Carr v Fischer

[2006] NSWCA 313

New South Wales

Court of Appeal

CITATION:	CARR & ANOR v FISCHER & ORS [2006] NSWCA 313
HEARING DATE(S):	10 & 11 August 2006
JUDGMENT DATE:	16 November 2006
JUDGMENT OF:	Handley JA at 1; Ipp JA at 2; Bryson JA at 3
DECISION:	Appeal dismissed with costs.
CATCHWORDS:	LEGAL PRACTITIONER - negligence - solicitor - investment advice and investigations into the person with whom the client was dealing - complex factual dispute about whether solicitor was negligent in investigations into the person with whom the client proposed to deal - fact-finding of primary judge considered in detail and affirmed - COURTS and JUDGES - delay in giving judgment 21 months - consideration of significance of delay - reasons showed primary judge had full and clear understanding and retained clear impressions of witness - fact findings affirmed, appeal dismissed.
LEGISLATION CITED:	Real Property Act 1900 (NSW) ss.32(6), 59
CASES CITED:	Citicorp Australia Ltd v O'Brien (1996) 40 NSWLR 398 Hadid v Redpath (2001) 35 MVR 152 Monie v Commonwealth of Australia [2005] NSWCA 25 NAIS v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 223 ALR 171
PARTIES:	Peter Joseph Carr - 1st Appellant Boston Holdings Pty Ltd - 2nd Appellant Respondents: John Howard Fischer Neil Jamieson John David Watts Geoffrey Mark Roberson John Joseph Cotter
FILE NUMBER(S):	CA 41053/2004
COUNSEL:	D. McGovern SC & I. Young - Appellants P.H. Greenwood & Ms K. Robertson - Respondents
SOLICITORS:	Wight & Strickland - Appellants Colin Biggers & Paisley - Respondents
LOWER COURT JURISDICTION:	Supreme Court - Common Law Division
LOWER COURT FILE NUMBER(S):	SC 20004/2001
LOWER COURT JUDICIAL OFFICER:	Levine J.
LOWER COURT DATE OF DECISION:	16/11/2004
LOWER COURT MEDIUM NEUTRAL CITATION:	[2004] NSWSC 1079

CA 41053/04

HANDLEY JA
IPP JA
BRYSON JA

16 November 2006

PETER JOSEPH CARR & Anor v FISCHER & Ors

Judgment

1 HANDLEY JA: I agree with Bryson JA.

2 IPP JA: I agree with Bryson JA.

3 BRYSON JA:

The Litigation
The appellants, plaintiffs in the Common Law Division, appeal from the verdict and judgment for the respondents, who were the defendants, given by Levine J. on 16 November 2004 – [2004] NSWSC 1079. The claim was based on allegedly negligent advice given to the first appellant Mr Carr by Mr David Hor, a solicitor employed by the respondents in their legal practice, Champion Partners, in July and August 1996. The relevant principal of the firm was Mr Roberson, the fourth respondent. The appellant claimed damages in respect of investments which he made in entities associated with Mr Jack Roberts.

The Investments

4 The Fairfield Medical Arcade Unit Trust (FMA Unit Trust) was created by a Deed dated 22 April 1996. Mr David Lamb an accountant settled $1 and one unit was created, owned by Mr Russell John Roberts. The Trustee was Fairfield Medical Arcade Pty Ltd. Mr David Lamb was involved as the accountant for the Trustee, not as a person beneficially interested in the Unit Trust. There are anomalies in documents which, on their face, purport to be records of the Unit Trust. Unit Certificates in evidence are signed on behalf of Fairfield Medical Arcade Pty Ltd which was the trustee by Karan Roberts as Director. The name of the Unit Trust is sometimes given, inaccurately, as Fairfield Medical Arcade Pty Ltd Unit Trust.

5 There is much detail in evidence and in findings relating to investments.

The First Investment. In April 1996 the first appellant gave Mr Jack Roberts a cheque for $100,000 as a sign of good faith and in order to show Mr Jack Roberts that the first appellant was financially capable, in relation to a proposed investment in a site at Fairfield which they had discussed: the first appellant had inspected the site. This was treated as payment by Boston Holdings Pty Ltd the second appellant for 100,000 units in FMA Unit Trust. This was recorded in a Unit Certificate bearing date April 1996.

6 The Second Investment. $50,000 was paid on 6 May 1996 and treated as payment for 50,000 units in FMA Unit Trust issued to the second appellant and recorded in a Unit Certificate bearing date 6 May 1996.

7 The Third Investment. $150,000 paid on or about 29 July 1996 was treated as payment on the issue to the second appellant of 150,000 units in FMA Unit Trust, recorded in Certificate dated 29 July 1996 and an application for units dated 30 July 1996.

8 The Fourth Investment. This investment was made on 29 October 1996 and is recorded in a document, in terms a receipt, dated that day (Blue 2/448) given by Lisa Roberts on behalf of the Crescent Medical Centre; the body of the receipt says “Received $200,000-00 from Boston Holdings P/L for 33 1/3% ownership of The Crescent Medical Centre P/L with full rights to all profits as from November 1st 1996.” The Trial Judge found that this was "… to acquire a one third interest in the business of that Medical Centre which was operated by the Fairfield Medical Arcade Unit Trust" (Judgment [31] Red 35).

9 The Fifth Investment. This investment was made on 11 December 1996. A payment of $100,000 was treated as payment by the second appellant for 116,666 units in Fairfield Medical Arcade Pty Ltd Unit Trust. This is recorded in a Unit Certificate dated 11 December 1996 (Blue 2/449) and in a receipt dated 11 December 1996 (Blue 2/450) and signed by J. Roberts on the letterhead of Fairfield Medical Arcade Pty Ltd Unit Trust which says "Received $100,000 from Boston Holdings bringing in total share value to 33 1/3%.”

10 The Sixth Investment. This was a payment of $150,000 which was treated as payment by the second appellant for 200,000 units in the Penrith Plaza Medical Unit Trust, and recorded in a Unit Certificate issued on behalf of Coastline Medical Pty Limited and dated 19 June 1997.

11 The Seventh Investment. This was a payment of $150,000 recorded in a Unit Certificate relating to The Penrith Plaza Medical Unit Trust, dated 1 July 1997 and issued on behalf of Coastline Medical Pty Limited.

12 The Eighth Investment. This was a payment of $200,000 invested in some way in Rapid Detox Centre Australasia Pty Limited; recorded in a receipt (apparently dated 3 February 1998) (Blue 2/455) signed by J. Roberts (apparently Mr Jack Roberts) on behalf of Rapid Detox Centre Australasia Pty Ltd. The receipt first refers to $126,000 for "as below” but lower says:

Received $200,000 for payment of:-
10% Rapid Detox Centre Australasia Pty Ltd.
10% Southwestern Day Surgery Centre Pty Ltd
Airfern Pty Ltd
J. Roberts

13 The Ninth Investment. This was a payment of $120,000 paid by the first appellant to Private Health Group Pty Ltd for options for 600,000 shares of $1 face value in Private Health Group Pty Ltd for the first appellant himself and 600,000 shares for Veronica Carr, recorded in a copy of a letter from Mr Carr to Private Health Group Pty Ltd dated 16 August 1999 (Blue 2/460).

14 A Tenth Investment should be mentioned although in my understanding it was not the appellants' case that they should recover damages for loss of it. In what appears to be a memorandum from the first appellant on behalf of the second appellant to Private Health Group Pty Ltd (“PHG”) dated August 1999 Mr Carr said, or agreed "Boston Holdings Pty Limited in exchange for 1,200,000 Convertible Notes bearing 10% return, will retire our interests in Penrith Plaza Medical Centre, Penrith, The Crescent Medical Centre, Fairfield and all companies in the Roberts Group.” (Blue 2/458). No expert evidence or other evidence analysed or valued those investments as at the date they were “retired” and exchanged. PHG issued to the second appellant a Convertible Note certificate dated 1 August 1999 for 1,200,000 Convertible Notes of one dollar. A letter of 20 August 1999 from Personal Finance Services Pty Limited to the directors of the second appellant states:

We are authorised … to inform you that it is our intention to list Private Health Group Pty Limited on the Australian stock exchange in the near future.
Your present convertible notes will become the equivalent of $1 shares on listing (5 shares @ 20 cents per share for each $1 convertible note). Your present holding entitles you to purchase an equivalent number at the pre-listed price of $1.

