought to exercise the put option if he had been properly advised in relation to it. I do not agree. 6. This submission is based upon a misconception about the proper operation of the Put and Call Option Agreement. As I have already said, the primary judge found that the correct construction of the Put and Call Option Agreement was that the Trigger Event occurs at the end of six months of disablement, being in this case the inability on the part of Mr Paltos to perform his usual working activities in the Partnership for a period of six consecutive months. None of this fresh evidence goes anywhere near to establishing that Mr Paltos can now perform his usual working activities in the Partnership, let alone that he could at the time he was legally able to exercise the put option. 7. To the extent that Bartier Perry seek to rely on this evidence as a "roadblock" warranting a finding relevant to causation that, although incorrect as a matter of law, Mr Paltos may have thought that he could not exercise the put option lest he be forbidden from ever practising as a solicitor in the future, that was a matter well and truly litigated before the primary judge on the basis of abundant material that Mr Paltos strongly desired to return to practise as a solicitor and by the time of the trial had done so to a limited extent. This evidence adds nothing material to the abundant evidence which was before the primary judge on that topic. 8. Given the nature of the proceedings, the extensive findings already made on this subject, the peripheral relevance of the material and the general public interest in the finality of litigation, I would exercise the Court's discretion to reject all of the fresh evidence and dismiss Bartier Perry's notice of motion. Application of the Civil Liability Act and the Competition and Consumer Act 1. Despite the provisions of the Civil Liability Act 2002 (NSW) and the Competition and Consumer Act being central to the resolution of the present case, a striking feature of these proceedings is the absence of any real references to those legislative provisions by the parties before the primary judge or in this Court. 2. The consequences are that, for the purposes of the appeal, virtually all of Bartier Perry's complaints are concerned with the construction of the Put and Call Option Agreement and findings of fact made by the primary judge. The exception is ground 6, which complains about a matter of principle in the ascertainment of Mr Paltos' damages. Even in that case, however, the provisions of the Civil Liability Act and the Competition and Consumer Act were barely addressed. Ground 1 of the appeal – breach of duty of care and breach of retainer 1. Ground 1 of the appeal involves four separate, but overlapping, challenges to the primary judge's findings of fact about Mr McCaffery's advice to Mr Paltos about the Put and Call Option Agreement. Bartier Perry submitted that on a correct understanding of the facts it had discharged its obligation properly to advise Mr Paltos about the manner and circumstances of exercise of the put option granted by the Put and Call Option Agreement. 2. I have concluded that this ground must fail. This is because, on the assumption most favourable to Bartier Perry about what Mr McCaffery on behalf of Bartier Perry told Mr Paltos about the manner and circumstances of exercise of the put option, Mr Paltos was nevertheless entitled to succeed in his case that Bartier Perry breached its retainer and the concurrent duty of care. 3. Before descending into the detail of Bartier Perry's complaints about factual findings, it is first necessary to address submissions made on behalf of Mr Paltos which asserted that in order to succeed on this ground Bartier Perry was required to demonstrate that factual findings made by the primary judge must be shown not to have been "open": "COLEMAN: Our submission is that not only were the findings reasonably open, but that they were abundantly underpinned by not less than 25 contemporaneous file notes and/or emails of the defendant in the Court below – and I'll take your Honours to it – the cross-examination of the solicitor who was advising the respondent at the relevant time. We submit other than this Court in effect sidestepping the requirement that an appellant demonstrate that a finding of fact wasn't reasonably open, whether one has regard to some of the more colourful formulations of the test that emerged from the authorities or not, if one takes the more bland proposition not reasonably open, we submit on none of these issues can it be shown that the findings of his Honour are vulnerable." 1. As was made clear during oral address, that submission cannot be accepted. In a case such as the present, where s 75A of the Supreme Court Act applies, the Court is conducting a rehearing. A judgment of this Court is required both on the facts and the law. In relation to demeanour-based credit findings, as explained in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [22]-[28], appellate restraint is required. Nevertheless, as the High Court went on to explain in Fox v Percy: "[29] … Finality in litigation is highly desirable. Litigation beyond a trial is costly and usually upsetting. But in every appeal by way of rehearing, a judgment of the appellate court is required both on the facts and the law. It is not forbidden (nor in the face of the statutory requirement could it be) by ritual incantation about witness credibility, nor by judicial reference to the desirability of finality in litigation or reminders of the general advantages of the trial over the appellate process." Ground 1(a) 1. The primary judge made the following finding about Mr McCaffery's advice to Mr Paltos: "[310] On 23 February 2016, as noted earlier in these reasons, the defendant, through Mr McCaffrey, noted the plaintiff's present incapacity which, in the view of the defendant, was 'likely to continue partially for indefinite period' and noted or asked whether there was 'permanent disablement of the plaintiff for the purposes of the [Put and Call Option Agreement]'. It then refers, albeit in abbreviations, to the six-month period; the option period; and then the 30 days. It cannot be the situation, given the content of that note, that Mr McCaffrey (and necessarily the defendant) did not read and seek to construe the Put and Call Option Agreement. What the defendant did not do was formally construe the Put and Call Option Agreement and it did not advise the plaintiff of any such construction." 1. Bartier Perry submitted that the primary judge erred in finding that Mr McCaffery did not "formally construe" the Put and Call Option Agreement or advise Mr Paltos about his construction of that agreement. It was submitted that his Honour's finding was contrary to Mr McCaffery's evidence, admissions made by Mr Paltos in cross-examination, the objective evidence and other findings in his Honour's judgment. 2. Bartier Perry submitted that the Court should find that in late February 2016, Mr McCaffery construed the Put and Call Option Agreement and correctly advised Mr Paltos that the put option did not assist him at that time because before it could be exercised there was a six-month requirement in relation to his disability. 3. It may be that by finding that Mr McCaffery did not "formally construe" the Put and Call Option Agreement, all that his Honour was saying was that Bartier Perry did not construe the Put and Call Option Agreement in the strict sense of not accurately interpreting and finding its correct meaning. As I will explain, that finding was correct. If, however, the finding made by the primary judge that Mr McCaffery did not "formally construe" the Put and Call Option Agreement intended to convey that Bartier Perry did not look at the Option Agreement at all, this was an overstatement of the position. As I will explain, however, I do not think that even if the finding should be understood as intended to convey that Bartier Perry did not look at the Option Agreement at all it affects his Honour's overall conclusion that Bartier Perry failed to give Mr Paltos competent advice about his rights under the Put and Call Option Agreement. That is, I accept that Mr McCaffery read the Put and Call Option Agreement and sought to understand its terms, sufficient to warrant the description that he "construed" it, at least in that limited sense. I also accept that it is likely that Mr McCaffery said to Mr Paltos that the Put and Call Option Agreement did not apply to him "yet" or "at this time". In context, the oral advice by Mr McCaffery was likely to have included some reference to the time dimension of the exercise of the option. Mr McCaffery's advice was not, however, in the circumstances and having regard to the terms of Bartier Perry's retainer, sufficient to discharge its obligation to provide competent legal advice to Mr Paltos about his rights against Mr Milevski as regards the Partnership. I will return to this subject shortly. Ground 1(b) 1. Bartier Perry next submitted that the primary judge erred in finding that by 14 April 2016 Mr Paltos was prepared to give up the whole of his interest in the Partnership. It was submitted that, at that time, Mr Paltos retained a "strong and passionate desire" to return to work and believed that desire "would be fulfilled or might be fulfilled" in the future. It was submitted that even though Mr Paltos was willing to transfer his interest in the Partnership to Mr Milevski, he was not prepared to do so in a way that would prevent him from being able to work again, which (so the written argument asserted) would have occurred if he tried to invoke his rights under the Put and Call Option Agreement. 2. Whilst I accept that on 13-14 April 2016 Mr Paltos continued to harbour a desire to return to work as a solicitor when he was able to do so, the primary judge's finding that by 13 April Mr Paltos was prepared to give up, by which the primary judge meant transfer, the whole of his interest in the Partnership, was plainly correct. 3. The contemporaneous documents and unchallenged findings of the primary judge make clear that on 14 April 2016 Mr Paltos had agreed in principle to the transfer of his interests in the Partnership to Mr Milevski, "by whatever mechanism", and that his current condition prohibited him from getting back to work as soon as he had expected: "[179] On 14 April 2016, Mr McCaffrey wrote to Mr Harris referring to Mr Paltos' deteriorating health condition over the past 24 hours, which was preventing Mr McCaffrey from obtaining detailed instructions, particularly upon the 32 items that had been sent to Mr McCaffrey. [180] Nevertheless, Mr McCaffrey restates that Mr Paltos was agreeable in principle to the transfer of his interests to Mr Milevski, by whatever mechanism, and that his current condition prohibited him from getting back to work as soon as he had expected. Mr McCaffrey also questioned the extreme haste with which Mr Milevski apparently wanted the matter resolved. Fifteen minutes later, Mr McCaffrey confirms with Mr Paltos the terms of his email to Mr Harris and suggests that the other side would see the claim of deteriorating health as a pretext for delay. [181] On 15 April 2016, Mr Howell emailed Mr Paltos, with a copy to Mr McCaffrey, raising the possibility of appointing a financial guardian because of Mr Paltos' health. [182] There can be little doubt that the contemporaneous notes and correspondence corroborates the view of Dr Lianos, Dr Breen and Dr Miller. Mr Paltos' executive functioning was significantly impaired. He was visibly and obviously impaired." (Footnote omitted.) 1. It is one thing to conclude that Mr Paltos would seek to practise as a solicitor in the future. Plainly he did. It is a quite different thing to find that Mr Paltos would be prepared to transfer the whole of his interest in the Partnership. There is no inconsistency in the two states of mind or decisions made by Mr Paltos. As I have explained, the primary judge's finding that Mr Paltos did not need to be "totally and permanently disabled" in addition to meeting the description in clause (b) of the definition of "TPD" was not challenged by Bartier Perry on appeal. Whilst it is correct that Mr Paltos would not have been permitted to solicit clients of the Partnership if he had exercised the put option, Bartier Perry's submission that having exercised the put option Mr Paltos could never work as a solicitor again is untenable. Ground 1(c) 1. The primary judge drew the following conclusions: "[316] Regardless of whether or not one takes the view expressed by the Court as to the construction of TPD, or as to the construction of total and permanent disablement, at least as at 14 April 2016, and in my view, on the basis of the evidence in this case, well before that time, Mr McCaffrey was and, if not should have been, aware that there was at least an arguable, if not overwhelming, view that the plaintiff was totally and permanently disabled within the meaning of the Put and Call Option Agreement. … [320] But the plaintiff's lack of insight into his capacity must have been obvious and, on the evidence before the Court, was obvious. Further, whether or not the plaintiff had insight and whether or not Mr McCaffrey was entitled or required to go behind the plaintiff's statements as to his not wanting to give up the Partnership, as at 13 April 2016, at the latest, Mr McCaffrey and the defendant were aware that Mr Paltos was willing to give up his entire interest in the Partnership and was suffering a total and permanent disablement, or was aware of the facts that, if the defendant's mind considered those facts, would inevitably, or more likely than not, lead to that conclusion." 1. Bartier Perry submitted that the primary judge erred in finding that by at least 14 April 2016 Mr McCaffery was aware, or should have been aware, that Mr Paltos was totally and permanently disabled within the meaning of the Put and Call Option Agreement. There were said to be three problems with his Honour's finding: 1. first, as at 14 April 2016, Mr Paltos could not have been totally and permanently disabled within the meaning of the Put and Call Option Agreement because he had only suffered his stroke four months earlier, whereas the definition of "TPD" required that he be unable to carry out his usual working activities in his usual occupation for a period of six consecutive months. At most, he may have been totally and permanently disabled in two months' time; 2. secondly, the medical evidence from the time does not support his Honour's finding; and 3. thirdly, in February Mr McCaffery believed it was possible that Mr Paltos would be able to return to work. 1. Bartier Perry invited the Court to find that Mr McCaffery believed that there was a real prospect that Mr Paltos "may not" be totally and permanently disabled for the purposes of the Put and Call Option Agreement when the Option Exercise Period notionally would have commenced on 23 June 2016. It was said that, in light of the medical evidence available at the time, it was not unreasonable for him to hold this belief. 2. Bartier Perry is correct that as at 14 April 2016, Mr Paltos could not have been totally and permanently disabled within the meaning of the Put and Call Option Agreement and the primary judge erred in so concluding. As I will explain, however, I do not think that it affects his Honour's overall conclusion that Bartier Perry failed to give Mr Paltos competent advice about his rights under the Put and Call Option Agreement. 3. Bartier Perry's retainer was not limited to providing advice only if Mr McCaffery did not believe there "was a real prospect" that Mr Paltos may not be "TPD" as defined in the Put and Call Option Agreement on the Option Exercise Date. Assuming, in Bartier Perry's favour, that Mr McCaffery believed that there was a real prospect that Mr Paltos "may not" be totally and permanently disabled for the purposes of the Put and Call Option Agreement on 23 June 2016, I have concluded that he was nonetheless obliged by the terms of his retainer to provide advice to Mr Paltos about his rights under the Put and Call Option Agreement, should he meet the description of "TPD" as defined on the relevant date of the Trigger Event. 4. The contemporaneous evidence about Mr Paltos' health as at 13 April 2016 provides an ample basis for his Honour's conclusion that Mr Paltos may have remained totally and permanently disabled within the meaning of the Put and Call Option Agreement on 23 June 2016, and if so, he may have been able to exercise the put option. Ground 1(d) 1. Bartier Perry submitted that the primary judge erred in finding that Bartier Perry's duty required it to provide further advice to Mr Paltos about the Put and Call Option Agreement on or about 14 April 2016 or at any time between that date and the termination of Bartier Perry's retainer. 2. It was submitted that the appropriate time for giving advice about the potential to exercise the put option after the dissolution of the Partnership would have been closer to 23 June 2016 when the prospect of Mr Paltos recovering within the six-month period prescribed by the definition of "TPD" could be known with greater certainty (at which stage Bartier Perry's retainer had already been terminated). 3. This complaint should be rejected. The finding by the primary judge that, acting competently, Bartier Perry should have provided advice to Mr Paltos about the manner and timing of the exercise of the put option was correct. As I will explain, the primary judge did not err in finding that Bartier Perry should have so advised Mr Paltos at least after 13 April 2016 when his medical condition had significantly deteriorated and he had agreed to transfer his share in the Partnership. Conclusion on ground 1 1. As noted at the outset, this ground complains about four overlapping factual findings made by the primary judge in support of an overall submission that the primary judge erred in concluding that Bartier Perry breached its duty of care and retainer. 2. Bartier Perry is entitled, to an extent, to succeed in relation to some of those factual findings: 1. if the finding that Mr McCaffery did not "formally construe" the Put and Call Option Agreement meant that Bartier Perry did not read the Agreement at all, this was an overstatement of the position; and 2. the finding that as at 14 April 2016, Mr Paltos was totally and permanently disabled within the meaning of the Put and Call Option Agreement was not correct. 1. Sub-grounds 1(a) and (c) should be allowed to that limited extent. That does not lead to ground 1 being upheld. That is because, on the assumption most favourable to Bartier Perry about what Mr McCaffery on behalf of Bartier Perry told Mr Paltos about the manner and circumstances of the exercise of the put option, Mr Paltos was nevertheless entitled to succeed in his case that Bartier Perry breached its retainer and the concurrent duty of care. 2. Whilst I find that it is likely that Mr McCaffery said to Mr Paltos during the currency of the retainer that the Put and Call Option Agreement did not apply to him "yet" or "at this time", this was insufficient to constitute reasonably competent advice. The primary judge was correct to conclude that Bartier Perry, via Mr McCaffery, ought to have advised Mr Paltos between 13 April and 18 or 19 April that if he continued until 23 June 2016 to be incapable of carrying out his usual duties in the Partnership, he could exercise his option to require Mr Milevski to purchase his 70% interest in the Partnership in accordance with the formula in Schedule C to the Put and Call Option Agreement. 3. The conclusion drawn by the primary judge that Bartier Perry breached its retainer and concurrent duty of care by failing to give this advice was amply supported. There was a limited suite of documents here in issue. Bartier Perry had them all. Bartier Perry's retainer plainly encompassed providing advice to Mr Paltos about the appropriate and possible means available to him to transfer his interest in the Partnership to Mr Milevski on the best terms possible, whether immediately, upon termination of the Partnership, or after its dissolution. By 13 April 2016, this was the only matter of substance that Bartier Perry was retained to advise about. On or after 13 April 2016, a reasonably competent solicitor in the position of Mr McCaffery would have understood that, if Mr Paltos remained unable to perform his usual duties in the Partnership in June 2016, the put option under the Put and Call Option Agreement was an obvious and potential method available to Mr Paltos to transfer his interest in the Partnership for value. Acting competently, advice to that effect should have been given. 