Down to Earth Spring Water and Ors v Mitrofanis Demetrius Nikolaidis and Leon Nikolaidis trading as Md Mikolaidis and Co [2002] NSWSC 64

1 The first plaintiff, Down to Earth Spring Water Pty Limited (“DTE”) was in 1990 carrying on the business of producing and selling bottled water to the domestic market in Sydney. At the material time DTE had four directors; John Preston, Gary Smith, Adam Loel and Jason Paris (“the directors”). The last mentioned three directors each held 25 percent of the shares in DTE. The remaining 25 percent of the shares in DTE were held by the second plaintiff, Nilbrook Pty Limited (“Nilbrook”). John Preston was at all material times a director and shareholder of Nilbrook and of the third plaintiff, Four MJ Pty Limited (“Four MJ”). Four MJ was the owner of premises at 117 – 119 Silverwater Road, Silverwater, from which DTE conducted its business. 2 Each of the defendants were partners in the legal practice conducted under the name “MD Nikolaidis & Co”. 3 In or about July 1991 the plaintiffs retained the defendant to act for them in relation to a dispute with the State Bank of NSW (“the Bank”). On 15 August 1991 the plaintiffs commenced proceedings in the Federal Court of Australia seeking relief against the Bank (“the damages claim”). On 19 August 1991 Beaumont J ordered that the proceedings be transferred to this Court. 4 By the damages claim the plaintiffs contended that the Bank had breached the terms of an agreement made on 11 January 1991 by which it had agreed to loan the sum of $1,000,000 to Nilbrook in consideration of each of DTE and Four MJ providing certain securities to it. The claim was also pleaded in negligence and pursuant to s 42 of the Fair Trading Act 1987 in respect of conduct engaged in by the Bank which was said to be misleading or deceptive. 5 Messrs Paris, Loel and Smith were plaintiffs in the proceedings brought against the Bank, each had provided a personal guarantee in support of the loan advance to Nilbrook. 6 The Bank cross-claimed against the plaintiffs seeking judgment for the sum due under the loan to Nilbrook and to enforce its securities. 7 The hearing of the plaintiffs’ damages claim and the Bank’s cross-claim commenced before Brownie J on 30 March 1992. On 2 April 1992 the hearing was adjourned to 9 June 1992. 8 On 9 June 1992 Mr Grieve QC, who had been retained by Leon Nikolaidis (“Mr Nikolaidis”) on the plaintiffs’ behalf, informed Brownie J that his instructions were to discontinue the plaintiffs’ damages claim. Leave was sought to amend the plaintiffs’ defence to the Bank’s cross-claim so as to plead that the loan contract was void for illegality. His Honour gave judgment for the Bank on the damages claim and adjourned the hearing of the cross-claim until 11 June 1992. 9 It is the plaintiffs’ case in these proceedings that the defendant did not have instructions to discontinue their damages claim and that, in instructing senior counsel so to do, the defendant acted in breach both of the contract of retainer and the common law duty of care owed to the plaintiffs. The latter is pleaded as a duty to act at all times in accordance with the instructions of the plaintiffs, to the extent that it was legally and ethically permissible to do so. The plaintiffs claim damages. 10 On 22 October 1999 an order was made pursuant to Pt 31 r 2 of the Supreme Court Rules 1970 (“the SCR) as follows: “That the issues of whether the defendant was retained by the plaintiffs and, if so, whether the defendant breached that retainer be determined by the court in an early separate trial.” 11 At the time the above order was made the plaintiffs’ case was pleaded as one of breach of retainer only. On 2 November 2001 the plaintiffs were granted leave to file an amended statement of claim pleading their claim also in negligence. The order pursuant to Pt 31 r 2 of the SCR was amended so as to include the determination of the question of whether the defendant acted in breach of the common law duty of care owed to the plaintiffs. 12 The proceedings before me involved the determination of these separate questions. 13 Despite the formulation of the separate question the proceedings were conducted upon the basis that there was no issue as to the fact of the retainer. The sole question agitated before me concerned what instructions were given by the plaintiffs during the course of a conference (or conferences) to Mr Grieve and junior counsel, Mr Svehla, and Mr Nikolaidis over the long weekend prior to the resumption of proceedings on 9 June 1992 (“the long weekend conference”). Read more about this case:

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