15 The first three investments are approximately contemporaneous with the retainer. Senior counsel for the appellants accepted that foreseeability of loss and recovery of damages for later investments involved greater difficulty than for investments in the FMA Unit Trust. The First and Second investments were made before Mr Hor was consulted and asked for advice, while the Third was made before Mr Hor's Letter of Advice of 29 August 1996. The Fifth investment was also an investment in units in the FMA Unit Trust, but it was not made until December 1996. Mr Hor was not asked to advise on the remaining investments, and was not told they were in contemplation.

The Findings.

16 The events leading to the advice complained of are referred to in paras [15] to [30] of Levine J.'s judgment:

[15] The plaintiff was unable to locate the advertisement to which he responded (Exhibit 10) which is in the following terms:

“PARTNERSHIP INVESTMENT


$25,000

RETURNS $4,000 p a.

2 p c. partnerships offered in commercial building, ground floor medical arcade. Return is guaranteed as total area is fully pre-leased to chemist, radiologist, dentist, physiotherapist, 8 G.P's, 4 specialists, etc.

Phone Mr Roberts on 9949 1634 or 018 968 409”.
[16] According to his evidence in chief Mr Carr rang Mr Roberts, and was told that the investments "involved bricks and mortar and high guaranteed rental returns". On that information he went to a site at Fairfield and inspected a property. Mr Roberts brought to the plaintiff's home a brief outlining the nature of his investments which impressed Mr Carr. As a sign of "good faith" and in order to show Mr Roberts that he was financially capable Mr Carr provided a deposit in the sum of $100,000. He was given a unit trust certificate which is annexure "A" to his first statement.

[17] In May of 1996 according to Mr Carr Mr Roberts said that there were more units available to purchase. Mr Carr handed to Mr Jack Roberts a cheque for $50,000 for the purpose of the acquisition of $50,000 worth of units. The cheques were issued in the name of the second plaintiff. Annexure 'B" to the Mr Carr's first statement is a unit trust certificate.

[18] In May of 1996 for a few months Mr Carr went to England for a holiday and was contacted there by Mr Roberts who indicated that more units were available for another $150,000 and that he, Mr Carr, could become a director of the unit trust.

[19] Upon his return to Sydney, according to his first statement, Mr Carr said he "immediately" placed a call to his solicitors and was put through to Brian Hor, to whom he could recall saying the following:

“I answered an advertisement in the Sydney Morning Herald placed by a Jack Roberts for an investment in a building to be occupied by a Medical Centre. I have invested some monies with the Fairfield Medical Arcade Trust at 103 The Crescent, Fairfield. I hold certificates for the current investment. I have been offered a greater share in the Unit Trust and have been requested to put more monies into the Trust. I will need someone to check out the investment for me and also to look at the promoter, Jack Roberts. Bruno Cara is his Solicitor in Brookvale. I would like to come in and talk to you in further detail about your investigations.”
[20] Mr Carr then made an appointment to see Brian Hor later that day. He estimated that he would have spent an hour with Mr Hor at the offices of Champions. He said that he instructed Mr Hor in words to the following effect:

“Boston Holdings Pty Limited is my company which currently holds a number of units in the Trust.
Boston Holdings Pty Limited paid $150,000.00 for those units.
The initial investment in the Unit Trust was for an investment in bricks and mortar involving a solid building opposite Fairfield Station being a two storey strata building.
I have inspected the building and it is being currently fitted out as a Medical Centre.
Jack Roberts told me that the building is called the Crescent Medical Centre and there will be eight doctors who pay a base rent of $60,000.00 per year.
I want and need the investment to be fully checked out including the Unit Trust, and to make sure my investment is fully secure.
Check whether the Unit Trust is a safe investment .”

[21] Mr Carr said in his statement that he remembered giving Brian Hor instructions in relation to the general turnover of the business in the medical centre and the number of specialists. He was aware that there were pathologists, x-ray specialists, a chemist and a physiotherapist. He said that he recalled specifically instructing Mr Hor to investigate Jack Roberts in order to see whether he was or ever had been bankrupt. He said that he said words to Mr Hor to the following effect:

“I want to know everything about this guy, whether he has ever been a bankrupt and about everything he has ever done. This is important to me because I have been asked to put in more money and I have also been asked to be a Director of the Unit Trust.”
[22] Mr Carr said in his statement that this was important to him because he would not have invested any further monies with Jack Roberts if he suspected he was a financial risk. He said that he also asked Brian Hor:

“Do a company search on the Fairfield Medical Arcade Pty Limited and all other related companies.”
[23] He said that he also asked Mr Hor:

“Please look at and advise me in relation to whether the Unit Trust was an appropriate structure to protect my investments or whether some other structure may be more appropriate.”

17 I interpose that Mr Carr also said, in his third statement, which was prepared and put in evidence on the first day of the hearing, (Judgment [43] Red 37) “… that when he saw Mr Hor in his office on 11 July 1996 he stated, “Jack Roberts wants the money on the day the medical centre opens on 29 July. So I have to have everything sorted out by then”."

18 The judgment continued:-

[24] I will complete the narrative of events as set out in Mr Carr's first statement. In July 1996 Mr Carr said he told Mr Hor that he was going skiing and that he could be contacted on his mobile phone. A message was received that way and Mr Hor advised Mr Carr:

“I am still waiting for the Trust's accountants to provide me with further information. I have spoken to Council and they say the proper address for the development is 103 The Crescent not 101. As a result of this confusion, I have not been able to check whether the Trust in fact owns the property. I will keep you posted when I get further information.”
[25] On or about 28 July Mr Carr said that he had a telephone conversation with Mr Hor saying words to the effect that he had been asked to put in an extra $150,000 " by tomorrow " and whether he wanted to be a director. Mr Hor had replied, " Everything is fine with the investment. Everything is fine to go ahead " (at paragraph 13).

[26] On 29 July Boston Holdings Pty Ltd paid a further $150,000 to acquire more units in the Trust; a Trust Certificate was produced and is annexure "C".

[27] In his third statement Mr Carr refers to paragraph 13 of his first statement and what he had said had been a telephone conversation on 28 July. In the third statement he said it was not 28 July but Friday 26 July that Brian Hor telephoned him at home. In the third statement Mr Carr expressly denies saying the words that were set out in paragraph 13 of his first statement. What words were said were to the effect of:

“I said –“What's the score?”
He said –“From what I have done everything looks fine with the investment”. ”
[28] As to both date and content, this represented a significant change in the testimony of Mr Carr.

[29] In the first statement Mr Carr says that on 1 August he was informed that Mr Hor had tried to contact him; he returned Mr Hor's call and told him: " Boston Holdings Pty Ltd has now been employed by the Unit Trust as a P R Manager and it is getting $500.00 per week. Boston Holdings has now put a total of $300,000.00 and owns 24% of the Unit Trust. Boston Holdings Pty Ltd now sub-contracts my services as a P R Manager ". Mr Hor said that he would send a letter confirming everything.

[30] That letter was dated 29 August 1996 and is annexure "D" to Mr Carr's first statement. Mr Carr said that Champions did not provide him with a copy of the Trust deed for the Fairfield Medical Arcade Unit Trust; that he became aware that the Trust had a mortgage over the Fairfield property in respect of the sum of $850,000 which was borrowed towards the purchase of the property and establishment of the Medical Centre. Mr Carr said that he was not made aware of whether and if the Trust had power to further borrow using his investment as part-collateral for borrowings.

19 The Letter of Advice of 29 August 1996 was in these terms (Blue 2/445):

RE: THE CRESCENT MEDICAL CENTRE

We refer to your previous discussions with the writer regarding this matter.

