Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: King v Benecke [2014] NSWCA 399
• Hearing dates: 25 and 26 August 2014
• Decision date: 24 November 2014
• Before: Basten JA at [1]; Macfarlan JA at [31]; Ward JA at [115]

Decision

Appeal dismissed with costs.

[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.]

• Catchwords: TORTS - professional negligence - appellant retained respondent solicitors to act in transactions concerning shareholdings in family farming and grazing business - causation - whether respondents' breaches of duty and retainer caused appellant economic loss - whether appellant's concern about his legal position caused him to pay more under settlement agreement than he would otherwise have paid - no basis for appellate intervention established - appeal dismissed
• Legislation Cited: Civil Liability Act 2002 (NSW), ss 5A, 5D, 5E
• Cases Cited: Fox v Percy [2003] HCA 22; 214 CLR 118; Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; 247 CLR 613
• Category: Principal judgment
• Parties: George Berkeley Ewart King (Appellant); Ian John Benecke (First Respondent); Stephen Edward Martin (Second Respondent); Brenden John Miller (Third Respondent); Michael Geoffrey Anthony Holden (Fourth Respondent)
• Representation: Counsel: A J McInerney SC/M F Newton (Appellant); I Pike SC/J J Hutton (Respondents); Solicitors: Thompson Eslick Solicitors (Appellant); Yeldham Price O'Brien Lusk (Respondents)
• File Number(s): CA 2013/277479

Decision under appeal

• Jurisdiction: 9111
• Citation: King v Benecke [2013] NSWSC 568
• Date of Decision: 2013-08-23 00:00:00
• Before: Harrison J
• File Number(s): SC 2009/297857

HEADNOTE

[This headnote is not to be read as part of the judgment]

In about August 2000 the appellant, Mr George King, retained the respondent, Mr Ian Benecke, to act for him in transactions with Mr King's father and uncle, Berkeley King and Peter King respectively. The transactions related to shareholdings in companies controlling the King family's farming and grazing business conducted on properties collectively known as "Coombing Park". By those transactions, George King had sought to acquire control of the properties from his father and uncle.

On 5 December 2008, after several years of disputation concerning distribution of the family property and various unsuccessful attempts at mediation, George King agreed to pay to his family $3,550,000 in settlement of the disputes.

In 2009 George King commenced proceedings against Mr Benecke and his partners claiming damages for professional negligence. He alleged that as a result of Mr Benecke's breaches of duty and retainer, he was required to pay to his family under the settlement agreement in December 2008 more to acquire complete and effective ownership of the properties than would have been the case if Mr Benecke had ensured that the earlier transactions with Berkeley and Peter King had binding legal effect.

By judgment of 23 August 2013, Harrison J sitting in the Common Law Division found that Mr Benecke had acted in breach of his professional duty but that George King had not established that those breaches caused him loss.

Held, dismissing the appeal (per Macfarlan JA; Basten and Ward JJA agreeing):

(1) The appellant has not demonstrated that the primary judge's partially credit-based conclusion that he did not pay more under the December 2008 settlement than he would have paid if Mr Benecke had not breached his duties is contrary to "incontrovertible facts or uncontested testimony", "glaringly improbable" or "contrary to compelling inferences" ([108]).

Fox v Percy [2003] HCA 22; 214 CLR 118, applied.

(2) The offers that the appellant made in 2006, prior to him becoming conscious of any insecurity in his legal position, undermine significantly his evidence that he paid much more in December 2008 by reason of his knowledge or belief that his legal position was insecure than he would have paid if he had not had that knowledge or belief ([93]). Those offers reveal that in mid-2006, the appellant was prepared to pay his sisters more than twice what he regarded as their legal entitlement in order to maintain or regain family harmony and perhaps to fulfil moral obligations that he understood that he had ([96], [98]).

(3) The appellant's settlement position did not change significantly between October 2007 and December 2008 (or indeed between June 2006 and December 2008), at least not to his disadvantage ([106]). Moreover, the trend of the offers at the December 2008 mediation did not suggest weakness in his position ([107]). The primary judge's partly credit-based conclusion on causation is therefore consistent with the documentary evidence ([108]).

(4) (per Basten JA; Ward JA agreeing) There was no clear evidence that the strength or weakness of the appellant's legal position was material to the outcome of the settlement negotiations. There was strong support for the conclusion that the settlement in fact reached was substantially equivalent to that which he accepted at an earlier point in time when he was not afflicted by doubt as to the strength of his legal entitlements. The appellant therefore failed to prove he had suffered a financial loss caused by the respondents in accordance with s 5D of the Civil Liability Act 2002 (NSW) ([29]-[30]).

Judgment

1 BASTEN JA: The dispute underlying the present appeal involved the distribution of family property including a large Angus cattle breeding business in central western New South Wales. The primary disputants were the parents and three adult offspring. One of the offspring, Mr George King, is the appellant. He sued the family solicitors, the respondents, in negligence, alleging that their breaches of duty caused him to settle the family dispute on disadvantageous terms. Before the trial judge, Harrison J, he succeeded in proving breaches of duty, but failed to establish that they had caused him loss: King v Benecke [2013] NSWSC 568.

2 The appeal should be dismissed, for the reasons given by Macfarlan JA and for the following supplementary reasons with respect to the issue of causation.

A brief background

3 The estate, known as Coombing Park, was operated and owned through a number of trusts and companies. In 1999 the primary shareholders of companies owning the land (which was held under a series of titles) were the father of the family Berkeley King, his brother Father Peter King and his sister Patricia Bellamy. Berkeley King and his wife Penelope King had three children, being the plaintiff in the proceedings below, George King and his two sisters, Katie and Kristen King.

4 In about 1996 George King returned from a period obtaining work experience in other parts of the country. He spoke to his father about returning to manage the property and the cattle business. He sought to do so on the basis that he would have control of the business and the land through the established corporate structure.

5 The principal company was the Whitney Pastoral Co Pty Ltd ("Whitney"). Sixty-six percent of the shares in that company were held by Somers Investments Pty Ltd. The shares in Somers Investments were broken into dividend bearing shares, equity shares and voting shares. They were shared equally by Berkeley King, Peter King and Patricia Bellamy. The second largest holding was 22.3% of the shares held by the Brumby Trust, the trustee for which was Brumby Run Pty Ltd.

6 In 1999 George King negotiated with his father, Berkeley King, and his uncle, Peter King, for the transfer to him of their shares in Somers Investments. As each had a one-third holding of that company, George King would have acquired a two-thirds (controlling) interest. (There were no plans at that stage to deal with the one-third holding vested in Patricia Bellamy.) There were also outstanding 10 small parcels of shares (none exceeding 3% of the capital) held by various family members. As part of the arrangement by which George King would obtain his father's shares, he was required (as a matter of obligation rather than benefit to him) to pay what was somewhat vaguely described as "fair value" for the minority interests. What was meant by the term "fair value" was, for a long time, unresolved. However, it seems tolerably clear that it did not refer to an arithmetical calculation of the percentage of a particular shareholding in the net assets of Whitney. The purpose (or at least the primary purpose) of this part of the arrangement was to ensure that George's sisters, Katie and Kristen, obtained a fair proportion as part of their inheritance.

7 By taking his father's share, George was, by common understanding, obtaining his inheritance in advance. The purpose was to allow him to remain on and manage the family business, which would be under his control. So far as his uncle's share was concerned, there was agreement that he would pay $500,000, the amount being loaned to him by his uncle who would receive an interest free capital payment of $10,000 during his life and would forgive the balance in his will. Peter King did not have family of his own and supported the arrangement with George King on the basis that George King would manage the property and keep the land from a forced sale and breakup. Although the agreement with his father appears to have been concluded in August 1999 and the agreement with Peter King not until May 2000, it seems that the parties intended that each agreement would be conditional on the other, although there was no express arrangement to that effect.

8 In about August 2000, George King engaged Mr Ian Benecke, a partner with Garland Hawthorn Brahe, to advise and act for him with respect to what was described in the pleadings as "the structure of the transactions and the share transfers that should occur for him to obtain ownership and control of the interests he was receiving" pursuant to the two agreements. In circumstances which will be explained in more detail shortly, Mr Benecke advised that the shares should not be transferred to George King directly, but to a trust, of which the trustee was Weander Pty Ltd. Weander was the trustee of the Berkeley King Share Trust ("the Trust") and was the holder of various interests in Somers Investments on behalf of Berkeley King.

9 According to George King's evidence, his father told him in late 2000 that, rather than transfer the shares in Somers Investments to him directly, he would place the shares in the Trust and transfer three of the four shares in the trustee company, Weander, to George. By that means he indicated that he was placing control of the shares in George's hands, as he would control the trustee company. Berkeley King retained the fourth Weander share. He also advised George King that he, Berkeley, would retain the equity shares in Somers Investments which he would leave to George in his will.