4. Reasonably competent advice would have been that if Mr Paltos remained unable to work in the Partnership for a period of six months he would at that time, but for a limited period only, be able to exercise the put option granted by the Put and Call Option Agreement. Competent advice would have been that exercise of the put option may be financially advantageous to Mr Paltos and that he should seek accounting advice about that question. Acting competently, Bartier Perry should have advised Mr Paltos that the put option arguably survived the dissolution of the Partnership. Bartier Perry failed to give that advice. There was no error in the conclusion by the primary judge that Bartier Perry thereby breached its retainer and concurrent duty of care. Ground 2 – misleading or deceptive conduct 1. Bartier Perry submitted that for the reasons advanced in support of ground 1, its conduct was not misleading or deceptive. It was submitted that: 1. as at 13-15 April 2016 there was nothing in the Put and Call Option Agreement that Mr Paltos could utilise to his advantage in the dispute with Mr Milevski; and 2. if the Put and Call Option Agreement contained the implied term extracted at [24] above, it was not engaged at that time and, if the put option survived the dissolution of the Partnership, it would have been premature to advise Mr Paltos that he could exercise the put option after the dissolution of the Partnership because at that time it was still unclear whether Mr Paltos would be unable to carry out his usual working activities in his usual occupation when the option became exercisable in 2 months' time on 23 June. It was submitted that any advice would have to be responsive to Mr Paltos' health and priorities in or around June 2016. 1. For essentially the same reasons as in relation to ground 1, the different formulations of advice said to have been given by Mr McCaffery to Mr Paltos do not matter in this case. On the version of Mr McCaffery's advice most favourable to Bartier Perry, I am satisfied that the advice given to Mr Paltos was misleading and deceptive. 2. Mr Paltos sought damages under s 236 of the Australian Consumer Law. While the measure of damages under s 82 of the Trade Practices Act 1974 (Cth) (which is relevantly in similar terms to s 236) is not necessarily the same as for negligence (see Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; [2004] HCA 3), Mr Paltos formulated his claim under this provision in the same manner as he did for breach of retainer and duty. However, it should be noted that the test for causation that inures in the word "by" found in s 82 adopts the common law "common-sense concept" discussed in March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; [1991] HCA 12: see Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55 at 525 per Mason CJ, Dawson, Gaudron and McHugh JJ. The test of causation in s 5D of the Civil Liability Act is not necessarily the same: Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420; [2009] HCA 48 at [43]-[44]. Nevertheless, in this case it was not suggested that there was any material difference in the application of the provisions. 3. Whilst I find that it is likely that Mr McCaffery said to Mr Paltos during the currency of the retainer that the Put and Call Option Agreement did not apply to him "yet" or "at this time", this was misleading and deceptive conduct. There was a limited suite of documents in issue. Bartier Perry had all of the documents and was being asked to provide advice to Mr Paltos about the appropriate and possible means available to him to transfer on the best terms possible his interest in the Partnership to Mr Milevski, whether immediately, upon termination of the Partnership, or after its dissolution. In that context, it was a dangerously incomplete statement of the rights Mr Paltos enjoyed to advise him that "the Put Options do not help [you, Mr Paltos]" yet or at this time. Whilst literally true, this advice was misleading and deceptive, in that it was apt to mislead Mr Paltos about the nature of his legal rights. 4. The true position was that Mr Paltos arguably enjoyed valuable rights under the Put and Call Option Agreement. If Mr Paltos remained unable to work in the Partnership for a period of six months he would at that time, but for a limited period only, be able to exercise the put option granted by the Put and Call Option Agreement. Non-misleading advice would have been that the exercise of the put option may be financially advantageous to Mr Paltos and that he should seek accounting advice about that question. Acting in a non-misleading way, Bartier Perry should have advised Mr Paltos that the put option arguably survived the dissolution of the Partnership. Bartier Perry failed to give that advice. 5. Bartier Perry's conduct was misleading and deceptive. Ground 2 should be rejected. Ground 3 – whether the implied term found by the primary judge existed 1. It will be recalled that, at least on a contingent basis, the primary judge found that the Put and Call Option Agreement contained an implied term to the following effect: "if the Put Option is exercised, and has not lapsed, requiring the Ongoing Owner to purchase the interest in the Partnership, that obligation is not capable of being defeated by the dissolution of the Partnership or any other step that would disentitle the Exiting Owner, who has the right to exercise the put option, from benefiting from the terms of the Put and Call Option Agreement." 1. Bartier Perry submitted that the implied term did not satisfy any of the conditions necessary to ground a term implied in law or in fact. In particular, Bartier Perry submitted that it was not necessary to give business efficacy to the Put and Call Option Agreement because: 1. if, as the primary judge found, the put option would have been exercisable after the dissolution of the Partnership, the implied term would be redundant; and 2. if, contrary to his Honour's finding, the implied term was engaged before the put option was exercisable, it would not have been fair or equitable because it would have pre-emptively forced Mr Milevski to remain in the Partnership and deal with the significant financial liabilities that Mr Paltos had created in circumstances where it was not yet clear whether Mr Paltos would have the right to rely on the put option in the future. 1. The latter submission may be put to one side immediately. The primary judge did not find that the put option was exercisable "pre-emptively" before June 2016. There was no notice of contention filed by Mr Paltos addressing this topic. 2. I have concluded that ground 3 proceeded on an essentially false basis. As Bartier Perry submitted, the primary judge found that on the correct construction of the Put and Call Option Agreement, the put option survived the dissolution of the Partnership. That construction of the Put and Call Option Agreement was not challenged on the appeal. 3. The primary judge found that, properly advised, Mr Paltos could and would have exercised the put option in June 2016. In those circumstances there was no basis to conclude that the implied term should be implied in law or in fact as a term of the Put and Call Option Agreement. Shortly put, it was unnecessary on the proper construction of the Put and Call Option Agreement for such a term to be implied. 4. For a term to be implied in law, the test is usually described as one of necessity: Liverpool City Council v Irwin [1977] AC 239 at 254-256, 262, 265-266; Byrne v Australian Airlines Ltd (1995) 185 CLR 410; [1995] HCA 24 at 453. Whilst the list of classes of contracts in which the law will imply terms is not closed (Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 at 487D), the implied term found here can hardly be described as necessary in circumstances where the express terms, correctly construed, provide that the right to exercise the option survived the dissolution of the Partnership. 5. For a term to be implied in fact, that term must, inter alia, be necessary to give business efficacy to the agreement: BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; [1977] UKPCHCA 1 at [40]-[41]; Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32 at [21]-[23], [28]. It was not necessary to imply a term into the Put and Call Option Agreement in order to give business efficacy to the agreement. On the proper construction of that Agreement, the option survived the dissolution of the Partnership. 6. Accordingly, assuming that the finding was other than tentative and contingent, I have concluded that the primary judge erred in finding the existence of the implied term. It follows that the primary judge erred in finding that there was a breach of contractual duty in Bartier Perry failing to advise Mr Paltos about the existence of the implied term. 7. I have also concluded, however, that this error was not material to the outcome. That is because, as Bartier Perry accepted on the appeal, the primary judge found that: 1. the put option would have been exercisable after the dissolution of the Partnership; and 2. Mr Paltos could (had advice been given that it was possible to do so) have exercised the put option even if the Partnership was dissolved. 1. Bartier Perry submitted that Mr Paltos had not proven that he would have exercised the put option if advised he was able to do so. As this was the focus of ground 4 of the appeal, I will return to it shortly. 2. Whilst I would uphold ground 3 of the appeal, this conclusion does not affect the correctness of the primary judge's findings about breach of retainer, duty or misleading and deceptive conduct. The findings of breach are amply supported by other findings made by the primary judge which were not challenged on the appeal. Ground 4 – causation 1. Grounds 4(a) and 4(b) concern causation. Bartier Perry's complaints are essentially about findings of fact. It was submitted that the primary judge erred in finding that Mr Paltos had proven that he would have either sought to rely on the implied term to prevent the dissolution of the Partnership or attempted to exercise the put option after the Partnership had been dissolved if he had been correctly advised in relation to his rights under the Put and Call Option Agreement. This was because of the risks and disadvantages of seeking to exercise the option, which were submitted to be repugnant to Mr Paltos' priorities at the time. In oral submissions these risks and disadvantages were collectively referred to as "speed bumps". 2. The case regarding the implied term and the dissolution of the Partnership may be set to one side. As I have found, the implied term was unnecessary in circumstances where the put option survived the dissolution of the Partnership. The alternative causation case raises no additional issues more favourable to Bartier Perry. 3. Bartier Perry submitted that on the assumption that prudent advice was as I have found (at [86] above), the hypothetical prudent solicitor would also have advised Mr Paltos: 1. of the risks associated with exercising the put option after the dissolution of the Partnership, including that Mr Milevski would seek to resist any attempt by Mr Paltos to rely upon it, which would likely result in expensive, contested litigation; and 2. that he would be unable to return to work in the Partnership if he exercised the put option. Bartier Perry argued that, as at April 2016, Mr Paltos was not prepared to take any step that would have involved betting against his recovery or which would have precluded him from being able to return to practice, such as admitting that he was totally and permanently disabled. 1. Bartier Perry submitted that the primary judge proceeded on the basis that, if Mr Paltos had been properly advised, he could have either consented to Receivers being appointed or exercised his rights under the Put and Call Option Agreement and potentially received more money than if the Partnership were simply wound up. Bartier Perry characterised this as a false dichotomy for the following reasons: 1. first, attempting to exercise his rights would have entailed considerable down-side risk for Mr Paltos from a financial and health perspective, and the primary judge's analysis made no allowance for the risks in assessing what Mr Paltos would have done; 2. secondly, exercising the put option would have been inconsistent with his personal, professional and health priorities (namely, to recover so that he could return to work) and it would have been commercially rational for Mr Paltos to consent to the appointment of the Receivers because that would have been far less risky and costly; and 3. thirdly, even if it was "essentially monetary issues that were driving … Mr Paltos", that does not mean that he would have sought to exercise his rights under the Put and Call Option Agreement. It was submitted that there was no guarantee that he would get more money if he were able to exercise the put option and even if consenting to the appointment of Receivers meant that he may have got less money in the short term, it preserved his ability to return to practice and retain his clients in the event his health improved, which could have left him financially better off in the long term. 1. Bartier Perry further submitted that the primary judge's analysis on causation was unsound because it was based on his Honour's erroneous finding that Mr Paltos gained an insight into the degree to which he was disabled on or about 13 April 2016, ignoring the fact that Mr Paltos still believed at that time that he may recover and be able to return to work. It was submitted that the fact that Mr Paltos took steps to return to work after the Partnership was dissolved, and then did in fact return to work as a solicitor in late 2016, is powerful objective evidence of that belief. It was submitted that he would not have acted any differently if he had been advised that he could exercise the put option after the dissolution of the Partnership; it would have been inconsistent with his priorities and the risks would have been too great for him at the time. 2. Mr Paltos submitted that it strained credulity to suggest that Mr Paltos would not have exercised the put option when he has taken essentially the same litigation risk by commencing these proceedings and the related Partnership Proceedings and he had no choice but to have exercised the put option, had he been advised that he could. 3. It was submitted that the same conclusions apply to causation in respect of damages for misleading and deceptive conduct, save that the limitation under s 5D(3) of the Civil Liability Act does not apply to subjective evidence of Mr Paltos after the event: see Australian Executor Trustees (SA) Ltd v Kerr [2021] NSWCA 5 at [290]. 4. It is axiomatic that proof of causation lay on Mr Paltos: Civil Liability Act, s 5E; Australian Consumer Law, s 18. 5. The question before the primary judge was whether, on the balance of probabilities, Mr Paltos had demonstrated that if he had been advised, between 13 and 19 April, that if he continued to be incapable of carrying out his usual duties as a partner of the Partnership until 23 June, he could arguably have exercised his put option to require Mr Milevski to purchase his 70% interest in the Partnership in accordance with the formula in Schedule C to the Put and Call Option Agreement (and that he should seek accounting advice about the value of that interest), the put option would likely have been exercised. 6. I have concluded that the primary judge was correct to find that had such advice been given, it is likely that the put option would have been exercised by Mr Paltos. 7. In reaching this conclusion it is important not to allow hindsight to lead too readily to a conclusion that Mr Paltos would have exercised the put option. 8. As to the risks of litigation to which Bartier Perry drew attention, it may be accepted that acting competently, Mr McCaffery would have warned Mr Paltos that litigation was a likely outcome of exercise of the put option. Mr Milevski may well have disputed Mr Paltos' entitlement to exercise the put option and would have engaged in litigation to seek to avoid having to purchase Mr Paltos' 70% interest in the Partnership in accordance with the formula in Schedule C to the Put and Call Option Agreement. Although the legal arguments to be advanced on behalf of Mr Milevski are unknown, it may be that ultimately Mr Milevski would have advanced arguments of the breadth advanced by Bartier Perry about the correct construction of the Put and Call Option Agreement. I have concluded that those arguments are not correct. On the proper construction of the Put and Call Option Agreement Mr Paltos was entitled to succeed. 9. The objective evidence available about Mr Paltos' appetite for expensive and uncertain litigation tends strongly in favour of the conclusion that Mr Paltos, if properly advised by Bartier Perry, would likely have issued a put option notice, despite the risk that Mr Milevski would have made Mr Paltos participate in litigation to secure any payment. Mr Paltos has at every relevant turn, including as at the relevant dates for this hypothetical litigation, in fact chosen to litigate; against Mr Milevski, against the Receivers and against Bartier Perry. In all three cases it may be inferred that the litigation was expensive and, considered prospectively, carried financial, health and reputational risks for Mr Paltos. I accept that Mr Paltos would have regarded in 2016 and 2017 the public disclosure of his disability and matters relating to an alleged gambling habit as undesirable. I am nevertheless comfortably satisfied that if he had been given the correct advice Mr Paltos would have exercised the put option despite the risk that it would expose the extent of his disability and allegations about his gambling. In effect exactly the same risks existed and have come to pass in these proceedings and in the Partnership Proceedings. I also accept that Mr Paltos would have needed to be in a position to fund litigation against Mr Milevski. On the basis of the conduct of the present proceedings and the Partnership Proceedings, I am persuaded that Mr Paltos has proven that he would have both exercised the put option and successfully sought to vindicate his rights in court if necessary. 10. As to Mr Paltos' personal, professional and health priorities (namely, to recover so that he could return to work), Bartier Perry's written submissions (at least) proceeded on a false basis. It is not correct that had he successfully exercised the put option Mr Paltos would have been prohibited from ever working as a solicitor again. A great deal of Bartier Perry's submissions were based on this assertion, which is incorrect on the proper interpretation of the Put and Call Option Agreement. The "Trigger Event" requiring Mr Milevski to purchase Mr Paltos' interest was that if Mr Paltos continued until 23 June to be incapable of carrying out his usual duties as a partner in the Partnership, he could exercise his put option to require Mr Milevski to purchase his 70% interest in the Partnership in accordance with the formula in Schedule C to the Put and Call Option Agreement. Having exercised the option, Mr Paltos would have been precluded from soliciting the clients of the practice: Trego v Hunt [1895] 1 Ch 462. Whilst I accept that Mr Paltos at all relevant times wanted to return to work as a solicitor, the prospect raised by Bartier Perry of him never being able to practise again is simply incorrect on the proper construction of the Put and Call Option Agreement. Bartier Perry's submissions about Mr Paltos' fear that exercise of the option would impede his return to practice are in any event overblown in circumstances where Bartier Perry did not give any advice on the subject, and competent advice, which they did not give, was that the exercise of the option would not have had the effect that Bartier Perry now say Mr Paltos would have feared that it did. The objective evidence is that Mr Paltos' personal, professional and health priorities were at the least consistent with the exercise of the put option. 11. Thirdly, even if as Bartier Perry submit it was correct that "essentially monetary issues" were driving Mr Paltos, the evidence before the primary judge makes clear that it is likely Mr Paltos would have exercised the put option if competently advised by Bartier Perry. If Mr Paltos had consulted his accountant about the monetary outcome of exercise of the put option (as he should have been advised to do) he would have received advice about the value of the put option of the kind he in fact received from Mr Paltos' accounting expert witness in these proceedings, Mr Duggan. It is likely that on receipt of that advice Mr Paltos would have issued a put option notice. 12. Making allowance for all of the "speed bumps" identified by Bartier Perry, on the balance of probabilities I am satisfied that, if given competent advice by Bartier Perry, Mr Paltos would have exercised the put option. Factual causation has been established under s 5D of the Civil Liability Act. I am also satisfied, for essentially the same reasons, that factual causation under s 18 of the Australian Consumer Law has been established. 13. I would reject ground 4. Ground 5 – calculation of loss and damage under cl 5.1 of the Put and Call Option Agreement 1. Bartier Perry submitted that the primary judge erroneously found that Mr Paltos would have been entitled to be paid $1,411,707 under cl 5.1 of the Put and Call Option Agreement after accepting the calculations prepared by Mr Paltos' accounting expert witness, Mr Duggan. 