RESULTS OF OUR INVESTIGATION
We summarise the results of our investigation into the Fairfield Medical Arcade Unit Trust ("the Trust”), as follows:
1. We have obtained a copy of the Trust Deed for the Trust dated 22nd April 1996. The Trust is apparently validly constituted and the Trust Deed apparently duly stamped. Russell John Roberts was the original Unit Holder when the Trust was founded. The Trustee is Fairfield Medical Arcade Pty. Limited (“the Trustee”).

2. We obtained an ASC company search in relation to the Trustee and note that the current name of the Trustee started on 19th April 1996. The single director of the company is Mr. Roberts. He is also the single secretary of the company. The registered office of the company appears to be the residential address of Mr. Roberts at Seaforth. The Trustee is a two dollar ($2.00) company and the principal place of business of the company at Westleigh appears to be the residential address of the two shareholders, Elizabeth Hudson and Walter Hudson.

3. We obtained bankruptcy searches of Mr. Roberts and note that he does not appear to have been a bankrupt.

4. We have obtained a copy of the Memorandum and Articles of Association of the Trustee and note that the Trustee appears to have sufficient powers to act as Trustee of the Trust, notwithstanding the fact that the Director of the Trustee was also the original Unit Holder in the Trust.

5. We obtained a copy of the front page of the Contract for the sale of land in respect of a property described as Unit 1,101 The Crescent, Fairfield, the legal reference for which is Folio Identifier 1/SP 36112. We obtained a Title Search of that property and note that the Trustee is the registered proprietor of the property, presumably on behalf of the Trust. We were unable to confirm this, as the Accountant for the Trust, Mr. David Lamb , had not yet prepared balance sheets for the Trust. However, we have been assured by Mr. Bruno Cara, Solicitor for the Trust, that the property was purchased on behalf of the Trust and that as at 24th July 1996 there was a Mortgage over the property in respect of the sum of $850,000.00 which was borrowed towards the purchase of the property and the establishment of the medical centre.

6. We obtained from the Accountant for the Trust a copy of the Register of Unit Holders, which shows that, as at 31st July 1996, Mr. Roberts had subscribed for units to the value of $1,100,000.00. The register does not appear to have been updated yet as regards your additional investment through your company of a further $150,000.00 worth of units. We enclose a copy of the Register of Unit Holders, for your information.

7. We also enclose a copy of both the Title Search to the property and a copy of the Strata plan 36112 which shows a diagram of Lot 1. We suggest that you check the diagram to ensure that it is identical to the property at which the medical centre is located.

Please note that the copy of the Trust Deed for the Trust and the copy of the Memorandum and Articles of Association of the Trustee have been retained by us in our strongroom for safe keeping, as a service to you.

In summary, it appears that the Trust has been validly established, that it owns the property at which the medical centre is conducted and that the amount subscribed for units in the Trust has been applied towards the purchase and establishment of the medical centre. However, you should check with Mr. David Lamb (telephone [phone]) once he has prepared a balance sheet for the Trust so that this can be confirmed.

You should also check with Mr. Lamb regarding when your further investment of $150,000.00 will be reflected in the Register of Unit Holders for the Trust.

Please do not hesitate to contact the writer should you require any further explanation of the above.

In the meantime, we take this opportunity to enclose our Account for professional legal services rendered, for your kind attention.

We also take this opportunity to thank you for your instructions. Please do not hesitate to contact the writer should you require any further assistance in the future.

20 When the Third investment was made, and whether Mr Hor knew that it was to be made in reliance on advice from him, were issues on the facts which the Trial Judge determined adversely to the appellants. I deal with these later. After dealing (Judgment [63] & [64] Red 44) with a telephone conversation on 22 July 1996 which Mr Carr could not remember but of which Mr Hor had notes, the Trial Judge said (Judgment [65]-[66] Red 44-45):

[65] It was next put to Mr Carr that the next contact with Mr Hor was on 1 August 1996. When he called, Mr Carr was out and he left a message with Mrs Carr for Mr Carr to call him. Mr Carr does not recall any such event. Mr Hor's notes of that conversation are Ex 1.32. It was put to Mr Carr that he told Mr Hor on 1 August that he, Mr Carr, had been employed as a PR manager at $500 per week; that was not denied but he does not remember the date he gave him that information. On 1 August Mr Carr told Mr Hor that he had put in a total of $300,000, that is, twenty four per cent of the units in the Trust. This gave rise to contention. It was Mr Carr's position that Mr Hor knew that Mr Carr was putting in money because he knew that he had to do so by 29 July. It was put to Mr Carr by Mr Greenwood SC that Mr Hor had absolutely no idea that " you were putting in another $150,000 on 29 July because you never told him that, did you? " to which Mr Carr responded, " I don't know where you are getting your information from but you are totally wrong ". It was the defendants' position that the first time Mr Carr told Mr Hor about the $300,000 was in the telephone conversation of 1 August. Mr Carr's position was as I have indicated, namely that Mr Hor knew in advance.
[66] In this conversation of 1 August 1996 it was put to Mr Carr that he told Mr Hor that the Trust just owned the property and the business of the Medical Centre was owned by another entity which rented the property. That was the way it was set up according to Mr Carr. There was a dispute that he told Mr Hor that.

Attacks on the judgment.

21 Senior counsel for the appellants challenged the conclusions of the Trial Judge as to the scope of the retainer (Judgment [96] & [97] Red 56-57), and also challenged the Trial Judge's conclusions on breach of retainer: (Judgment [109] Red 60) "Thus far I am not persuaded that the plaintiffs have proved the breach of any retainer which I have found." It was contended that the Trial Judge's views and findings about the credibility of the first appellant are shown to be erroneous by incontrovertible facts and uncontested testimony and consideration of surrounding documents. Counsel contended that on the correct view of the facts it should be inferred that it was inherently probable that if properly advised the appellants would not have proceeded with taking up units in the FMA Unit Trust, would have taken immediate steps to redeem the units already obtained and would not have acquired additional units.

22 Senior counsel contended that the scope of the retainer involved ascertaining the bankruptcy status of Jack Roberts, and that there was a breach in this respect. The Trial Judge's findings show that the scope of the retainer extended to this: the Trial Judge did not find that there was a breach in that respect. (Mr Hor did this, and reported to Mr Carr on it, but his report was wrong because he had a misunderstanding about the identity of Jack Roberts). Counsel also contended that it was within the scope of the retainer to ascertain the unit holding of Jack Roberts and his family in FMA Unit Trust. It was also contended that the retainer extended to investigating the assets and liabilities of the FMA Unit Trust, and to ascertaining the relationship between the shareholders in the Trustee company and Jack Roberts. It was also contended that the retainer extended to investigation of the Trust Deed and to bringing to Mr Carr’s attention the power to borrow, and to further borrow after raising $850,000 on mortgage, and the effect of borrowings on the value of the Trust assets and the capacity to allot further units; and that the retainer extended to an obligation to give advice as to the results of investigations by 29 July 1996, and to give advice in terms which went beyond reciting individual facts and gave an illuminating summation.

23 The complaints about breach of retainer appear in summary from para [13] of the appellants’ written submissions (Orange 33):

13. In summary and abbreviated form, the appellants’ submit the respondents breached their retainer in that they failed:

(a) to ascertain and advise that Jack Roberts was bankrupt (Grounds of Appeal 1-6 Red AB 80J-81L);

(b) to ascertain and advise who were the shareholders/directors of the trustee company and their relationship to Jack Roberts (Grounds 9 & 13 Red AB 81V and 82Q);

(c) to ascertain and advise who were the unitholders of the trust and their relationship to Jack Roberts (Grounds 9 & 12 Red AB 81V and 82M);

(d) to ascertain and advise whether the 1,100,000 units issued to Russell John Roberts were fully paid up to $1.00 each or not (Grounds 7, 8 and 9 Red AB 81M-X); and

(e) as a consequence failed to ascertain and advise that the appellants were the only equity participants and accordingly carried the entire risk associated with the investment (Grounds 7-15 Red AB 81M-83E).