10 George King had conversations with Mr Benecke at about that time in which Mr Benecke assured him that the arrangement was secure from his point of view and would save stamp duty. With respect to the equity shares to be left in his father's will, George King asserted that Mr Benecke had said:

"There is more than enough evidence to prove that your father is holding these for you if he ever goes back on his word."

11 The last statement was not tested, but some years later Berkeley King changed his will so as to leave the Somers Investments equity shares to his wife until 2027. Whether the arrangement between George King and his father would have provided a sufficient basis in equity to set aside the codicil to the will is not known. The appeal proceeded on the basis that the failure of Mr Benecke to advise George King to secure the transfer of his father's equity shares in Somers Investments constituted a breach of his duty as a solicitor to his client.

12 The transfer of the shares to the Trust proved fragile. True it was that George King controlled the trustee, Weander Pty Ltd, but, unbeknownst to George King at that time, under the trust deed his father was the appointor and had the power to revoke the appointment of the trustee. If he were to exercise that power, George King would lose control over his shareholdings in Whitney. Again, whether or not the agreement between George King and his father would have founded a claim in equity to prevent such a use of the power was not tested. The appeal proceeded on the basis that Mr Benecke was remiss in his duty to his client in failing to advise him of the relevant terms of the trust deed and how to prevent his father depriving him of control of the trustee.

13 When George King met Mr Benecke, he was introduced as the "family solicitor". George King was aware that Mr Benecke and his firm had undertaken legal work for the family business for generations. That is a common situation and one which involves no necessary conflict of interest, even when arrangements, such as wills, involve the conferral of benefits on some family members to the exclusion or restriction of benefits available to others. However, where a solicitor is acting for more than one member of a family, it is not possible for the solicitor to continue to act in circumstances where he or she receives information from one member of the family, relevant to the transaction, which cannot be shared with the other member of the family. That is not the sole circumstance where a conflict can arise, but it is one relevant for present purposes. Once it became apparent to Mr Benecke that he could not continue to act for both George King and his father with respect to the share transactions, he breached his duty to George King by continuing to act for both while not giving full advice to George King by which George could take steps to protect his own individual interests, if he thought fit to do so. Later he took steps on instructions from Berkeley King directly adverse to the interests of George King.

Effects of breaches of duty

14 In order to determine whether the breaches of duty by Mr Benecke caused harm to the appellant, it is necessary to determine precisely what the breaches of duty were and when they occurred.

15 The amended statement of claim alleged an agreement between the appellant and his father and mother in or about August 1999. However, it was not until August 2000 that the appellant retained Mr Benecke. At that time, Mr Benecke was also acting for his father, as the appellant was aware.

16 The agreement with his father was expressed by the appellant in his affidavit in the following terms:

"Berkeley: 'I will transfer my Somers shares to you and will resign as CEO to make way for you to be Managing Director. You will be the majority shareholder. I would prefer to shake a warm hand instead of a cold one. But I expect you to pay fair value for my remaining shares in [Whitney] and Esk.'

Me: 'I agree to this as long as I am not asked to buy out the shares at a time or for an amount that will compromise the business.'"

17 The appellant gave evidence that he understood the reference to "shaking a warm hand" to mean that his father intended to transfer the shares to him whilst his father was still alive, rather than on his death. The reference to Esk was a reference to the company known as Esk Pty Ltd which owned the one area of the grazing business not held by Whitney, being an area of some 675 hectares. As with the shareholding in Somers Investments, Esk was held by the three siblings, Mr Berkeley King, Mr Peter King and Ms Patricia Bellamy, in roughly equal shares.

18 It appears that at least part of the pressure on Mr Berkeley King to sell the property owned by Esk resulted from Patricia Bellamy seeking to sell her one-third holding. Mr Berkeley King was apparently concerned that to meet that demand, he would need to sell the Esk land and another holding known as Gobabla. Ms Bellamy's share was eventually purchased by Whitney and the shares were cancelled. However, that did not occur until 2006.

19 If the appellant had a view that he would obtain the shares from his father absolutely during his lifetime, that was changed before any transaction was effected. How that occurred is of some significance to later issues and the appellant's evidence in that regard should be set out in full.

"68 In mid to late 2000 I had a further discussion with my parents, Berkeley and Penny, about how the Somers shareholding would be transferred to me. The discussion was to the following effect:

Berkeley: 'I have set up the trust structure so I can transfer shares to you without any stamp duty as the shares are owned by the trust and you will own the trust through the shares in Weander.

I will transfer 3 of the 4 shares in Weander to you. This will give you majority control of all the shares in the trust of which Weander is the trustee.'

69 This was the first time I recall being told that there was a trust that held some of Berkeley's shares. On either the same occasion or during a conversation soon afterwards Berkeley said words to the following effect about the fourth Weander share:

'I want to keep the fourth Weander share so that I remain involved with the business even though I am giving control to you. I want to feel like I am still involved. I will leave it to you in my will.'

70 On another occasion Berkeley also said to me 'I will also leave my remaining Somers shares to you in my will' or words to that effect.

71 In about August 2000 Berkeley said to me words to the following effect:

'I have given Ian Benecke clear and concise instructions to transfer my Somers shares to you. Ian said to me 'do you realise in giving George control of Weander you are giving control of WPC to George?'.

72 Later in 2000 I met with Benecke at the offices of Garland Hawthorn Brahe in Sydney at which we discussed the transfer of both Berkeley and Peter's shares. In relation to Berkeley's shares we had a conversation to the following effect:

Me: 'Can you explain to me the share structure so I can understand what is happening to the Somers shares Dad has given me?'

Benecke: 'The shares in The Whitney Pastoral Group of companies are owned by the Berkeley King Share Trust. A corporate trustee, Weander Pty Limited, controls the trust. Whoever owns the majority of the shares in the corporate trustee has ultimate control of the assets in the trust.

It is a discretionary trust and so Weander controls any distributions of money. If you control Weander then any distribution will be at your discretion.'

Me: Are there any issues with the transfer of dad's shares to me via Weander?"

Benecke: 'No. You will have full and total control of all the shares in the Berkeley King Share Trust as long as you own the majority of the shares in Weander.'

Also, due to the stamp duty costs it would be better for Berkeley to hold the 15 Somers equity shares in trust for you and leave them in his will as stamp duty could be as much as $90,000.'

Me: 'Are the 15 Somers equity shares that Dad is holding in trust for me safe so that my control is secure?'

Benecke: 'There is more than enough evidence to prove that your father is holding these for you if he ever goes back on his word.'"

20 The alleged breaches of duty said to arise at this stage were twofold. The first was the failure to advise the appellant that his control of the Trust through Weander was not secure because under the trust deed his father had power to revoke the appointment of Weander as trustee of the trust. As both Mr Berkeley King's shares and those transferred by his uncle, Mr Peter King, were to be held in the Trust, the controlling interest which the appellant was intended to have in Whitney was therefore at risk. Acting with due care for the appellant's interests, Mr Benecke should have advised him to obtain an amendment to the trust deed, or a binding legal agreement not to remove Weander.

21 With respect to the shares to be transferred by testamentary disposition, Mr Benecke was said to have breached his duty by failing to advise that there were risks involved because his father might possibly change his mind and that the appellant should obtain a binding legal agreement in writing that the shares would be transferred "upon request otherwise by his will upon death" to the appellant.

22 With respect to the last sentence of the advice given by Mr Benecke set out above, the judge stated:

"531 It was Mr Benecke's position that the advice George King attributes to him at [72] of his affidavit did not involve any departure from the standard of a reasonable and competent solicitor. George King understood by as early as 1996 that his father could change his mind about his will. He agreed that that was acceptable to him. The advice that he could enforce the promise, and that there was sufficient evidence to do so, has not been established to be incorrect. George King has not sought to establish that there were not sufficient documents in evidence as at 30 August 2000 to prove the promise had been made. It is clear that by the time the dispute emerged in 2007 there were sufficient documents.

532 The specific breaches alleged by George King in respect of the 15 ordinary Somers shares are that Mr Benecke should have advised him to require their immediate transfer, or to obtain a binding legal agreement in respect of the promise, or to advise him of the risks of not doing so. Mr Benecke contends that these alleged specific breaches are the product of hindsight. They do not reflect what a reasonable and competent solicitor would advise in the context of a close and trusting family relationship. When Mr Benecke was cross-examined on this issue he maintained the position that George King could have enforced his father's promise.

533 Mr Benecke also emphasised that there is in any event no evidence that Berkeley King would have been prepared to give an irrevocable promise. The rather delicate situation he faced in keeping Coombing Park intact while attempting to provide for his children equally, and the evident concerns his daughters had about not seeing their brother receive preferential treatment, would very likely have made it difficult for him to commit to a formal agreement. There would also have been tax implications in doing so. Mr Benecke maintained that there was accordingly no breach of duty in not advising George King to seek one."