2. It was submitted that Mr Duggan incorrectly used the formula in Schedule C to the Put and Call Option Agreement when calculating the "Purchase Price" for the purposes of cl 5.1. It was said that the formula in Schedule C determines the "Market Value of Business Interests" and the formula in the definition of the term "Purchase Price" in cl 1.1 of the Put and Call Option Agreement should have been used instead. It was said that if Mr Duggan had calculated the value of the Purchase Price in accordance with the correct formula he would have arrived at a figure of $988,194. 3. Ground 5 may be disposed of shortly. 4. It will be recalled from [17] above that "Market Value" in the Put and Call Option Agreement is defined thus: "'Market Value' means the amount calculated in accordance with Schedule C and where there is a dispute as to the application of this formula then the Market Value is the value of the Business Interests as determined by an accountant appointed by the President of the Institute of Chartered Accountants for New South Wales and: a) they are to be instructed to value the Business Interests using the formula set out in Schedule C; b) no discount or uplift is to be applied merely because: i) the number of Business Interests being transferred is a minority holding or is a majority holding or is neither a minority holding nor a majority holding; or ii) the Business Interests being transferred are not being transferred with all of the other Business Interests; and c) their decision is that of an expert not an arbitrator and their valuation is binding on the parties". 1. "Business Interests" in the Put and Call Option Agreement are defined thus: "'Business Interests' means the form of a particular Owner or Incoming Partner's equity interest in the Business Entity including any associated entities". 1. "Purchase Price" in the Put and Call Option Agreement is defined thus: "'Purchase Price' means in relation to Business Interests that are transferred in accordance with this Deed, the amount calculated in accordance with the following formula: [A% x B] – C Where A = the percentage that the Business Interests held by the Exiting Owner bears to the total of all business interests of that class; B = the Market Value of all Business Interests; C = the amount of the sum insured received by the Related Insurance Owner of the Insurance Policy (if any) in respect of the Owner or Incoming Partner who suffered the Trigger Event, provided that, if the application of this formula equals zero or a negative number then the Purchase Price is $100". 1. It will be recalled that cl 5.1(a) provides: "5.1 Sale Transaction Terms Upon the exercise of a Call Option or a Put Option in accordance with clause 3.1, the terms on which the Exiting Owner's Business Interests are to be transferred to the Ongoing Owner are as follows: a) the Ongoing Owner must pay to the Exiting Owner the Purchase Price in consideration for the transfer by the Exiting Owner of the Exiting Owner's Business Interests;" 1. The language of cl 5.1 of the Put and Call Option Agreement is against Bartier Perry's suggested construction. As is the context. 2. The definition of "Purchase Price" makes clear that "B" in the formula is the "Market Value of all Business Interests". Schedule C to the Put and Call Option Agreement provides, relevantly: "SCHEDULE C MARKET VALUE Market Value of Business Interests equals the amount calculated in accordance with the following format: [(A – B – C – D) x 3.4 + E] x F% A = Historical fee revenue being the sum of the following: i) 50% of the 12 months actual cash fee revenue for the financial year immediately prior to the Completion Date; ii) 30% of the 12 months actual cash fee revenue for the 12 month period preceding (i) above; iii) 20% of the 12 months actual cash fee revenue for the 12 month period preceding (ii) above. B = Overhead expenses of the Business Entity (excluding remuneration paid to the owner partners) based on the assessment of a competent and appropriately qualified business valuer for each of the immediately previous three financial years using the same weightings as for A above. Adjustments shall include but not be limited to the adding back to profit interest paid and motor vehicle expenses and rent paid to non-arm's length parties being adjusted to a fair market rental including outgoings. C = The annual base level of remuneration for all of the owner partners, in aggregate, for the financial year in which the Completion Date occurs - such remuneration level is to have regard to each owner partner's qualifications, experience, contribution to the practice and comparable salaries (but not partner profit shares) in the market place in which the Business Entity operates. As at 30 June 2010 this market salary was notionally set at $215,000 for D Paltos and $150,000 for P. Milevski. D = Required return on net tangible assets at 10% of such net assets as at the date of the valuation excluding interest bearing debt and non-business assets such as related party loans. E = The net tangible assets (based on their current market value) of the Business Entity as at the Completion Date or such other date as close to the Completion Date as is reasonably practicable and as agreed to by the parties; F = The percentage that the Business Interests that are the subject of the Call Option or Put Option exercised bears to the total of all Business Interests. By way of example, hereunder is the valuation as at 30 June 2009 based on the above formula and the financial statements of Paltos & Co excluding all Interest bearing debt." 1. The calculation identified by Schedule C is of the "Market Value of Business Interests", not the Market Value of all Business Interests. 2. Bartier Perry's case is that Schedule C identified the market value of Mr Paltos' Business Interests and that the Market Value of Mr Paltos' Business Interests was to be used as "B" in the formula in the definition of "Purchase Price". 3. In Schedule C, the market value of Mr Paltos' Business Interests was determined by multiplying all of the other integers in the calculation by 0.7, representing "F", the percentage that Mr Paltos' Business Interests the subject of the putative put option bears to the total of all Business Interests. 4. Bartier Perry's submission was that the Market Value of Mr Paltos' Business Interests so calculated was then to be used in the formula for "Purchase Price" as representing B, "the Market Value of all Business Interests"; in effect applying the 0.7 multiplier that Mr Paltos' Business Interests the subject of the putative put option bear to the total of all Business Interests twice. 5. Bartier Perry's construction is inconsistent with the language used in the Put and Call Option Agreement. Bartier Perry's construction would be an incoherent and uncommercial construction of the Put and Call Option Agreement. The integer B in the formula for "Purchase Price" is plainly "the Market Value of all Business Interests". This is not the outcome of the calculation required by Schedule C to the Put and Call Option Agreement. That is clear from the chapeau which describes that calculation as being the "Market Value of Business Interests", not the Market Value of all Business Interests. It is also clear from the derivation of "F" which allows the multiplier to be calculated by identifying the relationship as a percentage of the Business Interests the subject of, relevantly, the put option to "all Business Interests". 6. Bartier Perry's construction is also inconsistent with the relevant context. There is a detailed worked example forming part of Schedule C to the Put and Call Option Agreement. That worked example is consistent, and only consistent, with the construction given to the calculation of the Purchase Price accepted by the primary judge. 7. No sensible reason was advanced by Bartier Perry as to why a businessperson reading the Put and Call Option Agreement would conclude that the 0.7 multiplier for Mr Paltos and 0.3 multiplier for Mr Milevski should be applied twice and not once to determine the Purchase Price for the exercise of an option. 8. The primary judge was correct to reject Bartier Perry's construction of the calculation of the Purchase Price for the purposes of the Put and Call Option Agreement. 9. Ground 5 should be rejected. Ground 6 – damages 1. It will be recalled that the primary judge did not assess Mr Paltos' damages on a lump sum basis once and for all but rather awarded Mr Paltos $1.41 million in damages and required Mr Paltos to give the following undertaking: "The plaintiff, Dennis Paltos, undertakes to pay to the defendant, Bartier Perry Pty Ltd, any amount received or allowed to him in proceedings brought by Peter Milevski, being proceedings 2016/118930 and 2017/246841, confined to amounts received or allowed by or to the said Dennis Paltos in any calculation on account of goodwill, if any, of the Paltos/Milevski Partnership or on account of work in progress, if any, in the said partnership at the date of its dissolution." 1. That is, Mr Paltos was required to undertake to repay Bartier Perry amounts comprising "any calculation on account of goodwill" of the Partnership and any payment "on account of work in progress" of the Partnership at the date of its dissolution achieved in the Partnership Proceedings. This was because, on the hypothesis that Mr Paltos had exercised the put option, neither goodwill of the Partnership nor work in progress of the Partnership would have been payable to Mr Paltos. Thus, any amounts received in relation to those claims must be deducted from the amount of $1.41 million that the primary judge awarded to Mr Paltos. 2. It was thus common ground before the primary judge that in the Partnership Proceedings against Mr Milevski, which have as yet not been heard, Mr Paltos is seeking payments of amounts on account of goodwill and work in progress of the Partnership as at the date of its dissolution which, if recovered, must properly be deducted from the damages payable to Mr Paltos by Bartier Perry. 3. In Pennant Hills Restaurants Pty Ltd v Barrell Insurances Pty Ltd (1981) 145 CLR 625; [1981] HCA 3 at 643 Stephen J said: "The common law, to which the plaintiff has necessarily had recourse, knows only lump sum damages, paid once and for all". 1. In Todorovic v Waller (1981) 150 CLR 402; [1981] HCA 72 at 412, Gibbs CJ and Wilson J said: "Certain fundamental principles are so well established that it is unnecessary to cite authorities in support of them [including that] damages for one cause of action must be recovered once and forever, and (in the absence of any statutory exception) must be awarded as a lump sum". 1. It should immediately be observed that Mr Paltos did not rely before the primary judge or in this Court upon any statutory exception to the fundamental principle as explained by the High Court. Accordingly, there is no occasion to consider the extent of the statutory exceptions to this principle in, for example, the Competition and Consumer Act. 2. Bartier Perry submitted that: 1. Mr Paltos was required to prove the fact and extent of his loss in this proceeding on a lump sum basis once and for all; 2. Mr Paltos' claims in negligence and for breach of retainer called for an assessment of common law damages and the Court did not have the power to make the orders made. The common law knows only lump sum damages, paid once and for all. As to the Australian Consumer Law claim, Mr Paltos did not argue on the appeal that the undertaking was justified as a measure by that claim; 3. the primary judge's failure to assess damages once and for all on a lump sum basis undermined the parties' and the public's interest in the finality of litigation. The assessment and extent to which Mr Paltos' damages will be effectively reduced will be determined in other proceedings; 4. the orders were inconsistent with s 63 of the Supreme Court Act, which provides that the Court shall grant relief so that "as far as possible, all matters in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of those matters avoided"; and 5. if the primary judge had calculated Mr Paltos' damages correctly, Mr Paltos would not have received a more favourable result, and this would have influenced his Honour's order as to costs. 1. Mr Paltos submitted that the undertaking was appropriate, the Court has the power under s 23 of the Supreme Court Act to make such orders as are necessary for the administration of justice, and s 63 empowers the Court to grant all such remedies "absolutely or on terms" in respect of legal and equitable claims. It was submitted that the primary judge was entitled to enter an award of $1.41 million on terms that required an undertaking to refund amounts, if any, received in respect of goodwill or work in progress. 2. I am unable to agree with Mr Paltos' submissions. There are qualifications to the general principle that common law damages are assessed on a lump sum basis once and for all, but those qualifications do not apply here. In Carazi Pty Ltd v Blow Dry Bar Franchising Pty Ltd (in liq) (No 2) [2015] NSWSC 108, White J surveyed the cases wherein exceptions or qualifications to the principle explained by Stephen J in Pennant Hills had been established. 3. One such exception was established by Polkinghorne v Holland (1934) 51 CLR 143; [1934] HCA 28, where the plaintiff entered into three transactions on the advice of a solicitor. The principal issue in the case was whether the solicitor's partners were liable for the losses which the plaintiff suffered that were occasioned by the solicitor's fraud. In respect of two of those transactions the High Court held that the delinquent solicitor's partners were vicariously liable, as he was acting in the course of the business of the firm. One of those transactions involved a transfer to the plaintiff of 4,000 £1 shares in a company. The share certificate that was issued showed that the shares were fully paid, but in fact they were paid only to four shillings in the pound. The orders of the High Court included the entry of judgment for the plaintiff against the defendants for two sums totalling £5,000 plus interest, those being sums of money outlaid by the plaintiff which were lost. The orders also included the following: "Order that the judgment entered in accordance with this order be without prejudice to the plaintiff's right to recover any further sum as damages in respect of any payment she might be required to pay as shareholder or contributory of United Trust Investment & Deposit Co Ltd in respect of the shares mentioned in Exhibit P11." 1. The introduction of capital gains tax as a feature of federal taxation led to the development of further qualifications to the general principle explained in Pennant Hills. In Rabelais Pty Ltd v Cameron (1995) 95 ATC 4552 at 4553 Hodgson J said: "If and insofar as there is income tax or capital gains tax loss caused in this general way, it seems to me that it would be recoverable as an item of damages. It is apparent from what I have said, however, that it would not be possible for me to make any assessment of that loss. It is desirable that all aspects of damages be disposed of in one hearing, but because there is the possibility of substantial loss, I would be prepared in this case to reserve leave to the plaintiff to apply for additional damages referable to income tax or capital gains tax considerations." 1. Observations to like effect are made in Turner v TR Nominees Pty Ltd (1995) 31 ATR 578 at 596; SRSC v Beaumont [2004] NSWSC 164 at [389] and [396]; and Walton v Illawarra [2011] NSWSC 1188; (2012) 28 BCL 202 at [92], [139] and [172]. 2. These tax cases all concern damages awards where, by operation of the tax system and time taken to exercise rights of review created by Part IVC of the Taxation Administration Act 1953 (Cth), it is not possible at the time of judgment to determine the tax payable in respect of the damages award. Tax is only payable in the year of income in which the award is made. Subject only to the possibility of obtaining a binding private ruling (which may be sought in advance) or a change in the law (as occurred when personal injury damages were excluded from the reach of the capital gains provisions) [1] the amount of tax payable on an award of damages, if any, cannot be known at the time the award is made. All of the relevant cases concern facts where, if tax were payable, the plaintiff would be entitled to a greater sum in damages. They are, to that extent, consistent with the order made by the High Court in Polkinghorne. 3. Mr Paltos was granted leave to file additional written submissions to identify any case or academic writing where an order of the kind made here had been considered. No such case or academic work was cited by Mr Paltos. If any such case exists it has not been brought to the attention of the Court by either party. 4. The fact that there is no such case is unsurprising. There are critical problems with the undertaking, which each underline the essential purpose of the rule explained by the High Court in Pennant Hills and Todorovic v Waller. 5. The first issue is finality in litigation. Mr Paltos is of course free to seek to conduct a case against his advisors seeking damages by reason of negligent advice where the damages sought overlap with damages sought in related proceedings. He is entitled to seek to have the proceedings against the advisors determined prior to those related proceedings, as he successfully achieved here. In this case, however, as the related case has not been heard (or settled on reasonable terms in the way described by the High Court in Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603; [1998] HCA 38), Mr Paltos is obliged to prove his damages. As the amount of damages in the future overlapping case is unknown, well established principles require the Court to assess the probabilities and possibilities of future hypothetical events, here the damages outcome of the as yet undetermined related proceedings. This is because to the extent that Mr Paltos is seeking payments for the goodwill and work in progress of the Partnership, those amounts must be deducted from the $1.41 million he was otherwise awarded by the primary judge. Those future hypothetical events are determined on the probabilities and possibilities: 1. in contract (Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4); 2. in tort (Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20; Johnson v Perez (1988) 166 CLR 351; [1988] HCA 64); and 3. in misleading and deceptive conduct (Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281; [1995] HCA 4). 1. Whilst, as I will explain, Mr Paltos repeatedly eschewed the possibilities and probabilities of future events occurring as forming part of his case, that methodology was the correct legal basis upon which to determine Mr Paltos' damages insofar as they related to future hypothetical events. 2. The second reason underlining the applicability of the rule described by Stephen J in Pennant Hills here is the real risk of insolvency. On Mr Paltos' own evidence before the primary judge the likelihood is that he was insolvent as at 29 April 2019. A statement of assets and liabilities filed by him demonstrated that his liabilities exceeded his assets at that date by over $2 million. Significant debts were owed to the Australian Taxation Office accruing interest at the General Interest Charge rate, which is significant. Other than some work as a solicitor, which he correctly submitted was sporadic, no other likely future source of income was revealed. If the award made by the primary judge is upheld, subject to Mr Paltos' undertaking, there is a real possibility that the value of the undertaking offered to Bartier Perry is zero. 3. The third reason underlining the applicability of the rule described by Stephen J in Pennant Hills in the present case is that Mr Paltos' commercial incentives in the Partnership Proceedings become completely different in light of the undertaking. Acting properly in a settlement of the Partnership Proceedings, Mr Paltos has an incentive to maximise his return overall whilst conceding payments in relation to goodwill and work in progress, which would be the subject of the undertaking and repaid to Bartier Perry. New and quite different commercial incentives have been created for Mr Paltos by the award of damages subject to the undertaking in the present case. 4. I have concluded that the primary judge erred in awarding damages to Mr Paltos on the basis of an undertaking to repay Bartier Perry certain amounts (if subsequently obtained by Mr Paltos in separate litigation). This was a case where the primary judge was required to award Mr Paltos lump sum damages, paid once and for all. No statutory exception to that principle was relied upon by Mr Paltos. No different outcome arising from his Australian Consumer Law case was suggested. The qualifications to the principle explained in cases such as Rabelais Pty Ltd v Cameron and Polkinghorne do not apply on the facts of this case. In failing to award Mr Paltos lump sum damages, paid once and for all, the primary judge fell into error. 