Instructions. Earlier relationship

24 The appellant retained the respondents’ firm to conduct his legal business over a long period commencing about 1967. As well as conducting various conveyancing transactions and sales of a butchery business and an investment property, the firm conducted his litigation in the Federal Court of Australia against McDonalds Australia Pty Ltd in which he was successful, and after quantum of damages had been negotiated and settled, recovered $2.2 million; this was the source of funds out of which he made the investments. The respondents’ firm introduced Mr Carr to a professional investment adviser. He consulted two financial planners or financial advisers, one on the advice of his daughter, and one on the advice of the respondents, but did not act on their advice.

25 In the first telephone contact on the 11 July 1996 Mr Carr told Mr Hor that Mr Carr needed an investment checked out; Mr Hor noted this. At the interview on that day Mr Carr gave Mr Hor some brief information, which Mr Hor noted (Blue 2/406) about the building in The Crescent Fairfield which was the asset of the FMA Trust. Mr Hor listed things which he had instructions to investigate including "balance sheets (find statements re assets and liabilities)”. As the Trial Judge said (Judgment [21] Red 33) in the passage I have already set out, it was Mr Carr's evidence that on 11 July 1996 he told Mr Hor, referring to Mr Jack Roberts "I want to know everything about this guy, whether he has ever been a bankrupt and about everything he has ever done" and went on to explain why this was important to him. This is reflected in the note which Mr Hor made on that occasion (Blue 2/407), in which the first item under a list of matters which Mr Hor was to investigate is: “Jack Roberts – Bank’y”. In the instructions recorded in Mr Hor’s file note Mr Jack Roberts is referred to only by that name; no other forename or forenames are referred to.

26 The contract of retainer, and potential liability for breach of it related to investments and proposed investments in FMA Unit Trust which were in contemplation when Mr Carr sought advice in July 1996. Any entitlement to damages in respect of later investments depends on tort law.

27 As the Trial Judge found, Mr Carr first contacted Mr Jack Roberts in response to a newspaper advertisement headed "Partnership Investment" which called for an investment of $25,000 with returns of $4000 per annum and referred to partnerships in a commercial building, a ground floor medical arcade which was fully pre-leased. An investment of $25,000 was referred to as a 2% partnership. The advertisement was not shown to Mr Hor.

28 Mr Hor ordered a bankruptcy search on the name Jack Roberts and received a printed report which showed that one J. Roberts also known as John Edward Roberts also known as Jack Roberts, born 15 January 1929 whose address was at 31 Delaigh Avenue, Curl Curl, New South Wales, was made bankrupt on a Creditors Petition on 11 March 1993 and obtained an automatic discharge on 21 May 1996. Another search paper showed that one Jack Barry Roberts a mixed business proprietor at Strathmore Victoria became bankrupt on 14 November 1962; Mr Hor decided to disregard this person, and hindsight shows that he was right to do so.

29 Mr Hor also obtained a company extract search relating to Fairfield Medical Arcade Pty Ltd dated 18 July 1996 which showed that its only director and only secretary was Russell John Roberts of McMillan Street Seaforth. Considering this search information led Mr Hor to obtain a bankruptcy search on 19 July 1996 against Russell John Roberts: he received a report showing that Russell John Massey alias Russell John Roberts an unemployed pearl dealer of Broome Western Australia was bankrupt from 6 March 1990 until automatically discharged on 7 March 1993. Mr Hor decided, correctly, that this was not the person in whom Mr Carr was interested.

30 On 16 July 1996 Mr Hor sent a letter (Blue 2/409) to Messrs Cara & Co. Solicitors of Dee Why referring to the firm’s acting for Mr Jack Roberts and to the FMA Unit Trust and saying: “We are instructed that you act for the Trust and for Mr Jack Roberts, the promoter of the Trust.” Mr Hor referred to Mr Jack Roberts having invited Mr Carr to subscribe for "a substantial number of additional units in the trust" and to become a director of the Corporate Trustee, and requested seven items of documents and information "to enable us to assist him in making a decision regarding these invitations".

31 Mr Hor obtained some information in a telephone call with Mr Bruno Cara of Cara & Co. on 17 July 1996 (Blue 6/1440). Mr Cara told Mr Hor to the effect that the Unit Trust was very new, that it had bought real estate which had been settled on Monday (meaning 15 July 1996), that it had just been fitted out, there was a debt of $850,000 and that it was worth $1.35 million in the mortgagee's valuation. Further conversation indicated that Mr Cara was obtaining information from the Trust accountants.

32 Mr Bruno Cara of Cara & Co. replied by letter of 24 July 1996 (Blue 2/425) enclosing a copy of the Memorandum and Articles of Association of Fairfield Medical Arcade Pty Limited and a stamped copy of the Trust Deed. The letter also said (Blue 4/250):

In relation to the Balance Sheets of the Trust, we advise that apart from the acquisition of the property which was settled on the 15th July, 1996, the Trust has not traded and Accounts have not been prepared in relation to the Trust.

In relation to the Register of Unit Holders, we suggest that you direct your enquiries to Mr. David Lamb of Sharpe Hume & Co., Chartered Accountants, (Ph. No. 262 4388).

In relation to Mortgages, we advise that a Mortgage of $850,000.00 was granted in respect of the Assets of the Trust to support the acquisition of the property and the establishment of the Medical Centre.

We confirm that the sole shareholder and director of Fairfield Medical Arcade Pty. Limited is Mr. Russell Roberts.

33 The schedule to the Unit Trust Deed names Russell John Roberts as the original unit holder for one unit. The reference in Messrs Cara & Company’s letter of 24 July 1996 to Mr Russell Roberts as the sole shareholder and director corresponded with the company extract dated 18 July 1996 as to Mr Russell John Roberts being sole director, but did not correspond with that search in its reference to shareholders; the search named two persons named Hudson of Westleigh as shareholders, each of one share; the latest Notification relating to a change of office holders was dated 7 May 1996 and the latest annual return was that for the year 1995.

34 When Mr Hor wrote to Messrs Cara & Co. on 16 July 1996 and said: “We are instructed that you act for the Trust and for Mr Jack Roberts, the promoter of the Trust", this reflected what Mr Carr had told him in the initial telephone conversation on 11 July 1996. Cara & Company’s reply of 24 July 1996 does not state for whom that firm acted. With the benefit of hindsight and the understanding that Mr Russell Roberts, whom the letter mentioned, is a different person to Mr Jack Roberts, it can be seen that the letter does not refer to Mr Jack Roberts at all; it does not indicate, either way, whether or not Mr Russell Roberts and Mr Jack Roberts are the same person or different people.

35 On 27 August 1996 Mr Hor received from Sharpe Hume & Co. Chartered Accountants copies of pages 1 and 2 of the Register of Unitholders which showed that Mr Russell John Roberts of MacMillan Street, Seaforth held 1,100,000 units and the second appellant held 150,000 units in FMA Unit Trust. The copy of the Register showed that the second appellant was entered as a unit holder on 31 July 1996 (and not earlier) for 150,000 units (and not for 300,000 units). The Third Investment was not represented in the Register of Unitholders.

36 Mr Hor also obtained a title search dated 2 August 1996 of the property in The Crescent Fairfield which Fairfield Medical Arcade Pty Limited had acquired. The search showed that the property was mortgaged; the Second Schedule has notifications of two mortgages, but one of these was the mortgage in exercise of power of sale under which the property had been sold to Fairfield Medical Arcade Pty Limited; that notification was no longer significant. In substance, there was only one mortgage. After registration of the transfer title was freed and discharged from the earlier mortgage: see Real Property Act 1900 (NSW) s.59, and the recording of the mortgage was to be cancelled: see s.32(6).

37 Mr Hor’s Letter of Advice of 29 August 1996 reflected the information he had received from Cara & Co. In the Letter of Advice he reported to Mr Carr that the Accountant for the Trust had not yet prepared balance sheets, and passed on the information which Mr Cara had given that the property was purchased on behalf of the Trust and that as of 24 July 1996 there was a mortgage for $850,000 which was borrowed towards the purchase of the property and establishment of the Medical Centre. Mr Hor also told Mr Carr that it appeared that the Trust had been validly established, that it owned the property at which the Medical Centre was conducted and that the amounts subscribed for units in the Trust had been applied towards the purchase and establishment of the Medical Centre. He also told Mr Carr that he should check with the Accountant Mr David Lamb for a balance sheet when prepared.