23 There were no clear findings with respect to these matters: in reaching his conclusions on the question of breach of duty, in this period, the only express finding made by the trial judge was at [537], in the following terms:

"(a) Mr Benecke breached his duty to George King by continuing to fail to advise him of the risks in the way the share transfers had been structured."

24 Subsequent events are set out by Macfarlan JA, with the findings in respect of subsequent breaches at [81] below.

Causation

25 Pursuant to the Civil Liability Act 2002 (NSW), ss 5D and 5E, the appellant bore the burden of establishing on the balance of probabilities that the negligence of the respondents caused him economic loss. (That was so whether the cause of action involved a breach of duty in tort or a breach of contract: s 5A(1).) To that end, it was necessary for him to establish that the negligence was "a necessary condition of the occurrence of the harm": s 5D(1)(a). He also had to establish "harm", which in the particular circumstances meant that in financial terms, after the settlement, he was worse off than he would have been absent the respondents' negligence. The questions of loss and causation were inextricably interwoven.

26 There are a number of steps in the chain of causation. First, if advised as to the potential weaknesses in his legal entitlements in 2000 or 2001, the appellant needed to satisfy the Court that he would have (a) sought independent legal advice and (b) presented his father with an alternative course of action with respect to the transfer of shares. He could not have given evidence as to those matters, which needed to be determined "subjectively in the light of all the relevant circumstances": s 5D(3).

27 Assuming he could satisfy the Court as to those steps, he would then need to have established that his father would have accepted and adopted such a course of action. There was no direct evidence to support such a finding. There were two difficulties in adopting such a conclusion on the evidence at trial. First, although Mr Berkeley King was clearly anxious to secure his son's commitment to management of the properties, he was also concerned to provide equal shares for his two daughters as well as his son in the distribution of his estate. When property is distributed in specie during the owner's lifetime, there remain many contingencies which will affect how the ultimate distribution will be achieved on death. In the present case, part of the intended distribution involved investments held by the parents, resulting from the sale of another piece of land, which were believed by George King in about 2000 to amount to $1-$2 million and were expected to provide part of the daughters' inheritance. There was little evidence as to whether that amount had appreciated over the years prior to the settlement negotiations, although George King made an assessment of the value of the investments in the course of the mediation. A note from Berkeley King dated 23 July 2006 stated "that George should have unfragmented control of [Whitney] and that the girls should be made as close as possible to $ equal: I envisaged that we would have most of the proceeds from the sale of Weander to achieve this, however this is not quite the case now as we have put most of those proceeds into [Whitney]."

28 It is true that the appellant pleaded that, but for the respondents' breaches of duty, he would have obtained independent legal advice and "would have obtained control and ownership of" the various shareholdings: amended statement of claim, par 34C. The complaint on appeal was that the judge failed to make the relevant findings, but the material from which the inferences were sought to be drawn was fragile. It is doubtful whether this Court would be prepared to make such findings, not having heard the evidence: the appellant did not seek an order for a fresh trial. However, as indicated by Macfarlan JA, the matter may be disposed of on a different basis.

29 The final step in the chain of causation required a connection between the failure of the appellant to obtain a legally secure footing to retain the shares in the various companies, and the settlement negotiations. As explained by Macfarlan JA, those negotiations, which were undertaken at a time when the appellant had independent legal advice, were devoted to resolving an intra-family dispute, having regard to the parents' perceived moral obligations to their adult children and the appellant's concomitant moral responsibilities towards his siblings. There was no clear evidence that the strength or weakness of his legal position was material to the outcome. There was, as is demonstrated by Macfarlan JA, strong support for the conclusion that the settlement in fact reached was substantially equivalent to that which he accepted at an earlier point in time when he was not afflicted by doubt as to the strength of his legal entitlements.

30 For these reasons, the appellant failed to prove he had suffered a financial loss, caused by the respondents' in accordance with s 5D of the Civil Liability Act.

31 MACFARLAN JA: This is an appeal by Mr George King against a judgment of Harrison J sitting in the Common Law Division ([2013] NSWSC 568), given in proceedings for damages for professional negligence brought by Mr King against Mr Ian Benecke, a solicitor, and his partners.

32 The primary judge found that Mr King retained Mr Benecke's firm to act for him in transactions with Mr King's father, Mr Berkeley King, and Mr King's uncle, Mr Peter King. The transactions related to shareholdings in companies controlling the King family's farming and grazing business conducted on properties collectively known as "Coombing Park". By the transactions, Mr George King had sought to acquire control of the properties from his father and uncle.

33 His Honour found that Mr Benecke acted in breach of his professional duty but that Mr George King had not established that the breaches caused him loss. The loss that Mr King alleged was in essence that some years after the transactions he had had to pay to his family under a settlement agreement more to acquire complete and effective ownership of the properties than would have been the case if Mr Benecke had ensured that the transactions referred to earlier had had binding legal effect.

34 On appeal, Mr King seeks judgment in the sum of $1.4 million plus interest, in lieu of the primary judge's entry of judgment for the defendants. This is the amount that the primary judge considered would have been the proper amount of damages to be awarded to Mr King in the event that he had succeeded on the causation issue.

35 The respondents to the appeal challenge the primary judge's findings only to the extent that they contend that in assessing damages his Honour should have given credit for a benefit obtained by Mr King as part of the settlement with his family, being a release from liability in respect of certain alleged wrongful conduct.

36 Subject to that issue, the appeal is therefore concerned solely with the question of causation of loss. As his Honour's conclusion on causation involved his rejection of Mr King's evidence that concern about his insecure legal position (arising from Mr Benecke's breaches of duty) caused him to pay significantly more under the settlement agreement than would otherwise have been the case, his Honour's decision was at least in part credit-based. To succeed on his appeal, it is accordingly necessary for Mr King to show that the primary judge's decision was contrary to "incontrovertible facts or uncontested testimony", "glaringly improbable" or "contrary to compelling inferences" (Fox v Percy [2003] HCA 22; 214 CLR 118 at [28]-[29]). Mr King sought to surmount this hurdle primarily by referring to written communications between the parties, and other documents, which he contended supported his evidence and contradicted the primary judge's findings.

THE FACTUAL CIRCUMSTANCES

37 Coombing Park has been held by the King family for some generations. In 1999 it was held as follows.

38 One part, called Coombing West, was owned by Esk Pty Ltd whose shares were owned by Berkeley King, his sister Patricia Bellamy and his brother Peter King (or their interests) as to approximately one-third each.

39 The remainder of the properties comprising Coombing Park were owned by The Whitney Pastoral Co Pty Ltd ("Whitney" or "WPC") whose major shareholder (owning 65.71%) was Somers Investments Pty Ltd in which Berkeley King, Patricia Bellamy and Peter King (or their interests) held approximately one-third of the shares each. Brumby Run Pty Ltd held a further 22.3% of Whitney as trustee for the Brumby Trust of which the same three persons were beneficiaries. Peter King and Patricia Bellamy held small direct interests in Whitney, with most of the remainder of the shares in that company being held by interests associated with Berkeley King or his daughters Katie and Kristen (the latter also being known as "Shish"). Those interests (totalling 5.99% of Whitney's capital) and Berkeley King's approximately one-third shareholding in Esk were referred to in the proceedings and in the contemporaneous documents as "the Minority Shares".

40 George King gave evidence that in 1996, about five years after he left school, he agreed with his father and uncle that he would undertake the management of Coombing Park on the basis that they would leave to him their shareholding interests in the companies that had direct or indirect ownership of the properties. He said that further discussions in the following years culminated in the following agreement with Berkeley in early August 1999:

"Berkeley: 'I will transfer my Somers shares to you and will resign as CEO to make way for you to be Managing Director. You will be the majority shareholder. I would prefer you to shake a warm hand instead of a cold one. But I expect you to pay fair value for my remaining shares in WPC and Esk.'

Me: 'I agree to this as long as I am not asked to buy out the shares at a time or for an amount that will compromise the business.'"

41 George King went on in his affidavit to say:

"I understood that my purchase of Berkeley's remaining ESK and WPC shares at an appropriate time in the future was intended to generate sufficient cash to provide an amount to be left as an inheritance to my sisters. The amount Berkeley received as a result of my purchase together with my parents['] remaining estate (non-Coombing Park assets) would provide my sisters with an inheritance equivalent to the one third of Somers that I have received. That is

(a) I had received 33% of Somers which equated to 21.90% of WPC.

(b) ...

(c) I understood that Berkeley's remaining Coombing Park shares which comprised 135 Esk shares and 38,280 WPC shares had a value approximately equal to the one third of Somers I was receiving and that I would have to pay that amount to purchase them at an appropriate time in the future.