5. I would uphold ground 6 of the appeal. 6. Error having been established, s 75A(10) of the Supreme Court Act and r 51.53 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) provide that this Court should not order a new trial unless a substantial miscarriage or wrong would thereby be occasioned. Factors relevant to the exercise of this power here are that: 1. Mr Paltos successfully resisted the attempt by Bartier Perry to have these proceedings heard at the same time as the Partnership Proceedings. A new trial on damages would protect Mr Paltos from the effects of the deliberate litigious choices he had made and continues to make (see the orders made on 30 June set out at [6] above); 2. the hearing of the Partnership Proceedings has not even commenced in the Equity Division, five years after the relevant events. If a new trial is ordered to await the conclusion of the Partnership Proceedings, that outcome is hardly in accordance with the dictates of s 56 of the Civil Procedure Act 2005 (NSW); 3. Mr Paltos foreswore any loss of a chance reasoning, including in this Court when given an additional opportunity to consider his position after the oral hearing and make additional written submissions addressing this issue. This is significant in circumstances where Mr Paltos' case, which is yet to be heard in the Equity Division, is that the value of the goodwill of the Partnership and the work in progress is between $879,434 and $1,026,007. It is Mr Paltos' case in the Partnership Proceedings, with which to this extent Bartier Perry agrees in the present case, that 70% of any amount of goodwill in the Partnership or work in progress of the Partnership should be paid to Mr Paltos. This amount will need to be deducted from the award of $1.41 million to which Mr Paltos is otherwise entitled; and 4. at present Mr Paltos has an incentive to maximise his return including in relation to payments for goodwill and work in progress in the Partnership Proceedings. If a limited remitter of this case was ordered, Mr Paltos would be guaranteed the return of $1.41 million from Bartier Perry, subject only to his not being awarded amounts for goodwill and work in progress. In that way Mr Paltos would have a commercial incentive in the Partnership Proceedings to bargain away any entitlement to payments in relation to goodwill and work in progress in favour of a greater return under other heads of recovery he seeks. 1. On 11 June 2021, to assist in considering whether this Court should itself determine the damages payable by Bartier Perry to Mr Paltos, the Registrar wrote to the parties in the following terms: "The Court has asked me to write to you to seek further written submissions on the contingent hypothesis that ground 6 of the notice of appeal is upheld and the Court sets aside the award of damages made in this case and the undertaking the subject of that award. On that hypothesis, error having been established, s 75A(10) of the Supreme Court Act 1970 (NSW) and r 51.53 of the Uniform Civil Procedure Rules 2005 (NSW) provide that this Court should not order a new trial unless a substantial miscarriage or wrong has been thereby occasioned. On the assumption that the Court may itself determine the damages issue the parties are directed to exchange and file by email with the associate to Payne JA further written submissions (not exceeding 10 pages) by 4pm on 25 June 2021 and written submissions in reply (not exceeding 5 pages) on 2 July 2021 addressing the following issues: 1. The correctness and applicability to this case of the statement in IRC Banks, Lindley & Banks on Partnership (20th ed, 2020, Thomson Reuters) to the following effect: 'if one partner in fact manages to secure the benefit of the firm's goodwill for himself, he can be compelled to account for its value, but such value will naturally reflect the fact that he and the other partners would be entitled to set up business in competition with the notional purchaser [citing Smith v Everett (1859) 27 Beav 446; Mellersh v Keen (1860) 28 Beav 453; Re David and Matthews [1899] 1 Ch 378]'. (Footnotes included.) 2. Noting the submission by Mr Paltos on the appeal (tr 92) that 'on about 22 April, for no consideration, the receivers handed the practice and everything with it to Mr Milevski', whether the Court should find that the assumptions made for the purposes of any of the following reports, the reasoning in and conclusions reached in those reports should be accepted: a. the valuation report of JNP Capital Pty Ltd dated 27 September 2016 [(the JNP report)]; b. the valuation report of Mr Gregory R Wiese dated 19 July 2017 [(the Wiese report)]; and c. the valuation report of Ms Rebecca Conoulty of Sapere Forensic dated 25 March 2019 [(the Conoulty report)]. 3. Whether those reports were admitted into evidence subject to any restrictions. 4. Whether the approach the Court should adopt to address the outcome of Mr Paltos' claim for damages from Mr Milevski based on the goodwill of the partnership and work in progress as at 21 April 2016 (and any other matter the subject of paragraph 6 below) is that described in Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20, where the High Court explained that hypothetical future events are not 'commonly susceptible of scientific demonstration or proof' and can only be evaluated in terms of chance (per Brennan and Dawson JJ at 639 and Deane, Gaudron and McHugh JJ at 642-3). The High Court explained that the correct approach was to calculate the 'degree of probability' (per Deane, Gaudron and McHugh JJ at 643) or 'possibility' (per Brennan and Dawson JJ at 639-40) of a future event occurring and then to adjust the award of damages according to that calculation, unless the probability is so low (less than one per cent) as to be speculative or so high (more than 99 per cent) as to be practically certain (at 643). 5. Whether the approach the Court should adopt to address the outcome of Mr Paltos' claim for damages from Mr Milevski based on the goodwill of the partnership and work in progress as at 21 April 2016 (and any other matter the subject of paragraph 6 below) is the same (at least in the present case) in contract, tort and under s 18 of Sch 2 to the Competition and Consumer Act 2010 (Cth). 6. Whether in addition to the goodwill of the partnership and work in progress as at 21 April 2016, any additional matters should be considered in addressing Mr Paltos' claim for damages from Mr Milevski, in particular: a. the Receivers' fees and expenses; b. any non-recoverable legal costs of proceedings against Mr Milevski which might have arisen had the put option been exercised; c. costs of an independent expert whose services may have been required for the calculation of the amount payable under the put option, if that were disputed; d. whether Mr Paltos' asserted or accepted liability for over-drawing, or share of partnership assets used for personal purposes should be taken into account; and e. whether there are any other interests or matters either party contends would bear on the outcome of the taking of partnership accounts, which would not have been incurred on the hypothesis that the put option had been exercised." 1. On 28 June 2021, the parties each filed written submissions about these questions. On 5 July 2021, the parties each filed written submissions in reply about these questions. 2. It is regrettable that the submissions filed by Mr Paltos (which were signed by his solicitors and not by counsel who had appeared at the hearing) travelled far beyond the leave granted to make additional submissions about the six identified questions. In particular, Mr Paltos submitted that an order should be made that Mr Paltos be permitted to apply for additional damages under cl 5.2 of the Put and Call Option Agreement, depending on the outcome of the Partnership Proceedings. Clause 5.2 of the Put and Call Option Agreement is already the subject of the cross-appeal, which I deal with below. The possibility of an order permitting a further application to the Court (after the conclusion of the Partnership Proceedings) by Mr Paltos for additional damages was not a topic about which additional submissions were sought. Save that there may be some tangential relevance to the questions posed by the Court, I do not propose to address the submissions that travelled outside the questions asked by the Court. I accept Bartier Perry's submission in reply that the amount of Mr Paltos' loss was not impossible to prove. 3. The essence of the parties' submissions, to the extent that Mr Paltos' submissions were responsive to the Court's request, was as follows. 1. Question 1: the statement in Lindley & Banks 1. Bartier Perry submitted that the statement in Lindley & Banks is correct. The principle in it was adopted by Windeyer J in Page v McKensey (Supreme Court (NSW), Windeyer J, 17 December 1993, unrep), accepted on appeal (Page v McKensey [1995] NSWCA 351) and approved in Old v McInnes and Hodgkinson [2011] NSWCA 410 at [87]. An outgoing partner is entitled to have the value of goodwill brought to account in the dissolution but the goodwill of a partnership must be valued on the basis that any purchaser would take into consideration, amongst other things, that "the former partners would be free to deal with any former clients, and free to make their new circumstances known, but not free to solicit former clients of the dissolved partnership". A valuation of partnership goodwill should recognise that a third party purchaser would discount the price they would be willing to pay for that goodwill in light of the fact that a former partner would be able to enter into competition with them after the goodwill had been sold. 2. Mr Paltos submitted that the statement in Lindley & Banks is not incorrect but should not be considered in isolation and is not necessarily applicable in all circumstances. In particular, the passage presupposes that "secur[ing] the benefit of the firm's goodwill" was other than, for example, in breach of duty. Secondly, and as stated in Re David and Matthews [1899] 1 Ch 378 at 385, whilst the partner may be entitled to set up business in competition with the notional purchaser, the partner may not solicit such customers as long as they remain customers of the firm. In a sale pursuant to a court order or in dissolution proceedings that prohibition would still be applicable. Thirdly, it does not deal with the fact that a partner must still take care to ensure that she does nothing to damage the existing goodwill of the dissolved firm, for example by unilaterally removing client files. 1. Question 2: the correctness of the assumptions and conclusions in the JNP, Conoulty and Wiese reports 1. Bartier Perry analysed the assumptions and conclusions of the three expert reports (that analysis will be referred to below) and submitted that this Court would accept the JNP valuation of $860,902 to $1,065,371 (JNP valuation) and Ms Conoulty's valuation of $879,434 to $1,026,007 as the best evidence of the value of the Partnership goodwill that Mr Milevski acquired. Doing the best it can on the available evidence, this Court would find that the value of the Partnership's goodwill was $957,928, being the mean of the ranges provided in the JNP and Conoulty reports. Mr Paltos' entitlement is 70% of that figure in the sum of $670,549 and this ought to be deducted from the damages recoverable by Mr Paltos. 2. Mr Paltos submitted that this Court should be reluctant to adopt the assumptions, reasons and conclusions of the JNP, Wiese and Conoulty reports as "only the Conoulty Report was tendered into evidence (without objection) and 'properly relied upon as expert evidence'". The Court would need to resolve the tension in the evidence "without the benefit of cross-examination and submissions from the parties (including Mr Milevski and the Receivers)". A finding in this case by this Court may create "a res judicata or issue estoppel preventing either the respondent, Mr Milevski or the Receivers from agitating the value of the Partnership". Mr Paltos' submissions also referred to matters not in evidence, such as that Mr Wiese has died and that other reports are now proposed to be relied upon in the Partnership Proceedings. 3. In reply, Bartier Perry submitted that "despite the Court's invitation, the respondent has not identified a single assumption, process of reasoning or conclusion in the JNP report or Conoulty report that he contends should not be accepted. Indeed, he has not engaged with the substance of the reports at all. This Court would find that the value of the Partnership's goodwill was $957,928". 4. In reply, Mr Paltos submitted that he "does not necessarily dispute the propositions at AS [3] to [10]" (those propositions are summarised at (a) above). The only submission addressed by Mr Paltos to the finding the Court should make about the value of Partnership goodwill and work in progress was that "Mr Milevski and the Receivers ought to be heard" on the subject and that this should take place in the Equity Division. 1. Question 3: the admission of the JNP, Conoulty and Wiese reports into evidence 1. Bartier Perry submitted that the JNP report was admitted into evidence without objection or any limitations as to its use. The Conoulty report and the Wiese report were only stated to be admitted on the "voir dire". Whilst the primary judge did not rule, formally or otherwise, "on the voir dire", it may be inferred that the primary judge rejected both reports as irrelevant. The Conoulty report was described as irrelevant apparently on the basis that his Honour proposed to accept the undertaking. As error has been established in the acceptance of the undertaking, I have concluded that leave is not required to challenge his Honour's finding about the relevance of the Conoulty report, which is admissible. 2. Mr Paltos submitted that the Conoulty report was admitted but the primary judge made no determination as to the admissibility of the Wiese report. No submission was made about the JNP report. 3. In reply, Bartier Perry submitted that Mr Paltos was relying on matters "not based on evidence before this Court". 4. In reply, Mr Paltos submitted that Bartier Perry was at least aware of the existence of the Wiese report from the time Mr Paltos' evidence was served upon them on 13 April 2018 and there is no unfairness to Bartier Perry in that regard. 1. Question 4: approach to damages 1. Bartier Perry submitted that it would be procedurally unfair to allow Mr Paltos to advance a case based on loss of chance principles. Bartier Perry's submissions assumed that Mr Paltos bore the onus of establishing the amount of the goodwill of the Partnership. It was further submitted that in order to establish the amount of his damages, Mr Paltos must prove both (i) the value of what he has lost (which in this case consists of the moneys he would have been paid according to the formula in the Put and Call Option Agreement plus any other expenses he has had to incur which he otherwise would not have had to incur as a result of Bartier Perry's breach); and (ii) the value of any corresponding advantage he has obtained or retained as a result of not exercising the put option (which in this case is, relevantly, his right to be paid his share of the Partnership's goodwill). The difference between (i) and (ii) is the measure of Mr Paltos' loss. It was submitted that this Court would be justified in resolving any uncertainty regarding the amount of Mr Paltos' loss against him because his forensic decisions have made an accurate determination doubtful. As Lord Mansfield noted in Blatch v Archer (1774) 1 Cowper 63; (1774) 98 ER 969 at 970, "all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted." 2. Mr Paltos submitted that if the approach to damages based upon permitting him to apply (after the Equity Proceedings) for additional damages under cl 5.2 of the Put and Call Option Agreement was rejected, application of the principles in Malec v Hutton would lead the Court to conclude "with a significantly high degree of probability" that Mr Paltos "would have succeeded to the extent of $1,411,707 referrable to clause 5.1" of the Put and Call Option Agreement and that cl 5.2 entitles Mr Paltos to further damages "to the extent of $1,670,149.10 referrable to [cl 5.2]". In addition, it was submitted to be "certain that the respondent has incurred legal costs in [the Equity Division Proceedings] which would not have otherwise been incurred. Those costs are not insubstantial and there is evidence that the respondent had legal fee liabilities exceeding $740,000.00 as at 29 April 2019." 3. In reply, Bartier Perry submitted that the Account Proceedings would have been commenced in any event because Mr Milevski inevitably would have sought to appoint Receivers and challenge Mr Paltos' entitlement to exercise the put option. The Partnership Proceedings would also inevitably have been commenced because the Partnership owed Westpac approximately $461,476, which it could not repay because Mr Paltos took $589,182 from the Partnership, which he then lost to gambling. Mr Milevski's proceedings seeking contribution and indemnity in respect of the debt to Westpac were also thus inevitable. It was submitted that this Court is not required to speculate what the outcome of the Equity Proceedings may be to calculate Mr Paltos' damages. If this Court does not find that Mr Paltos has failed to prove his loss, this Court would simply be required to determine the value of the Partnership's goodwill on the evidence before it and deduct the value of Mr Paltos' share of the goodwill from the damages recoverable. 4. In reply, Mr Paltos submitted that he has established he suffered damage by virtue of not being able to exercise the put option. Clause 5.1 of the Put and Call Option Agreement entitled Mr Paltos to the payment of the Purchase Price. The $1.41 million Purchase Price should be accepted without deduction. Clause 5.2(a) of the Put and Call Option Agreement entitled Mr Paltos to the benefit of an indemnity from Mr Milevski and to be released from any guarantees or personal covenants with respect to the debts of the business. It was submitted that Mr Paltos will not receive a benefit if Mr Milevski is required to account to the Partnership for its goodwill. Any amount for which Mr Milevski will be required to account to the Partnership in the Account Proceedings is an asset of the Partnership and is not capable of being set off against the damages payable to Mr Paltos. 1. Question 5: assessment of damages may differ in contract, tort and under s 236 of the Australian Consumer Law 1. Bartier Perry submitted that although the assessment of damages may differ in contract, tort and under s 236 of the Australian Consumer Law, nothing relevantly turns on those differences in this case. 2. Mr Paltos submitted that "if the approach in Malec is followed there is no difference in contract, tort or pursuant to section 18 of [the Australian Consumer Law]." 1. Question 6: any additional claims and expenses 1. Bartier Perry submitted that: 1. Mr Paltos is not entitled to damages on account of the Receivers' fees because those costs (or substantially similar costs) would have been incurred even if Mr Paltos had been advised that the put option would survive the dissolution because this Court would find that Mr Milevski would have sought to appoint the Receivers and any attempt by Mr Paltos to resist their appointment on the basis of the implied term would have foundered; 2. Mr Paltos is not entitled to any damages on account of potential future non-recoverable legal costs of proceedings against Mr Milevski because the evidence establishes that contested proceedings with Mr Milevski would have been inevitable if Mr Paltos had sought to exercise the put option and he would have had to incur the same or substantially similar costs if it had been exercised successfully; 3. there is no evidence that Mr Paltos and Mr Milevski would have sought to resolve any conflict between them regarding the amount payable pursuant to the Put and Call Option Agreement by referring the matter to an independent expert. In any event, there is no evidence as to how much such a process would have cost; and 4. if this Court were to assess Mr Paltos' damages on loss of chance principles it would be careful to ensure that Mr Paltos is required to account for 100% of his overdrawing because that is not a hypothetical or future matter. 1. Mr Paltos submitted that no non-recoverable legal costs of proceedings against Mr Milevski would have arisen had the put option been exercised. Mr Paltos accepted liability for his overdrawing and the loan account to the Partnership. Somewhat surprisingly, Mr Paltos submitted that each of Mr Milevski and the Receivers have an interest in the outcome of the taking of partnership accounts, which would not have been incurred on the hypothesis that the put option had been exercised. 2. Annexure 1 to Mr Paltos' submissions itemised what was said to be the amounts owed under cll 5.2(a) and 5.2(b)(ii) of the Put and Call Option Agreement which equated to $1,670,149.10 in total. Annexure 2 to Mr Paltos' submissions was a table of example calculations which were said to illustrate the contributions likely to be payable by Messrs Paltos and Milevski on the taking of accounts in the Account Proceedings. 