Scope of Duty and Investment Advice

38 It was contended that the retainer, seen in the context of the earlier and ongoing relationship between client and solicitor, was of a general nature.

39 Submissions made at the trial by Senior Counsel who then appeared for the appellants (Black 346S-V) show that it was not the appellants’ case at first instance that they asked for advice as to the financial wisdom of the transaction of the type addressed in Citicorp Australia Ltd v O'Brien (1996) 40 NSWLR 398. Counsel said (Black 346T-U): "What we sought was advice as to the safety of the investment." The Trial Judge found that the retainer could not be characterised as requiring the solicitor to provide views about financial matters (Judgment [99] Red 57). The Trial Judge did not find that Mr Carr retained the respondents to conduct a general investigation into Mr Roberts, to check out everything that Jack Roberts had ever done and in effect give a clean bill of health to the enterprise (Judgment [97] (Red 57).

40 The amount of investment and the nature of the investment to which the appellant and Mr Hor contemplated that the advice would relate is established by the terms of the telephone conversation and interview of 11 July 1996; the investment referred to was to be units in the FMA Unit Trust and Mr Hor was told that Jack Roberts had proposed to Mr Carr that the two of them would own the whole trust “50/50$650,000ea". Investments in other trusts or a business, for greater amounts, were outside their contemplation. The First, Second and Third, and possibly the Fifth Investments were within contemplation at the time of the retainer. The Fourth Investment is not an investment in the FMA Unit Trust or in any Unit Trust at all; it appears to relate to purchase of a share of the business conducted by a different business of a medical centre, not conducted by Trustee of the FMA Unit Trust, although at the same premises. In my view the contractual retainer and the obligations arising from it did not extend to the Fourth or to other investments; and they were too remote in time and other circumstances to be within a duty of care in negligence law incurred by the respondents. Ownership of business and (potentially) partnership liabilities were quite outside the range of Mr Hor’s consideration. However it is not necessary to examine this further.

41 My conclusion is that Mr Hor’s instructions did not require him to make any deeper analysis of the FMA Unit Trust affairs than he actually undertook in the Letter of Advice.

Breach of Duty – Bankruptcy

42 In disposing of this issue the Trial Judge said (Judgment [102] Red 58):

[102] As to the bankruptcy of Mr Roberts, I have expressed the slightest of reservations, and indeed curiosity, but have not found it to have constituted what could now be considered to be a breach of the retainer as I have found it.

43 With hindsight it is now known that the Jack Roberts with whom Mr Carr dealt was identical with John Edward Roberts who was bankrupt until 21 May 1996, that Russell John Roberts is quite a different person and that Jack Roberts was not an officer of the company. Mr Jack Roberts gave evidence in the proceedings which made it altogether clear that he is the John Edward Roberts referred to in the bankruptcy search. Mr Hor concluded and gave his advice on the basis that the Russell John Roberts who was sole director and secretary of the company and who had not been a bankrupt was identical with the Jack Roberts with whom Mr Carr was dealing. Mr Hor’s interpretation of the facts before him was wrong, and so was the advice in paragraph 3 of his Letter of Advice. The statement "We obtained bankruptcy searches of Mr Roberts and note that he does not appear to have been a bankrupt" was wrong; Mr Hor had before him a bankruptcy search which showed that John Edward Roberts had been a bankrupt.

44 Several matters were referred to in argument as having some bearing on Mr Hor’s advice, in which it is clear that he assumed that Russell John Roberts the sole director and Jack Roberts with whom Mr Carr was dealing were the same person. There were references to the address given for Mr Jack Roberts; there was a suggestion in the evidence that Mr Jack Roberts had told Mr Carr that he lived in Seaforth (and Mr Russell John Roberts’ address was given in the company search as at Seaforth), whereas the address of John Edward Roberts in the bankruptcy search was at Curl Curl. There were also references to Mr Jack Roberts’ age; the bankruptcy search relating to John Edward Roberts shows that that person was born in 1929. These were not in my opinion conclusive or strong indications. There was no expert evidence dealing with the interpretation which a reasonable solicitor would make of the facts before Mr Hor, but the issue of negligence under consideration is not complex and well within the Court's judgment without expert evidence. While the assumption that Mr Russell John Roberts referred to in the company search, Mr Russell John Roberts referred to in the Register of Unitholders and Mr Russell Roberts referred to by Mr Cara is the same person as the Jack Roberts referred to by Mr Carr presents itself readily and is assisted by the terms of Messrs Cara & Co’s response, it was not in my opinion reasonable to adopt that assumption because Mr Hor also had before him a bankruptcy search showing that one John Edward Roberts had recently been bankrupt and had been discharged from bankruptcy only in May 1996, and because Mr Carr's instructions showed that he attached importance to the question of Mr Jack Roberts’ bankruptcy.

45 There were in my view of the facts no positive indications before Mr Hor that they were not the same person, and some indications which formed a basis for thinking that they were. There were ready lines of inquiry available which Mr Hor could have pursued to establish whether Mr Russell John Roberts was the person whom Mr Carr had identified as Jack Roberts; he could have pressed inquiries of Cara & Co, or told Mr Carr to direct inquiries of Mr Jack Roberts, or sought to contact Mr Russell John Roberts or, on the information available to him, made some other inquiries. Mr Hor could have reported to Mr Carr what was known from the bankruptcy searches and commented on any perceived difficulty in identifying the John Edward Roberts named in the bankruptcy search. The incorrect advice to the effect that from bankruptcy searches Mr Jack Roberts did not appear to have been a bankrupt was based on a wrong interpretation and on insufficient inquiry into the information he had, and was negligent.

46 The reasonable course for Mr Hor to take, in my finding, upon the information before him was to pass on to Mr Carr the information shown by the bankruptcy searches to the effect that a Mr John Edward Roberts had been a bankrupt and that Mr Russell John Roberts had not, and to point out that Mr Carr should consider this in relation to the person he had been dealing with as Jack Roberts; Mr Hor, acting reasonably, was not in a position to decide that the person with whom Mr Carr had been dealing as "Jack Roberts" did not appear to have been a bankrupt, or to give advice on that basis.

47 Senior counsel for the appellants contended that the relationship between Mr Roberts and Mr Carr was perceived by Mr Hor very much as a partnership, as two men going into business together in a quasi-partnership type of arrangement, and that this context shows the importance of ascertaining Mr Jack Roberts’ bankruptcy status. Whether or not Mr Hor perceived the importance of the advice in this way, it fell specifically within his retainer.

Advice on 26 July 1996 – Third Investment

48 The Trial Judge referred to cross-examination of Mr Carr and Mr Carr's evidence about the conversation of 1 August 1996, of which Mr Hor had contemporaneous notes. After referring to evidence and making some findings about the conversation of 1 August 1996 the Trial Judge said (Judgment [69] Red 45) that Mr Carr agreed that the next communication after 1 August 1996 that he had with Mr Hor was the letter of 29 August 1996 and said (Judgment [70]-[72] Red 46):

[70] Thereupon there arose the subject matter of an alleged conversation with Mr Hor on 28 July 1996.

[71] This takes us back to the matters referred to in para [27] of these reasons where on the first day of the hearing in a new statement Mr Carr changed his account as set out in para 13 of the original statement forming part of Exhibit A. It was now Mr Carr's position that in the evening conversation on 26 July, a Friday, in response to the expressly stated worded question " What is the score? ", Mr Hor replied, " From what I have done everything looks fine with the investment ".

[72] This change of position was sought to be explained, as is so often the case, by it really representing the truth as it had been all along, but the lawyers were at fault. I reject the position taken by Mr Carr on this issue. I do not intend any disrespect to his daughter who did give evidence to the effect that the telephone rang, was answered, and that her father came in and made a remark to the effect that Champions had given the go-ahead. At this stage I can state that the plaintiffs have not persuaded me that more probably than not any such conversation took place on that date.