(d) My parents' non-Coombing Park assets (comprising other property holdings and a share portfolio) were worth approximately $1 million and would be left to Katie and Kristen.

(e) In light of the above I understood that each of Katie, Kristen and I were to receive approximately equal amounts from our parents. I had received one third of Somers worth $800,000. Katie and Kristen were together to receive my parents['] remaining estate worth $1 million, plus the amount when I purchased Berkeley's remaining shares."

42 Acting on Mr Benecke's advice (which the primary judge found to have been negligent) that transfer to him of Berkeley King's shares in Somers could result in a substantial stamp duty and/or capital gains tax liability, George King agreed in 2000 that Berkeley's 15 Somers shares that he had agreed to transfer to George would instead be held by Berkeley in trust for George, with Berkeley promising to leave them to George by will. This transaction was referred to in the proceedings as the "Berkeley Transaction".

43 Thereafter, Peter King agreed to sell his shares in Somers, Whitney and Esk to George King (the "Peter Transaction"). On the advice of Mr Benecke (again found by the primary judge to be negligent), the shares were transferred to Weander Pty Ltd as the trustee of the Berkeley King Share Trust, rather than to George personally. This occurred upon the basis that Berkeley had agreed that George would acquire (as transpired) a controlling interest in Weander Pty Ltd, with the concept put to George being that he would control the shares held by the Berkeley King Share Trust if he controlled the trustee.

44 In 2003 Patricia Bellamy commenced proceedings against Berkeley and the principal group companies claiming that they were guilty of oppressive conduct towards her in relation to her shares in those companies. Under a settlement reached in 2006, her shareholding interests in Somers and Whitney were extinguished and those in Esk were transferred to Whitney. The primary judge found that the settlement was "highly favourable to Whitney" (Judgment [614]) and that the value of George King's interest in Whitney increased dramatically as a result of the settlement (Judgment [617]).

45 In a letter of 20 July 2006 to Mr Benecke, George King said the following:

"We had a facilitated family meeting on the 22nd of June at the request of my Sisters to come to an agreement as to what was due to them from the WPC Group given that I have received my inheritance from Berkeley around 1999. I put forward a pay - out plans [sic] for my sisters (Please refer to annexure marked A.) which was agreed to and accepted.

I have been away on annual holidays for the past two weeks and they have decided (Katie in particular) that is not what they want and have asked that 'Gobabla' [one of the Coombing Park properties] be sold and the proceeds from that sale less some debt be given equally to my two sisters."

46 Annexure A to the letter calculated a total "payout value" to George King's sisters of $1,294,702 ($647,351 each). It proceeded upon the basis that his sisters were entitled to, or at least should receive, the same proportion of the value of Berkeley King's direct and indirect interests in Whitney (and those of persons associated with him, including his daughters) as George King had or would have. The calculation included not only the value of the family's Whitney shares but also the value of the shares in Somers that Berkeley King had promised to give George King in 1999.

47 The primary judge held that the figure of $1,294,702 assumed a value of $5 per share in Whitney (Judgment [618]) but George King contends that the value assumed was $7.35. The offer did not relate to Berkeley's shares in Esk as well as those in Whitney.

48 George King's letter of 20 July 2006 went on to say:

" ... Peter King agreed to the transfer of his shares to me on the condition that Berkeley transferred his shares to me; this effectively gave me control of the Group. Berkeley gave a condition on the transfer of his shares that I 'look after' the girls in with respect [sic] to purchasing the WPC & Esk shares from his and Penny's estate. It was never expected to be dollar equal. (Please refer to annexure marked C.) This is Katie and Kristen's actual legal position."

49 The issues that motivated George King to make the offer to his sisters are apparent from the following further statements in his letter to Mr Benecke of 20 July 2006:

"What is happening is that I am being expected to 'pay - out' each of the girls an amount equivalent to the minority shareholder value of one third of the entire WPC Group. This is based on the assumption by Berkeley, Penny, Katie and Kristen that the work I have done of the past ten years has been for the direct benefit of the family and to no benefit to me as an adult. What is seen as unfair by my sisters is that I have had the use of my inheritance from Berkeley which has put me in a position to purchase both Peter's and Patricia's shareholdings. The original agreement with Berkeley was that I received his Somers Shares (22% / $800,000) and my sisters get the remaining WPC and ESK shares and all of Berkeley and Penny's residual estate which is valued at about 1.4 million dollars at the moment. At Katie's request she wanted to change the original plan so as to get some asset out now.

...

My thoughts are that if this is to continue it will destroy family relationships. I also see it as un-winnable by me on the emotional grounds it appears to be played on at the moment. If I were to do nothing my legal position with all this is extremely clear and I do not think I require advice on that front. My position is I would like to return to Berkeley the equivalent amount of shares he transferred to me in 1999."

50 In a letter of 21 July 2006 to a Mr Michael Adamedes, George King said:

"Agreement of Somers

The agreement that was in place was that it was my responsibility to even up the dollar value of inheritance, I had to pay back the shareholder loans (which are at call) and pay fair value for all the shares in WPC and Esk that were left to the girls. The residual estate from [the property] Weander was also going to the girls. I understood the 22% shareholding via Somers was to be my total inheritance and I could base my career decisions on that."

51 On 23 July 2006 Berkeley King wrote a note that included the following:

"George has the legal right to not give any part of the WPC to anyone, every one else in the family is a minority shareholder in a private coy and we all know only too well what that means. I believe George also has moral obligations which if he chooses to ignore them will have disastrous consequences for our family".

52 In an email to Berkeley King of 23 July 2006 George King wrote:

" ... I have no doubt now that if you had the control you would sell what ever you wanted to pay out what you wanted, what you are telling me to do now is a betrayal of what you promised in 1999 ..."

53 After a further mediation in July 2006, George King made an offer to pay his sisters $1,761,412, being $880,706 each. He referred to this offer as follows in a note that he prepared on about 31 July 2006:

"● I have also offered to purchase the remaining 198,855 [Whitney] shares (26.6%) for $7.50; this is 50% above the last share sale. Also have offered to purchase the 135 Esk shares for $2,000 per share.

● I do not think the Company should commit to any more than this amount at this time.

● $1,761,412 or $880,706 each."

Unlike his offer of June 2006, this offer included Berkeley's shares in Esk. The parties agreed that the primary judge was in error in saying otherwise.

54 On 18 June 2007 George King wrote a letter to Berkeley King that included the following:

""I believe the only way Katie and Shish will see this as fair is if they get the [equivalent] of one third of Coombing each.

...

It causes me anguish that in 1999 we made a deal that you would transfer your Somers shares to me which equated to 22% of WPC and that was to be my entire inheritance and the girls were to get the remainder of your estate and your Esk and WPC shares. Now because I have secured [Peter King's] shares formally and Bellamy's Somers and WPC shares are extinguished and land values have trebled it seems that the original deal is null and void and any achievements I have made from the strong position you gave me are now on the table to be divided again."

55 On 21 June 2007 Berkeley King wrote a letter to George King that included the following:

"I have three children that have all become adults and I love them all with all my heart and unconditionally. At this moment I have one with great wealth (some of which was given and some of which was earned) and two with nothing. I have no choice but to fight for my two who have nothing, especially Katie whose needs are great at this time."

56 On 27 June 2007 George King wrote a letter to Berkeley King that included the following:

"My understanding of where you are all at with this is that you only intended to transfer control of your shares to me, not ownership. I can now see that if you all perceive that you didn't transfer ownership to me - that your shares were being held by me in Trust for the family that your position is where you now see it. Your letter of the 21st said that half of Bellamy's shares and half of Brumby Run should go to you and half should go to me via Peter. To think this you must be assuming you must have title to one third of Whitney?

I see this as the area of most confusion on both sides, you and the girls think I am 'stealing' shares that I have no 'legal or moral right to' ... If you see that you still have moral right to the shares you gave me then the girls would be understandably angry with me. I don't even think you have told them of the circumstances around the 1999 transfer of your shares or the deal we made then."

57 In early August 2007 a conversation occurred between George King and Berkeley King in the following terms:

"[George King]: 'Are you planning on doing something different with the Somers shares you are holding for me?'

Berkeley: 'If you don't trust me I will sign them across to you now'.

[George King]: 'I'll organise it.'"

58 In August 2007 Mr Benecke prepared the documents necessary to effect the transfer. In mid-August 2007, Mr Benecke told George King that Berkeley had not signed them.

59 In September 2007 George King prepared a position paper for a further mediation which took place on 16 October 2007. It included the following:

"Dad wrote to me on the 23rd July 2006 saying I had a moral obligation to either sign Gobabla over to the girls or sell it and give them the net proceeds after a fair distribution of the Company debt, or this would have disastrous consequences for our family.

...