3. In reply, Bartier Perry submitted that Annexure 1 did not respond to the questions asked by the Court and should be ignored. In the proceedings below, Mr Paltos did not seek any of those damages in closing submissions or direct the primary judge to any of that evidence. Bartier Perry also submitted that the evidentiary basis for Annexure 2 is not before this Court and the Court should ignore Annexure 2. 4. In reply, Mr Paltos submitted that: 1. if a payment on behalf of goodwill or enterprise value is required in the Equity Proceedings, Receivers' fees should be capped at $10,000; 2. unrecoverable legal costs are not speculative. Mr Paltos would have either had the benefit of a costs order or those costs would have formed part of the indemnity set out in cl 5.2 of the Put and Call Option Agreement; and 3. as to independent expert costs, Mr Paltos' submission appears to be that Bartier Perry's complaint is "misguided" as the Put and Call Option Agreement did not require referral to an independent expert. In any event, Mr Paltos submitted that those costs would have formed part of the indemnity set out in cl 5.2. 1. Having considered those submissions, I have concluded that this Court should itself determine the damages payable by Bartier Perry to Mr Paltos. The alternative, to remit the matter to either the primary judge or to the judge hearing the Partnership Proceedings, would not be consistent with the dictates of Part 6 of the Civil Procedure Act and in particular the just, quick and cheap resolution of disputes. These proceedings relate to events which occurred over five years ago. Despite the related Account Proceedings being commenced in the Equity Division in 2016, the records of the Court indicate that, apparently on Mr Paltos' application, they (together with the Partnership Proceedings) have now been adjourned indefinitely to await the outcome of these proceedings in this Court. 2. To address the correct assessment of damages it is thus necessary to consider the evidence about damages in some detail. In analysing damages, it is necessary to consider whether there are any relevant differences in the way Mr Paltos' claims in contract, tort and for breach of s 18 of the Australian Consumer Law are advanced. I accept the joint submission that in the way the case was conducted, although the potential measure of damages is of course different in each claim, Mr Paltos' case was that the measure of damages was in each claim the same. That is, no different damages outcome is contended for by Mr Paltos in relation to his damages in contract, tort or under the Australian Consumer Law. 3. In the case of the claim in contract, Mr Paltos was entitled to be put in the same position as he would have been had the contract been performed. Had the contract been performed by the necessary advice having been given, the option would have been exercised. One aspect of putting Mr Paltos in the same position as if the contract had been performed is to address Mr Paltos' damages on the assumption that whatever amount in relation to goodwill and work in progress that Mr Paltos was entitled to by reason of the dissolution of the Partnership be taken into account in calculating the value of the lost opportunity to exercise the put option. This is because, on the facts of this case, the opportunity to exercise the put option was lost after the Partnership had been dissolved and an account ordered. The opportunity lost was the opportunity to recover the amount of up to $1.41 million from Mr Milevski, depending (in part) on the outcome of the Partnership Proceedings. There is no evidence that Mr Milevski would not have been able to pay up to $1.41 million on exercise of the option. 4. Because the put option was not exercised, in the Partnership Proceedings, Mr Paltos is entitled to 70% of the value of the net assets of the Partnership as at the date of dissolution. Had he exercised the put option he would not have been entitled to that benefit and it must be brought into account in assessing his damages in the present case. 5. Before the primary judge and in the submissions made by counsel in this Court, Mr Paltos accepted that the damages he is seeking from Bartier Perry must be reduced by any amounts in goodwill and work in progress obtained in the Partnership Proceedings. To the extent that the submissions made by his solicitors referred to at [162]-[164] resile from that concession, I reject them. Nothing in cl 5.2 of the Put and Call Option Agreement, which formed the basis of the submissions made by Mr Paltos' solicitors, affects the concession correctly made by counsel for Mr Paltos at the trial and repeated in this Court that the damages Mr Paltos is seeking from Bartier Perry must be reduced by any amounts in goodwill and work in progress obtained in the Partnership Proceedings. I will return to the operation of cl 5.2 of the Put and Call Option Agreement in addressing Mr Paltos' cross-appeal. 6. Upon dissolution of the Partnership, clients had been required by the Receivers to elect between retaining Mr Milevski's new firm, retaining Mr Paltos or moving their work elsewhere. The majority of the employed staff had taken up employment with Mr Milevski's new practice. [2] It appears that all or nearly all of Mr Paltos' clients transferred their business to Mr Milevski. [3] As I will explain, Mr Paltos submitted in this Court that the correct factual finding to make is that all of the assets of the Partnership were transferred to Mr Milevski by the Receivers for no consideration. 7. The Conoulty report prepared on behalf of Mr Paltos for the purposes of the Partnership Proceedings referred to in the submissions at [164(2)]-[164(3)] above is an important document. Both parties accepted that it was admitted into evidence by the primary judge. I reject Mr Paltos' submission that Ms Conoulty's report should be given less weight due to matters contained in a later report. There is no evidence before this Court of any later report. Mr Paltos chose to conduct his case against Bartier Perry separately from and before the Partnership Proceedings. The circumstance that this case must be determined on the basis that Mr Paltos chose to deploy is one of his own making. Ms Conoulty explained that: "…146 open client files belonging to the Partnership were physically transferred to Mr Milevski and his new business location at Castlereagh Street. Of these transferred clients, 66 were identified as being active by Mr Milevski and 47 of them were invoiced by Milevski Family Lawyers in the following 13 months". [4] 1. A question not addressed in detail by the parties is on whom the onus lies to establish the value of the benefit that Mr Paltos will or might receive on the taking of accounts on dissolution of the Partnership for the value of Partnership assets (potentially including goodwill) at the date of dissolution. Bartier Perry asserted that the onus was on Mr Paltos to prove the difference between what he would have received had the option been exercised and what he is entitled to as his share of the Partnership assets, including goodwill, on the taking of accounts, if the claim is considered as a claim in tort or for damages for breach of s 18 of the Australian Consumer Law. 2. The approach of subtracting value from price is commonly employed where the acquisition of land, chattels, businesses or shares is induced by deceit. It has also been commonly employed under s 82 of the Trade Practices Act which is relevantly the same as s 236 of the Australian Consumer Law. It is sometimes described as the rule in Potts v Miller (1940) 64 CLR 282; [1940] HCA 43. As the High Court explained in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 at [35], in McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187 at 192 Jordan CJ, who called the rule "well settled", acknowledged that it was only a "rule of practice". The flexibility of the rule can be seen by reference to a number of its characteristics set out in HTW Valuers v Astonland at [36]-[37]: "[36] One key qualification of the rule which prevents it from being inflexible is that the test depends not on the difference between price and 'market value', but price and 'real value' [5] or 'fair value' [6] or 'fair or real value' [7] or 'intrinsic' value [8] or 'true value' [9] or 'actual value' [10] or what the asset was 'truly worth' [11] or 'really worth' [12] or 'what would have been a fair price to be paid … in the circumstances … at the time of the purchase' [13] . This distinction is sometimes difficult to draw, but it is old [14] and fundamental. [37] A second qualification flows from the first. The distinction between a value which answers one of the tests just stated and market values means that market values – the prices actually obtainable in market sales – may be disregarded if they are 'delusive or fictitious' because they are the result of 'a fraudulent prospectus, manipulation of the market or some other improper practice on the part of the defendant' [15] . There are other reasons why the law does not limit recovery by reference to market value – the amount for which the plaintiff might have sold the assets acquired. One is that, subject to mitigation issues, the plaintiff is 'not bound to sell them' [16] . Another is that there may not be a market [17] . Another is that the market is mistaken on some basis other than manipulation. It is common to speak of shares being undervalued (or overvalued) by the market." (Footnotes renumbered.) 1. In HTW Valuers v Astonland the plaintiff sued in tort for fraudulent misrepresentation that induced his entry into a contract to purchase a business. The plaintiff did not rescind the contract of sale. To establish that it had suffered any damage, it bore the onus of proving that the price it paid for the property purchased was more than the "fair or real value" of the property it had acquired at the date of purchase. Because the plaintiff did not adduce evidence of what that value was, it failed to discharge its burden of proving it had suffered any loss. 2. Although Mr Paltos made no direct submission on this question, I have concluded that Bartier Perry's submission should be rejected. This is not a case for the application of the "rule" in Potts v Miller, however flexibly applied. A closer analogy to the present question is where a plaintiff claims damages for breach of contract for wasted expenditure. In such a case if the defendant asserts that the alleged wasted expenditure nonetheless benefitted the plaintiff, the onus of establishing the value of that benefit lies on the defendant: Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (1991) 33 FCR 1; [1991] FCA 758 at 17; Tyco Australia Pty Ltd v Optus Networks Pty Ltd [2004] NSWCA 333 at [255], [264]; Ruthol Pty Ltd v Tricon (Australia) Pty Ltd [2005] NSWCA 443 at [44], [53], cited in E K Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [195]. 3. The reason that the amount with which Mr Paltos would be credited on the taking of accounts for the Partnership assets is relevant to the assessment of damages is because Bartier Perry can say that it is a benefit he will derive by reason of its breach of contract. Accordingly, the onus of establishing the value of that benefit lies on Bartier Perry. 4. That conclusion, however, as pointed out by Bartier Perry, only takes Mr Paltos so far. This is because, in the circumstances of this case, Mr Paltos and Bartier Perry each essentially submit that the correct measure of Mr Paltos' interest in the taking of accounts for the Partnership assets is the same. To the extent that Mr Paltos in his most recent round of submissions suggests that the interests of Mr Milevski and the Receivers need to be taken into account, I reject the submission. Neither Mr Milevski nor the Receivers are parties to these proceedings. Whatever finding is made about Mr Paltos' damages claim against Bartier Perry, it does not affect Mr Milevski or the Receivers. Findings of fact made by this Court are not admissible in the Equity Proceedings to prove the existence of a fact that was in issue in this Court: Evidence Act 1995 (NSW), s 91. The fact that this question is being determined now, in the absence of Mr Milevski and the Receivers, is a direct consequence of the forensic choice Mr Paltos made to conduct this case separately and before the Partnership Proceedings. If it is not already clear, in the special circumstances of this case the findings of this Court about the sums representing goodwill and work in progress to which Mr Paltos is entitled are not intended to have any bearing on any question to be litigated between Mr Paltos, Mr Milevski and the Receivers. Much less can those findings give rise to a res judicata or issue estoppel in proceedings involving different parties. 5. As to the subject matter of the calculation, I have concluded that it is limited to the value to Mr Paltos of goodwill and work in progress in the Partnership Proceedings. I reject the additional heads of damage sought by Mr Paltos. Annexure 1 to Mr Paltos' submissions is based upon cl 5.2 of the Put and Call Option Agreement. No case raising those matters was conducted before the primary judge and, subject to the cross-appeal which I will address below, the subject matter of Annexure 2 was not before this Court. I also reject Annexure 2 to Mr Paltos' submissions. The evidential basis for the matters described in that Annexure was not before this Court. I also reject the suggestion made by Mr Paltos that the Account Proceedings and the Partnership Proceedings would not have occurred had Mr Paltos been given correct advice by Bartier Perry. The conduct of Mr Milevski and Mr Paltos in the events which have occurred make it almost inevitable that both the Account Proceedings and the Partnership Proceedings would have occurred even if Bartier Perry had given correct advice. The first because the put option was not yet exercisable when Mr Milevski commenced the proceedings and Mr Milevski would not have acknowledged an obligation to pay the sum calculated in accordance with cl 5.1 of the Put and Call Option Agreement without a court order. The second because, even now, and despite acknowledging a substantial debt to the Partnership, Mr Paltos and Mr Milevski are unable to agree about the correct treatment of the loan funds. 6. In Mr Paltos' pleadings in the Partnership Proceedings (the amended cross-claim filed with consent pursuant to orders made on 20 November 2017), which were before the primary judge, he claims: "PLEADINGS AND PARTICULARS … 7. On 3 March 2016: (a) Peev Holdings Pty Limited CAN 611 099 980 (Peev) was registered with the first cross-defendant its sole director, secretary and member; (b) Milevski Family Lawyers Pty Limited CAN 611 104 753 (MFL) was registered with: (i) the first cross-defendant its sole director and secretary; and (ii) Peev its sole member. … 9. On 21 April 2016, the Court ordered in the Equity Proceedings, inter alia, that: (a) The Partnership be dissolved pursuant to section 35 of the Partnership Act 1892 (NSW) (Act) (Order 1). (b) The second cross-defendant and the third cross-defendant (Receivers) be appointed Receivers and Managers of the Partnership and that the partnership, business and assets, including goodwill thereof be realised by the Receivers and Managers and that either party [the first cross-defendant or the cross-claimant] be at liberty to purchase from the Receivers and Managers any partnership assets (Orders 3 and 7). (c) The Receivers have the power to carry on the Partnership business and have the power in relation to the Partnership business as are given to a liquidator pursuant to section 477 of the Corporations Act 2001 (Cth) (Order 4). (d) The Receivers pay, out of the net proceeds of sale of the assets of the Partnership, all such monies as may be required to be paid for the purpose of discharging the present obligations of the Partnership to its creditors (Order 6(c)). (e) Upon the sale of the business assets of the Partnership and after the discharge of the debts of the Partnership, the Equity Proceedings be referred to a Judge of the Equity Division of the Supreme Court for the taking of accounts of the Partnership to determine the net profit or loss of the Partnership and inquiry into the amount, if any, payable on the taking of accounts (Order 9). … 10. The cross-claimant's interest in the Partnership and its Assets (as defined at paragraph 11(c) below) as at 12 April 2017 exceeds the contribution of indemnity sought by the first cross defendant. 11. After 21 April 2016: (c) The first cross-defendant through MFL and/or Peev has conducted a legal practice using the entire assets, undertaking and goodwill of the partnership (jointly 'Assets'); (d) The first cross-defendant, MFL and/or Peev have not paid any consideration to the Receivers or the cross-claimant for the Assets. … The Receivers' conduct 15. During the period 21 April 2016 to a date known only to the first, second and third cross defendants: (a) The Receivers permitted the first cross-defendant, MFL or Peev to remove and control the assets of the Partnership which included, without limitation, the client files of the Partnership; (b) The Receivers transferred the client files of the Partnership to the first cross-defendant, MFL or Peev; (c) The Receivers permitted the first cross-defendant through MFL and/or Peev to conduct a legal practice using the entire or a substantial part of the Assets; (d) The Receivers failed to obtain payment from the first cross-defendant, MFL or Peev, on, prior to or after undertaking the conduct referred to at sub-paragraphs (a) and (b). … 17. On or about 27 September 2016, the Receivers obtained a valuation to determine the 'Enterprise Value' of the Partnership which included the goodwill of the business conducted by the Partnership (Valuation). … 18. The mid-point valuation of the Enterprise Value attributed to the Partnership including the goodwill was $963,137. 19. On 2 December 2016, the Receivers acknowledged that the first cross-defendant 'was required to pay the cross-claimant for his share of the business transferred to him at valuation'." 1. Mr Paltos' case, which Bartier Perry embrace for the purposes of this damages calculation, is that Mr Milevski has conducted his legal practice since April 2016 using the entire assets, undertaking and goodwill of the Partnership and that Mr Milevski has not paid the Receivers or Mr Paltos for those assets of the Partnership. 2. There was a great deal of evidence before the primary judge about Mr Paltos' claim for goodwill and work in progress. It appears from the Receivers' letter of 2 December 2016 and its attachment that Partnership debtors as at the date of dissolution totalled $227,008. The Partnership was profitable. In the year ended 30 June 2012 it earned a profit of $984,533 on revenue of $2,140,040. In the 2013 financial year the profit derived was $785,398 on revenue of $2,040,205. In the 2014 financial year the Partnership made a profit of $865,229 on revenue of $2,220,268. In the 2015 financial year the partnership made a profit of $1,014,055 on revenue of $2,228,755. The accounts for the year ended 30 June 2016 (wrongly headed 30 June 2015) show a profit for the 12 months to 30 June 2016 (presumably to 21 April 2016) of $640,819 on revenue of $1,547,446. 3. The arrangement between the Receivers and Mr Milevski is recorded in BCR Advisory's letter of 6 April 2017 and Mr Milevski's response of 11 April 2017. The Receivers stated that they could not conduct the Partnership business and that most but not all of the Partnership's previously appointed staff elected to take up employment with Mr Milevski's practice. For the most part, the day to day work on matters continued to be conducted by the same personnel as had previously been the case, but for Mr Milevski. 