49 A later reference shows that Levine J’s finding was that no conversation took place on 26 July 1996 (Judgment [101] Red 58):

[101] I have already found that no conversation took place on 26 July 1996. At the time of that conversation, when one considers the progress of Mr Hor's activities, set out above (at para [76] and following), certain things were outstanding, and it would have been nonsensical for Mr Hor on either of Mr Carr's versions to have said what he said, and in view of his professional habits, to have made no record of it in view of its purported importance.

50 There is considerable significance in the finding that Mr Hor did not give Mr Carr telephone advice on 26 July 1996 to the effect that (Blue 1/235 para [8]) “everything looks fine with the investment” because the finding shows that the Third Investment was made before Mr Hor gave any advice upon which the first appellant can have relied in committing the appellants to the Third Investment. (It will be seen that he had already committed the appellants to the First and Second Investments before even seeking the respondents' advice). This produces consequences for the measures which would have been open to the appellants if they had received advice adverse to investing in FMA Unit Trust: adverse advice would (if acted on) at the most have led to attempts to recover the first three investments by redeeming the units (in exercise of rights of redemption under the Deed).

51 On behalf of the appellants it was submitted that the Trial Judge was in error in this finding, and many matters and circumstances were put forward in support of this contention.

52 It was complained that the Trial Judge did not have regard and made no reference to evidence of information obtained by Mr Hor from Mr Carr on 11 July 1996 which showed that in an initial telephone conversation Mr Carr told Mr Hor that the FMA Unit Trust business was due to open on 29 July 1996, and at an interview later that day told Mr Hor (reading from Mr Hor’s notes): “Jack has proposed to Peter that the two of them own the whole trust 50/50 $650,000ea" and "Jack wants all money from Peter by 29/7/96.” Knowledge of these matters appears from the terms of a letter which Mr Hor wrote on 16 July 1996, and acknowledgements by Mr Hor in evidence also showed that he knew from the first phone call that Jack Roberts wanted more money from Mr Carr by 29 July 1996 and that Mr Carr required an answer to his instructions to advise by that time. This was put forward as assisting, as a supporting probability, the appellants’ case that Mr Hor actually did give advice before 29 July 2006.

53 It was contended that the Trial Judge was unduly critical of a change in the testimony of Mr Carr between his first and third statements, and that the departures to which the Trial Judge referred were not significant. In the first statement the conversation with Mr Hor had been attributed to (Blue 1/7 para [13]) “On or about 28 July" but in his third statement it was attributed to (Blue 1/235 para [8]) "Friday 26 July 1996". It was contended to the effect that there had been significant delays (as indeed there were) before delivery of judgment, and that in the circumstances the Trial Judge should have stated the reasons why the evidence of a particular witness had been rejected and why the preference existed for the evidence of one witness over the evidence of other witnesses. Counsel referred to observations relating to the significance of delay in giving judgment in Hadid v Redpath (2001) 35 MVR 152; Monie v Commonwealth of Australia [2005] NSWCA 25 at [43] and NAIS v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 223 ALR 171 [85]-[89].

54 There are conflicting passages in statements of Mr Carr about whether he had in fact earlier told Mr Hor that he was to put in another $150,000 by 29 July 1996. In Mr Carr’s Witness Statement of 17 July 2001 (Blue 1/7 para [13]) he said to the effect that he told Mr Hor on or about Sunday 28 July 1996 that he had been asked to put in another $150,000 by 29 July 1996. In his Third Witness Statement dated 2 December 2002 (Blue 1/235 para [8]) he gave a quite different account in which Mr Hor telephoned him at about 6 p.m. on Friday 26 July 1996, Mr Carr did not say the words in paragraph 13 of the earlier statement but said "What's the score?", Mr Hor said “From what I have done everything looks fine with the investment." In effect, in his later statement Mr Carr denied that Mr Hor had been told on Sunday 28 July that the $150,000 was to be paid on Monday 29 July; this takes away any force which the submission, which I consider later, that Mr Hor’s use of the word "confirmed" shows that he already knew that this event was to happen would otherwise have; on his later version Mr Carr denied that he told Mr Hor that the event was to happen.

55 Mr Carr gave evidence on all or parts of six different days and the Trial Judge had an unusually good opportunity to make observations and form impressions of him. Although the transcript of the evidence cannot convey the impression produced by a witness’s manner, there are a number of indications that Mr Carr’s evidence could well have been very memorable; including his ready acknowledgement that he had threatened to shoot a Process Server, and the offhand indirectness of his treatment of some quite serious subjects with expressions to the effect of "Why should I". The Trial Judge cannot have had any difficulty in recollecting Mr Carr’s evidence and manner. To my reading the judgment shows indications of careful preparation and of attention to detail, with full recourse to the transcript as well as to recollection.

56 Mr Carr’s evidence occupied a considerable part of the hearing, and the Trial Judge took adverse views of Mr Carr’s credibility and made many adverse comments on Mr Carr's evidence. These references, and a reading of the judgment overall make it clear, in my opinion, that notwithstanding that judgment was reserved for about 21 months, the Trial Judge had a full and clear understanding in detail of Mr Carr's evidence and retained clear impressions of Mr Carr in the witness box.

57 It was also contended to the effect that the Trial Judge did not deal adequately with the evidence of Mr Carr's daughter Ms. Deborah Schofield, who said in her Witness Statement dated 4 December 2002 (Blue 2/272):

10. After the conversation in paragraph 9 above, I recall my father receiving a telephone call at home sometime in the late afternoon or early evening. My mother, my husband and I were present when he received the telephone call. I recall that we were either having or about to have dinner together when the phone rang. My father took the call and then said words to the effect of:

“That was my lawyer. Jack’s checked out all right. Everything is fine with the investment.”
After he received this telephone call my father seemed pleased and relieved.

58 Ms. Schofield does not give a clear date for this event but context indicates when it occurred by referring to a conversation at some time in February 1995 in which Mr Carr said he had responded to an advertisement in a newspaper seeking investments in medical centres and a later conversation when he told her that he had been to see the respondents’ firm and “They are checking out the investment and Jack Roberts " (Blue 2/272 para [9]).

59 Ms. Schofield was cross-examined and her recollection of the event was challenged in cross-examination, when she adhered to her evidence, and gave additional circumstances. Her evidence shows that she had first been asked to remember anything she could about the events within a few days before she gave evidence in December 2002.

60 Although the Trial Judge said relatively little about the evidence of Ms Schofield, his Honour's expression (Judgment [72] Red 46) "I do not intend any disrespect to his daughter …” indicates that the Trial Judge was rejecting the evidence in a full and clear way. Upon reading her evidence it appears that she had not wavered while giving evidence, but that she introduced considerably more detail and circumstance than appear in her statement and rejected the suggestion (which counsel approached in a rather obscure way) that her evidence was unreliable, by proclaiming her antipathy to lies. To my reading her evidence shows a fullness of interest in upholding Mr Carr and his cause, with detail, and shows surprising confidence in the witness’s own recollection of what Mr Carr said in her hearing after a telephone conversation in which she had not participated which took place well over six years before her attention was again directed to it. The late emergence of Ms Schofield's Witness Statement, and the relation of its contents to the alteration in Mr Carr’s account of the events are adverse to acceptation of what she said. The Trial Judge's rejection of Ms Schofield's evidence should be understood to be attributable to the weight of probabilities against its being correct.

61 The Trial Judge had before him clear evidence from Mr Hor denying that he had given advice at that time or that there had been such a conversation; and this was corroborated, in a manner, by there being no file note of any such conversation by Mr Hor, although otherwise he made file notes of all significant conversations in which he was involved. The Trial Judge gave careful consideration to Mr Hor’s evidence, and set out passages in his cross-examination dealing with whether Mr Hor knew, before 1 August 1996, of Mr Carr's intention to invest $150,000 in an investment which took place on or about 29 July 1996. The Trial Judge found Mr Hor to be essentially an honest and reliable witness (Judgment [85] Red 51) and also referred to the fact that Mr Hor was dependent upon his contemporaneous notes. His Honour concluded (Judgment [89] Red 54): “And in the end, in relation to this aspect, I am more comfortable with his explanation and testimony generally than I am, to the extent that there is any to the contrary proffered by Mr Carr."

