FITZPATRICK v WATERSTREET [1998] NSWCA 280

FITZPATRICK v WATERSTREET SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

MASON P, BEAZLEY JA and SHEPPARD AJA 4 and 5 June 1998, 17 December 1998

Equity — fiduciary duty — solicitor and client — absence of retainer — content of duty — limited by services undertaken and extent of retainer — rights of recoupment and contribution — evidenced by agreement and common intention

Serini Pty Ltd ('"'Serini'"), the second appellant was the company of Ms Fitzpatrick the first appellant. In 1982, Sereni and Mr Waterstreet, the first respondent acquired a flat in Elizabeth Bay as tenants in common in equal shares. In 1983, Waterstreet and Johnson (the second respondent) considered undertaking a joint borrowing in Swiss francs in order to rationalise 'theft. existing borrowings. After discussions between Waterstreet, Johnson and Fitzpatrick, a loan with European Asian Bank AG ("EAB") in Swiss francs was settled on 5 March 1984. In part, it was secured by a mortgage given by Waterstreet and Sereni over the Elizabeth Bay flat and a guarantee given by Sereni. Mr Johnson and his firm (Holman Webb) acted as solicitor for Fitzpatrick and Sereni in the transaction, without retainer or the charging of any fee.

By July 1985, the borrowers were in default and were being pressed by EAB to increase loan repayments or realise the securities given. Fitzpatrick was highly reluctant to allow the sale of the Elizabeth Bay flat. In August 11986, Waterstreet and Fitzpatrick came to an agreement whereby Fitzpatrick agreed to allow the sale to go ahead, and abandoned any further claims in relation to the proceeds of sale of the flat in return for payments in her favour by Waterstreet.

In 1990, Fitzpatrick and Sereni commenced proceedings against Waterstreet and Johnson for breach of fiduciary duty and fraudulent misrepresentation. Brownie J dismissed these claims, in large part based upon credibility findings favourable to the respondents and unfavourable to Fitzpatrick. In particular, Brownie J held that neither Waterstreet nor Johnson had breached their fiduciary duty as solicitors to the appellants prior to entry into the EAB loan in February 1984. During the hearing of the appeal it was abandoned against Waterstreet.