4. The first valuation of the Partnership obtained by the Receivers was the JNP report which identified a valuation range of between $860,902 and $1,065,371. It will be recalled that both parties accepted that this report was in evidence without restriction. Mr Jason Phillips of JNP Capital assessed the "Fair Value" of the Partnership as at 21 April 2016 on a going concern basis without regard to any discount for a minority interest. Mr Phillips recorded that "Milevski Family Lawyers has been engaged by Messrs Morgan and Davis to service the Partnerships' client base." He summarised the "fee revenue trends" for the financial years of 30 June 2012, 2013, 2014, 2015 and the year from 1 July 2015 to 21 April 2016. In the previous four financial years fee income was steady ($2,081,052, $1,974,882, $2,087,210, $2,109,281) (presumably fees rendered). From 1 July 2015 to 21 April 2016 fee income was $1,412,142. Next, Mr Phillips tabulated the monthly revenue billed by each professional in the months from July to December 2015. He opined that the extent of the Partnership's client base which had continued to be serviced by Mr Milevski or an employee of Mr Milevski suggested that a significant level of intangible value in the Partnership had passed to Mr Milevski. He noted that Mr Milevski had referred to the Partnership and his former role in it on the website of his practice. Mr Phillips applied a discounted cashflow analysis as the primary valuation methodology. These were based on what he described as "detailed forecast of future cashflows" but used earnings before interest and tax as a surrogate for "ungeared cashflows generated by the business to arrive at an Enterprise Value". The cashflow forecast was determined using the profit-loss forecast for the period from 1 July 2017 to 30 June 2021 adopting an estimated 3% long-term growth rate. For reasons which are too lengthy to set out, Mr Phillips adopted a discount rate being a "… required rate of return that will satisfy all capital providers investing in other investments with a comparable risk", being the opportunity cost of capital referred to as the "Weighted Average Cost Of Capital" (after tax) of 28.04% (or 40.06% pre-tax). This was applied to estimated future fee receipts based on average monthly historical fees but using post-23 December 2015 staffing levels (less estimated future staff expenses, rent and other overheads, both for a five-year period). The resulting calculation was that the Enterprise Value of the "Valuation Entity" (being the Partnership) was in a range of $860,902 to $1,065,371. No value within that range was any more or less appropriate than any other value. Mr Phillips adopted a mid-point of the valuation range which is $963,137. This was a valuation of goodwill of the Partnership. 5. On 2 December 2016 the Receivers wrote to Mr Milevski stating: "The business has been valued at $963,137.00. We note your repeated assertions that on the appointment of the Receivers to the Partnership, which we note was on your application, the clients of the Partnership chose to transfer their files to you. However, the reality is that you received the full benefit of an operating business, including clients, existing matters, staff, equipment, software and systems. There are insufficient assets in the Partnership for the Receivers to pursue a claim against you in this regard (noting that the claim is one which could be made by Mr Paltos in any event). We enclose a spreadsheet detailing the amounts which would be payable by both you and Mr Paltos assuming that all liabilities are repaid, that you are required to pay Mr Paltos for his share of the business, that all debtors pay balances in full, as per their client accounts and that Mr Paltos' loan account is repaid. You will see that you would be required to contribute an amount of $448,528 and Mr Paltos an amount of $184,169. This would require the co-operation and agreement of both of you." 1. The spreadsheet prepared by the Receivers debited Mr Milevski with $674,195 as his liability to pay 70% of the value of goodwill of the Partnership (described in the spreadsheet as "sale of business"). The other net assets of the Partnership showed a shortfall of $632,092 including Receivers' fees incurred up to 2 December 2016 of $70,508 and an estimate of future Receivers' fees of $45,000. 2. The reason the Partnership had a shortfall of assets to liabilities was substantially that Mr Paltos had overdrawn his profit share and that the Partnership was substantially indebted to Westpac. Part of the Partnership's borrowings to Westpac were for a loan that was for Mr Paltos' private purposes. The primary judge found that he had overdrawn his entitlement to a share of profits to the extent of $373,809.79 (at [426]). The Receivers had calculated that the amount of overdrawing was $374,374.33. Mr Paltos did not dispute that he owed the firm $215,372.50 for loans taken by the Partnership for his personal benefit. It was common ground, however, that these liabilities are irrelevant to the assessment of damages for which Bartier Perry is liable. Despite seeking to engage cl 5.2 of the Put and Call Option Agreement for a variety of purposes, Mr Paltos did not contend that cl 5.2 required Mr Milevski to indemnify him or procure his release from those debts. 3. On 8 August 2016 the Receivers advised Mr Paltos that: "At the time the Receivers were appointed, we assessed the business. As Receivers, we could not operate the Partnership as a business as we did not hold practising certificates. We had two choices. We could close the files, which would inevitably result in the client transferring to other firms, and in our assessment WIP would not be recovered, and invoices would not be paid due to duplication of costs. Alternatively, we could allow either you or Mr Milevski to approach the clients to obtain their agreement to the transfer of the files, which, with one of you involved, would maximise the chances of recovery of WIP and debtors as carriage of the matters would continue uninterrupted. Given your health, Mr Milevski agreed to take the matters over, but at all times subject to the consent of the clients. Clients still had the option to transfer their matter to any other firm, including yourself if they wanted. … The business was not transferred to Mr Milevski for nil consideration. We have engaged a valuer to value the business, with the intention that there be an accounting as between the two partners based on that valuation." 1. The Receivers provided a copy of a debtors' ledger as at 31 July 2016 which showed that the outstanding debts as billed at 21 April 2016 (or earlier) totalled $372,495. The Receivers had received $71,689. $24,373 was written off and there was an outstanding balance of $276,433. 2. On 11 May 2017 the solicitor for the Receivers, Ms M Harpur, advised Mr Paltos' solicitor that: "To be clear, our clients have not transferred 'the business' to Peter Milevski. You will be well aware that much of the business of a law firm – that is, the conduct of matters on behalf of clients – is relationship based. The choice of lawyer with carriage of a matter is a decision for the client, who may withdraw their instructions at any time and direct the transfer of a file to a new firm or lawyer. There is no ownership in clients. In this case, there was also no restraint of trade clause in the partnership agreement. Subject to the lien held by the Receivers over matters where monies remained outstanding, it follows that the Receivers had no ability to object to or prevent the transfer of matters and clients to Mr Milevski, Mr Paltos, or any other firm or lawyer. Some clients directed the transfer of their matters to Mr Milevski. Other clients directed the transfer of their files to a different firm. The Receivers billed all WIP on the files at the date of their appointment. In circumstances where active files were transferred to Mr Milevski, the Receivers reached agreement with Mr Milevski in relation to recovery of outstanding debtors in order to secure the Partnership's lien. Your client has been receiving regular reports on recovery of those debtors. There were no monies owed on files transferred to other firms." 1. On 21 July 2017, Ms Harpur advised Mr Paltos' solicitor that as both Mr Paltos and Mr Milevski had taken issue with the JNP valuation, the Receivers had consulted a Mr Greg Wiese and asked that he review the JNP valuation and provide his own valuation of the assets of the Partnership of which Mr Milevski received the benefit (the Wiese valuation). 2. It will be recalled that the primary judge did not determine the admissibility of the Wiese report. I have concluded that the report was admissible and that there is no real prejudice to Bartier Perry by its admission. This is because submissions were able to be made by Bartier Perry about the assumptions and conclusions of the Wiese report which are compelling. The Wiese valuation attributed no value to goodwill of the Partnership on the basis, contrary to Mr Paltos' submissions in this Court, that the Partnership assets and business had not been transferred to Mr Milevski. If the assumption upon which the Wiese valuation was built was correct, then Mr Milevski did not acquire the Partnership asset being the goodwill of the practice because, as Barwick CJ and Stephen J said in Geraghty v Minter (1979) 142 CLR 177; [1979] HCA 42 at 181 and 193, goodwill cannot be dealt with separately from the business with which it is associated and is inherently inseverable from that business (this was approved and applied in Commissioner of Taxation (Cth) v Murry (1998) 193 CLR 605; [1998] HCA 42 at [22]). In Murry, the majority held (at [31]) that: "… the sale of an asset of a business does not involve any sale of goodwill unless the sale of the asset is accompanied by or carries with it the right to conduct the business." 1. The reasons for Mr Wiese's assumption that the goodwill inhered in the Partnership's business and was not transferred to Mr Milevski were that: "[2.5] The goodwill which contributed to the value of the partnership practice was in substance personal to the partners and not a partnership asset. … Mr Milevski's name and personal standing moved with him to his new practice but is not a partnership asset. … [4.5] Family law practices are generally not supported by recurring clients. Client relationships are typically initiated by referrals from a variety of sources including but not necessarily in order of significance, commercial and other solicitors, previous clients, accountants, financial advisers, a practitioner's personal network and human resources departments. Often a potential client will seek more than one reference to a family law solicitor before proceeding. Referrals are predominantly, if not invariably, to an individual practitioner rather than to a firm. Some work is also derived from advertising and promotions such as free seminars. Examples of clients being attracted by a brand name not supported by direct marketing are rare. [4.6] A client relationship is limited to addressing the issues arising from the breakdown of a specific marriage. The period of the client relationship, that is the period to which clients are contributing fees to the firm, varies considerably but it is not unusual for a fully contested property settlement to take between two and a half and three years to reach conclusion by way of judgement from the Court. The fees from an individual client are not received evenly over that period but rather as a function of activity on the file which may well occur in waves with a peak of activity immediately prior to the trial occurring late in the period of assignment. The assignments which generate the most fees tend to take the longest periods. … [5.4] The business name of Paltos Milevski Family Lawyers remains registered in the name of the partnership. There is no barrier to the name being used for a family law practice in the future. [5.5] While Paltos Milevski Family Lawyers employed qualified solicitors, client contact was largely if not exclusively with one of the principals. … [6.3.1] ownership of the business name has not changed; [6.3.2] there was no published advice as to the transfer or sale of the business; and [6.3.3] there was no support from the partners individually or indeed from you as the Receivers to a disposal – for instance, the core of the business is the provision of family law services and neither of the partners has undertaken not to continue offering such services. [6.4] On the date of valuation, in the absence of Mr Milevski, being a solicitor with a practising certificate, Paltos Milevski Family Lawyers did not operate and was not legally able to operate, as discussed in 4.4 above, a law practice. [6.5] … Without purporting to provide legal advice, we cannot see that … Mr Milevski [could be prevented from] operating on his own account and in particular any non compete provision would seem to require the firm of Paltos Milevski Family Lawyers to be operating. [6.6] As a further test of whether a business had transferred, if Mr Milevski had left Paltos Milevski Family Lawyers as a continuing practice and established a business on his own account under his own name without the consent or support of Paltos Milevski Family Lawyers: [6.6.1] referral sources of Mr Milevski would have continued to refer work to Mr Milevski; and [6.6.2] internet searches for Paltos Milevski would have continued to refer to Milevski." 1. Mr Wiese did not engage with the opinion of Mr Phillips of JNP Capital. He said that the JNP valuation was "fair value". His instructions were to use market value. Mr Wiese said: "[7.2.4] … The difference between fair and market value reflects the difference between the special value that assets may have had to one of the former partners in continuing the partnership business. The reasons that JNP adopted Fair Value are outlined in 4 numbered points on page 12 of the JNP report. Each of them is based on an assumption that either Milevski or Paltos would continue in and assume complete ownership of the Enterprise. As at the date of our valuation, we know this assumption is unreasonable and therefore that the assumption of fair value in the JNP report is not relevant to our opinion. [7.3] For the reasons discussed above, our opinion is of a different matter to that in the JNP report. The conclusions are neither comparable nor contradictory." 1. Mr Wiese distinguished between the personal goodwill of each of the partners and the Partnership's goodwill. The personal qualities of each of the partners would no doubt be a source of Partnership goodwill, but it may be doubted that it had a separate existence prior to the dissolution of the Partnership. 2. Mr Wiese opined that the only assets of value that passed from the practice of the Partnership to Mr Milevski's practice as Milevski Family Lawyers was the value attributable to a library including precedents and templates, the workforce who commenced employment with Milevski Family Lawyers and "transferred files". He assessed the value of those assets as $177,500. 3. Mr Paltos did not accept the Wiese valuation. He instructed Ms Conoulty to prepare the Conoulty report of 25 March 2019. As I have said, the parties each accepted that his Honour held the report to be admissible. To the extent that Mr Paltos relied on the additional finding of the primary judge that the report was not relevant, I reject the submission. The report was only not relevant because his Honour was persuaded to accept the undertaking from Mr Paltos which I would set aside. Ms Conoulty considered that the "Transferred Assets", being the assets of the Partnership transferred to Mr Milevski, have a value in the range of $879,434 to $1,026,007 including goodwill. 4. It bears emphasis that Ms Conoulty's report represented Mr Paltos' damages case. At least when Mr Paltos was represented by counsel, both parties in the present proceedings urged on the Court that Ms Conoulty's report was based on the correct methodology and was based upon factual assumptions that the parties invited the Court to conclude were correct. To the extent that Mr Paltos in the most recent round of submissions urged caution in the adoption of Ms Conoulty's report he did not do so by reference to any assumption or conclusion of that report, but by reference to matters which were not in evidence – the contents of a later report of Ms Conoulty and the death of Mr Wiese. 5. Ms Conoulty valued the Transferred Assets by applying a methodology of capitalisation of maintainable earnings. She adopted a multiplier of between 3.0 and 3.5. She approached the valuation on the basis that the value should be determined as fair value not market value, that is, represented as including the special value to Mr Milevski of the Transferred Assets. She considered that a multiple of between 3.0 and 3.5 was below the high point of the market value multiple ranges and that the fair value of the Transferred Assets would lie at the upper end of that range. 6. Ms Conoulty opined that Mr Milevski continued substantially the same business within Milevski Family Lawyers as previously operated by the Partnership. She gave the following reasons for that opinion: "(a) 146 open client files belonging to the Partnership were physically transferred to Mr Milevski and his new business location at Castlereagh Street. Of these transferred clients, 66 were identified as being active by Mr Milevski and 47 of them were invoiced by Milevski Family Lawyers in the following 13 months; (b) The employees of the Partnership were terminated and 5 of them were immediately offered employment by Milevski Family Lawyers with the new business taking responsibility for the accrued employee entitlements owed by the Partnership. This demonstrates to me a degree of continuity from the Partnership to Milevski Family Lawyers. The employees that were not offered employment were paid their leave entitlements by Milevski Family Lawyers. The benefit of Mr Milevski retaining the employees of the Partnership was that they were familiar with the clients that were also transferred and he avoided the need to recruit and train new employees. … (c) The established practices, procedures, manuals and precedents of the Partnership were transferred to Mr Milevski; and (d) The Partnership website and phone number was diverted to Mr Milevski ensuring not only that existing clients could contact him but that any subsequent new clients referred to the Partnership by the usual referral sources would also be diverted to Mr Milevski's new business. If Mr Milevski did not consider there to be value in diverting the website and phone number then the alternative would have been to wait for new clients to search his name and find his new website, or call him on his new business number or mobile phone. Another alternative could have been for the website and phone number to have been diverted to the Receivers or the phone number diverted to Mr Paltos's mobile." 1. In calculating the future maintainable earnings of the business transferred to Mr Milevski, Ms Conoulty adjusted the results of the Partnership as a whole to exclude fees personally generated by Mr Paltos because he would not be contributing to those fees in the future and Mr Milevski would not generate those additional billings. That is, Ms Conoulty made allowances in favour of Mr Milevski for goodwill personal to him but did not agree with Mr Wiese that no goodwill of the Partnership existed. She considered the average monthly billing for each professional employee of the Partnership for the two months of February and March 2016. She excluded January because it is a typically low billing month consistent with most professional service firms and excluded April as it was the month in which the Receivers were appointed and therefore not a full month. Ms Conoulty assessed the average monthly revenue to be $121,892 which she multiplied by 11.5 months because January fee revenue is generally lower than other months. She discounted that revenue by 10% to allow for the assumption that some of Mr Paltos' clients would not transfer their business to Mr Milevski. In considering that discount Ms Conoulty took into account that Mr Paltos was not capable of servicing those clients due to his ill health. She calculated that of the $921,000 in fees received and billed by Milevski Family Lawyers relating to Partnership transferred files, $505,102 related to clients where Mr Paltos was the partner prior to his stroke. She also made allowance for an element of personal goodwill attributed to Mr Milevski. 2. Ms Conoulty conducted her assessment of expenses in relation to the generation of those earnings. On this basis she calculated that the pre-tax future maintainable earnings of the Transferred Assets was $293,145. Applying a capitalisation rate of between 3.0 and 3.5 she valued goodwill as between $879,434 and $1,026,007. The midpoint of that range is $952,721 which is close to the JNP valuation albeit that that calculation was made on a different basis. 70% of that midpoint is approximately $666,905. 3. In assessing Mr Paltos' damages, as I have said, Bartier Perry bore the onus of demonstrating what the value was of Mr Paltos' claim for an allowance for the net value of the Partnership assets on the taking of accounts to which he would not have been entitled had the put option been exercised. That assessment depends upon making findings about future hypothetical facts, namely the outcome to Mr Paltos of his claims for goodwill and work in progress upon the taking of the Partnership accounts. I reject the submission made by Bartier Perry that the question to be determined is simply the value of the goodwill of the Partnership. By reason of Bartier Perry's conduct Mr Paltos has an additional right. That additional right is the opportunity to conduct litigation to compel Mr Milevski to pay for the goodwill of the Partnership upon the taking of the Partnership accounts, of which Mr Paltos is entitled to 70%. By reason of Mr Paltos' decision to conduct his damages case separately from and prior to the proceedings involving Mr Milevski, the outcome of this aspect of the Partnership Proceedings is a future hypothetical fact in these proceedings. 