62 There were other issues of fact on which the Trial Judge, after careful consideration, accepted Mr Hor’s evidence in conflict with that of Mr Carr. Senior counsel for the appellants referred to passages in the transcript of Mr Hor’s evidence to which the Trial Judge did not refer; but in my opinion these passages do not show any misunderstanding on the part of the Trial Judge. What appears to me to be the principal matter relied on was the reference to confirmation, in a note made by Mr Hor of a conversation with Mrs Carr on 1 August 1996 (Blue 2/431). Mr Hor noted that he had telephoned Mr Carr who was out, and left a message with Mrs Carr for him to call and "She confirmed he has put another $150k, in & is still invited to be a director” and went on to deal with whether he should be a director. It was contended that the logical conclusion is that at some earlier point Mr Carr had told Mr Hor that he was going to put in another $150,000 and this was primary evidence that could have led to a finding of facts corroborative of the evidence given by Mr Carr and his daughter about the telephone advice given on 26 July 1996. I do not regard these considerations and the use of the word "confirm" as sustaining the submission or as showing in any clear way that Mr Hor’s evidence is not reliable. As I showed earlier, Mr Carr’s later statement means that there was no earlier information to confirm.

63 In my opinion the Trial Judge's rejection of the evidence relating to Mr Hor’s having given telephone advice on or about 26 July 1996 was a credit-based finding based on an appraisal of the evidence of witnesses, and on the witnesses themselves, which the Trial Judge was in a good position to make, and supported by consideration of probabilities. The findings have not been shown to be contrary to anything which could be said to show the position in an objectively clear way. In my opinion these findings should not be disturbed.

Breach of Duty. Other Claims

64 On behalf of the appellants it was also contended to the effect that, in a number of respects, there were breaches of the respondents’ duty of care in the advice given to Mr Carr by Mr Hor’s letter of 29 August 1996.

65 In developing the contention that Mr Hor should have given a more complete analysis of Trust affairs and had failed to do so, senior counsel for the appellants made observations to the effect that when the purchase price of the real property, shown in particulars of the contract which Mr Hor had obtained to be $500,000, the mortgage debt of $850,000 and the subscriptions for units totalling $1,400,000 were taken together, no need for the mortgage borrowings appeared, no asset represented by the surplus of the subscriptions and mortgage debts over the price of the property appeared, and the position overall was unsatisfactory.

66 In my opinion there was no shortcoming in Mr Hor's advice in these respects. The advice made it perfectly clear that there was no balance sheet and advised Mr Carr to pursue the matter of a balance sheet. The information available suggested that there should have been further assets, perhaps cash at bank. In my opinion Mr Hor dealt with this adequately in the advice he gave to Mr Carr to seek a balance sheet. Without further information to show what expenditure there had been other than acquiring the property, and without a balance sheet to show what assets and debts there were, Mr Hor’s advice went as far as he reasonably could; there was no indication before him that Unit Trust assets had not been dealt with in an appropriate way and, I should add, there is no indication from later circumstances that assets had not then been dealt with in an appropriate way.

67 Mr Hor’s retainer required him to ascertain and advise on who were shareholders and director of the Trustee company and their relationship to Jack Roberts. He investigated these matters and reported to Mr Carr in his Letter of Advice of 29 August 1996, that Mr Russell John Roberts was the original unit holder, the sole director and secretary and that the registered office of the company appeared to be his residential address at Seaforth. Mr Hor accurately ascertained and advised who were the unit holders in the Trust; he obtained copies of the Register of Unit Holders and reported accurately to Mr Carr. As Mr Hor ascertained completely who owned all the units and passed the information to Mr Carr, it cannot be concluded in my view that he failed to carry out the instructions which required him to confirm the unit holdings of Jack Roberts and of his family.

68 As Mr Hor reported to Mr Carr, the Register of Unitholders showed that Mr Russell John Roberts had subscribed for units to the value of $1,100,000, that Boston Holdings Pty Limited had subscribed the units to the value of $150,000 and that the additional investment of $150,000 worth of units did not yet appear in the Register. Mr Hor told Mr Carr that he should check with Mr Lamb regarding reflecting the further investment in the Register. In my understanding it was not the appellants’ case at any point that the subscription for 1,100,000 units was not made and was not fully paid; there is no evidence and no finding on that subject, and the only indication is the Register of Unitholders which shows that it was paid.

69 Mr Hor ascertained and advised that Mr Russell John Roberts had subscribed for units to the value of $1,100,000; this was based accurately on the Register of Unitholders which showed that the amount paid per unit was $1.00. Mr Hor did not commit any breach of the retainer in this respect. There was no evidence upon which it should be concluded that the appellants were the only equity participants, that Mr Russell John Roberts had not subscribed for 1,100,000 units and had not fully paid for them or that the Register of Unitholders which had been shown to Mr Hor was not accurate.

70 At many points Senior Counsel spoke of the number of units in FMA Unit Trust as limited to 1,250,000, or as contemplated to be 1,250,000. This appears to be based on extending the reference in the initial advertisement to $25,000 as a 2% investment; it is not based on the terms of the Deed, which relates to the settlement of an initial sum of one dollar and of one unit and leaves it to the Trustee to accept applications for additional units; see cl.1A(d)(ii) (Blue 1/132) and cl.3(c) (Blue 1/137-138). Mr Hor’s notes of his instructions do not show that he was told that there were to be 1,250,000 units; there are references (Blue 2/407) to the total cost of buying and fitting out the building being $1.2 million and "Jack has proposed to Peter that the two of them own the whole Trust 50/50$650,000ea”. Submissions based on the view that there were anomalies by reference to the total units in the Trust being 1,250,000 do not have a proper basis.

71 An undated notice (Blue 1/188) on the letterhead of Fairfield Medical Arcade Pty Ltd Unit Trust and signed by "R. Russell" states that the number of units will not exceed 1,200,001 and includes a receipt for $100,000 received from Boston Holdings Pty Ltd for 8% of Fairfield Medical Arcade Pty Ltd Unit Trust. Counsel were unable to refer to evidence which showed when this document came into existence. It should not be assumed that it was placed before Mr Hor at any material time, in the absence of evidence that it was.

72 I would not uphold any of these claims of breach of duty.

73 Senior counsel for the respondents contended that the case which was presented at first instance was based on four breaches of duty relating to:

- bankruptcy
- the power to borrow (at all)
- the Corporations Law point
- absence of advice about a Unit Holders Agreement

He contended that of these, those pressed on appeal were the breach relating to bankruptcy, and power to make further borrowings as a subset of the power to borrow; and that the others were not pressed on appeal (and they were not).

74 Senior counsel for the appellants pointed out that the Deed conferred the power to borrow on the Trustee company, without any limitation. Although no evidence deals with this subject I am aware and take notice that this is not an unusual provision in such a Deed. In my opinion performance of the retainer to a reasonable standard of care did not require Mr Hor to point out or comment on this provision. Senior counsel for the respondents contended that there was no evidence of further borrowing by the Unit Trust and that the subject was irrelevant. I do not address this fully; there may have been a basis for an inference that there was further borrowing, although evidence does not clearly dealt with this, but there is in my opinion no basis for deciding that it was a breach of the retainer not to give advice dealing specifically with the power to make further borrowings after borrowing $850,000 on mortgage to which Mr Hor’s Letter of Advice referred.

Reliance and Causation. “Not on your Nellie.”

75 The Trial Judge after concluding that the appellants had not proved breach of any term of the retainer said (Judgment [110] Red 60): “If there is error in that regard then any breach by the defendant[s] was not the cause of any loss that the plaintiffs suffered." After reviewing, at considerable length, circumstances relating to the advice and various investments into which Mr Carr entered the Trial Judge concluded (Judgment [147] Red 72):

[147] Applying this law to the found facts of the present case, the defendants' advice is not the common-sense reason for the loss suffered by the plaintiffs. As set out above, even if it was plain enough that the defendants' advice was a necessary pre-condition (in the " but for " sense) for Mr Carr's decision to invest, the advice was not the legal cause of the loss.