I have subsequently sold Gobabla which equated to approximately our debt. Dad has said for the last year that he thinks the girls should get $1M each as a fair payout which I have been working towards. The asset valuation of all the remaining shares is $2.6M. Two million dollars for the remaining 14.5% is nearly six times the value we paid for Bellamy's 33%. There is now talk of including a beach house for Mum, I don't know if this is in addition to or including the two million dollars."

60 Berkeley King's position paper, also prepared in September 2007, reaffirmed his promise to leave his shares in Somers to George King. Nevertheless Berkeley treated himself as still owning the shares as he said in the position paper that he owned "just over 50% of the group" whilst George owned "just under 50%" and 199 of the 200 voting shares.

61 The record of the mediation (prepared by Ms Kathy Sims) noted points that the parties agreed at the mediation on 16 October 2007 would form "the basis for further discussion". These points contemplated a payment out of George King's resources of $3.5 million. In his affidavit of 31 August 2010, George King said that at the mediation his family collectively proposed that they would accept $3.5 million and that he agreed to investigate "whether the company could obtain finance to pay $3.5 million" ([166]). This was on the basis that Berkeley and his wife would have the right of occupancy of the Coombing Park main homestead rent-free for their lifetimes. In his evidence-in-chief, George sought to clarify or amend that evidence by saying that whilst the remainder of his family "agreed that I was to go away and do that. I didn't answer them" (Transcript p 43).

62 George King referred to the mediation of 16 October 2007 as follows in his email of 18 October 2007 to the mediator, Ms Lyn Sykes:

"The 'big house' has gone into a spin with a sense of hysteria from Katie again. I don't feel comfortable dealing with them outside of a facilitated meeting. I will wait to our December meeting as agreed in our meeting of Tuesday [16 October 2007].

They need a bit of time to settle down, from experience they will need this time to become rational again and to not keep moving the goal posts ... ".

63 An email of 22 October 2007 from George King to Ms Sykes included the following:

"This is where the main point of contention is. If Berkeley stood by his agreement of 1999 about transferring his Somers shares to me, including the equity shares the position would now be that I had 85.5% of [Whitney] and Berkeley would have 14.5% as the majority of shares the Aunt held were in Somers Investments. My understanding from the deal in 1999 was crystal clear that that was to be my only inheritance, the unclear part was that I had to buy Berkeley's remaining shares at 'fair value'.

...

Every time I disagreed to something they have told me they say that I am treating this as a business transaction and not as family, they don't want me to disagree with their proposals. I am hearing don't be difficult and just agree with them regardless of the consequence for me and my new family?

What do I have to do in this process to limit the damage to relationships?"

64 On 24 October 2007 Berkeley King signed a codicil to his will providing that his shares in Somers were to be held by his will trustees for the benefit of his wife, Penny King, until 2027.

65 On about 6 November 2007 George King saw a tax invoice from Mr Benecke that referred to Mr Benecke providing services concerning the alteration of Berkeley King's will.

66 In about mid-November 2007 George King first heard of the concept of an "appointor" of a trust and came to understand that such a person had the power to change the trustee. He assumed that Berkeley King was the appointor of the Berkeley King Share Trust and became worried that if he did not obtain the Berkeley and Peters' shares in Somers, Berkeley would be able to sell Coombing Park without requiring George's agreement (affidavit of 31 August 2010, [176]).

67 On 18 December 2007 George King said the following to his solicitor concerning a mediation between the family members that had taken place the previous day:

"My guess from the meeting yesterday is that they (Dad & Katie) are going to start legal action. I suspect they will start with dismissing Deerslayer Pty Limited as Trustee for The Berkeley King Share Trust. Are we [certain] everything is closed there?

I offered $3.5 for the three respective share groups, they had previously been demanding $4.0 and in yesterday[']s meeting changed their demand to $5.2."

68 The primary judge found that at the mediation on 17 December 2007, George King offered to pay $3.5 million (without an immediate right in him to occupy the homestead). George King contends that this finding was wrong and that the amount of the offer was in fact $3 million, with a documentary reference by him to $3.5 million (see [67] above) being a typographical error.

69 On 19 December 2007 George King said in an email to the mediator, Ms Sykes:

" ... All Dad's life he's lectured everyone he's met about morals and integrity. He's gone back on his promise about holding the Somers shares in trust for me, (he's changed his Will, gave me the bill to pay which had codicil changing these shares) ... Has given me shares in a trust that he had the power to take back and his solicitor put shares I purchased into the trust!!!"

70 On 24 December 2007 George King wrote to Berkeley King in the following terms:

"I know you are really angry with me at the moment & you have started legal action against me. I just want you to know no matter what happens I will always love you."

71 On 8 January 2008 Berkeley King, as appointor, executed a deed replacing Deerslayer as trustee of the Berkeley King Share Trust.

72 On 12 March 2008 Berkeley King told George King that he was seeking to have George removed as manager of Coombing Park, resulting in George striking him on his right ear.

73 On 28 March 2008 George King was charged with assault and at that time Berkeley, his wife and their daughters obtained Apprehended Domestic Violence Orders against George.

74 On about 16 June 2008 George King received a handwritten note from his mother, Penny King, offering to accept a settlement of $7,598,000. This represented 50% of what she referred to as 2008 valuations of the properties at $15.196 million.

75 In his letter of 17 June 2008 in response, George King asserted that the net assets of Whitney were $13,021,961 less, apparently, certain costs of realising an asset or assets. He asserted that he owned 85.42% of Whitney. Presumably this ownership was largely through the three one-third interests in Somers that he had, or thought he had, acquired from Berkeley King, Peter King and Patricia Bellamy, together with the interests in Esk that he had acquired from Peter King and Patricia Bellamy. He identified the components of the outstanding 14-15%. These were in essence the Minority Shares (including Berkeley King's one-third interest in Esk) and one share in Brumby Run. For that outstanding percentage he offered $2,909,279 plus an additional $250,000, making a total of $3,250,000.

76 In a letter of 7 July 2008 to Penny King, George King said the following:

"I am prepared to offer you and the girls full asset backing of $1,626,102.00 for all your shares in the WPC Group. In addition to this, in an effort to finalise this matter and as a gesture of good-will I [am] prepared to offer you all a further $1,373,898.00 lifting my offer to $3,000,000.00. As an incentive to vacate the Coombing Park homestead by 31 December 2008 I am prepared to offer you all a further $500,000.00 bringing my total and final offer to THREE MILLION FIVE HUNDRED THOUSAND DOLLARS ($3,500,000.00)."

77 The family dispute was settled at a mediation on 5 December 2008. George King agreed to pay $3,550,000, with $2,550,000 payable by 1 February 2009 and $1,000,000 payable by 31 December 2010. His parents and sisters were to have the right to reside in the homestead only until 30 June 2009.

78 In his affidavit of 31 August 2010, George King said that the agreement was preceded at the mediation by offers from his family to accept, first, $6,000,000 and then successively $5,500,000, $4,000,000 plus a right of occupation of the homestead until 31 December 2010, $3,255,000 plus acquisition of Coombing South and the right to live in the homestead until 30 June 2009, and $3,650,000 plus the right to live in the homestead until 31 March 2009. In oral evidence, George said that he could not recall whether he made any counter-offers. However his counsel submitted that a file note in evidence suggested that he did.

THE JUDGMENT AT FIRST INSTANCE

79 The primary judge commenced his analysis by noting that the defendants did not dispute that Berkeley King made a promise to his son in 1999 in the terms alleged by George King. His Honour then made the following findings.

"406 ... That in mid-1999 an agreement was reached between Berkeley King and George King pursuant to which George King was to receive all interests in Somers held or controlled by his father. Berkeley King was to resign as chief executive officer of Whitney and George King was to be appointed as its managing director. George King was to pay 'fair value' for his father's remaining shares in Whitney and Esk, at a time and in an amount that would not compromise the business. At or about the same time, an agreement was reached between Peter King and George King pursuant to which Peter King agreed that he would sell all shares held or controlled by him in Whitney, Somers and Esk to George King. The purpose of the two agreements, as understood by Berkeley King, Peter King and George King, was to give George King majority control of Whitney, thereby securing his future and keeping Coombing Park in the King family."

80 His Honour proceeded to find that Mr Benecke was acting for George King at all times and on all critical aspects of the transactions and agreements central to the case (Judgment [453]). He then concluded:

"459 Mr Benecke was under a duty of care clearly to advise George King that Mr Benecke could not act, and was not acting, in his interests and that he should obtain independent legal advice. Mr Benecke breached that duty by failing to advise George King that he could not act, and was not acting, in his interests and that he should obtain independent legal advice. Mr Benecke represented to George King by his conduct that he was acting on George's behalf and in his interests in relation to each of the Berkeley Transaction and the Peter Transaction. That representation was false in relation to the Berkeley Transaction because Mr Benecke was acting in the interests of Berkeley King and not acting on George King's behalf or in his interests. That representation was false in relation to the Peter Transaction because Mr Benecke was merely documenting an agreement and not acting on George King's behalf or in his interests."