4. In making findings about future hypothetical facts the correct approach is that described by the High Court in Malec v Hutton. There the High Court explained that hypothetical future events are not "commonly susceptible of scientific demonstration or proof" and can only be evaluated in terms of chance (per Brennan and Dawson JJ at 639 and Deane, Gaudron and McHugh JJ at 642-3). The High Court explained that the correct approach was to calculate the "degree of probability" (per Deane, Gaudron and McHugh JJ at 643) or "possibility" (per Brennan and Dawson JJ at 639-640) of a future event occurring and then to adjust the award of damages according to that calculation, unless the probability is so low (less than one per cent) as to be speculative or so high (more than 99 per cent) as to be practically definite (at 643). That approach to future hypothetical facts is the same in contract, tort and under s 18 of the Australian Consumer Law. 5. The present question is one to be determined having regard to the percentage probability or possibility that Mr Paltos will achieve the recovery that Ms Conoulty has calculated, which Mr Paltos asserts is correct and Bartier Perry also rely on. Neither party has put forward any arguments in relation to the percentage possibility that the judge determining the Partnership accounts would accept JNP Capital's or Ms Conoulty's assessment of the value of goodwill and work in progress, on the one hand, or the Wiese valuation, on the other. 6. In reaching the conclusion that the correct approach is that described by the High Court in Malec v Hutton I am conscious that neither party invited this approach. I have determined, however, that it is the legally correct approach. I reject Bartier Perry's submission that it is procedurally unfair to them to proceed in this way. Contrary to Bartier Perry's submission, Mr Paltos was not obliged to prove the value of the goodwill of the Partnership. As I have said, it was Bartier Perry who bore the onus of proof on that subject. There is nothing procedurally unfair about addressing an issue about which Bartier Perry bore the onus of proof by adopting the correct legal approach. Bartier Perry have been given every opportunity to make submissions about the correct figure for goodwill and work in progress. As I have said, they submitted that 100% of Mr Paltos' share of the figure calculated by Ms Conoulty should be subtracted from the damages otherwise payable to Mr Paltos. I also reject the submission made by Mr Paltos' solicitors that he proved $1.41 million of damage and that no deduction was appropriate for the value of the goodwill. Plainly, and as Mr Paltos accepted before the primary judge and in the submissions by counsel in this Court, the value of any goodwill of the Partnership obtained by Mr Paltos in the Partnership Proceedings must be subtracted from the damages Bartier Perry is liable to pay as that sum is a benefit Mr Paltos would not have enjoyed if he had successfully exercised the put option. 7. The critical differences between the expert reports before the Court relate to the assumptions made about whether the Receivers permitted Mr Milevski to acquire the employees and assets of the Partnership without payment or whether Mr Milevski simply obtained the business of clients including clients of Mr Paltos where Mr Paltos was not able to acquire those clients for himself due to ill health. On this topic, it was common ground that "on or about 22 April, for no consideration, the receivers handed the practice and everything with it to Mr Milevski". As Senior Counsel for Mr Paltos explained: "COLEMAN: … The partnership was dissolved on 21 April. On or about 22 April, for no consideration, the receivers handed the practice and everything with it to Mr Milevski. That's all part of that. WHITE JA: Formally, by some document? COLEMAN: Yes. We'll turn that up. It's in one of the blue books, we'll find the reference and provide it. It's not controversial that that happened. …" (Emphasis added.) 1. Bartier Perry's submission about this topic was simple. Before the primary judge and in this Court both parties submitted that the Conoulty report was correct and was based upon factual assumptions the Court should find were correctly made. In the absence of any contradiction, the Court should find that what Mr Paltos himself asserts – the accuracy of the assumptions and conclusions in the Conoulty report – are correct. On this basis Mr Paltos is entitled to between $879,434 and $1,026,007. 70% of that figure should be deducted from the $1.41 million Bartier Perry is otherwise liable to pay Mr Paltos. 2. Mr Paltos' position on these issues in oral address was opaque: "PAYNE JA: … Is Mr Emmett right when he says it was and is your client's case that there's about a million dollars in goodwill to which he is entitled to be paid by Mr Milevski? COLEMAN: That's what he's asserting in the valuation to which our learned friend took your Honours. WHITE JA: He's claiming 70% of that amount. PAYNE JA: Sorry, 70%, yes quite right. 70% of the approximately a million dollars. COLEMAN: Yes. PAYNE JA: Why isn't Mr Emmett right that if your damages need to be assessed sitting here today that you would subtract that amount from the $1.4 million. COLEMAN: That assumes that he'll be successful in relation to that, and your Honours were taken to evidence that's rather to the contrary, namely that– PAYNE JA: Mr Milevski disputes it. COLEMAN: Yes. Whatever deficits there might be in the formulation of the primary judge's resolution of this, that would be a purely arbitrary and capricious circumstance, and [one] that didn't find favour with the primary judge, and we submit wouldn't with your Honours. It would almost necessarily condemn Mr Paltos to a course of litigation. He would have no incentive to go his hardest to try to claw back what had been taken from him." 1. In supplementary submissions Mr Paltos submitted: 1. in the Account Proceedings Mr Milevski claims that he is not required to account to the Partnership for the value of the Partnership assets, including goodwill, that the Receivers transferred or relinquished to him. He claims that the value of those assets was $nil; 2. Mr Milevski's liabilities to account for the goodwill or enterprise value of the Partnership are presently identifiable but will only be quantified upon the taking of the accounts in the Account Proceedings; and 3. any amount which Mr Milevski will be required to account to the Partnership as an asset of the Partnership is not a right for damages which Mr Paltos has against Mr Milevski, capable of being set off against the damages payable to Mr Paltos (which are equal to the Purchase Price of $1.41 million), but rather an amount which Mr Milevski may be required to pay to the Partnership as an asset of the Partnership. Any goodwill or enterprise value payable by Mr Milevski will not be paid to Mr Paltos. 1. I reject Mr Paltos' submission that amounts Mr Milevski may be required to pay to the Partnership are not relevant to the damages calculation. The whole basis of the Partnership Proceedings is that Mr Paltos is entitled to 70% of the net assets of the Partnership. It is his case that he is entitled to an amount which will be determined on the basis that it includes 70% of the goodwill of the Partnership. Although Mr Paltos' submissions referred to Mr Milevski's approach to the litigation, no submission was advanced, by either party, in support of that approach. 2. Both parties accepted that R I Banks, Lindley & Banks on Partnership (20th ed, 2020, Thomson Reuters) expresses a proposition relevant to determination of the present question thus: "if one partner in fact manages to secure the benefit of the firm's goodwill for himself, he can be compelled to account for its value, but such value will naturally reflect the fact that he and the other partners would be entitled to set up business in competition with the notional purchaser [Smith v Everett (1859) 27 Beav. 446; Mellersh v Keen (1860) 28 Beav. 453; Re David and Matthews [1899] 1 Ch. 378]". (Footnotes included.) 1. In Smith v Everett (1859) 27 Beav 446 and Mellersh v Keen (No 2) (1860) 28 Beav 453, Sir John Romilly MR held that in the case of a partnership that was dissolved on the death of one of the partners and the surviving partner continued to carry on the business and thus obtain the benefit of the goodwill, a share in the goodwill formed part of the estate of the deceased partner if the goodwill had any value at all having regard to the right of the surviving partner to carry on business in competition: see Smith v Everett at [452]. In Mellersh v Keen his Lordship said at [455] that in determining the value of goodwill the question is: "What it would have produced, if it had been sold in the most advantageous manner and under such circumstances that it would have produced the largest sum for all the parties interested?" 1. In Re David and Matthews [1899] 1 Ch 378, Romer J said at 383 that the goodwill should be valued on the footing that if the business were sold the surviving partner would be at liberty to carry on a rival business but could not use the name of the partnership and would not have the right to solicit the old customers of the firm. 2. Relatively few implied restrictions are imposed on a vendor of goodwill, so that a valuable partnership business may, in practical terms, be unsaleable and, thus, worthless to anyone but a former partner who wishes to acquire it. Goodwill may have no value independently of the partnership premises or the firm name. Lord Lindley pointed out that: "It is only so far as the goodwill has a saleable value, that it can be regarded as an asset of any partnership …". [18] 1. The current editor of Lindley & Banks takes the view that, as a statement of principle, this goes too far. Although goodwill is unmarketable, it clearly exists as an asset: at [10-227]. The editor suggests that Lord Lindley perhaps meant that unsaleable goodwill must be ignored for accounting purposes: citing Wilson v Williams (1892) 29 L R Ir 176, where the goodwill of a stockbroker's business was excluded from the accounts for this reason. Although it was once suggested that the goodwill of a solicitor's practice has no value (see Arundell v Bell (1883) 52 L J Ch 537), this is clearly not the present position: see Sobell v Boston [1975] 2 All ER 282; Bridge v Deacons [1984] AC 705; Burchell v Wilde [1900] 1 Ch 551; Fitch v Dewes [1921] 2 AC 158 at 168 per Lord Cave. 2. In Thames Cruises Ltd v George Wheeler Launches Ltd [2003] EWHC 3093 at [43], Peter Smith J expressed the view at [43] that it was unlikely (but not impossible) that a partnership at will would have developed "any sizeable goodwill value because of the ability of the partners of the dissolved firm to compete subsequent to dissolution". Lindley & Banks suggests that the position would be the same on the dissolution of a partnership for a term, absent any applicable express restriction: at [10-227]. Goodwill generated by the efforts of the partners will, in the normal course, be a partnership asset: at [10-228]. 3. In the event of a general dissolution (i.e. one involving a full-scale winding up), the goodwill must normally be sold, unless the partners agree otherwise (and unless the goodwill is valueless or otherwise inherently unsaleable): at [10-229]; see fn 1101. 4. Lindley & Banks explains that if the firm's business and its associated goodwill ceases to exist on dissolution, there will be nothing to realise. In Ryder v Frohlich [2006] NSWSC 833 (see further [2004] NSWCA 472), the business consisted of the provision to a company of the services of the two partners. One partner abandoned the partnership and the business, by definition, ceased to exist. It was not possible to go back to the position which existed prior to the dissolution for valuation purposes: at [10-229]. 5. Section 38 of the Partnership Act 1890 (UK) contemplates that the members of a dissolved firm will complete any unfinished business but will not take on any new work. The editor of Lindley & Banks says that it is self-apparent that, if no new work can be taken on, the value of the firm's goodwill will be swiftly dissipated unless (exceptionally) a forced sale can be secured on or shortly following the dissolution date: at [10-230]. 6. If one partner secures the benefit of the firm's goodwill for him or herself, he or she can be compelled to account for its value, but such value will naturally reflect the fact that he or she and the other partners would be entitled to set up business in competition with the notional purchaser: at [10-230]. It may be impossible for any partner to demonstrate that the goodwill has no saleable value until the partnership affairs have been fully wound up: at [10-231]. 7. A partner's ability to carry on a competing business in the same locality may, for all practical purposes, represent a sufficient deterrent to prospective purchasers to render the goodwill unsaleable: at [10-233]. In cases where the death of a partner results in the dissolution of the partnership, if the personal representatives of the deceased partner do not seek to force a sale of the partnership assets and are content to receive the value of his or her share as at the date of death, a payment will only fall to be made in respect of goodwill if it has a marketable value: at [10-233]. However, goodwill is often of little or no value on a dissolution (i.e., where the valuation is on a "break up" basis): at [36-53]. 8. Lindley & Banks explains that where goodwill does have a value, the actual method of valuation will be determined by the size of the business and the type of goodwill involved. All of the circumstances must be considered before it is possible to determine which method will be appropriate in a given case: at [36-59]. 9. In Mellersh, a partnership was dissolved with the effect that one partner would obtain exclusively the benefit of the goodwill and be made accountable for it. The Chief Clerk calculated the value of the goodwill on the principle that: "the goodwill might have been sold together with the leasehold interest in the house and premises in which the partnership business was carried on, and which formed part of the assets of the partnership, and that the purchaser of the business would have had the possession of the house and premises, and that the books of the partnership would have been handed over, and the accounts of the customers of the partnership transferred to such purchaser, and that the customers would have been informed of such transfer, and that such goodwill was worth one year's purchase of the net annual profits of the banking business, calculated on an average of the three years ending on the 31st day of December 1858". 1. The Master of the Rolls, Sir John Romilly, held that the Chief Clerk came to the right conclusion. The Master of the Rolls considered that the Court was bound to ask "[w]hat [the goodwill] would have produced, if it had been sold in the most advantageous manner and under such circumstances that it would have produced the largest sum for all the parties interested?" It was held that: "It is clear that this goodwill ought not to have been sold in such a manner as to have enabled the Plaintiffs to obtain, for themselves exclusively, the banking business, which they had previously carried on with the Defendant, and to get all the accounts of the customers of the firm transferred to them before the goodwill was sold. It ought to have been sold at the time of the dissolution, of which the Plaintiffs gave only a fortnight's notice … if … they had advertised that, on the 31st of December, the goodwill would be sold, explaining what the goodwill would be … it is … very probable that some joint stock banking company would have thought it worth their while to get some footing in that, which, although not a populous, is still a very thriving place … it is also probable that the Plaintiffs might have thought it more advantageous for them to buy the goodwill than to have allowed competition in the town. If all this had taken place, so as to create that species of competition, and as the Plaintiffs had no other house of business ready at that time, it is very possible that the goodwill might have sold for a good deal more than the amount found by the Chief Clerk." 1. In affirming the Chief Clerk's certificate, Sir Romilly concluded that the goodwill might have been sold, and might have produced something considerable: "although it is quite true that if, when the Plaintiffs continued the business and all the accounts of the customers of the old firm had been transferred to the new, the goodwill had been put up for sale by auction, nobody would have given a penny for it, yet it is quite consistent with the other view of the case. I do not see in what way the Chief Clerk could have come to a conclusion of what it would have produced, except by taking the average of three years' annual profits." 1. These principles have been accepted in New South Wales. In Page v McKensey (Supreme Court (NSW), Windeyer J, 17 December 1993, unrep), Windeyer J valued the goodwill of a partnership of chartered accountants. After dissolution the defendants continued to use the business name and "to all intents and purposes continued the partnership business". Windeyer J accepted the defendants' valuation evidence that the value of the name without covenants was $150,000 and treated that as the value of the goodwill. His Honour rejected the plaintiff's valuation evidence, which was assessed on the basis of the sale of a going concern with full covenants including restraint covenants. His Honour summarised the principles as follows: "On a dissolution of partnership the value of assets must be determined at the date of dissolution having regard to the terms of any agreement among the partners. Here there were no such terms. It follows that goodwill must be valued on the basis that it could be purchased by an outsider or one or more of the former partners. Any outside purchaser of goodwill would take into consideration the facts that: a. the former partners would be free to practise in the immediate vicinity; b. the former partners would be free to deal with any former clients, and free to make their new circumstances known, but not free to solicit former clients of the dissolved partnership. c. the former partners would be free to take over any existing files of the dissolved partnership if the clients so wished and fees for work to the date of dissolution were paid to the old firm. d. the former partners would not be free to use the name of the former partnership or a name so close to it that it would be likely to be confusing or to mislead people to think it was a continuation of the old partnership. … Former partners purchasing goodwill would do so with knowledge of these matters and their likely effect on outside buyers. Thus while the value of goodwill is a question of fact in all cases it is a question to be determined within and in accordance with the principles I have set out. Differences in partnership history, size, areas of work and other matters will of course influence the value of goodwill." 1. On appeal, the appellant did not challenge the correctness of Windeyer J's statement of the method by which goodwill is valued: Page v McKensey [1995] NSWCA 351. 2. Page v McKensey was cited with approval in Old v McInnes and Hodgkinson [2011] NSWCA 410 at [87] (Meagher JA, Beazley and Giles JJA agreeing). That case relevantly concerned the question of whether a partner was entitled to have the value of goodwill brought to account in the dissolution of the partnership. 3. As a matter of principle the task in assessing damages here is to determine on the evidence before the primary judge what the prospects were of Mr Paltos obtaining on the taking of an account the sum claimed by Mr Paltos in the Partnership Proceedings on account of goodwill and then discounting that opportunity for the uncertainties of litigation. 4. There appears to be much to be said for the proposition that in substance the business of the Partnership was transferred to Mr Milevski (as Ms Conoulty assumed). As Lord Romilly said in Mellersh in relation to the business there in question (a banking business), had the receivers advertised the business of the practice as being for sale with all that that entailed, including the right to use the partnership name and to approach the clients to solicit their continued business free from constraint that either of the partners could themselves solicit the clients, a considerable sum could be realised. Indeed, it is possible that Mr Milevski could have bid to purchase the business in order to retain the clients. 5. On the other hand, the position the Receivers now patently adopt, that no Partnership assets were transferred to Mr Milevski and thus no amount is payable for goodwill, is also arguable. 