Expensive family law shop divorce … Negligent advice to stroke partner unable to work … Incomplete advice … NSW CA shaves nearly half-a-million from Rothman J’s award of damages … Commercial law firm still up for about $1 million in damages … Misery … Janek Drevikovsky reports
The “dangerously incomplete” advice was also a breach of retainer and amounted to misleading conduct, the Court of Appeal found last week, agreeing for the most part with the trial judge, Justice Stephen Rothman.
But the victory was only partial for plaintiff Dennis Paltos, with a unanimous appeal bench knocking about half-a-million dollars off his original payout.
Meanwhile, the veteran lawyer, who received a practising ticket in 1979, remains locked in court warfare with his former partner Peter Milevski, now a family law specialist at Barry Nilsson.
The sprawl of litigation stems back to 2015, when Paltos suffered two strokes that forced him to stop working at Paltos Milevski Family Lawyers, the firm he co-owned with Milevski.
However, Paltos continued to draw profits from the partnership, 70 percent of which belonged to him. Trouble began to brew and Paltos suspected Milevski was “trying to push [him] out”.
Paltos took his problems to Bartier Perry, where his case was handled by senior lawyer and consultant Chris McCaffery.
When Paltos and Milevski set up their firm, McCaffery was told, they signed a ‘Put and Call Option’ which, if certain conditions were met, enabled one partner to force the other to buy them out of the business.
One “trigger condition” for the option was “total and permanent disability”. Paltos asked McCaffery if his strokes were serious enough to count as a permanent disability.
McCaffery replied that “the put options do not help you yet”.
This was literally correct, according to appeal judge Anthony Payne – the option defined “total and permanent disability” as six months of inability to work. When McCaffery gave his advice, Paltos had not yet been out of work for six months.
However, McCaffery did not tell his client that, when six months had elapsed, he would be able to exercise the option and force Milevski to buy him out of the partnership.
A “competent solicitor” would have given Paltos this advice, Justice Payne found, with agreement from Justices Lucy McCallum and Richard White.
The Bartier Perry lawyer also failed to tell Paltos that relying on the option might be a sound financial strategy and that the option would arguably still exist even if Milevski took steps on his own to dissolve the partnership.
That is exactly what Milevski did, winding up the partnership in the Supreme Court. At that point, Paltos realised, that because of McCaffery’s advice, he had lost a valuable opportunity to walk away with a payout and without expensive litigation.
Hence his action against Bartier Perry.
In the court below, Justice Rothman decided the advice was negligent, a breach of contract and misleading or deceptive conduct under ACL s.18. He awarded the family lawyer $1,411,707, the value of his share in Paltos Milevski according to a formula set out in the option.
But there was a problem – Milevski and Paltos’ partnership dispute was on foot in the Equity division. Part of the outcome would be an account of how the partnership’s assets, mainly its goodwill, should be divided between the pair.
Before Justice Rothman, it was common ground that Paltos’ damages from Bartier Perry would have to be reduced by however much he was awarded in the Equity proceedings. Otherwise, he would be double compensated.
So the trial judge ordered Paltos to give his word that he would pay back to Bartier Perry however much he won when the Equity proceedings were finally decided.
On appeal, Justice Payne rejected this approach. He agreed Paltos was entitled to damages but said they had to be in a lump sum – it was unheard of to force a successful plaintiff to pay back some of his damages later down the track.
Rather, HH said, the correct approach was to calculate the “percentage probability or possibility” of Paltos winning his share of the goodwill in the Equity division.
Guided by reams of accounting evidence, Justice Payne said that possibility was about 70 percent. After doing the math, HH found 70 percent of Mr Paltos’ share translated to $468,930.
Deducting that amount from the original damage bill, he awarded Paltos $942,777.
The Court of Appeal ordered the parties to pay their own costs, which may be a problem for Paltos. He is insolvent and his legal bills had already climbed above $700,000 during the first instance hearing, almost two years ago.
He has launched a new family law firm under his own name, but admits that the work is “sporadic”.