81 The primary judge added that Mr Benecke had breached his duty in the following particular respects (Judgment [537]):

"(a) Mr Benecke breached his duty to George King by continuing to fail to advise him of the risks in the way the share transfers had been structured.

(b) Mr Benecke acted in a position of conflict in advising from about August 2007 in relation to the valuation of the minority shareholding. In particular, he erroneously included in the valuations a sum for Berkeley King's Brumby Run shares.

(c) Mr Benecke exploited the weakness in George King's position caused by his own negligence by acting for Berkeley King to prepare a codicil to his will that removed the benefit of his promise to George King in respect of his Somers shares.

(d) Mr Benecke used confidential information obtained in the course of his retainer by George King for the purposes of further undermining his vulnerable position and strengthening his father's position.

(e) Mr Benecke exploited the weakness in George King's position caused by his own negligence by acting to remove Weander as trustee of the BKST.

(f) Mr Benecke continued to act for Berkeley King against George King during 2008.

(g) Garland Hawthorn Brahe failed to hand over George King's files despite repeated requests, until after the settlement was reached with his family.

(h) The intended objective of Mr Benecke's conduct in acting for Berkeley King against George King was to apply pressure to George and to create leverage in order to enhance Berkeley King's negotiating strength in the event of a dispute over the terms of the transfer of practical ownership and control to George King."

82 His Honour summarised George King's case that Mr Benecke's breaches of duty caused him loss as follows:

"539 George King's case on causation is conceptually clear. He maintains that he was placed under pressure to settle by Mr Benecke's defaults which eroded his negotiating position so that he paid more than if he had the benefit of proper professional advice. Put another way, he says that, but for Mr Benecke's breaches, he would have paid much less than the $3.55M for which he ultimately settled."

83 His Honour's reasoning and conclusions on the causation issue are apparent from the following extracts from his Judgment:

"602 The burden of George King's case is that he paid more than he should have when the matter settled, and only because of Mr Benecke's breaches. As extraordinary and egregious as those breaches were, including Mr Benecke's admission that he actively assisted Berkeley King to squeeze more out of his son, they did not in my view have a relevant causal relationship to the ultimate settlement sum. In this respect I consider that George King's views on price, at times when he could not have been under any pressure caused directly or indirectly by Mr Benecke, put the lie to the proposition that his final agreement was in effect extracted under duress.

...

610 ... it seems clear to me ... that in the August 1999 agreement between George King and his father, 'fair value' meant whatever amount was required to achieve rough equality between George King and his sisters in terms of the division of their parents' assets. It also seems to me that, irrespective of how the share transfers had been structured, and notwithstanding Berkeley King's view that 'fair value' meant as close as possible to money equality, the mere possibility of an alternative interpretation of the expression meant that the current dispute about it could never confidently be excluded.

611 In assessing whether or not George King was under pressure caused by Mr Benecke's breaches when he settled in December 2008, it is therefore critical to understand that his contractual obligation was to pay a price that as near as possible achieved monetary equality between himself and his sisters. I also consider that a significant contributor to the pressure under which George King then operated was his recognition and understanding of that fact.

...

618 George King offered $1.294M at the facilitated meeting on 22 June 2006. That was based upon a Whitney share price of $5. That was the amount George King considered his aunt had received. The significance of that offer, and the light, if any, that it casts upon the alleged Benecke pressure effects after December 2007, has to be understood in context. In particular, George King accepts now, as per Mr Ivey's 19 July 2012 report, that as at January 2009 Whitney was valued at approximately $17.67 per share or $14.14 with a minority discount. The offer also did not take account of the value of his right to occupy the homestead. The offer of $1.294M was unaffected by any doubts or pressures allegedly caused by Mr Benecke. Although it cannot be described as conclusive of the issue, the circumstances surrounding the making of George King's offer at this time supports the proposition that he was prepared then to resolve the dispute with his family on the basis that he was required to make a payment that would correspond as near as possible to money equality between him and his sisters in the division of their parents' assets.

619 It is interesting to note that in cross-examination, George King maintained that 'the pressure was beginning' and that 'it was already there' at the time he made his 22 June 2006 offer. That is, quite frankly, difficult to accept. It is contrary to his counsel's concession in opening that it was only after the 22 June 2006 mediation that George King began to doubt his father's intentions concerning the 15 Somers shares. It is also inconsistent with the thrust of his evidence concerning the effect upon him of realisations and discoveries that occurred in October 2007 or shortly thereafter. It is demonstrative of a realisation and concern about the effect upon his case of the high offers made by him before his discovery of the change to his father's will or the exercise of the Weander power of appointment.

620 I reject entirely any suggestion that George King was under any relevant pressure as at 22 June 2006 that was or may have been caused by Mr Benecke's negligent structuring of the share transfers.

621 George King made an offer of $1.761M at the facilitated meeting on 31 July 2006. Two things should be noted. First, that offer was based upon a share price of $7.50, which was 'unrealistically low' according to Mr Benecke. Even so, it was still considerably higher than the $1.429M that George King maintains he would have paid for the Minority Shares but for Mr Benecke's negligence. Secondly, it does not take account of the other benefits he received under the settlement, such as his father's Esk shares, a right to occupy the homestead and the value of the general release.

...

632 In the circumstances I find that George King was not under pressure by reason of lack of security concerning his legal position at 16 October 2007. He agreed to consider or investigate making a payment of $3.5M to obtain all of the Minority shares because he regarded it as within the range of 'what is fair'. There is no evidence to establish that his agreement to investigate making a payment of $3.5M was affected or influenced by any concern or issue about his legal position. His agreement without complaint or resistance to investigate making a payment of $3.5M is significant contemporaneous evidence in support of the fact that it was an amount that he considered to be fair.

...

649 The overall shape of the offers and counter-offers suggests that George King was not under pressure. In December 2007 he had offered $3.5M (without an immediate right to occupy the homestead). In July 2008 he had sought to settle for $4M but had been rebuffed. He bided his time and ultimately settled for $3.55M. His family made six successive bids against themselves at the mediation in December 2008. The sum of $3.5M was also what he agreed to investigate in October 2007 before his family, on his own account, went back on the agreement.

...

656 In evaluating George King's assertions that he was under pressure and regarded his legal position as weak, I am confronted with the absence of any supporting documentary evidence, and a large amount of objective documentary evidence to the contrary. No one else within his camp has been called to give evidence that he regarded his legal position as weak or (in the case of Mr Cheney) that he advised him that it was.

657 In summary I consider that the following findings should be made. First, that George King did not believe his legal position to be weak at the December 2008 mediation or at any time. Secondly, that he was not under pressure by reason of a perception about lack of security of his legal position in December 2008. Thirdly, that he did not pay any more at the December 2008 mediation than he otherwise would have because of perceptions about lack of security of his legal position. Fourthly, that he agreed to the December 2008 settlement because it was within the range of values he considered to be 'fair' and because it was a settlement he could comfortably afford that suited his wider business interests."

84 Although George King's claim failed in light of the primary judge's conclusion on causation, his Honour proceeded to reach conditional conclusions on the quantum of damages, lest a different view on causation be taken on appeal.

85 His Honour considered that damages should, prima facie, be assessed as $1,262,893, being the difference between the sum of $3.55 million paid by George King as a result of the December 2008 mediation, and the total of $1,787,107 and $500,000. The former represented the value of the Minority Shares calculated by George King's expert witness, Mr Richard Ivey, without a 20% minority holding discount. His Honour considered such a discount to be inappropriate. The latter represented the value to George King of obtaining vacant possession of the homestead in the near future. His Honour concluded that the appropriate amount of damages was $1.4 million after adding to $1,262,893 a sum for legal costs incurred in the resolution of George King's dispute with his family. His Honour rejected the defendants' submission that a deduction should be made for the benefit to George of a release he obtained under the settlement from alleged liability in respect of amounts totalling $2.5 million paid by Whitney to support his business called The Wellness House.

RESOLUTION OF THE APPEAL: THE CAUSATION ISSUE

The reference to "fair value" in the 1999 agreement

86 The primary judge held that the reference in the 1999 oral agreement between George King and his father to the "fair value for [Berkeley's] shares in WPC and Esk" (that is, the Minority Shares) "meant whatever amount was required to achieve rough equality between George King and his sisters in terms of the division of their parents' assets" (Judgment [610]). His Honour founded that conclusion on repeated references in subsequent correspondence to the parties', or at least Berkeley King's, intent that such "rough equality" be achieved.