6. The peculiar circumstances of this case, however, give rise to a real difficulty. Bartier Perry asserts, based on Mr Paltos' own evidence and submissions, that the assumptions and conclusions of the Conoulty report are to be preferred. Mr Paltos makes no real submission in opposition to acceptance of the Conoulty report, other than to refer to later reports not in evidence and to urge care in protecting Mr Milevski's and the Receivers' rights. Each of these submissions I reject as essentially irrelevant to the present task. 7. Although both parties were apparently content to proceed on the basis that the Court should approach this question on the balance of probabilities, the correct approach, as I have discussed, was that explained in Malec v Hutton of assessing the percentage probability or possibility of the relevant event. Doing the best I can, that percentage is 70%. That is because the essential submissions made by Bartier Perry about this question were, subject to irrelevant qualifications, accepted by Mr Paltos. To recap: 1. the JNP report has been prepared consistently with the relevant principles and on the basis of correct assumptions. Ms Conoulty agrees with the methodology, reasoning and basis of value adopted in the JNP report. This Court would accept the JNP report's valuation of $860,902 to $1,065,371; 2. the Wiese report incorrectly concludes that no goodwill was transferred to Mr Milevski on the basis of the assumption that "it is unreasonable to assume the existence of partnership goodwill" and "partnership goodwill did not transfer to Mr Milevski"; 3. the following factors identified by Ms Conoulty ought to have led Mr Wiese to conclude that Mr Milevski acquired substantially the same business such that the goodwill was transferred: 1. first, all the Partnership's 146 open client files were transferred to Mr Milevski; 2. secondly, five of the Partnership's former employees immediately started working for Mr Milevski; 3. thirdly, the Partnership's practices, procedures, manuals and precedents were all transferred to Mr Milevski; and 4. fourthly, the Partnership's website and telephone number diverted to Mr Milevski; 1. the evidence does not support Mr Wiese's finding that Mr Milevski retained the Partnership's former clients because of his "personal goodwill" which he presumably acquired as a result of his "name and personal standing" with the Partnership's clients. The correct approach would have been to reduce the valuation of the Partnership's goodwill to take account of any personal goodwill attributable to Mr Milevski, as Ms Conoulty has done, rather than writing it off entirely; 2. Mr Wiese's apparent assumption that all partnership goodwill is "personal goodwill" or worthless does not follow from the principles enunciated in Page v McKensey; 3. Ms Conoulty adopted "fair value" as the appropriate measure of the assets transferred to Mr Milevski. Her report is detailed, well-reasoned and clearly explained. The assumptions on which her report was prepared appear to be correct. The Conoulty report was essentially unchallenged expert evidence; and 4. this Court would accept the JNP valuation of $860,902 to $1,065,371 and Ms Conoulty's valuation of $879,434 to $1,026,007 as the best evidence of the value of the Partnership goodwill that Mr Milevski acquired. 1. As I have said, Mr Paltos after being given a separate chance to make considered written submissions on this topic did "not necessarily dispute the propositions" set out at (1)-(7) above. 2. It follows that the award of $1.41 million to Mr Paltos was excessive. There was no response of substance or by reference to evidence in this case to Bartier Perry's submission that "[t]his Court would find that the value of the Partnership's goodwill was $957,928". A deduction of 70% of that figure (rounded down to $957,000) is appropriate. 70% (Mr Paltos' share) of that figure is $669,900. 70% (the appropriate Malec v Hutton percentage) of that amount is $468,930. This is the amount I would deduct from the award of $1,411,707. Mr Paltos is thus entitled to an award of damages of $942,777 from Bartier Perry. 3. In circumstances where the basis of the award of indemnity costs was based solely on an offer by Mr Paltos to settle for $1.4 million, it follows that the award by the primary judge of indemnity costs should also be set aside. Notice of cross-appeal 1. Regrettably, determining the subject matter of the cross-appeal and the relief sought by the cross-appellant proved an elusive task. 2. The amended notice of cross-appeal filed on 6 April 2021, the first day of the appeal hearing, sought the following relief: "1. [Cross] Appeal allowed. 2. The cross-respondent [Bartier Perry] indemnify the cross-appellant [Mr Paltos] from and against all actions, claims, demands, notices, losses, damages, costs or expenses for which the cross-appellant may become liable in respect of the partnership styled Paltos Milevski Family Lawyers and which arise after 21 April 2016 (including any guarantees and the like that may have been provided by any such person, but only to the extent to which such guarantee has not been called upon or otherwise exercised prior to 21 April 2016). 3. The cross-respondent pay the cross-appellant's costs." 1. The findings of the primary judge on this topic were set out at [91]-[93] of the second judgment: "[91] The plaintiff also seeks, pursuant to the terms of clause 5.2 of the Put and Call Option Agreement, an indemnity from and against all actions, claims, demands, notices, losses, damages, costs or expenses for which the plaintiff may become liable in respect of the Partnership. In the terms sought, such an indemnity would indemnify the plaintiff against any orders made against the plaintiff in the Partnership Proceedings. The terms of clause 5.2(a) of the Put and Call Option Agreement require the partner to indemnify the outgoing partner in those respects. [92] But the objectively determined construction of clause 5.2(a) is not to indemnify the Exiting Owner (Mr Paltos) for past losses and the like. It is to indemnify for future claims or losses. As proposed, the draft Short Minutes would require the defendant to indemnify Mr Paltos against the claim by Mr Milevski. [93] Given the dissolution of the Partnership in April 2016, before the indemnity would otherwise have operated, the plaintiff's damage as a result of not possessing the indemnity would relate only to claims made after July 2016 relating to issues that arose prior to 2016. There is no evidence of any such issue and the plaintiff has failed to show damage, in this respect, arising as a result of the defendant's negligence or a need for an order of this kind." 1. The terms of cl 5.2(a) of the Put and Call Option Agreement are set out above at [18]. The only substantive relief sought by the cross-appeal tracks carefully the terms of cl 5.2(a). 2. Somewhat surprisingly, given the reliance upon cl 5.2(a) of the Put and Call Option Agreement in the notice of cross-appeal, the following exchange occurred early during the course of oral argument on the cross-appeal: "PAYNE JA: Take us through cl 5.2(a), because it seems that [cl 5.2] (b) might – well, do you rely on (a) or (b) for this point? COLEMAN: As I understand it, we rely on (b)." 1. Considerable argument followed about the ways in which it was submitted that cl 5.2(b) of the Put and Call Option Agreement might somehow be engaged on the facts here. 2. After lengthy exchanges with the Court about possible difficulties with the application of cl 5.2(a) to the facts of this case, the following exchange occurred: "McCALLUM JA: I'm confused, your ground in the amended cross-appeal echoes the language of 5(a). COLEMAN: Would your Honour excuse me. Yes, your Honour is absolutely right and that's the document we filed and that's what we're stuck with and I can't change that." 1. No application was made to amend the notice of cross-appeal to rely on cl 5.2(b) or any other clause. 2. Having identified the indemnity provided by cl 5.2(a) as the subject matter of the cross-appeal, the following exchange occurred: "WHITE JA: Is there any evidence that anyone, or Mr Milevski I suppose, has claimed that Mr Paltos is liable in respect of a liability which arises after July or August or indeed at any time after 21 April 2016? COLEMAN: I don't understand that to be the case. WHITE JA: What would be the point of the order in terms of the relief sought in the cross-appeal? COLEMAN: There wouldn't be." 1. A clearer acknowledgment of the inappropriate nature of the relief sought in the amended notice of cross-appeal is difficult to envisage. 2. Despite this clear abandonment of the only relief sought by the cross-appeal, in supplementary written submissions dated 13 April 2021, Mr Paltos submitted that the Court should make the following orders: "(a) The appellant's appeal is dismissed; (b) The respondent's cross-appeal is allowed and the existing undertakings provided by the respondent discharged and in lieu thereof the Court makes the following orders: (i) verdict and judgment for the respondent against the appellant in the sum of $1,411,707 together with interest continuing until the date of payment. (ii) a declaration that the appellant indemnify the respondent from and against all actions, claims, demands, notices, losses, damages, costs or expenses for which the respondent may become liable in respect of the partnership styled Paltos Milevski Family Lawyers (the Partnership) and which arise after 21 April 2016 (including any guarantees and the like that may have been provided by any such person, but only to the extent to which such guarantee has not been called upon or otherwise exercised prior to 21 April 2016) such amount to be determined upon the taking of accounts in the [insert details] Equity Proceeding. (iii) an order that the appellant pay to the respondent, or if the respondent has not paid the sum of $515,000 to the Partnership, to the Partnership on behalf of the respondent, an amount equal to the liabilities incurred by the respondent with respect to the debts of the Partnership for which he may become liable [Put and Call Option Agreement cl 5.2(b)(ii))] such amount to be determined upon the taking of accounts in the 2016/00118930 Equity Proceeding; (iv) leave be granted to the respondent to quantify: (A) the costs and expenses for which the respondent has become liable in respect of the Partnership; and (B) the amount of the liabilities incurred by the respondent with respect to the debts of the Partnership for which the respondent may become liable, upon the taking of accounts in the Equity Proceeding; (c) the Court notes that the appellant may by prior agreement with the respondent pay to it the costs and expenses for which the respondent has become liable in respect of the Partnership and the liabilities incurred by the respondent with respect to the debts of the Partnership and be subrogated to the rights of the respondent in the Equity Proceeding." 1. The submissions accompanying these suggested orders were barely comprehensible. Those submissions travelled far outside the limited grant of leave to make submissions that was afforded to the parties. The parties were granted leave to file short notes on: (a) "what … is being claimed by Mr Paltos in the accounting exercise [apart from goodwill] and what, if anything, is conceded"; and (b) whether there are any cases "wherein an assessment of damages, something like this undertaking, has been a part of the mechanism meant to reflect that assessment", being the undertaking that was required by the primary judge at [98] of the second judgment. 2. In circumstances where Senior Counsel for the cross-appellant has accepted that there is no evidence of any claim that Mr Paltos is liable in respect of a liability which arises at any time after 21 April 2016 and conceded that there was no point in any order of the kind sought on the notice being made, no basis has been shown for the making of the order sought in the amended notice of cross-appeal. 3. Even more troublingly, the relief sought in proposed orders (b)(iii) and (iv) was inconsistent in material respects with the amended notice of cross-appeal, particularly by reason of the references to cl 5.2(b)(ii) which formed no part of the cross-appeal. As I have said, no leave to further amend the amended notice of cross-appeal was sought. If such leave were sought, in the circumstances in which this issue was litigated on the appeal, I would refuse leave. Proposed order (b)(iv) appears to be a completely new form of order in place of the undertaking offered which was the subject of ground 6 of the appeal. No notice of contention or notice of cross-appeal was filed seeking such relief and if the submissions filed beyond the leave granted are intended to comprise such an application, I would refuse it. It is simply too late in these proceedings for such a fundamental change to be proposed, without notice and outside the framework of the appeal and the cross-appeal. 4. Finally, in the submissions filed on the subject of damages addressed at [164(4)] above, the solicitors for Mr Paltos repeated submissions made about cl 5.2 of the Put and Call Option Agreement. It was submitted that: 1. Mr Paltos' damages under cl 5.2 have already been identified. Those losses will be quantified in the Account Proceedings and not any damages claim; 2. as a result of Bartier Perry's negligence, Mr Paltos has forever lost the right to compel Mr Milevski to pay the amount calculated in accordance with Schedule C to the Put and Call Option Agreement of $1,411,707; 3. any Malec v Hutton assessment should not impact the $1,411,707 of damage proven by Mr Paltos. Assuming that the arguments raised by Bartier Perry in the proceedings below were raised by Mr Milevski in a hypothetical scenario in which Mr Paltos had exercised the put option, he would have been unsuccessful; 4. Mr Paltos has lost something of value and lost what he would have received at the time he would have received it, because he would have succeeded against Mr Milevski. In defending the Partnership Proceedings, Mr Paltos cannot, and has forever lost the right to, argue that cl 5.2 applied; and 5. if successful in the hypothetical proceeding involving Mr Milevski (had the put option been exercised), Mr Paltos would have either had the benefit of a costs order or those costs would have formed part of the indemnity set out in cl 5.2 of the Put and Call Option Agreement. 1. Those submissions must be rejected, essentially for the same reasons I have just given. Dealing with each I conclude: 1. the claim sought to be advanced by Mr Paltos' solicitors under cl 5.2 was not pleaded or conducted below and formed no part of the appeal; 2. the lost right to compel Mr Milevski to pay the amount calculated in accordance with Schedule C to the Put and Call Option Agreement of $1,411,707 is at the heart of the damages calculation but does not have any bearing on the cross-appeal or the extent to which Bartier Perry have proven that amounts representing goodwill and work in progress should be deducted from that sum; 3. No deduction is being made on a Malec v Hutton basis of the assessment of $1,411,707 under cl 5.1; 4. whilst, in theory, Mr Paltos has lost something of value in losing the right to argue that cl 5.2 applied, he has failed effectively to plead or prove that this right had any value; and 5. Mr Paltos has failed to prove that the indemnity set out in cl 5.2 of the Put and Call Option Agreement had any value to him. 1. No notice of contention or notice of cross-appeal was filed seeking relief under cl 5.2 of the kind now asserted by Mr Paltos. Again, it is simply too late in these proceedings for such a fundamental change to be proposed, without notice and outside the framework of the appeal and the cross-appeal. As I have said at [178], Annexures 1 and 2 to Mr Paltos' submissions dated 28 June 2021 must be rejected. I accept Bartier Perry's submission that Annexure 1 should be ignored. The Annexure summarises a claim based on cl 5.2 of the Put and Call Option Agreement which was not pleaded or conducted below. I also accept that the evidentiary basis for Annexure 2 is not before this Court and thus the Annexure is not relevant. 2. The cross-appeal must be dismissed with costs. Costs of the appeal 1. Section 98 of the Civil Procedure Act confers on the Court a wide discretion with respect to costs. Under r 42.1 of the UCPR, the general rule is that the Court is to order that costs follow the event. The "event" may be characterised in more than one way. Generally the "event" refers to the result of the claim or counterclaim, as the case may be, and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] (Ward, Emmett and Gleeson JJA). Where there has been a mixed outcome in the proceedings, and it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings, in general such an exercise will be carried out on a relatively broad brush basis, and largely as a matter of impression and evaluation by the Court: Doppstadt at [19]; James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36]; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 at 22. 2. The relevant principles for the determination of costs on an issue-by-issue basis were stated in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] (Beazley, Ipp and Basten JJA): "• Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported). • In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal. • If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27]. • Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed). • A separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34]. • Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272." 1. The present case is one where the various issues dealt with were severable and it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings. Such an exercise will be carried out on a relatively broad brush basis. 2. Whilst the appellant succeeded, and would ordinarily be entitled to costs, the appellant has achieved complete success on only one issue; damages. The respondent was successful on all other issues. 3. To reflect the relative success of the parties on the severable issues I would order that there be no order as to costs with a view to each party paying their own costs of the appeal. For abundant clarity, that order is intended also to apply to the reserved costs of Bartier Perry's notice of motion filed on 21 December 2020. Conclusion and orders 1. For the foregoing reasons I propose the following orders: 1. Bartier Perry's motion dated 19 March 2021 seeking to lead fresh evidence is dismissed; 2. Appeal allowed; 3. Set aside orders 2 and 5 made by Rothman J on 1 December 2020 (including the undertaking offered as a condition of making order 2) and in lieu thereof order: 1. Bartier Perry to pay damages to Mr Paltos in the amount of $942,777; 2. Bartier Perry to pay Mr Paltos' costs of the proceedings on the ordinary basis; 1. No order as to costs of the appeal with the intention that the parties pay their own costs of the appeal; 2. Cross-appeal dismissed; 3. Cross-appellant to pay the costs of the cross-respondent of the cross-appeal. 1. WHITE JA: I agree with Payne JA. 2. McCALLUM JA: I agree with Payne JA. ********** Endnotes 1. Damages are sought in an amended cross-claim that has not apparently been filed. A notice of motion seeking leave to file the amended cross-claim was filed, but it does not appear to have been determined. 2. See s 118-37, Income Tax Assessment Act 1997 (Cth). 3. Letter of Mr Davis of BCR Advisory to Mr Milevski dated 6 April 2017. 4. Letter of Mr Davis of BCR Advisory of 2 December 2016 to Mr Milevski: "the clients of the Partnership chose to transfer their files to you". The Wiese report to the Receivers refers (at para 3.2.5) to "details on files transferred to Milevski Family Lawyers" (attached as Appendix E "Fees on Files Transferred"). 5. Ms Conoulty refers to particulars in this statement at Annexure 12 in Appendix D of her report, neither of which is included in the appeal book. 6. Twycross v Grant (1877) 2 CPD 469 at 545, per Cockburn CJ; Cackett v Keswick [1902] 2 Ch 456 at 468, per Farwell J; Potts v Miller (1940) 64 CLR 282 at 289, per Starke J; Toteff v Antonas (1952) 87 CLR 647 at 650, per Dixon J; Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281 at 291, per Brennan, Deane, Dawson, Gaudron and McHugh JJ. 7. Broome v Speak [1903] 1 Ch 586 at 605, per Buckley J; Ted Brown Quarries Pt Ltd v General Quarries (Gilston) Pty Ltd (1977) 16 ALR 23 at 31, per Gibbs J. 8. Potts v Miller (1940) 64 CLR 282 at 299, per Dixon J. 9. Potts v Miller (1940) 64 CLR 282 at 300, per Dixon J. 10. McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187 at 192, per Jordan CJ. 11. Cackett v Keswick [1902] 2 Ch 456 at 468, per Farwell J. 12. Gould v Vaggelas (1985) 157 CLR 215 at 255, per Brennan J. 13. Stevens v Hoare (1904) 20 TLR 407 at 409, per Joyce J. 14. Davidson v Tulloch (1860) 3 Macq 783 at 790, per Lord Campbell LC; quoted in Arkwright v Newbold (1881) 17 Ch D 301 at 312, per Fry J. 15. Peek v Derry (1887) 37 Ch D 541 at 591 per Cotton LJ, 594 per Sir James Hannen, 594 per Lopes LJ. 16. Potts v Miller (1940) 64 CLR 282 at 299, per Dixon J; see also Peek v Derry (1887) 37 Ch D 541 at 591-592, per Cotton LJ. 17. Peek v Derry (1887) 37 Ch D 541 at 594, per Sir James Hannen. 18. Peek v Derry (1887) 37 Ch D 541 at 591, per Cotton LJ. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 August 2021