76 Senior Counsel for the appellants submitted that it is glaringly improbable that if Mr Carr had been given full comprehensive and factual information consistent with the scope of the duty of care in the retainer he would not have redeemed the units. It was contended to the effect that when Mr Carr was not told that he was participating in a venture promoted by a recently discharged bankrupt he lost an opportunity to say “no” to further investment and to redeem the existing units.

77 The Trial Judge referred to Mr Carr's express evidence dealing with whether he would have gone ahead if he had been told that Jack Roberts had been bankrupt in the past but no longer was. Mr Carr’s answer was: “Not on your Nellie” which can be unmistakably understood as meaning that he certainly would not have gone ahead; the Trial Judge said (Judgment [111] Red 60) “I simply do not accept that” and gave reasons at length. Evidence such as Mr Carr gave as to the course he would have taken or not have taken in a hypothetical situation is not reasonably to be considered in isolation from what can otherwise be judged from probabilities about the person’s behaviour, and its appraisal is not to be understood in simple terms of credit and credibility.

78 The Trial Judge's review of the facts relating to his finding that Mr Carr would have proceeded in any event was extensive. Mr Carr’s evidence that he would not have proceeded with the investment if he had been informed that Mr Roberts had previously been bankrupt was stated in a full and clear way and did not depend only on the answer "Not on your Nellie". See (Black 151R-152E). The Trial Judge's finding that Mr Carr would have gone ahead with the investment had he been told that Jack Roberts had been bankrupt in the past but no longer was (Judgment [111] Red 60) was based in part on a credit finding, as the Trial Judge said that he did not accept Mr Carr's evidence. However this was not the only basis for that conclusion, as the Trial Judge reviewed considerations bearing on the probabilities of Mr Carr's conduct. The Trial Judge said (Judgment [111] Red 61): "Mr Carr's conduct prior to approaching the defendants is almost by itself disentitling in this regard" and referred to Mr Carr’s having paid large sums to Mr Roberts to establish his own good faith and soundness as an investor, while knowing nothing about Mr Roberts, without seeking legal advice and having almost no information. The Trial Judge also referred to Mr Carr’s having had available but having rejected professional financial services, and having dealt with Mr Roberts in response to a newspaper advertisement. The Trial Judge also referred, on a sound basis of fact, to Mr Carr’s slipshod approach to the management of his financial affairs to the point, the Trial Judge said, "almost of indifference". The Trial Judge also referred to Mr Carr’s having continued to invest in various different entities which Mr Jack Roberts offered to him, with which that advice did not deal: it could not be reasonably supposed that the advice supported the later investments. In my opinion these circumstances strongly support the Trial Judge's conclusion as matters of probability, and when they are taken with the Trial Judge's rejection of Mr Carr’s evidence, on an issue on which the appellants bore the onus of proof, the finding that Mr Carr would have gone ahead with the investments even if he had been told that Mr Jack Roberts had been bankrupt in the past but no longer was appears to me to be correct.

79 The Trial Judge said that he was persuaded by submissions to the effect that Mr Carr took no steps himself to assess the commercial risk of the later ventures which the respondents’ advice did not speak of and could not reasonably be regarded as dealing with; and that he acted unreasonably in doing so (Judgment [119] Red 63). The Trial Judge referred to a number of significant matters to which Mr Carr did not attend. These included his not having certificates in relation to his investments at the time when he consulted Mr Hor, or until a long time later; he was unable to say when that was. Karan Roberts became a director on 1 November 1996; her signature as a director appears on Unit Certificates which bear earlier dates, as far back as April 1996, when she plainly was not a director. He did not receive any profit or loss statement, nor any other concrete information upon which to base his later investments; and of course no financial information of any value was available at the time of the first three investments.

80 Mr Carr’s having first paid $150,000, then seeking advice, then paying another $150,000 before obtaining advice supports the Trial Judge's findings, as a matter of probability, on what he would have done in the future had there been some adverse indication in the advice. Mr Carr did not give further attention to references in the advice to information which was not yet available from the accountant for the Trust, Mr David Lamb, or to the mortgage to secure $850,000 over the property which the Trust owned; or to the absence of reference to the Third Investment of $150,000 in the Register of Unitholders. Several other matters which, while of less prominent apparent importance, were left unresolved by the Letter of Advice were not given any attention by Mr Carr. Mr Carr made a fifth investment which carried the size of the Trust to a number of units well above what he had earlier been told by Mr Jack Roberts was in contemplation.

81 In my opinion the challenge to the Trial Judge’s finding on causation of loss does not succeed.

Damages

82 The Trial Judge also made findings which negated causation of loss, more particularly in relation to various other later investments. While I see no reason to doubt these conclusions, I do not think that they require close consideration. The matters which I have already reviewed show sufficient grounds upon which the verdict and judgment should be affirmed.

83 Senior counsel for the appellants contended that the loss in relation to the investments in the FMA Unit Trust was the capital outlay on those investments, none of which was returned; he put the amount of the loss at $600,000 (which refers to the First to Fifth Investments) or alternatively $400,000 (which refers to the First, Second, Third and Fifth Investments).

84 The definition of loss is quite difficult. All investments in FMA Unit Trust and later investments were exchanged for the Convertible Notes in December 1999. PHG was not ever floated on the stock exchange and the Convertible Notes, like the options, became worthless. PHG was deregistered in 2002. It has never been the appellants’ case that the respondents' negligence caused the appellants to enter into that transaction, or that the respondents are liable for the loss of that investment (which was wholly lost). The appellants’ case seems to require the conclusion that the investments in FMA Unit Trust, and other investments, were lost in that they were valueless by the time they were exchanged for Convertible Notes; and the evidence relating to FMA Unit Trust and other investments does not relate to that time, but to the proceeds of receiverships which were initiated on 1 June 2000, after the appellants had ceased to have interests in them. In the receiverships, which were initiated by National Australia Bank as Secured Creditor on 1 June 2000, the proceeds went towards mortgage debts on properties owned by the Unit Trusts, leaving a deficiency of several million dollars and no distribution for unit holders.

85 Evidence of Mr Carr shows that income payments continued until December 1999, after the exchange, and then stopped. The Trial Judge found that it is impossible to trace the sources of investment income (Judgment [163] Red 76). I have not found it possible to understand what the evidence shows about the amounts of income payments.

86 On the view I have formed that there was a breach of the contract of retainer with respect to the advice about Mr Jack Roberts’ bankruptcy, proof of loss would depend on showing that if the correct advice had been given the appellants would have withdrawn the $300,000 which they had at that time invested in FMA Unit Trust, by redeeming the units. The results which an attempted redemption would have achieved cannot be seen from any findings or evidence in a clear way, but such indications as there are (and they are not complete or satisfactory) seem to show that the Unit Trust may well have been sufficiently in funds to redeem the appellants’ units in and around August 1996. The answer "Not on your Nellie” related literally to further investments; whether Mr Carr would have maintained the existing investments or sought to redeem them was not the subject of express evidence, but was left to inference. Claims for damages in respect of later investments involve the need for the appellants to show, in relation to each investment, causation of the investment and the loss by the breach of duty; and also to pass the test of remoteness. Causation would fall to be decided on the "but for" basis; there is no other. The remoteness test is a considerable difficulty for the appellants; it involves them in showing that reasonable foreseeability of the risk of loss within the foresight of a solicitor giving advice on an investment extends to investments in a different form to the investment of which the solicitor was told, and later in time than the facts and events which the solicitor was able to investigate.

87 According to written submissions on behalf of the respondents (Orange 80 para [6]):

6. The appellants’ submissions have [focused] mainly on the trial judge's decision regarding breach of duty. But His Honour's conclusion in favour of the respondents have seven separate and distinct foundations:

· no breach of duty;

· no reliance on any such breach;

· the asserted reliance was not reasonable reliance;

· the causal chain was broken by supervening events;

· there was no legal connection between the alleged breach and the alleged damage;

· the damage claimed was too remote; and

· damage was not proven.

88 It appears to me to be correct that the Trial Judge’s reasons show grounds which his Honour regarded as sufficient grounds for deciding adversely to the appellants on each of those seven grounds. I do not think however that I need to refer to all of them.

89 Orders:

In my opinion the Court of Appeal should dismiss the appeal with costs.

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