87 Whilst I accept that that equality was an objective of Berkeley King in which George King at least acquiesced, I do not accept that the parties intended it to be achieved solely through their agreement that George King would pay "fair value" for the Minority Shares. Rather, I consider the better view to be that the objective was to be achieved first by payment of this amount (and its division between Katie and Kristen) and secondly by their parents leaving to their daughters the parents' non-Coombing Park assets. George's understanding was to this effect (see [41] above, his letter of 21 July 2006 to Mr Adamedes at [50] above and his letter of 20 July 2006 to Mr Benecke at [49] above). It is consistent with, although not dictated by, Berkeley's repeated references to equality between his children (see [55] above and Berkeley's position papers dated 23 July 2006 and 7 September 2007).

88 It is also consistent with the primary judge's reference early in his judgment to George's intended purchase of the Minority Shares at a fair value being only part of Kristen and Katie's inheritance, with the purchase price to be supplemented by their inheritance of their father's non-Coombing Park assets, including a substantial share portfolio (Judgment [15]). That paragraph appears inconsistent with his Honour's later finding that it was through the payment of fair value for the Minority Shares alone that equality of inheritance was to be achieved.

89 Adoption of this view is not inconsistent with acceptance of George King's description quoted in [41] above of his oral agreement with his father. As his evidence indicated, his discussions with his father were not limited to a few words on a single occasion. There were clearly other discussions and circumstances that gave rise to the objective of "rough equality" of inheritance that the parties to the proceedings accepted was applicable. Whether or not any agreement implicit in the understanding about that objective was binding would of course be another question. However, as will be apparent from what is said below, any binding aspect to it is not of present significance bearing in mind the approach taken by George and his family to settlement of their differences.

90 I add that this view also accords with the natural meaning of the words "fair value" when used with reference to the Minority Shares. For the contrary view to be correct those words would have to be read, unnaturally, as including reference to an amount of money (necessary to be paid in order to achieve "rough equality" of inheritance) that could be quite unrelated to the value of the Minority Shares.

91 My view on this issue (which differs from that of the primary judge) does not however provide any significant assistance to George King's case on appeal. The primary judge found that George King had an understanding that he had a contractual obligation to pay a price for the Minority Shares that (by inference, of itself) as nearly as possible achieved inheritance equality between himself and his sisters and that this was "a significant contributor to the pressure under which George King then operated" (Judgment [611]). Whilst I do not consider that George King had, or understood himself to have, this contractual obligation, he was pressured by his family to believe, and at least to some extent accepted, that he had a moral obligation to see that one way or another, equality of inheritance between himself and his sisters was achieved. In the context of disputes within his family, I do not consider that the evidence indicates that a distinction of any significance is to be drawn between the legal and moral obligations in this respect.

Whether the documentary evidence supported the primary judge's conclusion that any perceptions of George King about lack of security of his legal position did not cause him to pay significantly more at the December 2008 mediation than would otherwise have been the case

92 As noted in [36] above, the primary judge's decision was at least in part credit-based because he rejected George King's evidence that he paid more under the December 2008 settlement agreement than he would have paid if Mr Benecke had not breached his duties. As a result, George King's appeal, of necessity, focused on the documents in evidence in an attempt to demonstrate that the primary judge's credit-based finding was flawed in one of the respects identified in Fox v Percy (again see [36] above). Having considered the voluminous documentary evidence, as extracted and summarised in the parties' Agreed Chronology of some 80 pages, I have concluded that none of the bases upon which Fox v Percy would permit appellate intervention has been established. On the contrary, I agree with the primary judge's conclusion that the documentary evidence provides significant support for Mr Benecke's case rather than that of George King.

93 In my view the offers that George King made in 2006, prior to him becoming conscious of any insecurity in his legal position, undermine significantly his evidence that he paid much more in December 2008 by reason of his knowledge of or belief in insecurity of his legal position than he would have paid if he had not had that knowledge or belief. In particular, when account is taken of the fact that the 2008 settlement payment was premised on an assumption of a much higher value of the underlying pastoral assets than that upon which the 2006 offers were based, George King's approach to settlement in 2008 was no different in substance to that which he had adopted in 2006.

94 The importance attached by the primary judge to George King's approaches to settlement in 2006 and 2007 is evident from [602] of his Judgment where he said that they "put the lie" to the proposition upon which George King's case was based. His Honour elaborated in subsequent paragraphs (see [83] above) and also referred in [649] to the "overall shape of the offers and counter-offers" over time tending to contradict George King's case.

95 A significant feature of George King's June 2006 offer (and, by necessary inference, the July 2006 offer) was that it contemplated him paying more to his family than he believed that he was legally obliged to pay. That it did contemplate this is evident from the fact that the base for his calculation of the offered sum included not only the value of the Minority Shares (minus Berkeley King's shares in Esk) but also the value of the shares in Somers that Berkeley had promised in 1999 to give George.

96 In his letter to Mr Benecke of 20 July 2006 (referring back to his offer made in June), George described annexure C to the letter as identifying his sisters' "actual legal position" (see [48] above). In contrast to his annexure A (which recorded the means by which his offer was calculated), this annexure assumed an entitlement of his sisters only to the Minority Shares in Whitney. After taking into account in annexure C an expected inheritance by them of Berkeley King's shares in Esk, George calculated the total legal entitlement of his sisters as $572,720 (that is, $286,360 each). However George had in fact offered in June to pay his sisters $1,294,702, calculated in accordance with annexure A. Comparison of the two annexures therefore reveals that in mid-2006, George King was prepared to pay to his sisters, whether for family harmony reasons or otherwise, more than twice what he regarded as their legal entitlement. As George acknowledged in cross-examination, his June offer was based on the assumption that Berkeley's shares would (notionally) be returned to him, that Patricia Bellamy's shares were cancelled (as occurred) and that Berkeley's shares were then divided equally between George and his sisters (Transcript p 117).

97 The reasons that George King was prepared to offer more than what he thought he was legally obliged to pay are evident from his contemporaneous communications. In short, his family was forcefully asserting that he had a moral obligation to ensure that his sisters were dealt with fairly, and that they received an inheritance more or less equating to his. These pressures were given weight by George's effective acquisition, on apparently advantageous terms, of the one-third interests of Peter King and Patricia Bellamy in Whitney, with the value of George's interests being enhanced by subsequent increases in property values. In that respect, George King asserted in 2007 that land values had trebled since, it seems, 1999 (see his letter of 18 June 2007 to Berkeley King referred to at [54] above).

98 In the letter to Mr Benecke of 20 July 2006 (see [49] above), George said that he was "being expected" to pay his sisters "an amount equivalent to the minority shareholder value of one-third of the entire WPC Group". Later in the letter he referred to the "emotional grounds" on which the family discussions were being "played". As he had done earlier in the letter (see [48] above), he contrasted this with the legal position which he regarded as "extremely clear" and upon which he did not require advice. Emotional pressure was accordingly being brought to bear on him and he said in the letter that continuation of the disagreements would "destroy family relationships". In light of these remarks, it is evident that George King offered to pay more than what he saw as his legal obligation in order to maintain (or perhaps more accurately, regain) family harmony and perhaps to fulfil moral obligations that he understood that he had.

99 George was asked in cross-examination whether at the time he made the offer set out in annexure A to the letter of 20 July any pressure was being brought to bear on him by his father. He responded that pressure was coming from his sister and that he could not say what his father was thinking then (Transcript pp 116-7). He said that he was concerned because his sister "wanted to undo the deal and she exerts a lot of pressure over [my father] and influence". This suggests that George King was under pressure then (as it seems he was thereafter) to pay his sisters more than that which he thought he was legally obliged to pay under the agreement with his father. It does not suggest that he knew or believed that his father had a means of undoing or avoiding what George thought was the legal effect of their arrangements. Rather, his conduct indicated that he did not intend to claim the benefit of what he thought was the legal position.

100 That the same dichotomy between legal obligations and moral pressures or obligations was present at this time in Berkeley King's mind is evident from his note of 23 July 2006 in which he said that George King had "the legal right to not give any part of the WPC to anyone" but nevertheless "has moral obligations which if he chooses to ignore them will have disastrous consequences for our family" (see [51] above). Again, Berkeley King's non-legal perspective is revealed by his letter of 21 June 2007 to George King in which he referred to one of his children (being George) having "great wealth (some of which was given and some of which was earned)" and two children (being his daughters) having nothing (see [55] above). He said that he had no choice but to fight for the two who had nothing. In his letter of 18 June 2007 to Berkeley King, George had referred to the emotional pressure on him by saying that he believed that "the only way Katie and Shish will see this as fair is if they get the [equivalent] of one third of Coombing each" and "any achievements I have made from the strong position you gave me" were seemingly "now on the table to be divided again" (see [54] above).

101 A concern of George King that Berkeley King might not recognise his legal entitlement to Berkeley's shares in Somers emerged in George's letter to Berkeley of 27 June 2007 (see [56] above). There he referred to Berkeley and his sisters thinking that he was "'stealing' shares that I have no 'legal or moral right to'". Following this, in early August 2007, Berkeley told George that "if you don't trust me I will sign [the shares in Somers] across to you now" (see [57] above). George had Mr Benecke prepare the necessary documents but Mr Benecke told George in mid-August that Berkeley had not signed them (see [58] above). Berkeley King's mediation position paper of September 2007 assumed Berkeley's continued ownership of his Somers shares, whilst reaffirming his promise to leave them by will to George.

102 It seems that at the mediation of 16 October 2007 George King was prepared to consider making a payment of $3.5 million to his family, with his parents to retain a rent-free lifetime right to occupy the homestead of Coombing Park (see [61] above). He gave evidence that he was prepared to do this because he was concerned that his father would not transfer his Somers shares to him (affidavit of 31 August [166]). However the primary judge rejected that evidence (Judgment [630]).

103 The rejection is consistent with the result of a comparison of George King's settlement positions in 2006 and 2007. No marked difference in the amount he was prepared to offer, or considering offering, is apparent from that comparison as the 2006 figures of $1,294,702 and $1,761,412 were based on a much lower net value of the Coombing Park properties than that upon which the 2007 figure was based. In George King's notes concerning the figure of $1,761,412 he referred to 26.6% (represented by 198,855 shares) of Whitney being purchased at $7.50 per share (suggesting a whole company value of $5,606,813) and 135 Esk shares being purchased for $2,000 per share (suggesting a whole company value of $750,000, there being 375 issued shares). On this basis, the assumed net value of the Coombing Park properties was in the order of $6,356,813. This contrasts with the Coombing Park properties' net value of $15,921,500 assumed at the 16 October 2007 mediation, as recorded in the mediator's notes, and the $15.196 million value assumed in George's communications with his mother in June 2008 (see [74] above). The contrast may be greater than appears from these figures as Esk was included in the July 2006 figures but may not have been included in the later figures. However, details aside, the basic proposition that the 2007 figure that George King was apparently prepared to consider related to an enterprise value that was double or more that which underlay the figure of July 2006 holds good. A doubling of the settlement figure between 2006 and 2007 ($1,761,412 to $3.5 million) was therefore unsurprising.

104 The same picture emerges from a comparison of the per share values underlying the settlement amounts under consideration. George King's June 2006 offer assumed a Whitney share value of $5 (or arguably $7.35 - see [47] above) and his July 2006 offer assumed a value of $7.50 per Whitney share ([53] above). On the other hand, the settlement in December 2008 was apparently premised on a value near to $17.67 per Whitney share (or $14.14 with a minority discount), this being the value as at January 2009 subsequently identified by Mr Ivey in his expert report (Judgment [618]).

105 The amount that George King paid as a result of the settlement of December 2008 was $3,550,000. This was approximately the same as that which he was apparently prepared to consider paying in October 2007 but it had the advantage to him, that the 2007 figure did not, that it was conditioned upon his parents agreeing to vacate the homestead by 30 June 2009.

106 These figures do not suggest that George King was, by reason of any increasing concern about his legal position, forced to agree in December 2008 to pay much more than he would otherwise have paid. Certainly, in the months following the October 2007 mediation George King became aware of negative events concerning his legal position, in particular that Berkeley had changed his will insofar as it left his Somers shares to George and that Berkeley, as appointor, had removed the company that George controlled (Deerslayer, formerly named Weander) as trustee of the Berkeley King Share Trust which held the shares in Somers that George believed that he had acquired from his uncle. However, George's settlement position did not change significantly between October 2007 and December 2008 (or indeed between June 2006 and December 2008), at least not to his disadvantage. As already noted, the amount that he agreed to pay in December 2008 approximated that which he was prepared to consider paying in October 2007 but it had the added advantages to him that he would obtain vacant possession of the homestead in the near future (a right accepted by the primary judge to have a value of $500,000) and a release from alleged liability concerning payments totalling $2.5 million made by Whitney to his Wellness House business.

107 Moreover, the trend of the offers at the December 2008 mediation did not suggest weakness in George King's position, as he was able to force his family down from an opening position of $6 million through successive reductions to the amount of $3,550,000 at which settlement occurred.

108 For these reasons, I consider that George King has not demonstrated that the primary judge's conclusion that he did not pay more under the December 2008 settlement than he would have paid if Mr Benecke had not breached his duties suffers from any of the flaws identified in Fox v Percy (see [36] above). My view is that his Honour's partly credit-based conclusion is consistent with the documentary evidence.

Whether Berkeley and Peter King would have agreed to structure the transactions differently

109 The respondents submitted to the primary judge that George King had not established that Berkeley and Peter King would have agreed to structure the transfers of their shares as George now says they should have been structured (Judgment [543], proposition (a)). The primary judge did not provide a direct answer to this question but it is unnecessary to pursue the issue because I have held that George King has failed in his challenge to the primary judge's conclusion that Mr Benecke's breaches of duty did not, for other reasons, cause him loss.

George King's allegedly new point

110 George King submitted on appeal that the primary judge erred in failing to identify the relevant "harm" suffered by him and in conflating the concept of "damage" with the question of "damages" (see Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; 247 CLR 613 at [24]). He submitted that the "harm" for this purpose was, first, the impact on him of Berkeley King's codicil of 24 October 2007 whereby George King lost the benefit of the Berkeley Transaction and, secondly, the impact of Berkeley King's exercise on 8 January 2008 of his appointor power under the Berkeley King Share Trust to remove Deerslayer Pty Ltd as trustee, with the result that George King lost the benefit of the Peter Transaction. He then submitted that "[b]ut for Mr Benecke's breaches of duty it would not have been necessary for George King to purchase Berkeley's Somers Shares and the Peter Shares from the Berkeley King interests; he would already have owned them" and it was therefore wrong for the primary judge to conclude that George King did not pay any more at the December 2008 mediation than he otherwise would have paid. The respondents contended that this was a new argument that should not be permitted to be put for the first time on appeal and that, if it were allowed to be put, it would nevertheless fail for a variety of reasons.

111 In my view, it is sufficient to dispose of this point by concluding, as I do, that in the context of this case it raises in substance no different point to that argued at first instance and considered by the primary judge. From whichever perspective the issue of causation is approached, it was necessary for the primary judge to consider what motivated George King to agree at the December 2008 mediation to pay the sum of $3.55 million. The effect of his Honour's reasoning was that George King did not agree to pay that, rather than a much smaller, sum because he believed that he had to acquire legal title that he did not have, or was concerned that he did not have. The finding was to the effect that he paid that sum because he thought he had to do so to fulfil his family's expectation that he treat his sisters fairly and thereby end the family disputation. This answered George King's claim, both as put at trial and as necessarily consequent on his "new" point on appeal, that he agreed to pay at the December 2008 mediation substantially more than he would have paid if Mr Benecke had not breached his duties. His Honour's finding was to the effect that George King would have paid the settlement sum even if the breaches had not occurred.

112 That finding answers the supposedly new point because, whilst on that point's analysis, George King did not obtain legal title at the earlier dates at which he should have (see [110] above), he nevertheless did so by reason of the December 2008 settlement without having to pay any more than he otherwise would have paid. At most the "new" point might be relevant to onus but the primary judge's conclusion was an affirmative one made without the need to resort to any question of onus (see Judgment [657]). The consequence is that George King did not suffer any loss as a result of Mr Benecke's breaches of duty and his claim against Mr Benecke fails.

DAMAGES

113 In light of my conclusions on causation, Mr Benecke's limited challenge to the primary judge's assessment of damages does not arise and I do not consider it necessary to deal with it.

ORDERS

114 As George King has failed in his challenge to the primary judge's conclusion on causation, his appeal should be dismissed with costs.

115 WARD JA: I have had the advantage of reading in draft the reasons of each of Basten JA and Macfarlan JA.

116 I agree that the appeal should be dismissed with costs for the reason that the appellant failed to prove that he had suffered loss as a result of Mr Benecke's breach of duty, for the reasons given by their Honours.

117 To the extent that there is a difference between their Honours as to what was meant by the concept "fair value" for the Minority Shares, nothing ultimately turns on this for the reasons given by Macfarlan JA at [91].

118 It is clear that the arrangements between the appellant and his father, as part of which fair value was to be paid for the Minority Shares, included that there was to be rough equality of inheritance as between the respective siblings and that when the appellant came to settle his differences with the family he did so accepting at least a moral obligation to achieve this. In that context it is immaterial whether "fair value" for the Minority Shares was taken as based on a market value of the shareholding or was to represent the mechanism by which the siblings' inheritance was to be equalised.

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Decision last updated: 24 November 2014